Republic of the Philippines Having obtained an emergency U.S.

visa, respondent purchased a round trip

SUPREME COURT plane ticket from petitioner JAL for US$1,485.00 and was issued the
Baguio City corresponding boarding pass.9 He was scheduled to a particular flight bound
THIRD DIVISION for Los Angeles, California, U.S.A. via Narita, Japan.10
G.R. No. 170141             April 22, 2008 On July 29, 1992, the date of his flight, respondent went to Ninoy Aquino
International Airport in the company of several relatives and friends. 11 He
JAPAN AIRLINES, petitioner, was allowed to check-in at JAL's counter. 12 His plane ticket, boarding pass,
vs. travel authority and personal articles were subjected to rigid immigration
JESUS SIMANGAN, respondent. and security routines.13 After passing through said immigration and security
DECISION procedures, respondent was allowed by JAL to enter its airplane.14
REYES R.T., J.: While inside the airplane, JAL's airline crew suspected respondent of
WHEN an airline issues a ticket to a passenger confirmed on a particular carrying a falsified travel document and imputed that he would only use the
flight on a certain date, a contract of carriage arises, and the passenger has trip to the United States as a pretext to stay and work in Japan. 15 The
every right to expect that he would fly on that flight and on that date. If he stewardess asked respondent to show his travel documents. Shortly after,
does not, then the carrier opens itself to a suit for breach of contract of the stewardess along with a Japanese and a Filipino haughtily ordered him
carriage.1 to stand up and leave the plane. 16 Respondent protested, explaining that he
was issued a U.S. visa. Just to allow him to board the plane, he pleaded with
The power to admit or not an alien into the country is a sovereign act which
JAL to closely monitor his movements when the aircraft stops over in
cannot be interfered with even by Japan Airlines (JAL). 2
Narita.17 His pleas were ignored. He was then constrained to go out of the
In this petition for review on certiorari,3 petitioner JAL appeals the: (1) plane.18 In a nutshell, respondent was bumped off the flight.
Decision4 dated May 31, 2005 of the Court of Appeals (CA) ordering it to pay
Respondent went to JAL's ground office and waited there for three hours.
respondent Jesus Simangan moral and exemplary damages; and (2)
Meanwhile, the plane took off and he was left behind. 19 Afterwards, he was
Resolution5 of the same court dated September 28, 2005 denying JAL's
informed that his travel documents were, indeed, in order. 20 Respondent
motion for reconsideration.
was refunded the cost of his plane ticket less the sum of US$500.00 which
The Facts was deducted by JAL.21 Subsequently, respondent's U.S. visa was cancelled. 22
In 1991, respondent Jesus Simangan decided to donate a kidney to his ailing Displeased by the turn of events, respondent filed an action for damages
cousin, Loreto Simangan, in UCLA School of Medicine in Los Angeles, against JAL with the Regional Trial Court (RTC) in Valenzuela City, docketed
California, U.S.A. Upon request of UCLA, respondent undertook a series of as Civil Case No. 4195-V-93. He claimed he was not able to donate his
laboratory tests at the National Kidney Institute in Quezon City to verify kidney to Loreto; and that he suffered terrible embarrassment and mental
whether his blood and tissue type are compatible with anguish.23 He prayed that he be awarded P3 million as moral damages, P1.5
Loreto's.6 Fortunately, said tests proved that respondent's blood and tissue million as exemplary damages and P500,000.00 as attorney's fees.24
type were well-matched with Loreto's. 7
JAL denied the material allegations of the complaint. It argued, among
Respondent needed to go to the United States to complete his preliminary others, that its failure to allow respondent to fly on his scheduled departure
work-up and donation surgery. Hence, to facilitate respondent's travel to was due to "a need for his travel documents to be authenticated by the
the United States, UCLA wrote a letter to the American Consulate in Manila United States Embassy"25 because no one from JAL's airport staff had
to arrange for his visa. In due time, respondent was issued an emergency encountered a parole visa before. 26 It posited that the authentication
U.S. visa by the American Embassy in Manila.8 required additional time; that respondent was advised to take the flight the
following day, July 30, 1992. JAL alleged that respondent agreed to be Disagreeing with the RTC judgment, JAL appealed to the CA contending that
rebooked on July 30, 1992.27 it is not guilty of breach of contract of carriage, hence, not liable for
JAL also lodged a counterclaim anchored on respondent's alleged wrongful damages.31 It posited that it is the one entitled to recover on its
institution of the complaint. It prayed for litigation expenses, exemplary counterclaim.32
damages and attorney's fees.28 CA Ruling
On September 21, 2000, the RTC presided by Judge Floro P. Alejo rendered In a Decision33 dated May 31, 2005, the CA affirmed the decision of the RTC
its decision in favor of respondent (plaintiff), disposing as follows: with modification in that it lowered the amount of moral and exemplary
WHEREFORE, judgment is hereby rendered ordering the defendant damages and deleted the award of attorney's fees. The fallo of the CA
to pay the plaintiff the amount of P1,000,000.00 as moral damages, decision reads:
the amount of P500,000.00 as exemplary damages and the amount WHEREFORE, the appealed Decision is AFFIRMED with
of P250,000.00 as attorney's fees, plus the cost of suit. 29 MODIFICATION. Appellant JAPAN AIR LINES is ordered to pay
The RTC explained: appellee JESUS SIMANGAN the reduced sums, as follows: Five
Hundred Thousand Pesos (P500,000.00) as moral damages, and Two
In summarily and insolently ordering the plaintiff to disembark while Hundred Fifty Thousand Pesos (P250,000.00) as exemplary
the latter was already settled in his assigned seat, the defendant damages. The award of attorney's fees is hereby DELETED. 34
violated the contract of carriage; that when the plaintiff was
ordered out of the plane under the pretext that the genuineness of The CA elucidated that since JAL issued to respondent a round trip plane
his travel documents would be verified it had caused him ticket for a lawful consideration, "there arose a perfected contract between
embarrassment and besmirched reputation; and that when the them."35 It found that respondent was "haughtily ejected" 36 by JAL and that
plaintiff was finally not allowed to take the flight, he suffered more "he was certainly embarrassed and humiliated" 37 when, in the presence of
wounded feelings and social humiliation for which the plaintiff was other passengers, JAL's airline staff "shouted at him to stand up and
asking to be awarded moral and exemplary damages as well as arrogantly asked him to produce his travel papers, without the least
attorney's fees. courtesy every human being is entitled to"; 38 and that "he was compelled to
deplane on the grounds that his papers were fake." 39
The reason given by the defendant that what prompted them to
investigate the genuineness of the travel documents of the plaintiff The CA ratiocinated:
was that the plaintiff was not then carrying a regular visa but just a While the protection of passengers must take precedence over
letter does not appear satisfactory. The defendant is engaged in convenience, the implementation of security measures must be attended by
transporting passengers by plane from country to country and is basic courtesies.
therefore conversant with the travel documents. The defendant In fact, breach of the contract of carriage creates against the carrier
should not be allowed to pretend, to the prejudice of the plaintiff a presumption of liability, by a simple proof of injury, relieving the
not to know that the travel documents of the plaintiff are valid injured passenger of the duty to establish the fault of the carrier or
documents to allow him entry in the United States. of his employees; and placing on the carrier the burden to prove
The foregoing act of the defendant in ordering the plaintiff to that it was due to an unforeseen event or to force majeure.
deplane while already settled in his assigned seat clearly That appellee possessed bogus travel documents and that he might
demonstrated that the defendant breached its contract of carriage stay illegally in Japan are allegations without substantiation. Also,
with the plaintiff as passenger in bad faith and as such the plaintiff is appellant's attempt to rebook appellee the following day was too
entitled to moral and exemplary damages as well as to an award of late and did not relieve it from liability. The damage had been
attorney's fees.30 done. Besides, its belated theory of novation, i.e., that appellant's
 original obligation to carry appellee to Narita and Los Angeles on and in seeking relief from appellant's misdeeds. Yet, the record is
July 29, 1992 was extinguished by novation when appellant and devoid of evidence to show the cost of the services of his counsel
appellant agreed that appellee will instead take appellant's flight to and/or the actual expenses incurred in prosecuting his
Narita on the following day, July 30, 1992, deserves little attention. action.43 (Citations were omitted)
It is inappropriate at bar. Questions not taken up during the trial When JAL's motion for reconsideration was denied, it resorted to the
cannot be raised for the first time on appeal. 40 (Underscoring ours petition at bar.
and citations were omitted)
Issues
Citing  Ortigas, Jr. v. Lufthansa German Airlines,41 the CA declared that "(i)n
contracts of common carriage, inattention and lack of care on the part of JAL poses the following issues -
the carrier resulting in the failure of the passenger to be accommodated in I.
the class contracted for amounts to bad faith or fraud which entitles the WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT
passengers to the award of moral damages in accordance with Article 2220 RESPONDENT WAS ENTITLED TO MORAL DAMAGES, CONSIDERING
of the Civil Code."42 THAT:
Nevertheless, the CA modified the damages awarded by the RTC. It A. JAL WAS NOT GUILTY OF BREACH OF CONTRACT.
explained:
B. MORAL DAMAGES MAY BE AWARDED IN BREACH OF
Fundamental in the law on damages is that one injured by a breach CONTRACT CASES ONLY WHEN THE BREACH IS ATTENDED
of a contract, or by a wrongful or negligent act or omission shall BY FRAUD OR BAD FAITH. ASSUMING ARGUENDO THAT JAL
have a fair and just compensation commensurate to the loss WAS GUILTY OF BREACH, JAL DID NOT ACT FRAUDULENTLY
sustained as consequence of the defendant's act. Being OR IN BAD FAITH AS TO ENTITLE RESPONDENT TO MORAL
discretionary on the court, the amount, however, should not be DAMAGES.
palpably and scandalously excessive.
C. THE LAW DISTINGUISHES A CONTRACTUAL BREACH
Here, the trial court's award of P1,000,000.00 as moral damages EFFECTED IN GOOD FAITH FROM ONE ATTENDED BY BAD
appears to be overblown. No other proof of appellee's social FAITH.
standing, profession, financial capabilities was presented except
II.
that he was single and a businessman. To Us, the sum of 500,000.00
is just and fair. For, moral damages are emphatically not intended to WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT
enrich a complainant at the expense of the defendant. They are RESPONDENT WAS ENTITLED TO EXEMPLARY
awarded only to enable the injured party to obtain means, diversion DAMAGES CONSIDERING THAT:
or amusements that will serve to alleviate the moral suffering he A. EXEMPLARY DAMAGES ARE NOT RECOVERABLE IN
has undergone, by reason of the defendant's culpable action. BREACH OF CONTRACT OF CARRIAGE UNLESS THE CARRIER
Moreover, the grant of P500,000.00 as exemplary damages needs IS GUILTY OF WANTON, FRAUDULENT, RECKLESS,
to be reduced to a reasonable level. The award of exemplary OPPRESSIVE OR MALEVOLENT CONDUCT.
damages is designed to permit the courts to mould behavior that B. ASSUMING ARGUENDO THAT JAL WAS GUILTY OF
has socially deleterious consequences and its imposition is required BREACH, JAL DID NOT ACT IN A WANTON FRAUDULENT,
by public policy to suppress the wanton acts of the offender. Hence, RECKLESS, OPPRESSIVE OR MALEVOLENT MANNER AS TO
the sum of P250,000.00 is adequate under the circumstances. ENTITLE RESPONDENT TO EXEMPLARY DAMAGES.
The award of P250,000.00 as attorney's fees lacks factual basis. III.
Appellee was definitely compelled to litigate in protecting his rights
 ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO AN fail to consider relevant facts. Likewise, there was no grave abuse of
AWARD OF DAMAGES, WHETHER OR NOT THE COURT OF APPEALS discretion in the appreciation of facts or mistaken and absurd inferences.
AWARD OF P750,000 IN DAMAGES WAS EXCESSIVE  AND We thus sustain the coherent facts as established by the courts below, there
UNPRECEDENTED. being no sufficient showing that the said courts committed reversible error
IV. in reaching their conclusions.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING JAL is guilty of breach of
FOR JAL ON ITS COUNTERCLAIM.44 (Underscoring Ours) contract of carriage.
Basically, there are three (3) issues to resolve here: (1) whether or not JAL is That respondent purchased a round trip plane ticket from JAL and was
guilty of contract of carriage; (2) whether or not respondent is entitled to issued the corresponding boarding pass is uncontroverted. 49 His plane
moral and exemplary damages; and (3) whether or not JAL is entitled to its ticket, boarding pass, travel authority and personal articles were subjected
counterclaim for damages. to rigid immigration and security procedure. 50 After passing through said
Our Ruling immigration and security procedure, he was allowed by JAL to enter its
airplane to fly to Los Angeles, California, U.S.A. via Narita, Japan. 51 Concisely,
This Court is not a trier of facts. there was a contract of carriage between JAL and respondent.
Chiefly, the issues are factual. The RTC findings of facts were affirmed by the Nevertheless, JAL made respondent get off the plane on his scheduled
CA. The CA also gave its nod to the reasoning of the RTC except as to the departure on July 29, 1992. He was not allowed by JAL to fly. JAL thus failed
awards of damages, which were reduced, and that of attorney's fees, which to comply with its obligation under the contract of carriage.
was deleted.
JAL justifies its action by arguing that there was "a need to verify the
We are not a trier of facts. We generally rely upon, and are bound by, the authenticity of respondent's travel document." 52 It alleged that no one from
conclusions on this matter of the lower courts, which are better equipped its airport staff had encountered a parole visa before. 53 It further contended
and have better opportunity to assess the evidence first-hand, including the that respondent agreed to fly the next day so that it could first verify his
testimony of the witnesses.45 travel document, hence, there was novation. 54 It maintained that it was not
We have repeatedly held that the findings of fact of the CA are final and guilty of breach of contract of carriage as respondent was not able to travel
conclusive and cannot be reviewed on appeal to the Supreme Court to the United States due to his own voluntary desistance. 55
provided they are based on substantial evidence.46 We have no jurisdiction, We cannot agree. JAL did not allow respondent to fly. It informed
as a rule, to reverse their findings. 47 Among the exceptions to this rule are: respondent that there was a need to first check the authenticity of his travel
(a) when the conclusion is a finding grounded entirely on speculations, documents with the U.S. Embassy. 56 As admitted by JAL, "the flight could not
surmises or conjectures; (b) when the inference made is manifestly wait for Mr. Simangan because it was ready to depart." 57
mistaken, absurd or impossible; (c) where there is grave abuse of discretion;
(d) when the judgment is based on a misapprehension of facts; (e) when the Since JAL definitely declared that the flight could not wait for respondent, it
findings of facts are conflicting; (f) when the CA, in making its findings, went gave respondent no choice but to be left behind. The latter was
beyond the issues of the case and the same is contrary to the admissions of unceremoniously bumped off despite his protestations and valid travel
both appellant and appellee.48 documents and notwithstanding his contract of carriage with JAL. Damage
had already been done when respondent was offered to fly the next day on
The said exceptions, which are being invoked by JAL, are not found here. July 30, 1992. Said offer did not cure JAL's default.
There is no indication that the findings of the CA are contrary to the
evidence on record or that vital testimonies of JAL's witnesses were Considering that respondent was forced to get out of the plane and left
disregarded. Neither did the CA commit misapprehension of facts nor did it behind against his will, he could not have freely consented to be rebooked
the next day. In short, he did not agree to the alleged novation. Since
novation implies a waiver of the right the creditor had before the novation, bad faith. JAL personnel summarily and insolently ordered respondent to
such waiver must be express.58 It cannot be supposed, without clear proof, disembark while the latter was already settled in his assigned seat. He was
that respondent had willingly done away with his right to fly on July 29, ordered out of the plane under the alleged reason that the genuineness of
1992. his travel documents should be verified.
Moreover, the reason behind the bumping off incident, as found by the RTC These findings of facts were upheld by the CA, to wit:
and CA, was that JAL personnel imputed that respondent would only use the x x x he was haughtily ejected by appellant. He was certainly
trip to the United States as a pretext to stay and work in Japan. 59 embarrassed and humiliated when, in the presence of other
Apart from the fact that respondent's plane ticket, boarding pass, travel passengers, the appellant's airline staff shouted at him to stand up
authority and personal articles already passed the rigid immigration and and arrogantly asked him to produce his travel papers, without the
security routines,60 JAL, as a common carrier, ought to know the kind of least courtesy every human being is entitled to. Then, he was
valid travel documents respondent carried. As provided in Article 1755 of compelled to deplane on the grounds that his papers were fake . His
the New Civil Code: "A common carrier is bound to carry the passengers protestation of having been issued a U.S. visa coupled with his plea
safely as far as human care and foresight can provide, using the utmost to appellant to closely monitor his movements when the aircraft
diligence of very cautious persons, with a due regard for all the stops over in Narita, were ignored. Worse, he was made to wait for
circumstances."61 Thus, We find untenable JAL's defense of "verification of many hours at the office of appellant only to be told later that he
respondent's documents" in its breach of contract of carriage. has valid travel documents.66 (Underscoring ours)
It bears repeating that the power to admit or not an alien into the country is Clearly, JAL is liable for moral damages. It is firmly settled that moral
a sovereign act which cannot be interfered with even by JAL. 62 damages are recoverable in suits predicated on breach of a contract of
In an action for breach of contract of carriage, all that is required of plaintiff carriage where it is proved that the carrier was guilty of fraud or bad faith,
is to prove the existence of such contract and its non-performance by the as in this case. Inattention to and lack of care for the interests of its
carrier through the latter's failure to carry the passenger safely to his passengers who are entitled to its utmost consideration, particularly as to
destination.63 Respondent has complied with these twin requisites. their convenience, amount to bad faith which entitles the passenger to an
award of moral damages. What the law considers as bad faith which may
Respondent is entitled to moral and exemplary damages and attorney's furnish the ground for an award of moral damages would be bad faith in
fees plus legal interest. securing the contract and in the execution thereof, as well as in the
With reference to moral damages, JAL alleged that they are not recoverable enforcement of its terms, or any other kind of deceit. 67
in actions ex contractu except only when the breach is attended by fraud or JAL is also liable for exemplary damages as its above-mentioned acts
bad faith. It is contended that it did not act fraudulently or in bad faith constitute wanton, oppressive and malevolent acts against respondent.
towards respondent, hence, it may not be held liable for moral damages. Exemplary damages, which are awarded by way of example or correction
As a general rule, moral damages are not recoverable in actions for for the public good, may be recovered in contractual obligations, as in this
damages predicated on a breach of contract for it is not one of the items case, if defendant acted in wanton, fraudulent, reckless, oppressive, or
enumerated under Article 2219 of the Civil Code. 64 As an exception, such malevolent manner.68
damages are recoverable: (1) in cases in which the mishap results in the Exemplary damages are designed by our civil law to permit the courts to
death of a passenger, as provided in Article 1764, in relation to Article reshape behaviour that is socially deleterious in its consequence by creating
2206(3) of the Civil Code; and (2) in the cases in which the carrier is guilty of negative incentives or deterrents against such behaviour. In requiring
fraud or bad faith, as provided in Article 2220. 65 compliance with the standard of extraordinary diligence, a standard which
The acts committed by JAL against respondent amounts to bad faith. As is, in fact, that of the highest possible degree of diligence, from common
found by the RTC, JAL breached its contract of carriage with respondent in carriers and in creating a presumption of negligence against them, the law
seeks to compel them to control their employees, to tame their reckless are awarded and whenever the court deems it just and equitable, 75 as in this
instincts and to force them to take adequate care of human beings and their case.
property.69 Considering the factual backdrop of this case, attorney's fees in the amount
Neglect or malfeasance of the carrier's employees could give ground for an of P200,000.00 is reasonably modest.
action for damages. Passengers have a right to be treated by the carrier's The above liabilities of JAL in the total amount of P800,000.00 earn legal
employees with kindness, respect, courtesy and due consideration and are interest pursuant to the Court's ruling in Construction Development
entitled to be protected against personal misconduct, injurious language, Corporation of the Philippines v. Estrella,76 citing Eastern Shipping Lines, Inc.
indignities and abuses from such employees. 70 v. Court of Appeals,77 to wit:
The assessment of P500,000.00 as moral damages and P100,000.00 as Regarding the imposition of legal interest at the rate of 6% from the
exemplary damages in respondent's favor is, in Our view, reasonable and time of the filing of the complaint, we held in Eastern Shipping
realistic. This award is reasonably sufficient to indemnify him for the Lines, Inc. v. Court of Appeals, that when an obligation, regardless of
humiliation and embarrassment he suffered. This also serves as an example its source, i.e., law, contracts, quasi-contracts, delicts or quasi-
to discourage the repetition of similar oppressive acts. delicts is breached, the contravenor can be held liable for payment
With respect to attorney's fees, they may be awarded when defendant's act of interest in the concept of actual and compensatory damages,
or omission has compelled plaintiff to litigate with third persons or to incur subject to the following rules, to wit -
expenses to protect his interest.71 The Court, in Construction Development 1. When the obligation is breached, and it consists in the
Corporation of the Philippines v. Estrella,72 citing Traders Royal Bank payment of a sum of money, i.e., a loan or forbearance of
Employees Union-Independent v. National Labor Relations money, the interest due should be that which may have
73
Commission,  elucidated thus: been stipulated in writing. Furthermore, the interest due
There are two commonly accepted concepts of attorney's fees, the shall itself earn legal interest from the time it is judicially
so-called ordinary and extraordinary. In its ordinary concept, an demanded. In the absence of stipulation, the rate of interest
attorney's fee is the reasonable compensation paid to a lawyer by shall be 12% per annum to be computed from default, i.e.,
his client for the legal services he has rendered to the latter. The from judicial or extrajudicial demand under and subject to
basis of this compensation is the fact of his employment by and his the provisions of Article 1169 of the Civil Code.
agreement with the client. 2. When an obligation, not constituting a loan or
In its extraordinary concept, an attorney's fee is an indemnity for forbearance of money, is breached, an interest on the
damages ordered by the court to be paid by the losing party in a amount of damages awarded may be imposed at the
litigation. The basis of this is any of the cases provided by law where discretion of the court at the rate of 6%  per annum. No
such award can be made, such as those authorized in Article 2208, interest, however, shall be adjudged on unliquidated claims
Civil Code, and is payable not to the lawyer but to the client, unless or damages except when or until the demand can be
they have agreed that the award shall pertain to the lawyer as established with reasonable certainty. Accordingly, where
additional compensation or as part thereof.74 the demand is established with reasonable certainty, the
It was therefore erroneous for the CA to delete the award of attorney's fees interest shall begin to run from the time the claim is made
on the ground that the record is devoid of evidence to show the cost of the judicially or extrajudicially (Art. 1169, Civil Code) but when
services of respondent's counsel. The amount is actually discretionary upon such certainty cannot be so reasonably established at the
the Court so long as it passes the test of reasonableness. They may be time the demand is made, the interest shall begin to run
recovered as actual or compensatory damages when exemplary damages only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed
 to have been reasonably ascertained). The actual base for these issues were not raised by the pleadings, they shall be treated in all
the computation of legal interest shall, in any case, be on respects as if they had been raised in the pleadings.
the amount finally adjudged. As provided in Section 5, Rule 10 of the Rules of Court, "(w)hen issues not
3. When the judgment of the court awarding a sum of raised by the pleadings are tried with the express or implied consent of the
money becomes final and executory, the rate of legal parties, they shall be treated in all respects as if they had been raised in the
interest, whether the case falls under paragraph 1 or pleadings."
paragraph 2, above, shall be 12% per annum from such Nevertheless, JAL's counterclaim cannot be granted.
finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of JAL is a common carrier. JAL's business is mainly with the traveling public. It
invites people to avail themselves of the comforts and advantages it
credit.78 (Emphasis supplied and citations omitted)
offers.84 Since JAL deals with the public, its bumping off of respondent
Accordingly, in addition to the said total amount of P800,000.00, JAL is liable without a valid reason naturally drew public attention and generated a
to pay respondent legal interest. Pursuant to the above ruling of the Court, public issue.
the legal interest is 6% and it shall be reckoned from September 21, 2000
The publications involved matters about which the public has the right to be
when the RTC rendered its judgment. From the time this Decision becomes
final and executory, the interest rate shall be 12% until its satisfaction. informed because they relate to a public issue. This public issue or concern
is a legitimate topic of a public comment that may be validly published.
JAL is not entitled to its counterclaim for damages.
Assuming that respondent, indeed, caused the publication of his complaint,
The counterclaim of JAL in its Answer 79 is a compulsory counterclaim for he may not be held liable for damages for it. The constitutional guarantee of
damages and attorney's fees arising from the filing of the complaint. There freedom of the speech and of the press includes fair commentaries on
is no mention of any other counter claims. matters of public interest. This is explained by the Court in Borjal v. Court of
This compulsory counterclaim of JAL arising from the filing of the complaint Appeals,85 to wit:
may not be granted inasmuch as the complaint against it is obviously not To reiterate, fair commentaries on matters of public interest are
malicious or unfounded. It was filed by respondent precisely to claim his privileged and constitute a valid defense in an action for libel or
right to damages against JAL. Well-settled is the rule that the slander. The doctrine of fair comment means that while in general
commencement of an action does not per se make the action wrongful and every discreditable imputation publicly made is deemed false,
subject the action to damages, for the law could not have meant to impose because every man is presumed innocent until his guilt is judicially
a penalty on the right to litigate.80 proved, and every false imputation is deemed malicious,
We reiterate case law that if damages result from a party's exercise of a nevertheless, when the discreditable imputation is directed against
right, it is damnum absque injuria.81 Lawful acts give rise to no a public person in his public capacity, it is not necessarily actionable.
injury. Walang perhuwisyong maaring idulot ang paggamit sa sariling In order that such discreditable imputation to a public official may
karapatan. be actionable, it must either be a false allegation of fact or a
During the trial, however, JAL presented a witness who testified that JAL comment based on a false supposition. If the comment is an
suffered further damages. Allegedly, respondent caused the publications of expression of opinion, based on established facts, then it is
his subject complaint against JAL in the newspaper for which JAL suffered immaterial that the opinion happens to be mistaken, as long as it
damages.82 might reasonably be inferred from the facts.86 (Citations omitted
and underscoring ours)
Although these additional damages allegedly suffered by JAL were not
incorporated in its Answer as they arose subsequent to its filing, JAL's Even though JAL is not a public official, the rule on privileged commentaries
witness was able to testify on the same before the RTC. 83 Hence, although on matters of public interest applies to it. The privilege applies not only to
public officials but extends to a great variety of subjects, and includes This petition for review1 assails the Decision2 of the Court of Appeals-Cebu
matters of public concern, public men, and candidates for office.87 (CA-Cebu) dated 20 September 2011 in CA-G.R. SP No. 05546. The CA-Cebu
Hence, pursuant to the Borjal case, there must be an actual malice in order reversed and set aside the Order 3 of the Regional Trial Court, Branch 53,
that a discreditable imputation to a public person in his public capacity or to Bacolod City (RTC Bacolod) dated 27 September 2010 in Commercial Court
a public official may be actionable. To be considered malicious, the libelous Case No. 09-070 entitled Sunrise Marketing (Bacolod), Inc., represented by
statements must be shown to have been written or published with the Juanita Ang -v: Spouses Roberto and Rachel Ang.
knowledge that they are false or in reckless disregard of whether they are The Facts
false or not.88 Sunrise Marketing (Bacolod), Inc. (SMBI) is a duly registered corporation
Considering that the published articles involve matters of public interest and owned by the Ang family.4 Its current stockholders and their respective
that its expressed opinion is not malicious but based on established facts, stockholdings are as follows:5
the imputations against JAL are not actionable. Therefore, JAL may not claim
Stockholder Number of Shares
damages for them.
WHEREFORE, the petition is DENIED. The appealed Decision of the Court of Juanito Ang 8,750
Appeals is AFFIRMED WITH MODIFICATION. As modified, petitioner Japan
Airlines is ordered to pay respondent Jesus Simangan the following: Anecita Ang 1,250
(1) P500,000.00 as moral damages; (2) P100,000.00 as exemplary damages;
and (3) P200,000.00 as attorney's fees. Jeannevie Ang 2,500
The total amount adjudged shall earn legal interest at the rate of 6% per Roberto Ang 8,750
annum from the date of judgment of the Regional Trial Court on September
21, 2000 until the finality of this Decision. From the time this Decision Rachel Ang 3,750
becomes final and executory, the unpaid amount, if any, shall earn legal
interest at the rate of 12% per annum until its satisfaction. Total 25,000
SO ORDERED. Juanito Ang (Juanito) and Roberto Ang (Roberto) are siblings. Anecita
Limoco-Ang (Anecita) is Juanito’s wife and Jeannevie is their daughter.
Republic of the Philippines Roberto was elected President of SMBI, while Juanito was elected as its Vice
SUPREME COURT President. Rachel Lu-Ang (Rachel) and Anecita are SMBI’s Corporate
Manila Secretary and Treasurer, respectively.
SECOND DIVISION On 31 July 1995, Nancy Ang (Nancy), the sister of Juanito and Roberto, and
her husband, Theodore Ang (Theodore), agreed to extend a loan to settle
G.R. No. 201675               June 19, 2013
the obligations of SMBI and other corporations owned by the Ang family,
JUANITO ANG, for and in behalf of SUNRISE MARKETING (BACOLOD), specifically Bayshore Aqua Culture Corporation, Oceanside Marine
INC.,* Petitioner, Resources and JR Aqua Venture. 6 Nancy and Theodore issued a check in the
vs. amount of $1,000,000.00 payable to "Juanito Ang and/or Anecita Ang
SPOUSES ROBERTO and RACHEL ANG, Respondents. and/or Roberto Ang and/or Rachel Ang." Nancy was a former stockholder of
DECISION SMBI, but she no longer appears in SMBI’s General Information Sheets as
early as 1996.7 Nancy and Theodore are now currently residing in the United
CARPIO, J.:
States. There was no written loan agreement, in view of the close
The Case
relationship between the parties. Part of the loan was also used to purchase e) a parcel of land registered in the name of Rachel; and
real properties for SMBI, for Juanito, and for Roberto. 8 f) Roberto and Rachel’s fifty percent share in 2 parcels of land
On 22 December 2005, SMBI increased its authorized capital stock to registered in the name of their son, Livingstone L. Ang (Livingstone),
₱10,000,000.00. The Certificate of Increase of Capital Stock was signed by and in another lot registered in the name of Livingstone and Alvin
Juanito, Anecita, Roberto, and Rachel as directors of SMBI. 9 Juanito claimed, Limoco Ang.13
however, that the increase of SMBI’s capital stock was done in A certain Kenneth C. Locsin (Locsin) signed on behalf of Nancy and
contravention of the Corporation Code.10 According to Juanito, when he and Theodore, under a Special Power of Attorney which was not attached as
Anecita left for Canada: part of the Settlement Agreement or the Mortgage, nor included in the
x x x Sps. Roberto and Rachel Ang took over the active management of records of this case.
[SMBI]. Through the employment of sugar coated words, they were able to Thereafter, Juanito filed a "Stockholder Derivative Suit with prayer for an ex-
successfully manipulate the stocks sharings between themselves at 50-50 parte Writ of Attachment/Receivership" (Complaint) before the RTC Bacolod
under the condition that the procedures mandated by the Corporation Code on 29 January 2009. He alleged that "the intentional and malicious refusal of
on increase of capital stock be strictly observed (valid Board Meeting). No defendant Sps. Roberto and Rachel Ang to settle their 50% share x x x of the
such meeting of the Board to increase capital stock materialized. It was total obligation x x x will definitely affect the financial viability of plaintiff
more of an accommodation to buy peace x x x. 11 SMBI."14 Juanito also claimed that he has been "illegally excluded from the
Juanito claimed that payments to Nancy and Theodore ceased sometime management and participation in the business of [SMBI through] force,
after 2006. On 24 November 2008, Nancy and Theodore, through their violence and intimidation" and that Rachel and Roberto have seized and
counsel here in the Philippines, sent a demand letter to "Spouses Juanito L. carted away SMBI’s records from its office. 15
Ang/Anecita L. Ang and Spouses Roberto L. Ang/Rachel L. Ang" for payment The Complaint sought the following reliefs:
of the principal amounting to $1,000,000.00 plus interest at ten percent
(10%) per annum, for a total of $2,585,577.37 within ten days from receipt a) Issuance of an ex-parte Writ of Attachment and/or Garnishment,
with a Break Open Order covering the assets of the spouses Roberto
of the letter. 12 Roberto and Rachel then sent a letter to Nancy and
Theodore’s counsel on 5 January 2009, saying that they are not complying and Rachel Ang, or any interest they may have against third parties;
with the demand letter because they have not personally contracted a loan b) Placement of SMBI under Receivership pending resolution of the
from Nancy and Theodore. case;
On 8 January 2009, Juanito and Anecita executed a Deed of c) Enforcement of Juanito’s right to actively participate in the
Acknowledgment and Settlement Agreement (Settlement Agreement) and management of SMBI;
an Extra-Judicial Real Estate Mortgage (Mortgage). Under the foregoing d) Issuance of an Order compelling the Spouses Roberto and Rachel
instruments, Juanito and Anecita admitted that they, together with Roberto Ang to:
and Rachel, obtained a loan from Nancy and Theodore for $1,000,000.00 on
i. Render an accounting of the utilization of the loan
31 July 1995 and such loan shall be secured by:
amounting to $2,585,577.37 or ₱120,229,347.26;
a) Juanito and Anecita’s fifty percent share over a parcel of land
ii. Pay fifty percent of the aforementioned loan, amounting
registered in the name of SMBI;
to ₱60,114,673.62;
b) a parcel of land registered in the name of Juanito Ang;
iii. Explain why Nancy was removed as a stockholder as far
c) Juanito’s fifty percent share in 7 parcels of land registered in his as SMBI’s reportorial requirements with the SEC are
and Roberto’s name; concerned;
d) a parcel of land registered in the name of Roberto;
 iv. Restore Juanito’s right to actively manage the affairs of That the instant suit is for the benefit of a non-stockholder and not the
the corporation; and corporation is obvious when the primary relief prayed for in the Complaint
v. Pay attorney’s fees amounting to ₱20,000.00. which is for the defendants "to pay the amount of Php 60,114,673.62 plus
interest which is 50% of the loan obligations of plaintff [SMBI] to its creditor
On 29 January 2009, the RTC Bacolod issued an Order 16 granting the Sps. Theodore and Nancy Ang." Otherwise stated, the instant suit is nothing
application for an ex-parte writ of attachment and break open order. Atty. but a complaint for sum of money shamelessly masked as a derivative suit.21
Jerry Basiao, who filed an application for appointment as Receiver of SMBI,
was directed by the RTC Bacolod to furnish the required Receivership Rachel also argued that the Complaint failed to allege that Juanito "exerted
Bond.17 On the same date, Roberto and Rachel moved to quash the writ of all reasonable efforts to exhaust all intra-corporate remedies available
attachment and set aside the break open order and appointment of under the articles of incorporation, by-laws, laws or rules governing the
receiver.18 They claimed that these were issued in violation of their right to corporation to obtain the relief he desires," as required by the Interim
due process: Rules.
Records of this case would show that the complaint was filed before the RTC During cross-examination, Juanito admitted that there was no prior demand
Bacolod at 2:50 p.m. of January 29, 2009. x x x Counsel for the defendant- for accounting or liquidation nor any written objection to SMBI’s increase of
spouses went to the RTC Bacolod at around 3:00 p.m. on January 29, 2009 capital stock. He also conceded that the loan was extended by persons who
to inquire on the status of the case and was informed that the last pleading are not stockholders of SMBI. Thus, Rachel filed a Motion for Preliminary
on record is his entry of appearance with the conformity of the defendant Hearing on Affirmative Defenses on 27 November 2009, arguing that in view
Rachel Ang. Counsel was however informed by the clerk of court that the of Juanito’s admissions, the Complaint should be dismissed pursuant to
Honorable Judge has already issued an order directing the issuance of the Section 1 of the Interim Rules. Juanito filed his Opposition thereto on 8
writ of preliminary attachment, receivership and break open order but said January 2010,22 arguing that applying this Court’s ruling in Hi-Yield Realty,
order was not officially released yet x x x. Due to the undersigned counsel’s Inc. v. Court of Appeals, 23 the requirement for exhaustion of intra-corporate
insistence, however, said clerk of court of this Honorable Court furnished remedies is no longer needed when the corporation itself is "under the
him a copy of said order x x x. The clerk of court and the clerk in charge of complete control of the persons against whom the suit is filed." Juanito also
civil cases assured counsel that no writ of preliminary attachment was alleged that he and Anecita were deceived into signing checks to pay off
prepared or issued x x x. Despite such assurance x x x [and counsel’s advice bogus loans purportedly extended by Rachel’s relatives in favor of SMBI.
that they shall move to quash the order the following morning], that Some of the checks were payable to cash, and were allegedly deposited in
afternoon, the clerk of court x x x clandestinely, hurriedly and Rachel’s personal account.24 He also claimed that Rachel’s Motion is
surreptitiously, for reasons known only to her, x x x prepared the writ of disallowed under the Interim Rules.
attachment x x x.19 On 9 February 2009, Juanito moved that Rachel and her daughter, Em Ang
In her Verified Answer Ad Cautelam which was filed on 10 February 2009, (Em), as well as their counsel, Atty. Filomeno Tan, Jr. (Atty. Tan) be held in
Rachel prayed that the Complaint be dismissed as it was not a bona fide contempt. Juanito claimed that on the date the writ of attachment and
derivative suit as defined under the Interim Rules of Procedure for Intra- break open order were issued, Atty. Tan, accompanied by Rachel and Em,
Corporate Controversies20 (Interim Rules). According to Rachel, the "arrogantly demanded from the Clerk in charge of Civil Cases that he be
Complaint, although labelled as a derivative suit, is actually a collection suit furnished a copy of the [said orders] x x x otherwise he will tear the records
since the real party in interest is not SMBI, but Nancy and Theodore: of the subject commercial case." Juanito also accused Atty. Tan of
surreptitiously photocopying the said orders prior to service of the
The cause of action does not devolve on the corporation as the alleged summons, Complaint, Writ of Attachment and Attachment Bond. According
harm or wrong pertains to the right of the Sps. Theodore and Nancy Ang, as to Juanito, the purpose of obtaning a copy of the orders was to thwart its
creditors, to collect the amount allegedly owed to them. x x x implementation. Thus, when the authorities proceeded to the SMBI
xxxx premises to enforce the orders, they found that the place was padlocked,
and that all corporate documents and records were missing. On 14 record to show that non-payment of the loan will result in any damage or
December 2010, the Sheriff and other RTC Bacolod employees then filed a prejudice to SMBI.
Verified Complaint against Atty. Tan before this Court, which also contained Juanito then filed a Motion for Reconsideration with Prayer for Voluntary
the foregoing allegations.25 Inhibition on 28 October 2011. In his Motion, Juanito pointed out that
Rachel then filed a Reply on 27 January 2010, claiming that Juanito’s Rachel filed her Petition for Certiorari without previously filing a Motion for
reliance on the Hi-Yield case is misplaced: Reconsideration, warranting the dismissal of the said Petition. The CA-Cebu
The facts x x x of this case are strikingly different from that in Hi-Yield denied the Motion.
Realty. In that case, the Supreme Court noted that the complaining Hence, this petition.
stockholder was a minority stockholder. However, in the case at bar, Juanito The Issues
Ang is one of the biggest stockholders of [SMBI]. x x x He is a member of
[SMBI’s] Board of Directors and is even the vice-president thereof. The issues raised in the instant petition are:
Furthermore, in Hi-Yield Realty, the Supreme Court noted that the <
complaining stockholder was excluded from the affairs of the corporation. p align="justify">I. Whether based on the allegations of the
However, the evidence thus far presented, particularly Juanito Ang’s complaint, the nature of the case is one of a derivative suit or not.
admission, show that he and his wife, Anecita, participate in the
Corollary to the above, whether the Honorable Court of Appeals
disbursement of [SMBI’s] funds x x x. 26
erred x x x in ordering the dismissal of the Complaint on the ground
Juanito filed his Rejoinder on 2 March 2010. that the case is not a derivative suit.
The Ruling of the RTC Bacolod II. Whether the Honorable Court of Appeals x x x seriously erred in
On 27 September 2010, the RTC Bacolod issued an Order which stated that: considering evidence aliunde, that is, other than the four corners of
the complaint, in determining the nature of the complaint, in utter
WHEREFORE, premises considered, the court hereby rules that the present
action is a DERIVATIVE SUIT and the Motion to Dismiss based on Affirmative violation of the doctrine that the jurisdiction is determined by law
and allegations of the complaint alone.
Defenses raised by defendants is DENIED for lack of merit.27
The RTC Bacolod found that the issuance of the checks to settle the III. Granting arguendo, but without necessarily admitting that the
complaint is not one of a derivative suit, but only an ordinary civil
purported obligations to Rachel’s relatives, as well as the removal of Nancy
as a stockholder in SMBI’s records as filed with the SEC, shows that Rachel action, whether the Honorable Court of Appeals x x x gravely erred
in dismissing the petition entirely, when the Regional Trial Court a
and Roberto committed fraud. The Order likewise stated that the
requirement of exhaustion of intra-corporate remedies is no longer quo has jurisdiction also over the case as an ordinary civil action,
and can just proceed to hear the same as such. 28
necessary since Rachel and Roberto exercised complete control over SMBI.
Aggrieved, Rachel filed a Petition for Certiorari with the CA-Cebu. The Ruling of this Court
The petition has no merit.
The Ruling of the CA-Cebu
On 20 September 2011, the CA-Cebu promulgated its Decision which We uphold the CA-Cebu’s finding that the Complaint is not a derivative suit.
A derivative suit is an action brought by a stockholder on behalf of the
reversed and set aside the Order of the RTC Bacolod dated 27 September
2010. According to the CA-Cebu, the Complaint filed by Juanito should be corporation to enforce corporate rights against the corporation’s directors,
officers or other insiders.29 Under Sections 2330 and 3631 of the Corporation
dismissed because it is a harassment suit, and not a valid derivative suit as
defined under the Interim Rules. The CA-Cebu also found that Juanito failed Code, the directors or officers, as provided under the by-laws, 32 have the
right to decide whether or not a corporation should sue. Since these
to exhaust intra-corporate remedies and that the loan extended by Nancy
and Theodore was not SMBI’s corporate obligation. There is nothing on directors or officers will never be willing to sue themselves, or impugn their
wrongful or fraudulent decisions, stockholders are permitted by law to bring and/or Roberto Ang and/or Rachel Ang" and not SMBI. The proceeds of the
an action in the name of the corporation to hold these directors and officers loan were used for payment of the obligations of the other corporations
accountable.33 In derivative suits, the real party ininterest is the corporation, owned by the Angs as well as the purchase of real properties for the Ang
while the stockholder is a mere nominal party. brothers. SMBI was never a party to the Settlement Agreement or the
This Court, in Yu v. Yukayguan,34 explained: Mortgage. It was never named as a co-debtor or guarantor of the loan. Both
instruments were executed by Juanito and Anecita in their personal
The Court has recognized that a stockholder’s right to institute a derivative capacity, and not in their capacity as directors or officers of SMBI. Thus,
suit is not based on any express provision of the Corporation Code, or even SMBI is under no legal obligation to satisfy the obligation.
the Securities Regulation Code, but is impliedly recognized when the said
laws make corporate directors or officers liable for damages suffered by the The fact that Juanito and Anecita attempted to constitute a mortgage over
corporation and its stockholders for violation of their fiduciary duties. "their" share in a corporate asset cannot affect SMBI. The Civil Code
Hence, a stockholder may sue for mismanagement, waste or dissipation of provides that in order for a mortgage to be valid, the mortgagor must be the
corporate assets because of a special injury to him for which he is otherwise "absolute owner of the thing x x x mortgaged." 35 Corporate assets may be
without redress. In effect, the suit is an action for specific performance of an mortgaged by authorized directors or officers on behalf of the corporation
obligation owed by the corporation to the stockholders to assist its rights of as owner, "as the transaction of the lawful business of the corporation may
action when the corporation has been put in default by the wrongful refusal reasonably and necessarily require."36 However, the wording of the
of the directors or management to make suitable measures for its Mortgage reveals that it was signed by Juanito and Anecita in their personal
protection. The basis of a stockholder’s suit is always one in equity. capacity as the "owners" of a pro-indiviso share in SMBI’s land and not on
However, it cannot prosper without first complying with the legal requisites behalf of SMBI:
for its institution. (Emphasis in the original) This Mortgage is made and executed by and between:
Section 1, Rule 8 of the Interim Rules imposes the following requirements Spouses JUANITO and ANECITA ANG, of legal age, Filipino citizens, residents
for derivative suits: of Sunrise Marketing Building at Hilado Street, Capitol Shopping Center,
(1) The person filing the suit must be a stockholder or member at Bacolod City, hereinafter referred to as the MORTGAGORS;
the time the acts or transactions subject of the action occurred and Spouses THEODORE and NANCY ANG, x x x hereinafter referred to as the
the time the action was filed; MORTGAGEES represented in this instance through their attorney-in-fact,
(2) He must have exerted all reasonable efforts, and alleges the Mr. Kenneth Locsin;
same with particularity in the complaint, to exhaust all remedies xxxx
available under the articles of incorporation, by-laws, laws or rules In order to ensure payment x x x the MORTGAGORS hereby CONVEY unto
governing the corporation or partnership to obtain the relief he the MORTGAGEES by way of EXTRA-JUDICIAL REAL ESTATE MORTGAGE their
desires; 50% rights and interests over the following real properties to wit:
(3) No appraisal rights are available for the act or acts complained a. Those registered in the name of SUNRISE MARKETING (BACOLOD), INC. x
of; and xx
(4) The suit is not a nuisance or harassment suit. x x x x37 (Emphasis supplied)
Applying the foregoing, we find that the Complaint is not a derivative suit. Juanito and Anecita, as stockholders of SMBI, are not co-owners of SMBI
The Complaint failed to show how the acts of Rachel and Roberto resulted assets. They do not own pro-indiviso shares, and therefore, cannot
in any detriment to SMBI. The CA-Cebu correctly concluded that the loan mortgage the same except in their capacity as directors or officers of SMBI.
was not a corporate obligation, but a personal debt of the Ang brothers and
their spouses. The check was issued to "Juanito Ang and/or Anecita Ang We also find that there is insufficient evidence to suggest that Roberto and
Rachel fraudulently and wrongfully removed Nancy as a stockholder in
SMBI’s reportorial requirements. As early as 2005, when SMBI increased its (2) Subject matter of the suit;
capital stock, Juanito and Anecita already knew that Nancy was not listed as (3) Legal and factual basis of the complaint;
a stockholder of SMBI. However, they attempted to rectify the error only in
(4) Availability of appraisal rights for the act or acts complained of;
2009, when the Complaint was filed. That it took four years for them to
make any attempt to question Nancy’s exclusion as stockholder negates and
their allegation of fraud. (5) Prejudice or damage to the corporation, partnership, or
Since damage to the corporation was not sufficiently proven by Juanito, the association in relation to the relief sought.
Complaint cannot be considered a bona fide derivative suit. A derivative suit In case of nuisance or harassment suits, the court may, motu proprio or
is one that seeks redress for injury to the corporation, and not the upon motion, forthwith dismiss the case.
stockholder. No such injury was proven in this case. Records show that Juanito, apart from being Vice President, owns the
The Complaint also failed to allege that all available corporate remedies highest number of shares, equal to those owned by Roberto. Also, as
under the articles of incorporation, by-laws, laws or rules governing the explained earlier, there appears to be no damage to SMBI if the loan
corporation were exhausted, as required under the Interim Rules. The CA- extended by Nancy and Theodore remains unpaid. The CA-Cebu correctly
Cebu, applying our ruling in the Yu case, pointed out: concluded that "a plain reading of the allegations in the Complaint would
x x x No written demand was ever made for the board of directors to readily show that the case x x x was mainly filed to collect a debt allegedly
extended by the spouses Theodore and Nancy Ang to [SMBI]. Thus, the
address private respondent Juanito Ang’s concerns.1âwphi1
aggrieved party is not SMBI x x x but the spouses Theodore and Nancy Ang,
The fact that [SMBI] is a family corporation does not exempt private who are not even x x x stockholders."39
respondent Juanito Ang from complying with the Interim Rules. In the x x x
Yu case, the Supreme Court held that a family corporation is not exempt WHEREFORE, we DENY the petition. We AFFIRM the 20 September 2011
Decision of the Court of Appeals-Cebu in CA-G.R. SP No. 05546.
from complying with the clear requirements and formalities of the rules for
filing a derivative suit. There is nothing in the pertinent laws or rules which SO ORDERED.
state that there is a distinction between x x x family corporations x x x and
other types of corporations in the institution by a stockholder of a derivative
Republic of the Philippines
suit.38
SUPREME COURT
Furthermore, there was no allegation that there was an attempt to remove Manila
Rachel or Roberto as director or officer of SMBI, as permitted under the
SECOND DIVISION
Corporation Code and the by-laws of the corporation. Thus, the Complaint
failed to satisfy the requirements for a derivative suit under the G.R. No. 170928               September 11, 2007
Interim Rules. VICENTE S. ALMARIO, Petitioner,
vs.
The CA-Cebu correctly ruled that the Complaint should be dismissed since it
PHILIPPINE AIRLINES, INC., Respondent.
is a nuisance or harassment suit under Section 1(b) of the Interim Rules.
Section 1(b) thereof provides: DECISION
b) Prohibition against nuisance and harassment suits. - Nuisance and CARPIO MORALES, J.:
harassment suits are prohibited. In determining whether a suit is a nuisance On October 21, 1988, petitioner, Vicente S. Almario (Almario), was hired by
or harassment suit, the court shall consider, among others, the following: respondent, Philippine Airlines, Inc. (PAL), as a Boeing 747 Systems
(1) The extent of the shareholding or interest of the initiating Engineer.
stockholder or member;
On April 28, 1995, Almario, then about 39 years of age 1 and a Boeing 737 (B- his training, he would render service to it until the costs of training were
737) First Officer at PAL, successfully bid for the higher position of Airbus recovered in at least three (3) years.9 Almario having resigned before the 3-
300 (A-300) First Officer.2 Since said higher position required additional year period, PAL prayed that he should be ordered to reimburse the costs
training, he underwent, at PAL’s expense, more than five months of training for his training.
consisting of ground schooling in Manila and flight simulation in Melbourne, In his Answer with Special and Affirmative Defenses and Compulsory
Australia.3 Counterclaims,10 Almario denied the existence of any agreement with PAL
After completing the training course, Almario served as A-300 First Officer of that he would have to render service to it for three years after his training
PAL, but after eight months of service as such or on September 16, 1996, he failing which he would reimburse the training costs. He pointed out that the
tendered his resignation, for "personal reasons," effective October 15, 1991-1994 Collective Bargaining Agreement (CBA) between PAL and the
1996.4 Airline Pilot’s Association of the Philippines (ALPAP), of which he was a
On September 27, 1996, PAL’s Vice President for Flight Operations sent member,11 carried no such agreement.
Almario a letter, the pertinent portions of which read: Almario thus prayed for the award of actual damages on account of PAL’s
xxxx withholding of the necessary clearances which he needed in order to obtain
his lawful benefits, and moral and exemplary damages for malicious
2. Our records show that you have been trained by the Company as A300 prosecution and unjust harassment.12
First Officer starting on 04 September 1995 and have completed said
training on 08 February 1996. As you are aware the Company invested PAL, in its Reply to Defendant’s Answer and Answer to
heavily on your professional training in the estimated amount of Counterclaim,13 argued as follows:
PHP786,713.00 on the basis that you continue to serve the Company for a The right of PAL to be reimbursed for training expenses is based on Article
definite period of time which is approximately three (3) years or thirty-six XXIII, Section 1 of the 1991-1994 Collective Bargaining Agreement (CBA, for
(36) months. brevity) and which was taken from the decision of the Secretary of Labor.
3. In view of the foregoing, we urge you to reconsider your proposed [The Secretary of Labor] ruled that a pilot should remain in the position
resignation otherwise you will be required to reimburse the Company an where he is upon reaching the age of fifty-seven (57), irrespective of
amount equivalent to the cost of your professional training and the whether or not he has previously qualified in the Company’s turbo-jet
damaged [sic] caused to the Company.5 (Emphasis and underscoring operations. The rationale behind this is that a pilot who will be compulsorily
supplied) retired at age sixty (60) should no longer be burdened with training for a
Despite receipt of the letter, Almario pushed through with his resignation. new position.
By letter of October 9, 1996, Almario’s counsel sought PAL’s explanation Thus, Article XXIII, Section 1 of the CBA provide[s]:
behind its September 27, 1996 letter considering that Almario "did not sign "Pilots fifty-seven (57) years of age shall be frozen in their position. Pilots
anything regarding any reimbursement." 6 PAL did not reply, prompting who are less than fifty-seven (57) years of age provided they have previously
Almario’s counsel to send two letters dated January 6, 1997 and February qualified in any company’s turbo-jet aircraft shall be permitted to occupy
10, 1997 following-up PAL’s reply, as well as the release of Almario’s any position in the company’s turbo-jet fleet.
clearances which he needed to avail of his benefits. 7 The reason why pilots who are 57 years of age are no longer qualified to bid
8
On February 11, 1997, PAL filed a Complaint  against Almario before the for a higher position is because they have only three (3) years left before the
Makati Regional Trial Court (RTC), for reimbursement of ₱851,107 worth of mandatory retirement age [of 60] and to send them to training at that age,
training costs, attorney’s fees equivalent to 20% of the said amount, and PAL would no longer be able to recover whatever training expenses it will
costs of litigation. PAL invoked the existence of an innominate contract have to incur.
of do ut facias (I give that you may do) with Almario in that by spending for
Simply put, the foregoing provision clearly and unequivocally recognizes the favor of appellee is hereby DELETED.20 (Emphasis in the original;
prohibitive training cost principle such that it will take a period of at least underscoring supplied)
three (3) years before PAL could recover from the training expenses it His Motion for Reconsideration21 having been denied,22 Almario filed the
incurred.14 (Emphasis and underscoring supplied) instant Petition for Certiorari [sic] (Under Rule 45),23 raising the following
By Decision15 of October 25, 2000, Branch 147 of the Makati RTC, finding no issues:
provision in the CBA between PAL and ALPAP stipulating that a pilot who A. Whether the Court of Appeals committed reversible error
underwent a training course for the position of A-300 First Officer must in interpreting the Collective Bargaining Agreement between
serve PAL for at least three years failing which he should reimburse the Philippine Airlines, Inc. (PAL) and the Airline Pilots Association of the
training expenses, rendered judgment in favor of Almario. Philippines (ALPAP) as an ordinary civil law contract applying
The trial court denied Almario’s claim for moral damages, however. 16 It ordinary contract law principles which is contrary to the ruling of
denied too Almario’s claim for the monetary equivalent of his family trip the Supreme Court in Samahang Manggagawa sa Top Form
pass benefits (worth US$49,824), it holding that the same had been Manufacturing-United Workers of the Philippines  (SMTFM-UWP) v.
forfeited as he did not avail of them within one year from the date of his NLRC and, therefore, erroneously reading into the CBA a clause that
separation. was not agreed to during the negotiation and not expressly stated in
Thus the trial court disposed: the CBA;
WHEREFORE, in view of the foregoing, the Court hereby renders judgment B. Whether the Court of Appeals committed reversible error
in favor of defendant Vicente Almario and against the plaintiff: in holding that Article 22 of the Civil Code can be applied to recover
training costs which were never agreed to nor included as
1- Dismissing the plaintiff’s complaint; reimbursable expenses under the CBA;
2- Ordering the plaintiff to pay the defendant: C. Whether the availing by petitioner of a required training is a legal
a- the amount of ₱312,425.00 as actual damages with legal ground justifying the entitlement to a benefit and therefore,
interest from the filing of the counterclaim; negating claims of unjust enrichment;
b- the amount of ₱500,000.00 as exemplary damages; D. Whether the failure of private respondent to honor and provide
c- the amount of ₱150,000.00 as attorney’s fees; the Family Trip Pass Benefit in the equivalent amount of US$
49,824.00 which petitioner and his family were not able to avail of
d- the costs of the suit.
within the one (1) year from date of separation due to the actions of
17
SO ORDERED. PAL amounts to unjust enrichment;
On appeal by both parties, 18 the Court of Appeals, by Decision 19 dated E. Whether or not respondent is liable for malicious
March 31, 2005, reversed the trial court’s decision. It found Almario prosecution[.]24 (Underscoring supplied)
liable under the CBA between PAL and ALPAP and, in any event, under
Almario insists on the absence of any written contract or explicit provision in
Article 22 of the Civil Code. Thus it disposed:
the CBA obliging him to reimburse the costs incurred by PAL for his training.
WHEREFORE, the appealed Decision is REVERSED and SET ASIDE. In lieu And he argues:
thereof, a new judgment is hereby ENTERED, as follows: (a) Appellee
[T]here can be no unjust enrichment because petitioner was entitled to the
Vicente Almario is hereby ordered to pay appellant Philippine Airlines, Inc.
benefit of training when his bid was accepted, and x x x PAL did not suffer
the sum of Five Hundred Fifty Nine Thousand, Seven Hundred [T]hirty Nine
any injury because the failure to include a reimbursement provision in the
& 9/100 Pesos (₱559, 739.90) with six percent (6%) interest as above-
CBA was freely entered into by the negotiating parties;
computed; and (b) the award of exemplary damages and attorney’s fees in
xxxx
It is not disputed that the petitioner merely entered a bid for a higher xxxx
position, and that when he was accepted based on seniority and Section 1, Article XXIII of the 1985-1987 CBA provides:
qualification, the position was awarded to him. It is also not disputed that
Pilots fifty-five (55) years of age or over who have not previously qualified in
petitioner [had] not asked, requested, or demanded for the training. It came
when his bid was accepted by PAL; any Company turbo-jet aircraft shall not be permitted to bid into the
Company’s turbo-jet operations. Pilots fifty-five (55) years of age or over
Because the training was provided when the bid was accepted, the who have previously qualified in the company’s turbo-jet operations may be
acceptance of the bid was the basis and legal ground for the training; by-passed at Company option, however, any such pilot shall be paid the by-
Therefore, since there is a legal ground for the entitlement of the training, pass pay effective upon the date a junior pilot starts to occupy the bidded
contrary to the ruling of the Court of Appeals, there can be no unjust position.
enrichment;25 (Underscoring supplied) x x x PAL x x x proposed to amend the provision in this wise:
The petition fails. The compulsory retirement age for all pilots is sixty (60) years. Pilots who
As reflected in the above-enumerated issues raised by Almario, he cites the reach the age of fifty-five (55) years and over without having previously
case of Samahang Manggagawa sa Top Form Manufacturing-United qualified in any Company turbo-jet aircraft shall not be permitted to occupy
Workers of the Philippines (SMTFM-UWP) v. NLRC 26 (Manggagawa) in any position in the Company’s turbo-jet fleet. Pilots fifty-four (54) years of
support of his claim that the appellate court erred in interpreting the CBA as age and over are ineligible for promotion to any position in Group I. Pilots
an ordinary civil law contract and in reading into it "a clause that was not reaching the age of fifty-five (55) shall be frozen in the position they
agreed to during the negotiation and not expressly stated in the CBA." currently occupy at that time and shall be ineligible for any further
On the contrary, the ruling in Manggagawa supports PAL’s position. Thus movement to any other positions.
this Court held: PAL’s contention is basically premised on prohibitive training costs. The
The CBA is the law between the contracting parties – the collective return on this investment in the form of the pilot promoted is allegedly five
bargaining representative and the employer-company. Compliance with a (5) years. Considering the pilot’s age, the chances of full recovery [are]
CBA is mandated by the expressed policy to give protection to labor. In the asserted to be quite slim.
same vein, CBA provisions should be "construed liberally rather than ALPAP opposed the proposal and argued that the training cost is offset by
narrowly and technically, and the courts must place a practical and realistic the pilot’s maturity, expertise and experience.
construction upon it, giving due consideration to the context in which it is By way of compromise, we rule that a pilot should remain in the position
negotiated and purpose which it is intended to serve." This is founded on where he is upon reaching age fifty-seven (57), irrespective of whether or
the dictum that a CBA is not an ordinary contract but one impressed with not he has previously qualified in the Company’s turbo-jet operations. The
public interest. It goes without saying, however, that only provisions rationale behind this is that a pilot who will be compulsorily retired at age
embodied in the CBA should be so interpreted and complied with. Where a sixty (60) should no longer be burdened with training for a new position.
proposal raised by a contracting party does not find print in the CBA, it is not But if a pilot is only at age fifty-five (55), and promotional positions are
a part thereof and the proponent has no claim whatsoever to its available, he should still be considered and promoted if qualified, provided
implementation.27 (Emphasis and underscoring supplied) he has previously qualified in any company turbo-jet aircraft. In the latter
In N.S. Case No. 11-506-87, "In re Labor Dispute at the Philippine Airlines, case, the prohibitive training costs are more than offset by the maturity,
Inc.," the Secretary of the Department of Labor and Employment (DOLE), expertise, and experience of the pilot.
passing on the failure of PAL and ALPAP to agree on the terms and Thus, the provision on age limit should now read:
conditions for the renewal of their CBA which expired on December 31,
1987 and construing Section 1 of Article XXIII of the 1985-1987 CBA, held: Pilots fifty-seven (57) years of age shall be frozen in their positions. Pilots
fifty-five (55) [sic] years of age provided they have previously qualified in
any company turbo-jet aircraft shall be permitted to occupy any position in xxxx
the company’s turbo-jet fleet.28 (Emphasis and underscoring supplied) Atty. Parinas:
The above-quoted provision of Section 1 of Article XXIII of the 1985-1987 Q: Can you point to the provision in this agreement relating to the three (3)
CBA, as construed by the DOLE Secretary, was substantially incorporated in year period you stated a while ago?
the 1991-1994 CBA between PAL and ALPAP 29 as follows:
NOTE: Witness going over the document shown to him by counsel.
Pilots fifty-seven (57) years of age shall be frozen in their position. Pilots
who are less than fifty-seven (57) years of age provided they have previously Witness:
qualified in any company’s turbo-jet aircraft shall be permitted to occupy A: It is on page 99 of the Collective Bargaining Agreement, Article 23,
any position in the company’s turbo-jet fleet. 30 Miscellaneous.
The same section of Article XXIII of the 1991-1994 CBA was reproduced in Atty. Parinas: I would like to manifest that this provision pointed out by the
the 1994-2000 CBA.31 witness is already marked as Exhibit B-1 by the plaintiff.
Arturo Gabanton, PAL’s Senior Vice President for Flight Operations, xxxx
testifying on PAL’s "policy or practice" on underwriting the training costs of [Atty. Parinas]
its pilots at the time Almario was trained, with the "expectation" of
Q: Mr. witness, Exhibit B-1 states in part that "Pilots, 57 years of age shall be
benefiting therefrom "in order to recover the cost of training," explained:
frozen in their position. Pilots who are less than 57 years of age provided
Atty. Parinas: they have been previously qualified in any company’s Turbo-Jet Aircraft
Q: At the time the defendant was accepted for training as A300 First Officer, shall be permitted to occupy any position in the company’s Turbo-jet Fleet",
would you know what was the governing policy or practice of Philippine why do you say this is the basis for the three (3) year period within which a
Airlines that was being employed regarding the training cost[s] for the pilot must render service to the company after completing the training?
pilots? [Witness]
Witness: A: The reason why 57 years old is placed here in the Collective Bargaining
A: The company has to spend for the training of the pilots and after that Agreement [is that] it is expected that you serve the position for three (3)
the company expecting that services will be rendered in order to recover years because the retirement age is at 60, therefore, if you are past 57 years
the cost[s] of training. old, it will fall short of the three (3) years recovery period for the company.
Atty. Parinas: So it was established that [anyone] past 57 years old will not be allowed to
train for another position.33 (Emphasis and underscoring supplied)
Q: You stated that the pilot must serve the company after completing the
training, for how long after completing the training? It bears noting that when Almario took the training course, he was about 39
years old, 21 years away from the retirement age of 60. Hence, with the
Witness: maturity, expertise, and experience he gained from the training course, he
A: At least for three (3) years. was expected to serve PAL for at least three years to offset "the prohibitive
Atty. Parinas: costs" thereof.
Q: What is your basis in saying that a pilot must serve the company after The pertinent provision of the CBA and its rationale aside, contrary to
completing the training? Almario’s claim, Article 22 of the Civil Code which reads:
Witness:
A: That is embodied in the Collective Bargaining Agreement between
Philippine Airlines and the Airline Pilot Association of the Philippines.32
Art. 22. Every person who through an act of performance by another, or any to reimburse the costs of training without violating the principle of unjust
other means, acquires or comes into possession of something at the enrichment.1âwphi1
expense of the latter without just or legal ground, shall return the same to Following the computation by the appellate court which was arrived at by
him, offsetting the respective claims of the parties, viz:
applies.
Training Cost P851,107.00
This provision on unjust enrichment recognizes the principle that one may
not enrich himself at the expense of another. An authority on Civil Less: Appellee's corresponding 8 months
Law34 writes on the subject, viz: Service after training [P850,107.00
Enrichment of the defendant consists in every patrimonial, physical, or divided by 36 months (3 years)
moral advantage, so long as it is appreciable in money. It may consist of = P23,640.86 x 8 months] 189,126.88
some positive pecuniary value incorporated into the patrimony of the
defendant, such as: (1) the enjoyment of a thing belonging to the plaintiff;
(2) the benefits from service rendered by the plaintiff to the defendant; (3) Equals P661,980.12
the acquisition of a right, whether real or personal; (4) the increase of value
of property of the defendant; (5) the improvement of a right of the
defendant, such as the acquisition of a right of preference; (6) the Less: Accrued Benefits 102,240.22
recognition of the existence of a right in the defendant; and (7) the
improvement of the conditions of life of the defendant.
Net Reimbursable Amount or
xxxx Appellee's Outstanding Account P559,739.9036
The enrichment of the defendant must have a correlative prejudice, *****************
disadvantage, or injury to the plaintiff.1âwphi1 This prejudice may consist, Almario must pay PAL the sum of ₱559,739.90, to bear the legal interest
not only of the loss of property or the deprivation of its enjoyment, but also rate of 6% per annum from the filing of PAL’s complaint on February 11,
of non-payment of compensation for a prestation or service rendered to the 1997 until the finality of this decision.
defendant without intent to donate on the part of the plaintiff, or the failure
In light of the foregoing discussions on the main issue, the Court finds it
to acquire something which the latter would have obtained. The injury to
unnecessary to dwell on the other issues raised by Almario. Suffice it to
the plaintiff, however, need not be the cause of the enrichment of the
state that the appellate court’s disposition thereof is, as its decision reflects,
defendant. It is enough that there be some relation between them, that the
well-taken.
enrichment of the defendant would not have been produced had it not
been for the fact from which the injury to the plaintiff is derived. WHEREFORE, the petition is DENIED and the decision appealed from
(Underscoring supplied)35 is AFFIRMED.
Admittedly, PAL invested for the training of Almario to enable him to Costs against petitioner.
acquire a higher level of skill, proficiency, or technical competence so that SO ORDERED.
he could efficiently discharge the position of A-300 First Officer. Given that,
PAL expected to recover the training costs by availing of Almario’s services
for at least three years. The expectation of PAL was not fully realized,
however, due to Almario’s resignation after only eight months of service
following the completion of his training course. He cannot, therefore, refuse