SOLEDAD A. VERZOSA, PETITIONER, VS. AUGUSTO BAYTAN, ARMANDO ZACARIAS, ROSALIO RETENER, HORACIO CUSTODIO, ADORACION CUSTODIO, FELIX ANGELES, ALEJANDRO BELLEZA, SIMEON JACINTO, PA…

Verzosa versus Baytan

The Case

This is a petition for review by certiorari of a decision of the Court of Appeals, brought by Soledad Verzosa, a duly authorized public service operator who ran passenger buses under the name Try-V-Tran. She was sued by ten passengers injured when her bus collided with a freight truck, and both the trial court and the Court of Appeals held her liable for actual damages, moral damages, and attorney's fees. The case matters because it fixes the rule that a common carrier's liability to an injured passenger rests on breach of the contract of carriage, and that in such a contractual action moral damages may be awarded only upon proof of fraud or bad faith — mere negligence of the driver will not do.

Procedural History

The injured passengers filed a complaint for damages in the Court of First Instance of Manila against Soledad Verzosa and her driver, Silvino Manglicmot. Only Verzosa answered, pleading that her driver had exercised the diligence of a good father of a family and that the collision was due to the negligence of the driver of the freight truck. Upon motion of the plaintiffs, the driver Manglicmot was declared in default. After several hearings, the trial court rendered judgment ordering the defendants to pay medical expenses, lost income, the value of lost personal belongings, moral damages, attorney's fees, and the costs of suit. Verzosa appealed, and the Court of Appeals affirmed the decision except that it reduced the moral damages. Verzosa then filed this petition for review by certiorari, assigning as error the awards of moral damages and attorney's fees as contrary to law.

Facts

In 1953, Soledad Verzosa held a certificate of public convenience and operated passenger buses across Zambales, Bataan, Bulacan, Manila, and the suburbs under the name Try-V-Tran. On the fourth of September, 1953, ten passengers boarded one of her buses in Olongapo, Zambales, bound for Manila, driven by Silvino Manglicmot. Upon reaching sitio Longos in Malolos, Bulacan, the bus collided with a freight truck coming from the opposite direction.

The passengers suffered injuries. They were taken to the Malolos Provincial Hospital for emergency treatment, and some were later brought to the National Orthopedic Hospital. Most were employed by the United States Navy, while one was a dressmaker and two were school teachers. Beyond being unable to report for work during their treatment, they lost personal belongings, and the collision also destroyed two carretelas and injured the rig drivers and the horses.

The driver Manglicmot was charged with damages to property with multiple physical injuries and abortion through reckless imprudence before the Court of First Instance of Bulacan. Meanwhile, the passengers sued Verzosa and Manglicmot in Manila, seeking medical expenses, lost income, the value of lost belongings, moral damages, attorney's fees, exemplary damages, and costs. Verzosa denied liability and pointed to the negligence of the truck driver. The trial court ruled against her, and the Court of Appeals affirmed, reducing the moral damages.

Issues

• Whether or not the passengers may recover moral damages from the carrier in an action founded on breach of the contract of carriage, absent proof of fraud or bad faith.
• Whether or not the award of attorney's fees in favor of the passengers is in accordance with law and reasonable in amount.

Applicable Provisions

Article 2219 of the Civil Code provides:

Moral damages may be recovered in the following and analogous cases: (1) A criminal offense resulting in physical injuries; (2) Quasi-delicts causing physical injuries; (3) Seduction, abduction, rape, or other lascivious acts; (4) Adultery or concubinage; (5) Illegal or arbitrary detention or arrest; (6) Illegal search; (7) Libel, slander or any other form of defamation; (8) Malicious prosecution; (9) Acts mentioned in article 309; (10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

This article supplies the exclusive list of cases in which moral damages may be recovered, and the Court holds that a breach of the contract of transportation is not among them nor analogous to them.

Article 2220 of the Civil Code provides:

Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.

This is the specific provision governing moral damages in contractual breach, and it requires fraud or bad faith before such damages may be awarded.

Article 2208 of the Civil Code provides:

In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except: (1) When exemplary damages are awarded; (2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In case of a clearly unfounded civil action or proceeding against the plaintiff; (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim; (6) In actions for legal support; (7) In actions for the recovery of wages of household helpers, laborers and skilled workers; (8) In actions for indemnity under workmen's compensation and employer's liability laws; (9) In a separate civil action to recover civil liability arising from a crime; (10) When at least double judicial costs are awarded; (11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered. In all cases, the attorney's fees and expenses of litigation must be reasonable.

This provision governs the award of attorney's fees and caps it by the requirement of reasonableness.

Ruling

On the first issue, the Court held that the passengers are not entitled to moral damages. Verzosa was sentenced not for any act contrary to morals, good customs, or public policy, but merely because she is liable for the negligence of her driver. Article 1170, invoked by the respondents, merely states a general principle on damages, and as to moral damages Article 2219 is the specific provision that controls. The Court of Appeals correctly held that the liability arises from breach of the contract of carriage, and in that event moral damages are recoverable only when the defendant acted fraudulently or in bad faith under Article 2220. Here there was neither allegation nor proof of fraud or bad faith. The Court stressed that the mere carelessness of the carrier's driver does not per se constitute or justify an inference of malice or bad faith, and that to award moral damages for breach of contract without such proof would violate the clear provisions of the law and amount to unwarranted judicial legislation.

On the second issue, the Court noted that the passengers' demand letter specified no sum of money and expressly left open an extrajudicial settlement, while Verzosa's counsel denied liability on the ground that the negligence was that of the truck driver. Considering that the actual and compensatory damages awarded came to a little over eight thousand pesos, and that Article 2208 requires attorney's fees to be reasonable in all cases, the Court reduced the attorney's fees from five thousand pesos to one thousand pesos.

Doctrine

A common carrier's liability to an injured passenger arises from breach of the contract of carriage, not from quasi-delict, because a quasi-delict requires that there be no pre-existing contractual relation between the parties. In such a contractual action, moral damages are recoverable only upon proof of fraud or bad faith on the part of the carrier, as Article 2220 requires; the mere negligence of the carrier's driver does not amount to or justify an inference of malice or bad faith. Article 2219 does not include breach of the contract of transportation among the cases in which moral damages may be recovered, and a breach of contract cannot be considered an analogous case. The exception is where the passenger dies, in which case the carrier is subject to the rule on moral damages for mental anguish. Finally, attorney's fees must in all cases be reasonable, and the Court may reduce an excessive award.

Disposition

The petition was granted in part: the award of moral damages was eliminated, the attorney's fees were reduced to one thousand pesos, and the decision of the Court of Appeals was affirmed in all other respects, without special pronouncement as to costs.

Remember This

Memorize this line: in a breach of the contract of carriage, moral damages lie only where the carrier acted fraudulently or in bad faith, never on mere negligence of the driver. Examiners use this case to test the distinction between contractual and quasi-delictual liability of common carriers and the requisites for moral damages and attorney's fees.