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LBC EXPRESS v. CA

FACTS:

The case involves a petition for review on certiorari filed by LBC Air Cargo, Inc. (petitioner) questioning the decision of the Court of Appeals affirming the judgment of the Regional Trial Court of Dipolog City, Branch 8 (trial court). The trial court awarded moral and exemplary damages, reimbursement of P32,000.00, and costs of suit to private respondent Adolfo Carloto and Rural Bank of Labason, Inc. (respondents), but deleted the award of attorney's fees. The case arose from an incident where respondent Carloto claimed that he was instructed to proceed to Manila to follow-up the Rural Bank's plan of payment with the Central Bank. He asked his sister to send him P1,000.00 and the rediscounting papers through LBC. However, LBC failed to deliver the cashpack to him on time, resulting in his failure to submit the rediscounting papers to Central Bank on time and incurring penalty interest worth P32,000.00. Respondent Carloto then filed an action for damages against petitioner LBC. The trial court decided in favor of respondents and awarded them damages. On appeal, the Court of Appeals modified the judgment by deleting the award of attorney's fees. Petitioner LBC filed a petition for review on certiorari before the Supreme Court.

ISSUES:

  1. Whether or not respondent Rural Bank of Labason Inc., being an artificial person should be awarded moral damages.

  2. Whether or not the award of THIRTY-TWO THOUSAND PESOS (P32,000.00) was made with grave abuse of discretion.

  3. Whether or not the respondent Court of Appeals gravely abused its discretion in affirming the trial court's decision ordering petitioner LBC to pay moral and exemplary damages despite performance of its obligation.

RULING:

  1. The award of moral damages to the Rural Bank of Labason, Inc. is reversed. As an artificial person, the bank does not have feelings, emotions, or senses, and therefore, cannot experience physical suffering and mental anguish.

  2. The award of THIRTY-TWO THOUSAND PESOS (P32,000.00) is dismissed. The respondent Carloto is not without fault and his delay in submitting the rediscounting papers to the Central Bank resulted in the bank being penalized. The undue importance given to the ONE THOUSAND PESOS (P1,000.00) pocket money is not reasonable and does not warrant the award of damages.

  3. The respondent Court of Appeals gravely abused its discretion in affirming the award of moral and exemplary damages. The petitioner LBC did not act with personal malice or bad faith and their late delivery of the cashpack was not grossly negligent. Liability for damages is limited to the natural and probable consequences of the breach of the contract.

PRINCIPLES:

  • A corporation, being an artificial person, cannot be awarded moral damages as it does not have feelings or emotions.

  • The right to recover moral damages is based on equity and the party seeking it must come to court with clean hands.

  • Liability for damages in breach of contract cases is limited to the natural and probable consequences of the breach, unless the defendant acted fraudulently or in bad faith.

  • Exemplary damages may be awarded in a contractual or quasi-contractual relationship only if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.