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PHILTRANCO SERVICE ENTERPRISES v. FELIX PARAS

FACTS:

Felix Paras, a passenger of Inland Trailways, Inc., boarded a bus owned by Inland and driven by Calvin Coner. The bus was rear-ended by another bus owned by Philtranco Service Enterprises, Inc. due to which the Inland bus collided with a parked cargo truck, resulting in damages and injuries. Paras filed a complaint for damages against Inland. Inland filed a third-party complaint against Philtranco and its driver, Apolinar Miralles, seeking exoneration of its liabilities and claiming that Philtranco and Miralles were responsible for the accident due to their lack of care. The Regional Trial Court ruled in favor of Paras and ordered Philtranco and Miralles to pay him damages, attorney's fees, and costs. All parties appealed the decision to the Court of Appeals (CA).

The case involves a collision between buses owned by Inland and Philtranco. Inland filed a complaint against Philtranco and Miralles for breach of contract and negligence. The RTC found Philtranco and Miralles liable and awarded damages in favor of Paras and temperate damages in favor of Inland. Philtranco appealed to the CA, which affirmed the RTC's decision but modified the awards for actual damages and temperate damages. Philtranco filed a motion for reconsideration, but the CA denied it. Hence, this appeal before the Supreme Court.

The main issue presented by Philtranco is whether moral damages can be awarded in a case based on breach of contract of carriage. The Court holds that although moral damages are generally not recoverable in cases of breach of contract, they can be awarded if the common carrier is guilty of fraud or bad faith. In this case, Inland filed a third-party complaint against Philtranco and Miralles to establish their direct liability. Thus, the award of moral damages to Paras was proper and valid.

In the case, Inland filed a third-party complaint against Philtranco and Miralles, seeking to hold them directly and solely liable for the damages caused by the accident. The impleader of Philtranco and Miralles as third-party defendants was considered correct under the rules, as it allowed a defending party to bring in a third-party defendant for contribution, indemnity, subrogation, or any other relief in respect of the opponent's claim.

The court explained that the third-party action is proper when there is a right to relief under the substantive law and when the third-party defendant is not already a party to the action. The claim against the third-party defendant must be based on the plaintiff's claim against the original defendant, and the original defendant is attempting to transfer to the third-party defendant the liability asserted against him by the plaintiff.

ISSUES:

  1. Is the impleader of new parties proper under Rule 6 of the Rules of Court?

  2. What are the requisites for a valid third-party action?

  3. Whether or not a third party defendant can be held directly liable to the plaintiff even before the defendant is adjudged liable.

  4. Whether or not the award of temperate damages was proper.

  5. Whether Inland is entitled to compensation for unrealized income amounting to P3,945,858.50

  6. Whether Paras is entitled to temperate damages for his medical expenses

  7. Whether Inland is entitled to temperate damages for the damage to their vehicle

  8. Whether Paras is entitled to compensation for his loss of earning capacity

  9. Whether the award of temperate damages and actual damages to compensate lost earnings and costs of medicines infringe the statutory prohibition against recovering damages twice for the same act or omission.

  10. Whether the grant of attorney's fees to Paras and Inland is warranted.

  11. Whether legal interest applies to the amounts awarded.

RULING:

  1. Impleader of new parties under Rule 6 is proper only when a right to relief exists under the applicable substantive law. The third-party defendant must not yet be a party to the action, and the claim against the third-party defendant must be based upon the plaintiff's claim against the original defendant. The original defendant is attempting to transfer to the third-party defendant the liability asserted against him by the original plaintiff.

  2. The requisites for a valid third-party action are: (1) the party to be impleaded must not yet be a party to the action; (2) the claim against the third-party defendant must belong to the original defendant; (3) the claim of the original defendant against the third-party defendant must be based upon the plaintiff's claim against the original defendant; and (4) the defendant is attempting to transfer to the third-party defendant the liability asserted against him by the original plaintiff.

  3. Yes, a third party defendant can be held directly liable to the plaintiff even before the defendant is adjudged liable. Under Rule 14 of the Rules of Court, a person not a party to an action may be impleaded as a third party defendant on the ground of direct liability to the plaintiff. It is not necessary for the defendant to be first adjudged liable to the plaintiff before the third party defendant can be held liable.

  4. Yes, the award of temperate damages was proper. Actual damages must be proven with a reasonable degree of certainty and supported by receipts. In this case, the receipts presented by the plaintiff were limited to a small sum and did not include hospital and medical expenses or other costs. Therefore, the Court of Appeals properly awarded temperate damages as a reasonable alternative to compensate for the damages suffered by the plaintiff.

  5. The Court of Appeals (CA) rejected Inland's claim for unrealized income as it was deemed arbitrary, uncertain, and speculative. The CA allowed no compensation to Inland for unrealized income.

  6. The CA awarded Paras temperate damages of P50,000.00 in the absence of definite proof of his actual medical expenses. The CA concluded that Paras should not suffer from the lack of definite proof of his actual expenses for the surgeries and rehabilitative therapy.

  7. The CA awarded temperate damages of P250,000.00 to Inland for the damage to their vehicle. The CA determined that the bus had been damaged beyond economic repair, causing a substantial pecuniary loss to Inland.

  8. The CA recognized Paras' loss of earning capacity and concluded that he was entitled to compensation for unearned income during his hospital confinement and recovery and rehabilitation period. However, the CA omitted the amount of unearned income from the dispositive portion.

  9. The award of temperate damages and actual damages to compensate lost earnings and costs of medicines does not infringe the statutory prohibition against recovering damages twice for the same act or omission.

  10. The grant of attorney's fees to Paras and Inland is warranted due to their having been compelled to litigate or incur expenses to protect their interests. An increase in the award of attorney's fees is also justified considering the lapse of a long time in the prosecution of the claim.

  11. Pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals, legal interest at the rate of 6% per annum accrues on the amounts adjudged from the date when the RTC rendered its judgment. Legal interest at the rate of 12% per annum is imposed from the finality of the judgment until its full satisfaction, treating the interim period as the equivalent of a forbearance of credit.

PRINCIPLES:

  • Impleader of new parties under Rule 6 is proper only when a right to relief exists under the applicable substantive law.

  • A valid third-party action requires that the third-party defendant is not yet a party to the action, the claim against the third-party defendant belongs to the original defendant, the claim of the original defendant against the third-party defendant is based on the plaintiff's claim against the original defendant, and the defendant is attempting to transfer to the third-party defendant the liability asserted against him by the original plaintiff.

  • Article 2224 of the Civil Code allows the courts to award temperate or moderate damages when some pecuniary loss has been suffered but its amount cannot be proved with certainty.

  • Temperate damages may be awarded when definite proof of pecuniary loss cannot be provided, but the court is convinced that the aggrieved party suffered some pecuniary loss.

  • Damages for loss or impairment of earning capacity can be recovered in cases of temporary or permanent personal injury.

  • Indemnification for damages includes both the loss suffered (actual damages or damnum emergens) and the claimant's lost profits (compensatory damages or lucrum cessans).

  • Net earning capacity is the person's capacity to acquire money, less the necessary expenses for their own living.

  • The awarding of temperate damages and actual damages does not violate the prohibition against recovering damages twice for the same act or omission.

  • Attorney's fees may be granted when a party is compelled to litigate or incur expenses to protect their interests. The grant of attorney's fees may be increased depending on the circumstances of the case.

  • Legal interest accrues on the amounts awarded, with the rate determined based on the ruling in Eastern Shipping Lines, Inc. v. Court of Appeals.