G.R. No. 108670 September 21, 1994
LBC EXPRESS, INC., petitioner, vs. THE COURT OF APPEALS, ADOLFO M. CARLOTO, and RURAL BANK OF LABASON, INC., respondents.

FACTS

Private respondent Adolfo Carloto, manager of Rural Bank of Labason, needed funds for a business trip to Manila to settle his bank’s rediscounting obligations with the Central Bank. His sister, Elsie Carloto-Concha, consigned via LBC’s Dipolog branch the necessary documents and P1,000.00 cash for Carloto in Cebu City on November 16, 1984. The documents arrived on November 17, but the cashpack did not. Despite Carloto’s follow-ups, LBC failed to deliver the money. The cashpack was eventually returned to the shipper in Dipolog upon her request. Carloto claimed he only received the money on December 15, 1984. He alleged that due to the delay, he failed to submit documents to the Central Bank on time, resulting in a P32,000.00 penalty interest charged to his bank. He also claimed suffering embarrassment. LBC countered that the cashpack was delivered to Carloto’s Cebu address on November 22, but he was absent; a claim notice was left, and when unclaimed, the item was returned to the shipper on November 23.

ISSUE

The core issues were: (1) whether the Rural Bank, as a corporation, could be awarded moral damages; (2) whether the award of P32,000.00 as reimbursement for the penalty interest was proper; and (3) whether moral and exemplary damages were rightly awarded against LBC.

RULING

The Supreme Court reversed the Court of Appeals and dismissed the complaint. On the first issue, the Court held that a corporation, being an artificial person with no feelings, emotions, or senses, cannot experience mental anguish or social humiliation and is therefore not entitled to moral damages. On the second and third issues, the Court found no basis for awarding damages against LBC. The right to moral damages is equitable and requires the claimant to come with clean hands. Carloto was not without fault; his claim that the P1,000.00 was indispensable for his Central Bank transaction was untenable, as he stated it was for entertaining people. Furthermore, the evidence did not establish that LBC acted with bad faith or gross negligence. The cashpack was consigned on a Friday and sent to Cebu on the next business day, negating gross neglect. In breach of contract cases, absent fraud or bad faith, liability is limited to natural and foreseeable consequences, excluding moral damages. Since no bad faith was proven, the award of exemplary damages, which requires wanton, fraudulent, or oppressive conduct, also had no legal basis. Consequently, all awards were set aside.