LOPEZ V PAN AM WORLD AIRWAYS

16 SCRA 431BENGZON; March 30, 1966

FACTS
- Sen Fernando Lopez, his wife, his son-in-law, and his daughter made reservations,
through
their
agency,
for
first class accommodations in the Tokyo San
Francisco
flight
of
PAN-AM.
PAN-AM's
SF
head
office
confirmed
the reservations. First class tickets were subsequently issued, with the
total fare having been fully paid before this.- As scheduled, they left Manila
and as soon as they arrived in Tokyo, they contacted PAN-AM's Tokyo office
regarding their accommodations. For the given reason that the first class seats were all
booked up, PAN-AM's Tokyo office informed them that they could not go in
that flight unless they took the tourist class. Due to pressing engagements in
the US, they were constrained to take PAN-AM's flight as tourist passengers.Sen Lopez
filed
suit for
damages
alleging
breach
of c o n t r a c t s i n b a d f a i t h b y d e f e n d a n t o u t o f r a c i a l prejudice against
Orientals. He asked for P500T actual and moral damages, P100T exemplary damages,
P25Tattorney's fees plus costs.- PAN-AM asserted that its failure to provide first class
accommodations to plaintiffs was due to honest error of its employees. It
interposed a counterclaim for atty's fees of P25T.- CFI Rizal decision: in favor of
plaintiff
and
granted
(a)
P100Tm o r a l d a m a g e s ; ( b ) P20T, e x e m p l a r y damages; (c)
P25T, atty's fees, and costs of the action.- Plaintiffs filed MFR asking that moral
damages be increased to P400T and for 6% interest per annum on amount
to be granted.- CFI modified decision: (a)P150T, moral damages; (b) P25T, exemplary
damages; with legal interest on both from date of filing of complaint until paid;
(c)P25T,atty's fees; and costs of the action.- Both appealed: PAN-AM contended that
there was NO bad faith; Lopez et al wanted a total of P650T as award for damages.
ISSUES
1. WON there was bad faith on the part of PAN-AM2. WON the amount of damages
should be increased
HELD 1. YES
ReasoningDefendant through its agents first cancelled
p l a i n t i f f s , r e s e r v a t i o n s b y m i s t a k e a n d t h e r e a f t e r deliberately and
intentionally withheld from plaintiffs their travel agent such information. In so
misleadingp l a i n t i f f s i n t o p u r c h a s i n g f i r s t c l a s s t i c k e t s i n t h e convi
ction that they had confirmed reservations, when in fact they had none, defendant
wilfully and knowingly placed itself into the position of having to breach its
contracts with plaintiffs should there be no last-minute cancellation by other passengers
before flight time, as it turned out in this case. Bad faith means a breach of a known
duty through some motive of

interest or ill-will. - At any rate, granting all the mistakes advanced by the defendant,
there would at least be negligence so gross and reckless as to amount to malice or bad
faith.
2. YES
Ratio
Moral damages are recoverable in breach of contracts where the defendant
acted fraudulently or in bad faith (Art. 2220). Exemplary or corrective damages may be
imposed by wa y of example or correction for t h e
p u b l i c g o o d , i n b r e a c h o f c o n t r a c t w h e r e t h e defendant acted
in a wanton, fraudulent, reckless, oppressive or malevolent manner (Art. 2229,
2232). A written contract for an attorney's services shall control the amount to be
paid there for unless found by the court to be unconscionable
or unreasonable (Sec. 24,Rule 138, ROC).
- F a c t o r s i n d e t e r m i n i n g A m o u n t f o r M o r a l Damages:
The amount of damages awarded in this appeal has been determined by
adequately considering the official, political, social, and financial standing
of the offended parties on one hand, and the business and financial position of the
offender on the other. The present rate of exchange and the terms at
which the amount of damages awarded would approximately be in U.S. dollars has
also been considered.
(a) MORAL DAMAGES
- As a proximate result of defendant's breach in bad faith of its contracts with
plaintiffs, the latter suffered
social humiliation, wounded feelings, serious anxiety and mental anguish. It
may not be humiliating to travel as tourist passengers; it is humiliating
to be compelled
to travel as such, contrary to what is rightfully to be expected from the
contractual undertaking.- Sen Lopez was then Senate President
Pro Tempore. International carriers like defendant know the prestige of such
an office. For the Senate is not only the Upper Chamber of the Philippine
Congress, but the nation's treaty-ratifying body. He was also former Vice-President
of the Philippines. (MD = P100T)- Mrs. Maria Lopez, as wife of the Senator,
shared his prestige and therefore his humiliation. In addition she suffered physical
discomfort during the 13-hour trip; her reason for going to the US was actually
for medical c h e c k - u p a n d r e l a x a t i o n . T h e f a c t t h a t t h e s e a t i n g
spaces in the tourist class are quite narrower than in
first class will suffice to show that she indeed
experienced physical suffering during the trip. (MD = P50T)- Mr. and Mrs.
Alfredo Montelibano, Jr., were travelling as immediate members of the family of
Sen Lopez. E v e n i f t h e y i n i t i a l l y w a n t e d
to change their seatreservations from first class to tourist clas
s , t h e y eventually paid for first class seats. Hence, they also suffered
social humiliation. (MD = P25T each)
(b) EXEMPLARY DAMAGES

- In view of its nature, it should be imposed in such an

a m o u n t a s t o e f f e c t i v e l y d e t e r s i m i l a r b r e a c h o f contracts
in the future by defendant or other airlines.(ED = P75T)
(c) ATTORNEYS FEES
- Record shows a written contract of services wherein plaintiffs engaged the
services of their counsel Atty. Francisco and agreed to pay the sum of
P25T upon the termination of the case in the CFI, and anotherP25T if
case is appealed to the SC. This is
reasonablec o n s i d e r i n g t h e s u b j e c t m a t t e r o f t h e p r e s
e n t controversy, the professional standing of the attorney or plaintiffsappellants, and the extent of the service rendered by him.
Disposition
J u d g m e n t a p p e a l e d f r o m i s h e r e b y MODIFIED so as to
a w a r d i n f a v o r o f p l a i n t i f f s a n d against defendant, the following:(1) P200T
a s m o r a l d a m a g e s , d i v i d e d a m o n g plaintiffs;(2) P75T
as exemplary or corrective damages;(3) Interest at the legal rate of 6% per
annum on the moral and exemplary damages, from date of amended CFI
decision, until said damages are fully paid;(4) P50T as attorney's fees; and(5)
Costs
of action. Counterclaim dismissed.