Cathay Pacific Airways v. Sps.

Vazquez (2003)
Doctrine: In breach of contract cases, moral damages may only be recoverable if carrier is guilty of fraud or
bad faith, or where mishap resulted in the death of a passenger. Where in breaching the contract of carriage, the
airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and
probable consequences of the breach of the obligation which the parties had foreseen or could have reasonably
foreseen. In such a case the liability does not include moral and exemplary damages. Grant of moral damages
depends upon the courts discretion based on the circumstances of each case. But it must not be palpably and
scandalously excessive, as to indicate prejudice or corruption on the part of the trial court.
Facts:
Dr. Daniel and Mrs. Vasquez (The Sps.) are frequent flyers, and are gold card members of the Marco Polo
Club1.
o (9/24/1996) The Sps. Travelled with their maid and 2 friends to HK for pleasure and business.
o (9/28/1996) Return flight to MLA: The Sps. and 2 friends were booked for business class, and the
maid on economy class.
Upon surrender of their boarding passes at the departure gate, they were informed by the
attendant that the Sps. Vasquez (only) were reseated from BUSINESS to FIRST CLASS.
The Sps. refused the upgrade because they would not look nice as hosts to travel in first class
while their friends are in business class.
After consulting her supervisor, the attendant informed the Sps. that business class was fully
booked, and if they dont accept the privilege, the would not be allowed to fly. There was an
overbooking of the business class section.
The Sps. gave in eventually.
In Manila, the Sps. demanded from Cathay P1M and a written apology from the country manager and the
attendant, for the humiliation and embarrassment caused by its employees, within 15 days from receipt of
the letter.
o Cathay informed the Sps. that they will investigate the matter, but failed to give any feedback within
the Sps. self-imposed deadline.
The Sps. filed an aciton for damages against Cathay; prayed for P250K temperate, P500K moral, P500K
exemplary, P250K attys fees.
o

Alleged: The attendant humiliated and shouted at them; they were unjustifiably delayed; overhead storage compartment
was full; no one helped Dr. Vasquez put his baggage up in the compartment causing him extreme pain on his arm and
wrist because this aggravated his bilateral carpal tunnel syndrome; they belong to the uppermost, absolutely top elite of
Philippine financial community, and theyre amonf the wealthies persons in the Philippines.

Cathays defense: The upgrade was a common practice among commercial airlines; Dr. Vazquez blocked the queue
when he refused the upgrade, inconveniencing other passengers; its employeess acted in good faith, none of them
shouted or humiliated the Sps.; they immediately acted upon the demand letter; overbooking is a normal occurrence in
airlines, but still, no passenger was bumped off; basically, Cathays good faith negated the claim for damages.

RTC ruled in favor of the Sps2. CA affirmed RTC with adjustment on award of damages3.
Issue: WON an involuntary upgrading of an airline passengers accommodation from one class to an more
superior class at no extra cost a breach of contract of carriage that would entitle the passenger to an award of
damages.
Held: Yes, but not entitled to moral, temperate and exemplary damages. SC awarded P5K nominal damages.
1 Cathay has a Marco Polo Club (MPC) for its frequent flyers, who can enjoy the privilege, among others, priority upgrading of booking without any extra charge
whenever an opportunity arises. Example: upgrade from business class to first class.
2 awarded P 100K nominal, P2M moral, P5M exemplary, P1M attys fees.

3 Deleted exemplary, reduced moral to P250K, reduced nominal and attys fees to P50K each.

1. There was a breach of contract of carriage with the Sps. when Cathay insisted on the upgrade of
the seats. Like all other privileges, such priority upgrade could be waived. Cathay should have
consulted the Sps. first asked if they wanted to avail of the privilege or consent to the upgrade,
BEFORE giving the Sps. seats to waitlisted passengers, and automatically changed the seat
assignments.
2. Upgrade was not tainted with bad faith or fraud. No persuasive proof of bad faith or fraud. Cathay
did not employ inducement through insidious words or deceitful machination or willful concealment of
material facts. There was no bad faith on the part of the attendant; she was honest, although she might
have failed to remedy the situation.
o No bad faith in the overbooking of the business class section.
o

Sec. 3 of the Economic Regulation No. 7 of the CAB says that an overbooking that does not exceed
10% is not considered deliberate and thus, does not amount to bad faith. Here, there was no evidence
of overbooking beyond 10%, and no passenger was byumbped off or refused to board the aircraft.

o Bad faith and fraud need clear and convincing proof. Bad faith does not simply connote bad
judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing
of a wrong, a breach of a known duty through some motive or interest or ill will that partakes of the
nature of fraud. Fraud includes an inducement through insidious machination, which is a deceitful
scheme or plot with an evil or devious purpose.
3. SPS. ARE NOT ENTITLED TO MORAL DAMAGES.
o MORAL DAMAGES, Article 2220.
o Include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar injury. Although incapable of
pecuniary computation, moral damages may be recovered if they are the proximate result of
the defendants wrongful act or omission.
o Requisites for the award of moral damages:
(1) there must be an injury clearly sustained by the claimant, whether physical, mental or
psychological;
(2) there must be a culpable act or omission factually established;
(3) the wrongful act or omission of the defendant is the proximate cause of the injury
sustained by the claimant; and
(4) the award for damages is predicated on any of the cases stated in Article 2219 of the
Civil Code.
o In breach of contract cases, moral damages may only be recoverable if carrier is guilty of
fraud or bad faith, or where mishap resulted in the death of a passenger. Where in breaching the
contract of carriage, the airline is not shown to have acted fraudulently or in bad faith, liability for
damages is limited to the natural and probable consequences of the breach of the obligation which
the parties had foreseen or could have reasonably foreseen. In such a case the liability does not
include moral and exemplary damages.
o There was no evidence here that Cathays involuntary upgrade of the subject seats was
attended by fraud or bad faith.
o Grant of moral damages depends upon the courts discretion based on the circumstances of
each case. But it must not be palpably and scandalously excessive, as to indicate prejudice or
corruption on the part of the trial court.
o Exemplary damages were deleted, because it is a requisite that the act of the offender must be
accompanied by bad faith or done in wanton, fraudulent or malevolent manner. Such requisite is
absent in this case. Moreover, to be entitled thereto the claimant must first establish his right to
moral, temperate, or compensatory damages. Since the Sps. are not entitled to any of these damages,
the award for exemplary damages has no legal basis. And where the awards for moral and exemplary
damages are eliminated, so must the award for attys fees.

Nominal damages are proper here, because Cathay deferred to the CAs discretion the award thereof.
It regrets that it placed the Sps. in such a situation. But it has to be lowered to P5K because the
breach was intended to give more benefit and advantage.