G.R. No. 142029 - Francisco vs. Ferrer, Jr.

On November 19, 1992, Mrs. Rebecca Lo and her daughter Annette Ferrer placed an order for a three-layer wedding cake from the Fountainhead Bakeshop, Mango Avenue Branch.
The order was made in anticipation of a wedding scheduled for December 14, 1992 at the Cebu Country Club, with the understanding that the cake would be delivered at 5:00 o’clock in the afternoon.
Payment was made in two installments: an initial deposit of ₱1,000.00 on the day of the order followed by full payment of the remaining balance two weeks later.

On the wedding day, December 14, 1992, the plaintiffs, upon arriving at the Cebu Country Club around 6:00 o’clock in the evening, discovered that the cake had not been delivered.
A follow-up call was made at 7:00 o’clock in the evening; the explanation provided was a probable delay due to heavy traffic.
At 8:00 o’clock in the evening, the plaintiffs were informed that no wedding cake would be delivered because the order slip had been lost.
Faced with the absence of the pre-ordered cake as a key element of their ceremony, the plaintiffs were forced to purchase the only available cake at the venue—a sans rival—which they deemed an inadequate substitute for a wedding cake.
At 10:00 o’clock in the evening, a cake finally arrived; however, it was a two-layer cake rather than the agreed three-layer cake, and the plaintiffs refused to accept it.

Defendant Erlinda Francisco later sent a letter of apology accompanied by a ₱5,000.00 check as an attempt to compensate for the failure of delivery; however, the plaintiffs rejected this offer on the grounds that it was insufficient.
Approximately two weeks after the wedding, Erlinda Francisco made a telephone call to Mrs. Rebecca Lo reiterating her apology.
Additionally, Ricardo Ferrer, the son-in-law of Mrs. Rebecca Lo, confirmed that Ramon Montinola, Erlinda Francisco’s son-in-law, had personally visited the plaintiffs’ residence to offer ₱5,000.00 as indemnification, which was also rejected.

On March 12, 1993, the respondents (plaintiffs in the original contract dispute) filed an action for breach of contract with damages against the petitioners.
The Regional Trial Court (RTC) rendered a decision on May 19, 1995, awarding the plaintiffs:

On May 25, 1995, petitioners appealed the RTC decision to the Court of Appeals.
The Court of Appeals, promulgating its decision on July 05, 1999, modified the RTC award by substantially increasing the moral damages to ₱250,000.00 and adding exemplary damages of ₱100,000.00, along with reiterating the cost of the wedding cake, attorney’s fees, and litigation costs.
A petition for review on certiorari was subsequently filed, leading to the Supreme Court’s intervention in the case.

Whether the Court of Appeals erred in affirming and increasing the trial court’s award of moral damages from ₱30,000.00 to ₱250,000.00.

The petitioners contended that moral damages are recoverable in breach of contract cases only when the breach is accompanied by conduct that is palpably wanton, reckless, malicious, in bad faith, oppressive, or abusive.

Whether the Court of Appeals was justified in awarding exemplary damages of ₱100,000.00 in addition to the moral damages.

The issue centers on whether there was a demonstrated element of bad faith or egregious misconduct justifying an award of exemplary damages beyond compensatory measures.

The broader legal inquiry as to the proper basis for awarding moral and exemplary damages in breach of contract actions.

Whether the evidence in the case suffices to establish that petitioners acted with the dishonesty or negligence requisite for such damages.