Case Summary (G.R. No. 150843)
Factual Background
The Vazquezes checked in for Flight CX-905 on September 28, 1996, with confirmed Business Class seats. At boarding, Ms. Chiu informed them that, due to Business Class overbooking, their seats had been involuntarily upgraded to First Class based on their Marco Polo Club status. The Vazquezes initially refused, insisting on remaining with their guests in Business Class, but were ultimately told they could not board otherwise. They acceded under protest.
Procedural History
On October 2, 1996, the Vazquezes demanded P 1 million in indemnity and apologies for humiliation. After no substantive response, they filed suit on November 8, 1996, seeking temperate, moral, exemplary damages, and attorney’s fees. The Makati RTC (October 19, 1998) awarded each spouse P 100,000 nominal, P 2 million moral, P 5 million exemplary, and P 1 million attorney’s fees. The Court of Appeals (July 24, 2001) reduced moral to P 250,000 each, nominal to P 50,000 each, attorney’s fees to P 50,000 total, and deleted exemplary damages. Cathay petitioned for further relief.
Issues Presented
- Whether involuntary upgrading from Business to First Class without consent constitutes breach of the contract of carriage.
- Whether the upgrade was tainted by bad faith or fraud.
- Whether respondents are entitled to moral, exemplary damages, attorney’s fees, and other relief.
Breach of Contract of Carriage
A valid contract existed when respondents paid for Business Class seats and received corresponding boarding passes. The involuntary upgrade altered the agreed object of the contract without prior consent, constituting a breach. The respondents had the right to decline the upgrade and remain in Business Class; imposition of a different accommodation breached the carrier’s obligation.
Good Faith and Fraud
Fraud and bad faith require clear and convincing evidence of deceit or dishonest purpose. Cathay’s practice of upgrading loyal customers when sections are full is industry‐wide, objectively benevolent, and disclosed. No proof of insidious machination, concealment, or malicious intent by Cathay personnel was established. Overbooking within ten percent is permissible under CAB Regulation No. 7 and does not imply bad faith.
Damages Analysis
Under Articles 2219–2221 of the Civil Code, m
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Facts and Background
- Cathay Pacific Airways, Ltd. (Cathay) is a common carrier operating, among other routes, the Manila–Hong Kong–Manila service.
- As a marketing incentive, Cathay grants Marco Polo Club membership to frequent flyers, conferring priority for seat upgrades at no extra cost when higher‐class seats become available.
- Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal Vazquez (the Vazquezes) are Gold Card members of the Marco Polo Club.
- On 24 September 1996, the Vazquezes, their maid, and two friends (Pacita Cruz and Josefina Vergel de Dios) flew to Hong Kong; they were booked for the return Flight CX-905 on 28 September 1996, scheduled to depart at 9:20 p.m.
Contractual Relationship and Privileges
- The Vazquezes purchased Business Class tickets for the return flight and received corresponding boarding passes at Kai Tak Airport two hours before departure; their maid held an Economy Class pass.
- Club privileges entitled the Vazquezes to be among the first passengers considered for an upgrade to First Class if Business Class were fully booked.
- The terms of carriage formed a valid contract: Cathay’s obligation to provide Business Class seats in exchange for fare payment by the Vazquezes.
Incident and Passenger Interaction
- At boarding, ground attendant Clara Lai Han Chiu scanned Dr. Vazquez’s Business Class boarding pass and noted a computer message upgrading the Vazquezes to First Class due to full Business Class.
- Dr. Vazquez refused the involuntary upgrade, citing host‐guest considerations and the desire to discuss business in the same cabin as their friends.
- Ms. Chiu, under supervisor instruction, insisted that refusal would bar them from boarding, as Business Class was fully booked and their Club status gave them upgrade priority.
- The Vazquezes eventually acquiesced and took seats in First Class.
Procedural History
- On 2 October 1996, the Vazquezes sent a demand letter to Cathay’s Country Manager seeking P 1,000,000 for humiliation and an apology within 15 days.
- Cathay replied on 14 October 1996, promisi