Case Summary (G.R. No. 108253)
Petitioner
Lydia L. Geraldez contracted with Kenstar Travel for herself and her sister, paying P190,000.00 for the “Volare 3” European tour. She alleged breach of contractual commitments including failure to provide a European tour manager, assignment of an inexperienced guide, substandard hotel accommodations, and omission of a highlighted visit to UGC Leather Factory.
Respondent
Kenstar Travel Corporation marketed its “Volare 3” tour as including both a Filipino tour escort and an accompanying European tour manager. It denied bad faith, contending substantial compliance, and relied on disclaimers in its tour brochure.
Key Dates
- October 1989: Contract executed and payment made.
- July 9, 1991: RTC, Quezon City, Branch 80 rendered decision.
- CA Decision: Reduced awards on appeal (date not specified).
- February 23, 1994: Supreme Court decision.
Applicable Law
- 1987 Philippine Constitution (governing since 1987).
- Civil Code provisions on obligations and contracts (Articles 1338 on causal fraud; 1344 on incidental fraud; 1377 on adhesion contracts; 2208 and 2220 on moral damages).
- Rules of Court: Rule 57 §1(d) (fraud in contracting) and Rule 130 §28 (non-prejudice by third-party acts).
Facts of the Case
- Petitioner chose the “Volare 3” package ($2,990.00) advertised to include a European tour manager and first-class hotels.
- During the tour, no European manager appeared; instead, guide Rowena Zapanta, with no prior European experience, accompanied the group alone.
- Hotels proved substandard: lack of basic amenities, remote locations, unsanitary conditions.
- The UGC Leather Factory visit occurred too late for purchases.
- Petitioner filed suit for damages (Civil Case No. Q-90-4649), simultaneously pursuing administrative complaints resulting in fines against Kenstar.
Trial Court Decision
The Regional Trial Court found Kenstar negligent and in bad faith, awarding:
- P500,000.00 moral damages
- P200,000.00 nominal damages
- P300,000.00 exemplary damages
- P50,000.00 attorney’s fees
- Costs of suit
Appellate Court Decision
The Court of Appeals affirmed breach but held no malice, deleting moral and exemplary damages, and reducing:
- Nominal damages to P30,000.00
- Attorney’s fees to P10,000.00
Issue
Whether Kenstar Travel acted in bad faith or with gross negligence in failing to comply with its contractual obligations under the “Volare 3” program.
Supreme Court Ruling
The Supreme Court held that Kenstar committed fraudulent misrepresentations (dolo causante) and breached its obligations in bad faith:
- It deliberately chose an untrained guide to train her on the job, at the expense of clients’ convenience and safety.
- It failed to provide the promised European tour manager, mischaracterizing a corporate contractor as a “manager.”
- It breached specific itinerary commitments (factory visit) and misrepresented hotel quality.
- It could not escape liability through broad disclaimer clauses in an adhesion contract, nor by invoking “substantial compliance,” as public policy prohibits exculpation for fraudulent acts.
Contractual Breach and Misrepresentations
- Inexperienced guide failed to anticipate and attend basic needs, demonstrated by unattended medical emergency and failure to secure itinerary.
- No European tour manager as expressly promised in brochure.
- Highlighted factory visit rendered futile.
- Hotels were not “first-class,” lacking amenities, cleanliness, and convenient locations.
Liability for Damages
- Dolo causante (fraud in inducement) vitiated consent
Case Syllabus (G.R. No. 108253)
Background and Public Interest
- The Philippine tourism industry is a major revenue source and subject to public interest, regulation, and promotion at cabinet level.
- Existing laws and policies protect visiting foreign tourists more robustly than Filipino tourists traveling abroad.
- Judicial remedies for grievances against local travel operators are limited, often deterring Filipino tourists from pursuing claims.
Contract Formation and Tour Package Details
- In October 1989, petitioner Lydia L. Geraldez responded to newspaper advertisements by Kenstar Travel Corporation for European tours.
- Kenstar’s representative, Alberto Vito Cruz, provided a brochure and explained four tour classifications.
- Petitioner selected the “VOLARE 3” package: a 22-day Europe tour priced at US$ 2,990 per person, totaling ₱190,000 for petitioner and her sister Dolores.
- Kenstar expressly promised a Filipino tour escort and a European tour manager “knowledgeable about Europe” and “hardly a question he can’t answer.”
Alleged Breaches of Contractual Undertakings
- Absence of any European tour manager accompanying the group.
- Assignment of an inexperienced, first-time Filipino tour guide, Rowena Zapanta, unfamiliar with basic tour-guide functions and European destinations.
- Failure to visit the UGC Leather Factory at a usable time, contrary to brochure highlights promising special access and discounted purchases.
- Provision of hotels not meeting the brochure’s “first–class” description, lacking basic amenities (soap, towels, sanitary conditions) and located far from city centers.
Preliminary Attachment and Parallel Administrative Complaints
- Petitioner filed Civil Case No. Q-90-4649 against Kenstar in the RTC of Quezon City—seeking damages for breach of contract and fraud in contracting.
- The RTC granted a writ of preliminary attachment under Rule 57, Section 1(d) for fraud in contracting; attachment was lifted