Case Summary (G.R. No. 133638)
Facts: travel arrangements and cancellation dispute
Respondents (three Cebu-based businessmen) purchased confirmed PAL roundtrip tickets through Rainbow Tours for Cebu–Manila–Hong Kong travel, scheduled PR842 (Cebu–Manila, 25 Feb 1991), PR300 (Manila–Hong Kong, 26 Feb 1991 at 8:00 a.m.), and return PR301/PR512 (1 Mar 1991). On 23 February 1991, Mr. Lao Lim inquired at Rainbow Tours about seats on a later PR310 (5:00 p.m.) flight; Rainbow’s agent Gemma Dingal contacted PAL Reservations. Plaintiffs did not cancel their confirmed bookings at that time. On 26 February 1991, at NAIA check-in, PAL personnel informed Lao Lim and Go that their PR300 bookings had been cancelled and their names were not on the passenger list; Limtong was able to board PR300. Lao Lim and Go claimed they pleaded to be allowed to board but were refused; they departed on the later PR301 at 5:00 p.m. Plaintiffs allege humiliation by PAL staff who called their tickets “cheap tickets” and that missed business meetings in Hong Kong resulted in lost transactions worth P3,567,000. Plaintiffs sued for breach of contract of carriage, moral and exemplary damages, temperate damages, and attorney’s fees.
PAL’s defense and Rainbow Tours’ role
PAL impleaded Rainbow Tours, asserting that Rainbow’s agent instructed cancellation and rebooking. PAL relied on its Post Date Investigation Print-out and witness testimony (Racil Corcuera, Rosy Mancao) to show that Gemma Dingal of Rainbow called PAL to change the itinerary on 23 February 1991; encoders attempted to put plaintiffs on waitlist for PR310 and requested reinstatement of PR300 bookings but encountered errors and critical status due to overflows and a cancelled PR300 on 25 February 1991. Rainbow Tours’ witnesses (Gemma Dingal, Ruby Lim) testified that Racil erroneously cancelled bookings without Gemma’s instruction and that efforts to reinstate bookings failed.
Trial court and CA rulings
The Regional Trial Court (RTC) rendered judgment on 18 June 1996, holding PAL and Rainbow jointly liable, awarding P75,000 temperate damages to Lao Lim and to the heirs of Go, and P25,000 attorney’s fees (aggregate), plus costs. Both plaintiffs and PAL appealed. The CA (March 22, 2005) modified the RTC award substantially: it awarded moral damages of P50,000 and exemplary damages of P50,000 to each of Lao Lim and the heirs of Go; temperate damages of P100,000 to each plaintiff (including Limtong); and aggregate attorney’s fees of P60,000; it denied PAL’s claim for contribution from Rainbow and maintained joint and several liability. PAL’s motion for reconsideration at the CA was denied (July 15, 2005).
Issue: suspension of proceedings during rehabilitation
PAL argued that proceedings should have been suspended because it was under rehabilitation receivership. The Supreme Court held that this issue was moot and academic because PAL’s rehabilitation status had been terminated by the SEC effective 28 September 2007; thus suspension no longer presented an obstacle to proceedings against PAL.
Standard for breach of contract of carriage
The Court reiterated the governing tenet for actions based on breach of contract of carriage: the aggrieved party need not prove fault or negligence by the common carrier; proof of the existence of the contract and its non-performance suffices. The trial court found Lao Lim and Go held confirmed tickets and were not transported, a factual finding affirmed by the CA and entitled to conclusive effect in the Supreme Court absent recognized exceptions. Accordingly, PAL breached its contract of carriage as to Lao Lim and Go.
Credibility findings and appellate deference
PAL challenged Rainbow agent Gemma Dingal’s testimony as inconsistent or coached. The Supreme Court found the alleged inconsistencies inconsequential and deferred to the trial court’s credibility assessments, emphasizing that trial-level credibility findings, when affirmed by the CA, are accorded the highest degree of respect and will not be disturbed.
Moral damages for the heirs of the late Henry Go
The Court examined the award of moral damages (P50,000) to the heirs of deceased Go. Citing prior jurisprudence, the Court held that an award of moral damages requires clear showing that the complainant personally experienced mental anguish, wounded feelings, besmirched reputation, sleepless nights, or similar injury; the best witness is the complainant himself. Because Henry Go did not testify and there was no evidence presented to substantiate his subjective suffering, the award of moral damages to his heirs lacked factual basis and was improper. The Supreme Court therefore deleted the award of moral damages in favor of the substituted heirs of the late Henry Go.
Temperate (moderate) damages for Lao Lim and Go; denial for Limtong
The New Civil Code (Art. 2224) authorizes temperate damages when pecuniary loss is suffered but the amount cannot be proved with certainty. The trial and appellate courts found that Lao Lim and Go traveled to Hong Kong for business negotiations and failed to meet their contacts due to denial of boarding, which likely caused loss of business opportunity. Given the difficulty of proving exact pecuniary loss, the award of temperate damages (as given by the CA) was upheld for Lao Lim and Go. Conversely, Manuel Limtong was able to board PR300 as booked; the contract of carriage was not breached as to him, and thus he was not entitled to temperate damages. The Supreme Court deleted the temperate damages award insofar as it applied to Limtong.
Exemplary damages and bad faith
Exemplary damages (Art. 2229) may be imposed in addition to compensatory damages where the act was accompanied by bad faith, wantonness, fraud, oppression, or malice. The Court found exemplary damages warranted for Go (and applied generally to the facts as to Lao Lim by the CA) because PAL and Rainbow Tours’ employees acted in concert to conceal from plaintiffs the erroneous cancellation and the critical status of their bookings. Testimony indicated an agreement between PAL personnel and Rainbow’s agent not to inform the passengers to avoi
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Case Caption and Citation
- Supreme Court of the Philippines, Third Division; G.R. No. 168987; Decision dated October 17, 2012; reported at 697 Phil. 497.
- Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by Philippine Airlines, Inc. (PAL) seeking reversal of the Court of Appeals (CA) Decision of March 22, 2005 and its Resolution of July 15, 2005 denying PAL’s Motion for Reconsideration.
- Petitioners: Philippine Airlines, Inc. (petitioner in the Supreme Court; defendant-appellant and third-party plaintiff-appellee in the CA).
- Respondents: Francisco Lao Lim, the heirs/substituted plaintiffs of the late Henry Go, Manuel Limtong, and Rainbow Tours and Travel, Inc. (third-party defendant-appellee).
Case Background and Parties’ Business Purposes
- Plaintiffs/Respondents were Cebu-based businessmen intending to purchase weighing scales from Mrs. Ng Yuen Ming of Hong Kong and printing press equipment from Mrs. Myrna Irsch (Irche) of Germany, requiring in-person meetings in Hong Kong on 26 February 1991 to conclude agreements and sign contracts.
- Francisco Lao Lim engaged Rainbow Tours and Travel, Inc. to secure air transportation; he purchased three (3) confirmed PAL roundtrip tickets on 22 February 1991 for himself, Henry Go and Manuel Limtong.
- The itinerary purchased: Link-Flight PR842 Cebu-Manila on 25 February 1991 at 12:05 P.M.; Flight PR300 Manila-Hongkong on 26 February 1991 at 8:00 A.M.; return on PR301 Hongkong-Manila on 1 March 1991 at 11:05 A.M. with connecting Link-Flight PR512 Manila-Cebu at 2:50 P.M. the same day.
Chronology of Relevant Events and Flight Transactions
- 23 February 1991: Lao Lim visited Rainbow Tours to inquire about availability of seats on PAL Manila-Hongkong flight on 26 February 1991 at 5:00 P.M.; he was referred to Rainbow Tours travel agent Gemma Dingal who contacted PAL Reservations. Gemma was informed that seats for the 5:00 P.M. flight were unavailable.
- Plaintiffs did not cancel their confirmed bookings after that inquiry.
- 25 February 1991: Plaintiffs boarded PR842 (Cebu-Manila) as scheduled.
- 26 February 1991, at NAIA check-in: PAL’s check-in clerk informed Francisco Lao Lim and Henry Go that their bookings on PR300 (8:00 A.M.) had been cancelled and their names not on the passenger list; Manuel Limtong nevertheless was able to board PR300.
- 26 February 1991, 5:00 P.M.: Lao Lim and Go took Flight PR301 (Manila-Hongkong) subsequently to reach Hong Kong later than scheduled.
Plaintiffs’ Allegations and Claims
- Plaintiffs sued PAL for breach of contract of carriage and damages.
- They alleged humiliating treatment by PAL check-in personnel who allegedly shouted at them, labeled their tickets “cheap tickets,” and humiliated them before other passengers; they sought moral damages of P350,000.00 each for injury to feelings and reputation.
- Plaintiffs alleged consequential pecuniary losses from failure to reach Hong Kong for scheduled business conferences: loss of opportunity to purchase weighing scales from Mrs. Ng (last-day offer) and inability to consummate printing press purchases from Mrs. Irche, resulting in claimed lost profits of P3,567,000.00.
- Plaintiffs also sought exemplary damages and attorney’s fees.
PAL’s Defense and Third-Party Claim Against Rainbow Tours
- PAL asserted plaintiffs were revenue passengers whose travel arrangements were made through Rainbow Tours.
- PAL impleaded Rainbow Tours as third-party defendant, seeking contribution, indemnity, subrogation and other reliefs.
- PAL’s factual defense: cancellation of Lao Lim’s and Go’s confirmed bookings for PR300 on 26 February 1991 was made upon instruction of Gemma Dingal of Rainbow Tours; Gemma allegedly called PAL’s Racil Corcuera on 23 February 1991 at 10:46 A.M. and directed cancellation and rebooking instructions.
PAL’s Account of Reservation Handling and Reinstatement Attempts
- PAL witness Racil Corcuera testified that Gemma instructed cancellation of original confirmed bookings and requested placing plaintiffs on waitlist for PR310 (5:00 P.M. on 26 February 1991) and to book PR511 (Cebu-Manila) at 12:10 P.M. to connect to PR310; she also requested reinstatement of PR300 but Racil initially requested reinstatement for PR300 on February 25 instead of February 26, then corrected the request three hours later.
- Multiple requests for reinstatement were made but received no response from the flight controller; Racil was told by Violy of the Manila Office that the request was on critical status due to overflow and cancellation of the PR300 flight on 25 February 1991.
- PAL employees Rosy Mancao, Lyndon Maceren and Lito Camboanga made several efforts but plaintiffs’ bookings for PR300 could not be confirmed.
- PAL witness Rosy Mancao testified that PAL and Rainbow Tours agreed not to tell plaintiffs about the erroneous cancellation and critical status because “if they inform the plaintiffs it would just create further problems.”
- PAL witness Mariano Aldee III, assigned at the Check-In Counter, disputed plaintiffs’ claim of rude treatment and explained PAL policies and practices regarding courteous passenger handling, training, corporate policy ("Total Passenger Care"), administrative sanctions for discourtesy, and supervisory accountability.
Rainbow Tours’ Testimony and Position
- Rainbow Tours presented Gemma Dingal and Ruby Lim (one owner of Rainbow Tours) as witnesses.
- Gemma testified she called PAL merely to inquire about seat availability for the 5:00 P.M. flight and was surprised when Racil immediately cancelled confirmed bookings without instruction from Gemma or Lao Lim; Gemma and Ruby Lim attempted immediate reinstatement but were unsuccessful.
Trial Court Decision (Regional Trial Court, June 18, 1996)
- Trial court rendered judgment ordering PAL and Rainbow Tours to jointly and severally pay:
- P75,000.00 to Francisco Lao Lim as reasonable temperate or moderate damages;
- P75,000.00 to substituted plaintiff-heirs of the late Henry Go as reasonable temperate or moderate damages;
- Aggregate of P25,000.00 as attorney’s fees.
- Costs against PAL and Rainbow Tours.
- The trial court thus awarded temperate/moderate damages to Lao Lim and heirs of Henry Go and attorney’s fees, among other relief.
Court of Appeals Decision (March 22, 2005)
- CA found PAL breached its contract of carriage with Lao Lim and Go.
- CA modified trial court’s disposition and ordered PAL and Rainbow Tours, jointly and severally, to pay:
- To Francisco Lao Lim: P50,000.00 moral damages and P50,000.00 exemplary damages for breach of contract of carriage.
- To substituted heirs of the late Henry Go: P50,000.00 moral damages and P50,000.00 exemplary damages for breach of contract of carriage.
- To each of the plaintiffs: P100,000.00 temperate or moderate damages.
- Aggregate P60,000.00 as attorney’s fees.
- Denied PAL’s claim for contribution, indemnity, subrogation and other reliefs from Rainbow Tours for lack of merit.
- Costs against PAL and Rainbow Tours.
Supreme Court Issues Presented by Petitioner
- PAL raised the following principal contentions in its petition:
- The CA and its Resolution did not resolve PAL’s November 3, 1998 motion to suspend proceedings on ground of PAL’s rehabilitation receivership.
- Lao Lim and the late Henry Go were not holding confirmed bookings for PR300 on 2