Case Summary (G.R. No. 190601)
Factual Background
Petitioners contracted with respondent for their wedding reception to be held on July 28, 2001 at the Shangri-la Hotel Makati. Respondent scheduled an initial food tasting and a final food tasting prior to the event. Petitioners claim they requested preparations for seven persons at the tastings; respondent prepared for only six at the initial tasting. Petitioners initially chose a P1,000.00 per person main course which included king prawns but accepted an alternative salmon course at P950.00 per person during the initial tasting.
Contract Formation and Price Negotiation
Three days before the reception the final food tasting took place and petitioners alleged that the salmon served was smaller than in the initial tasting; respondent quoted P1,200.00 for the larger portion previously served. The parties eventually agreed on a final menu price of P1,150.00 per person. The Banquet and Meeting Services Contract was faxed July 26, 2001, and the Banquet Event Order was signed July 25, 2001; the final price was finalized on July 27, 2001.
Events During the Reception
Petitioners alleged that respondent’s representatives, Catering Director Bea Marquez and Sales Manager Tessa Alvarez, did not remain at the reception despite assurances; that there was delay in dinner service; that items in the published menu were unavailable; that waiters were rude and unapologetic; that Alvarez had promised no charge for extension beyond midnight but petitioners were billed PHP 8,000.00 per hour for three hours’ extension; and that wine and liquor brought by petitioners under an open bar arrangement were not served, forcing guests to pay for drinks.
Procedural History in the Trial Court
Petitioners sent a letter-complaint to respondent and received an apologetic reply from Krister Svensson, respondent’s Executive Assistant Manager in charge of Food and Beverage. Petitioners then filed a complaint for breach of contract and damages before the RTC of Makati City. Respondent answered, alleging among others that petitioners requested a combination of king prawns and salmon which justified the P1,200.00 price later discounted to P1,150.00; that Marquez and Alvarez were present though not permanently stationed because three other hotel functions coincided with the reception; and that delay in service resulted from an unanticipated increase in guests to 470 from the guaranteed minimum of 350 and maximum of 380 as stated in the Banquet Event Order.
Trial Court Findings and Judgment
By Decision of August 17, 2006, the trial court rendered judgment for petitioners and awarded PHP 350,000.00 as actual damages, PHP 250,000.00 as moral damages, PHP 100,000.00 as exemplary damages, and PHP 100,000.00 as attorney’s fees, with costs against respondent. The trial court relied heavily on Svensson’s apology letter and construed its tenor as an admission that respondent’s service was “unacceptable and definitely not up to our standards.”
Court of Appeals Ruling
The Court of Appeals reversed the trial court by Decision of July 27, 2009. It held that the proximate cause of the confusion, inconvenience and disarray during the reception was the unexpected increase in the number of guests, a circumstance attributable to petitioners. The appellate court therefore concluded that respondent could not be held liable for consequential inconveniences that stemmed from petitioners’ failure to control their guest list and to inform respondent adequately.
Issues Presented on Review
On certiorari review petitioners challenged the Court of Appeals’ factual and legal conclusions. The principal legal issues before the Supreme Court were whether the doctrine of proximate cause applies in actions arising from breach of contract and whether respondent breached its contractual obligations notwithstanding the increase in guests and the contract terms.
Contractual Liability and Applicable Law
The Supreme Court explained that the doctrine of proximate cause is applicable only in actions for quasi-delicts and not in actions involving breach of contract, because contractual obligations derive from the parties’ agreement while quasi-delictual obligations are created by law. The Court held that Article 1170, Civil Code governs contractual liability for fraud, negligence or delay in the performance of obligations. The Court cited the principle that in culpa contractual the existence of a contract and its nonperformance prima facie establish a right to relief and that breach of contract obliges the breaching party to make recompense unless extenuating circumstances such as due diligence or fortuitous event excuse liability.
Application of the Contract Terms
The Court examined the pertinent clauses of the parties’ Banquet and Meeting Services Contract, particularly paragraphs 4.3 and 4.5. Paragraph 4.3 provided that the engager shall be billed for the minimum guaranteed number regardless of under attendance and shall be billed for actual covers in excess of the minimum if attendance exceeded the guarantee. Paragraph 4.5 required the engager to inform the hotel at least forty-eight hours before the function of any change in the minimum guaranteed covers and stated that if actual attendance exceeded the minimum by ten percent the hotel would not be held liable for any damage or inconvenience caused thereby and that the engager should advise guests and take steps to remedy the situation. The Court found that petitioners failed to notify respondent of the increase in guests from the guaranteed minimum and that, under paragraph 4.5, respondent was excused from liability for the inconveniences caused by attendance exceeding the guaranteed number.
On the Letter of Krister Svensson and Admission
The Supreme Court addressed the trial court’s reliance on Svensson’s apologetic letter as an admission of liability. The Court agreed with the Court of Appeals that such statements are common in the service industry to pr
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Case Syllabus (G.R. No. 190601)
Parties and Procedural Posture
- SPOUSES LUIGI M. GUANIO AND ANNA HERNANDEZ-GUANIO were the plaintiffs below and the petitioners before the Court.
- MAKATI SHANGRI-LA HOTEL AND RESORT, INC., ALSO DOING BUSINESS UNDER THE NAME OF SHANGRI-LA HOTEL MANILA was the defendant below and the respondent before the Court.
- The petitioners filed a complaint for breach of contract and damages before the Regional Trial Court of Makati City, Branch 148.
- The RTC rendered judgment in favor of the petitioners and awarded P350,000.00 actual damages, P250,000.00 moral damages, P100,000.00 exemplary damages, and P100,000.00 attorney’s fees.
- The Court of Appeals reversed the RTC and held that the petitioners’ unexpected increase in guests was the proximate cause of the alleged injuries.
- The petitioners filed a petition for review with the Supreme Court which partially reversed the Court of Appeals.
Key Factual Allegations
- The petitioners booked the hotel for their wedding reception and scheduled an initial food tasting which they claimed was prepared for seven persons but was served for only six.
- The petitioners initially selected a set menu with a main course priced at P1,000.00 per person and accepted an option of salmon at P950.00 per person during the initial tasting.
- At a subsequent tasting three days before the reception, the petitioners alleged the salmon served was half the size previously offered and that the hotel then quoted P1,200.00 for the larger portion.
- The parties ultimately agreed on a final menu price of P1,150.00 per person and finalized their written contract the day before the event.
- During the reception the petitioners alleged that the Catering Director and Sales Manager failed to appear as promised, service of dinner was delayed, certain menu items were unavailable, and waiters acted rudely and unapologetically.
- The petitioners alleged that the hotel billed them P8,000.00 per hour for a three-hour extension to 4:00 A.M., contrary to a promise that no charge would be made for extension beyond midnight.
- The petitioners alleged that brought wine and liquor under an open bar arrangement were not served and that guests were compelled to pay for their drinks.
- The petitioners sent a letter-complaint and received an apologetic reply from the hotel’s Executive Assistant Manager, Krister Svensson.
Contract Terms
- The parties executed a Banquet and Meeting Services Contract and a Banquet Event Order which the Court treated as the written law between the parties.
- Paragraph 4.3 of the contract provided that the ENGAGER would be billed for the minimum guaranteed number of persons regardless of underattendance and would be billed for any attendance in excess of the minimum.
- Paragraph 4.5 of the contra