Moral Damages  Moral damages – P2M each
399 SCRA 207 – Cathay Pacific v. Vasquez  Exemplary damages – P5M each
Davide, CJ.
Respondents Spouses Vasquez are seeking to recover damages from petitioner Cathay
Pacific for forcing them to take upgraded first class seats when they wanted to stay in their
business class bookings. The Court ruled that there was a breach of contract on the part of
the petitioner, but held that the Spouses are not entitled to moral damages in the absence
of bad faith by Cathay Pacific.
DOCTRINE
Moral damages predicated upon a breach of contract of carriage may only be recoverable
in instances where the carrier is guilty of fraud or bad faith or where the mishap resulted in
the death of a passenger.
FACTS
1. Respondents-spouses Dr. Daniel Vasquez and Maria Luisa Vasquez are frequent flyers
of Cathay Pacific and are members of its Marco Polo Club. The members of such club
enjoy several privileges including priority for upgrading of booking without any extra
charge whenever an opportunity arises.
2. The Spouses, together with their maid and their friends Pacita Cruz and Josefina Vergel
de Dios, went to Hong Kong for business and pleasure. For their return flight to Manila,
the Vasquezes and their friends booked business class seats with Cathay Pacific.
3. When they were about to board, the Vasquezes were informed that they had been
upgraded to first class; however, the Spouses, not wanting to be disrespectful to their
companions and intending to discuss business with them during the flight, insisted that
they remain in the seats they booked in business class.
4. The ground attendant Ms. Chiu was instructed to convince the Spouses to accept the
upgraded seats because the business class was overbooked. Ms. Chiu thus told the
Spouses that if they do not accept the first class seats, they would not be allowed
to board the flight. The Spouses were therefore forced to sit in first class. :(
5. Upon their return to Manila, the Vasquezes wrote to Cathay Pacific, demanding P1M
for the embarrassment they had experienced. The Spouses also wanted a written
apology from the management of Cathay, as well as an apology from Ms. Chiu.
6. Cathay Management informed the Spouses that they would investigate the matter, but
failed to give them any feedback. As such, the Spouses filed an action for damages
against Cathay, praying for the payment to each of them the amounts of P250k -
temperate damages; P500k - moral damages; P500,000 - exemplary damages; and
P250,000 - attorney’s fees. Allegations:
 Ms. Chiu humiliated the Spouses because she had told them in front of all the
other passengers in a harsh, discourteous voice that they have to take the
first class seats.
 The Spouses were unduly delayed in boarding the flight because of the
incident. When they finally permitted to board, the forward storage
compartment was already full. Dr. Vasquez thus had to store his luggage in
the overhead compartment. He was not assisted by any of the crew members
in doing so, which aggravated his bilateral carpal tunnel syndrome.
7. The RTC ruled in favor of the Spouses, holding that there was a breach of
contract when the Spouses were forced to sit in first class when those were not
the seats of their choice. It also held that there was bad faith on the part of Cathay
in overbooking the flight, entitling the Spouses to damages:
 Nominal damages – P100k each
 Attorney’s fees – P1M each
8. The CA also held that there was a breach of the contract of carriage. However, it
was not convinced that Ms. Chiu acted in bad faith. It reasoned that Ms. Chiu’s voice
might have sounded discourteous to the Spouses who are not used to being harangued
in any way because they are part of the elite in Philippine society; and, because Ms.
Chiu, being a Hong Kong Chinese, might have an accent that sounds harsh or shrill
due to cultural differences.
 Nominal damages – P50k each
 Moral damages – P250k each
 Exemplary damages – deleted
 Attorney’s fees – P1M each
ISSUE with HOLDING
1. W/N there was a breach of the contract of carriage – YES
 Breach of contract is defined as the failure without legal reason to comply with the
terms of a contract. It is also defined as the failure, without legal excuse, to perform
any promise which forms the whole or part of the contract.
 There was a breach in this case because the Vasquezes should have been given
the choice as to whether or not to accept the upgraded seats. They should not
have been forced to sit in first class when they booked business class tickets.
2. W/N there was bad faith on the part of Cathay Pacific – NO
 Bad faith cannot be merely presumed. They are questions of fact that need clear
and convincing proof.
 Bad faith does not simply connote bad judgment or negligence; it imports a
dishonest purpose or some moral obliquity and conscious doing of a wrong, a
breach of a known duty through some motive or interest or ill will that partakes of
the nature of fraud.
 There is no evidence of bad faith in this case.
o The Vazquezes were not induced to agree to the upgrading through
insidious words or deceitful machination or through willful concealment
of material facts.
o The upgrade was not effected for some evil or devious purpose.
Upgrades are usually meant for the benefit of the passenger.
o Overbooking does not constitute bad faith when it is not beyond 10%,
according to Section 3 of the Economic Regulation No. 7 of the Civil
Aeronautics Board (See other notes). There was no proof that the
overbooking in this case exceeded 10%.
3. W/N the Spouses are entitled to moral damages – NO
 Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and
similar injury. Although incapable of pecuniary computation, moral damages may
be recovered if they are the proximate result of the defendant’s wrongful act or
omission. Requisites:
o Injury clearly sustained by the claimant, whether physical, mental or
psychological
o A culpable act or omission factually established
o The wrongful act or omission of the defendant is the proximate cause of
the injury sustained by the claimant
o The award for damages is predicated on any of the cases stated in Article
2219 of the Civil Code (See other notes)
1
  Moral damages predicated upon a breach of contract of carriage may only (10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
be recoverable in instances where the carrier is guilty of fraud or bad faith
or where the mishap resulted in the death of a passenger. Where in breaching
the contract of carriage the airline is not shown to have acted in bad faith, liability DIGESTER: Alyssa Mateo
for damages is limited to the natural and probable consequences of the breach of
the obligation which the parties had foreseen or could have reasonably foreseen.
In such a case the liability does not include moral and exemplary damages.
 The breach of contract of carriage, which consisted in the involuntary upgrading of
the Vazquezes seat accommodation, was not attended by fraud or bad faith
(based on the ruling in the previous issue). The CA award of moral damages has,
therefore, no leg to stand on.
 (See other notes par. 2 for obiter re moral damages)

DISPOSITIVE PORTION
WHEREFORE, the instant petition is hereby partly GRANTED. The Decision of the Court of
Appeals of 24 July 2001 in CA-G.R. CV No. 63339 is hereby MODIFIED, and as modified,
the awards for moral damages and attorney’s fees are set aside and deleted, and the award
for nominal damages is reduced to P5,000. No pronouncement on costs. SO ORDERED.

OTHER NOTES
The CA was correct in deleting exemplary damages because recovery of such requires bad
faith, which is absent in this case. The most that can be adjudged to the Spouses is nominal
damages. However, considering that the breach was intended to give more benefit and
advantage to the respondents in this case, nominal damages was reduced to P5k.

The Court here also admonished the trial court for the excessive awards of damages. The
well-entrenched principle is that the grant of moral damages depends upon the discretion of
the court based on the circumstances of each case. This discretion is limited by the
principle that the amount awarded should not be palpably and scandalously
excessive as to indicate that it was the result of prejudice or corruption on the part of
the trial court.

Section 3 of the Economic Regulation No. 7 of the Civil Aeronautics Board

Sec 3. Scope. This regulation shall apply to every Philippine and foreign air carrier with
respect to its operation of flights or portions of flights originating from or terminating at, or
serving a point within the territory of the Republic of the Philippines insofar as it denies
boarding to a passenger on a flight, or portion of a flight inside or outside the Philippines, for
which he holds confirmed reserved space. Furthermore, this Regulation is designed to cover
only honest mistakes on the part of the carriers and excludes deliberate and willful acts of
non-accommodation. Provided, however, that overbooking not exceeding 10% of the seating
capacity of the aircraft shall not be considered as a deliberate and willful act of non-
accommodation.

Art. 2219. Moral damages may be recovered in the following and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;