Cathay Pacific v. Spouses Vasquez, GR No. 150843, 3:4:2003

Cathay Pacific v. Spouses Vasquez, GR no.
150843, 3/4/2003
FACTS:
•Cathay is a common carrier engaged in the business of transporting passengers and
goods by air. It services the Manila-Hongkong-Manila course, among many others.
•As part of its marketing strategy, it accords its frequent flyers membership in its Marco Polo
Club. Members enjoy priority for upgrading of booking without any extra charge whenever
opportunity arises. So a frequent flyer booked in Business Class has priority for upgrading to
First Class if the Business Class Section is fully booked.
•Dr. Vasquez and Maria Vasquez are frequent flyers of Cathay and are Gold Card
members of the Polo Club. On Sept 1996, Vasquezes with their maid and 2 friends Cruz and
De Dios went to HK for pleasure and business.
•For their return flight on Sept 28, 1996, they were booked on a Cathay flight at
9:20pm. 2 hours before, they checked in their luggage and weregiven their boarding
passes, to wit, BUSINESS CLASS for Vasquezes and 2 friends, ECONOMY for the maid.
Theywent to the BCpassenger lounge.
•Boarding time. They went to the Departure Gate 28, designated for BC passengers. Dr.
Vasquez presented his boarding pass to the stewardess. It was inserted into an electronic
machine reader or computer. Another ground attendant Chiu assisted. When Chiu glanced at
the monitor, she saw a message that there was a “seat change” from BC to First Class for the
Vasquezes.
•Dr. Vasquez REFUSED the upgrade because they had 2 guests who will be in the BC and they
would be discussing business during the flight. The stewardess insisted saying that BC is already
fully booked and that if they would not avail, they would not be allowed to take the flight.
Vasquezes acceded and took the First Class Cabin.
•In a letter, the Vasquezes demanded 1M indemnification from Cathayfor “humiliationand

embarrassment” caused by its employees and a written apologyfrom a person from Cathay
preferably with a rank of no less than Country Manager and Mrs. Chiu w/in 15 days.•Asst.
Country Manager Robson informed them that Cathay would investigate the incident and get
back to them within a week’s time.
•No feedback come deadline, so Vasquezes filed a case for DAMAGES against Cathay.
Asked for temperate, moral, exemplary and atty’s fees.
VASQUEZES’ARGUMENT:When they refused Ms. Chiu, she obstinately, uncompromisingly

and in a loud, discourteous and harsh voice threatened that they could not board unless they
acceded.
•Because he was not assisted by any of the crew in putting up his luggage, his bilateral
carpal tunnel syndrome was aggravated, causing him extreme pain on his arm and wrist.
•Overbookingof the BC section constituted bad faith on Cathay.
CATHAY’SARGUMENT:It is a practice among commercial airlines to upgrade passengers to the
next better class of accommodation, whenever an opportunity arises, such as when a certain
section is fully booked.
•When Dr. Vasquez refused, he stood at the entrance of the boarding apron and blocked other
passengers. He shouted. Ms. Chiu thought of upgrading their 2 otherguests but they were not
qualified. When she tried booking them again to BC, it was already fully booked. She POLITELY
told them of such fact.
•Employee acted in GOOD FAITH. None of them shouted, humiliated, embarrassed, committed
any act of disrespect against them. Assuming there was a breach, they acted in GF
negating their liability for damages.
•If any damage has been suffered, it was DAMNUM ABSQUE INJURIA, damage
without injury. Overbooking that does not exceed 10% is not deliberate and in BF.
RTC: In favor of Vasquezes. The upgrading of passengers was a pretext to pack as many
passengers as possible to maximize its revenues. Deceit, gross negligence, bad faith
present.
Nominal—100k for each plaintiff; Moral—2M each; Exemplary—5M each; Atty’s fees—1M
each.
CA: Deleted exemplary. Reduced awards. There was a novation without the Vasquezes’ consent
and breach.
ISSUES:WoN Cathay is guilty of breach of contractin upgrading the seats without Vasquezes’
consent?Y.WoN the upgrade was tainted with fraud or bad faith?
HELD:THERE WAS BREACH OF CONTRACT.BUT NO BF/FRAUD, SO NO DAMAGES.
•A contract of carriage existed between Cathay and the Vazquezes. They voluntarily and
freely gave their consent to an agreement whose object was the transportation of the
Vazquezes from Manila to Hong Kong and back to Manila, with seats in the Business Class
Section of the aircraft, and whose cause or consideration was the fare paid by the
Vazquezes to Cathay.
•Breach of contract is defined as the “failure without legal reason to comply with the terms of a
contract.”
•In previous cases, the breach consisted in either the bumping off of a passenger with
confirmed reservation or the downgrading of a passenger’s seat accommodation from one
class to a lower class. In this case, what happened was the reverse.
•In all their pleadings, the Vazquezes never denied that they were members of Cathay’s Marco
Polo Club. They knew that as members of the Club, they had priority for upgrading of their seat
accommodation at no extra cost when an opportunity arises.
•But, just like other privileges, such priority could be waived. The Vazquezes should
have been consulted first whether they wanted to avail themselves of the privilege or
would consent to a change of seat accommodation before their seat assignments were
given to other passengers. . They clearly waived their priority or preference when they asked
that other passengers be given the upgrade. It should not have been imposed on them
over their vehement objection. By insisting on the upgrade, Cathay breached its contract
of carriage with the Vazquezes.
•We are not, however, convinced that the upgrading or the breach of contract wasattended by
fraud or bad faith.
•Bad faith and fraud are never presumed and are allegations of fact that demand clear
and convincing proof.The Vazquezes were not induced to agree to the upgrading through
insidious words or deceitful machination or throughwillful concealment of material facts. She
was honest in telling them that their seats were already given to other passengers and the
Business Class Section was fully booked.
•Neither was the transfer of the Vazquezes effected for some evil or devious purpose. Needless
to state, an upgrading is for the better condition and, definitely, for the benefit of the
passenger.
•We are not persuaded by the Vazquezes’ argument that the overbooking of the Business Class
Section constituted bad faith on the part of Cathay.oEconomic Regulation No. 7 of the Civil
Aeronautics Board:“...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.”
•It is clear from this section that an overbooking that does not exceed ten percent is not
considered deliberate and therefore does not amount to bad faith. Here, while there was
admittedly an overbooking of the Business Class, there was no evidence of overbooking of the
plane beyond ten percent, and no passenger was ever bumped off or was refused to board the
aircraftDAMAGES: 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. THUS NO MORAL DAMAGES in this
case.The deletion of the award for exemplary damages by the Court of Appeals is
correct. It is a requisite in the grant of exemplary damages that the act of the offender
must be accompanied by bad faith or done in wanton, fraudulent or malevolent
manner.The most that can be adjudged in favor of the Vazquezes for Cathay’s breach of
contract is an award for nominal damages under Article 2221 of the Civil Code.
Nonetheless, considering that the breach was intended to give more benefit and
advantage to the Vazquezes by upgrading their Business Class accommodation to First
Class because of their valued status as Marco Polo members, we reduce the award to P5,000

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Cathay Pacific v. Spouses Vasquez, GR no.

•In a letter, the Vasquezes demanded 1M indemnification from Cathayfor “humiliationand

VASQUEZES’ARGUMENT:When they refused Ms. Chiu, she obstinately, uncompromisingly

HELD:THERE WAS BREACH OF CONTRACT.BUT NO BF/FRAUD, SO NO DAMAGES.

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