Morris vs. Court of Appeals

Moral damages are not recoverable for breach of a contract of carriage in the absence of fraud or bad faith on the part of the carrier, except where the breach results in the death of a passenger. Exemplary damages require that the act be accompanied by bad faith or done in a wanton, fraudulent, or malevolent manner, and a prior award of compensatory damages must exist; where moral and exemplary damages are disallowed, an award of attorney’s fees cannot stand.

Petitioners Collin A. Morris and Thomas P. Whittier, American citizens and executives of a foreign corporation with regional headquarters in Makati City, held confirmed first-class reservations on Scandinavian Airlines System (SAS) Flight SK 893 from Manila to Tokyo, scheduled to depart at 3:50 p.m. on February 14, 1978. They were to attend a series of business meetings in Japan. When they presented themselves at the SAS check-in counter at the Manila International Airport, they were informed that no seats remained and were denied boarding. Their names, previously listed in the first-class section of the flight manifest, had been crossed out and marked “NOSH” (no show). The airline had upgraded economy class passengers to first class upon closing the flight manifest. Claiming they were wrongfully bumped off despite timely arrival and confirmed bookings, petitioners commenced an action for damages for breach of contract of air carriage before the Regional Trial Court of Makati.

• Parties and Nature of the Action: Petitioners Collin A. Morris and Thomas P. Whittier, American citizens and executives of Sterling Asia, held confirmed first-class reservations on respondent Scandinavian Airlines System (SAS) Flight SK 893, Manila to Tokyo, on February 14, 1978. They filed a complaint for damages for breach of contract of air carriage, alleging they were wrongfully bumped off despite a confirmed booking.

• The Confirmed Booking and Purpose of Travel: Petitioners requested their travel agent, Staats Travel Service, Inc., to book them as first-class passengers on the Manila-Tokyo flight. SAS booked them accordingly for the 3:50 p.m. departure. Their trip involved a series of business meetings with Japanese businessmen from February 14 to 22, 1978.

• Arrival at the Airport: A limousine service fetched petitioner Morris at his residence in Urdaneta Village, Makati City, at 1:30 p.m. on the day of the flight. They proceeded to Merville Park, Parañaque, and picked up petitioner Whittier at around 2:00 p.m. The group arrived at the Manila International Airport at 2:35 p.m.

• Check-in Attempt and Denial of Boarding: After clearing customs in two to three minutes, petitioners approached the SAS check-in counter and presented their travel documents to SAS employee Erlinda Ponce. After approximately fifteen minutes, they observed that their documents were not being processed. They were told that no seats remained and that they could not be accommodated. Petitioner Morris contacted the travel agency, which confirmed their booking with SAS’s office. When petitioners returned to the check-in counter, it was already closed. Ms. Ponce and SAS supervisor Raul Basa refused to entertain their inquiries. Reviewing the flight manifest, petitioners saw their names crossed out at the top of the first-class list. Mr. Basa stated that the flight was closed and nothing could be done. Petitioners confirmed they were at the check-in counter at around 3:10 p.m., exactly when the flight manifest was closed; the flight was scheduled to depart at 3:50 p.m.

• Respondent’s Account: SAS employee Erlinda Ponce testified that the economy class was overbooked but the first-class section was open. According to her, petitioners were not accommodated because they checked in after the flight manifest had been closed — forty minutes before departure. Their first-class seats were given to economy class passengers who were upgraded three minutes before the manifest closed, and the notation “NOSH” (no show) was placed beside petitioners’ names. Supervisor Raul Basa met petitioners at about 3:20 p.m. and learned from Ms. Ponce that they had arrived late; waitlisted economy passengers had already been upgraded. A ticketing and reservation supervisor confirmed that petitioners held confirmed reservations but that upgrading economy passengers to first class was not SAS’s policy if first-class booked passengers showed up.

• Trial Court’s Findings and Modification: The Regional Trial Court believed petitioners’ version, found that they were wrongfully bumped off in bad faith, and awarded moral damages of P1,000,000.00 to Morris and P750,000.00 to Whittier, exemplary damages of P200,000.00, and attorney’s fees of P300,000.00. Upon petitioners’ motion for reconsideration, the trial court increased the moral damages to P1,500,000.00 for Morris and P1,000,000.00 for Whittier.

• Appellate Reversal: The Court of Appeals set aside the trial court’s decision and dismissed the complaint, holding that petitioners’ testimony was self-serving and that they failed to prove they checked in on time. The appellate court credited the airline’s evidence that petitioners were denied boarding due to late arrival.

• Error in Reversing Trial Court’s Findings: Petitioners contended that the Court of Appeals gravely erred in dismissing their complaint and in characterizing their testimonies as self-serving. They argued that the trial court did not act arbitrarily in giving credence to their evidence and in concluding that they were wrongfully and in bad faith bumped off from the flight despite their timely arrival and confirmed first-class bookings.

• Entitlement to Damages: Petitioners maintained that they were entitled to the damages awarded by the trial court because the airline’s refusal to board them was attended by bad faith. They asserted that the evidence sufficiently established their arrival at the airport in time for check-in and that the deletion of their names and the upgrading of economy passengers constituted a deliberate and injurious breach of the contract of carriage.

• Lack of Cause of Action — Late Check-in: Respondent SAS argued that petitioners had no cause of action because they presented themselves for check-in only after the flight manifest had been closed and after their first-class seats had been allotted to waitlisted economy class passengers. The airline’s evidence, particularly the testimony of its check-in staff and supervisor, showed that petitioners arrived after the closure of the manifest, making their exclusion a consequence of their own delay rather than a wrongful act.

• Bad Faith and Damages: Whether moral and exemplary damages may be awarded for breach of a contract of air carriage absent proof of fraud or bad faith on the part of the carrier.

• Timeliness of Check-in: Whether petitioners established, by credible evidence, that they presented themselves for check-in before the flight manifest was closed.

• Bad Faith and Damages: The award of moral damages could not stand because the record did not support a finding that respondent airline acted with fraud or bad faith. Moral damages are recoverable in an action based on breach of contract of carriage only where the passenger dies as a result of the breach, or where it is proved that the carrier was guilty of fraud or bad faith. Bad faith imports a dishonest purpose, moral obliquity, conscious wrongdoing, or a breach of a known duty through motive, interest, or ill will partaking of the nature of fraud; it is more than bad judgment or negligence. Respondent’s refusal to board petitioners was occasioned by their failure to check in on time, a fact that negated any imputation of malice or dishonest design. Exemplary damages were likewise unwarranted because they require that the act be committed in a wanton, fraudulent, or malevolent manner and that compensatory damages be awarded — both requisites were absent.

• Timeliness of Check-in: The Court of Appeals did not err in finding that petitioners failed to prove they checked in before the manifest closed. Petitioner Morris admitted that they were at the counter at around 3:10 p.m., the very moment the flight manifest was closed, and SAS supervisor Basa testified that he met them only at about 3:20 p.m. This evidence, credited by the appellate court, established that petitioners’ late arrival, rather than any wrongful act of the airline, caused their exclusion from the flight. The deletion of moral and exemplary damages necessarily entailed the deletion of the award of attorney’s fees.

• Moral Damages in Culpa Contractual (Breach of Contract of Carriage) — In a suit for breach of contract of carriage, moral damages may be recovered only when: (a) the breach results in the death of a passenger, or (b) it is proved that the carrier acted fraudulently or in bad faith. This doctrine, distilled from Singson v. Court of Appeals, Cervantes v. Court of Appeals, and Yobido v. Court of Appeals, was applied to deny petitioners’ claim because their failure to check in on time removed any factual support for a finding of carrier bad faith.

• Definition of Bad Faith — Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose, some moral obliquity, the 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. Even if a breach of contract were assumed, the airline’s act of upgrading economy passengers to fill first-class seats after the manifest closed, without more, did not satisfy this standard.

• Exemplary Damages Prerequisites — An award of exemplary damages requires that the act be accompanied by bad faith or done in a wanton, fraudulent, or malevolent manner, and that compensatory damages have been awarded. The absence of bad faith and the failure to establish compensatory damages precluded exemplary damages.

• Consequential Deletion of Attorney’s Fees — Where the award of moral and exemplary damages is eliminated, the award of attorney’s fees must likewise be deleted, as held in Orosa v. Court of Appeals.

• “The contract of air carriage … generates a relation attended with a public duty. Neglect or malfeasance of the carrier’s employees naturally could give ground for an action for damages.” — This passage, cited from Philippine Airlines, Inc. v. Court of Appeals, underscores the heightened responsibility of an air carrier but also frames the subsequent limitation: liability for damages still depends on the nature and quality of the breach.

• “Moral damages are generally not recoverable in culpa contractual except when bad faith had been proven. However, the same damages may be recovered when breach of contract of carriage results in the death of a passenger.” — This articulation of the rule from Yobido v. Court of Appeals served as the central premise for reversing the award.

• “Bad faith does not simply connote bad judgement or negligence, it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of known duty through some motive or interest or ill will that partakes of the nature of fraud.” — The Court relied on this definition from Tan v. Northwest Airlines, Inc. to conclude that the airline’s conduct did not rise to the level of bad faith.

• Philippine Airlines, Inc. v. Court of Appeals, 341 Phil. 624 (1997) — Quoted for the principle that an air carrier sustains a relation attended with public duty, generating potential liability for neglect or malfeasance.

• Cervantes v. Court of Appeals, 304 SCRA 25 (1999) — Cited as authority for the requirement that moral damages in breach of contract of carriage require wanton, deliberate injury or fraudulent/bad-faith conduct.

• Tan v. Northwest Airlines, Inc., G.R. No. 135802, March 3, 2000 — Followed for the rule that where no fraud or bad faith is shown, liability is limited to foreseeable consequences and does not include moral and exemplary damages; also provided the controlling definition of bad faith.

• Yobido v. Court of Appeals, 346 Phil. 1 (1997) — Applied for the rule that moral damages are not recoverable in culpa contractual except when bad faith is proven or death results.

• Singson v. Court of Appeals, 346 Phil. 831 (1997) — Cited for the formulation that moral damages in a breach of contract of carriage suit are recoverable only where death results or the carrier is guilty of fraud or bad faith.

• Orosa v. Court of Appeals, G.R. No. 111080, April 5, 2000 — Applied as the basis for deleting the award of attorney’s fees once the awards for moral and exemplary damages were eliminated.

N/A

Note: The decision did not explicitly cite specific articles of the Civil Code. The principles on moral and exemplary damages applied by the Court are rooted in Articles 2217, 2220, 2231, and 2232, but the ponencia relied entirely on jurisprudential formulations.

Davide, Jr., C.J., Puno, Kapunan, and Ynares-Santiago, JJ., concurred.