CATHAY PACIFIC AIRWAYS v. SPS. VASQUEZ G.R. No.

150843
March 14, 2003 Davide Jr., CJ.
TOPIC IN SYLLABUS: Common Carrier
SUMMARY: Spouses Vasquezes, 2 friends and a maid were booked on a Cathay flight from HK to Manila. While
maid booked for Economy class, the rest of the group booked Business Class. When they were about to board,
the Vasquezes were informed that they had been upgraded to First Class. But they refused because they were
going to discuss business with their 2 companions. In the end, they acceded because they were told that they
could no longer be retransferred to BC as the same has been overbooked already. Vasquezes filed case for
breach of contract and damages. Court held that although there was a breach of contract, the Vasquezes were
not entitled to damages because the breach was not attended by bad faith. Under Economic Regulation No. 7, an
overbooking that does not exceed 10% 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 10% and no passenger was ever bumped off or was refused to board
the aircraft.

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 were given their boarding passes, to wit, BUSINESS CLASS for
Vasquezes and 2 friends, ECONOMY for the maid. They went to the BC passenger 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 Cathay for humiliation and embarrassment
caused by its employees and a written apology from 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 weeks time.
No feedback come deadline, so Vasquezes filed a case for DAMAGES against Cathay. Asked for
temperate, moral, exemplary and attys 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.
Overbooking of the BC section constituted bad faith on Cathay.
CATHAYS ARGUMENT: 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 other guests 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.

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 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. Nominal100k for each
plaintiff; Moral2M each; Exemplary5M each; Attys fees1M each.
CA: Deleted exemplary. Reduced awards. There was a novation without the Vasquezes consent and breach.

ISSUES: WoN Cathay is guilty of breach of contract in upgrading the seats without Vasquezes consent? Y.
WoN the upgrade was tainted with fraud or bad faith? N.
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 passengers 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 Cathays 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 was attended 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 through willful 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.
o Economic 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 aircraft

DAMAGES: 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 Cathays 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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