Fernando v. Northwest Airlines

G.R. No. 212038February 8, 2017Peralta, J.Second Division

An airline's failure to verify a passenger's valid ticket and its refusal to board confirmed passengers constitute bad faith in breach of the contract of carriage, warranting moral and exemplary damages.

Doctrine

When an airline issues a ticket to a passenger confirmed for a particular flight on a certain date, a contract of carriage arises, and failure to transport him exposes the carrier to suit for breach. In such an action the passenger need only prove the contract and its non-performance; where the failure to accommodate a confirmed passenger results from inattention or lack of care, the breach amounts to bad faith or fraud entitling the passenger to moral damages under Article 2220, and to exemplary damages where the carrier acted in a wanton, oppressive or malevolent manner.

Facts

Spouses Jesus and Elizabeth Fernando, Elite Platinum World Perks Card holders of Northwest Airlines, suffered two incidents. In December 2001, a Northwest agent at Los Angeles Airport refused to verify in the computer the validity of Jesus Fernando's return ticket, causing him to be interrogated by U.S. Immigration for over two hours and be granted only a 12-day stay. In January 2002, despite confirmed bookings, boarding passes and electronic tickets, a Northwest supervisor pulled the spouses out of the boarding queue demanding coupon-type tickets and told them to buy new tickets; by the time another agent verified their valid tickets, the plane had left.

Issues and how the Court ruled

Whether Northwest breached its contract of carriage and whether the breach was attended by bad faith

Yes on both counts. A contract of carriage arose upon confirmation of the bookings, and the aggrieved party need only prove the contract and its non-performance. Contrary to the RTC and CA, the Court found bad faith: ignoring Jesus Fernando's plea to verify the ticket through his Perks Card number showed an indifferent attitude with no regard for his inconvenience and anxiety, and refusing to board confirmed passengers with boarding passes and valid electronic tickets amounts to fraud or bad faith. Passengers do not contract merely for transportation; they are entitled to kindness, respect and courtesy from the carrier's employees.

Whether the spouses are entitled to moral damages greater than that awarded, plus exemplary damages and attorney's fees

Yes. Under Article 2220, moral damages are proper in breach of contract where the defendant acted fraudulently or in bad faith, and the claimant's social and financial standing may be considered where he was subjected to contemptuous conduct despite the offender's knowledge of that standing. Moral damages were increased to P3,000,000. Exemplary damages of P2,000,000 were awarded because Northwest acted in a wanton, oppressive manner, and attorney's fees equivalent to 10% of the damages were granted under Article 2208 since the spouses were compelled to litigate.

Whether Northwest may recover on its compulsory counterclaim for damages and attorney's fees

No. The counterclaim arising from the filing of the complaint cannot be granted because the complaint was neither malicious nor unfounded; it was filed precisely to vindicate the spouses' right to damages. The commencement of an action does not per se make it wrongful, as the law does not impose a penalty on the right to litigate.

Ratio

A carrier that confirms a passenger's booking binds itself to transport him; failure to do so is a breach requiring proof only of the contract and its non-performance. Where the carrier's employees, in disregard of the extraordinary diligence demanded of common carriers, refuse simple verification of valid tickets and subject passengers to humiliation and denial of boarding, the breach is attended by bad faith, opening the carrier to moral and exemplary damages and attorney's fees.

Remember it as

💡 Two Lindas, one Platinum card: the agent who wouldn't click the computer cost Northwest P5 million.

From the Supreme Court's own index

Carriage of passengersCommon carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances.
Carriage of passengersWhen an airline issues a ticket to a passenger confirmed for a particular flight on a certain date, a contract of carriage arises; the passenger then has every right to expect that he would fly on that flight and on that date; if he does not, then the carrier opens itself to a suit for breach of contract of carriage.
Breach of contractIn an action based on a breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was at fault or was negligent; all that he has to prove is the existence of the contract and the fact of its non-performance by the carrier.
Contract of carriageThe 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. Duties— Duty to observe extraordinary diligence in their vigilance over the goods they transport; when violated.
Liability ofPassengers do not contract merely for transportation; they have a right to be treated by the carrier's employees with kindness, respect, courtesy and due consideration; they are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees; so it is, that any rule or discourteous conduct on the part of employees towards a passenger gives the latter an action fordamages against the carrier.
Attorney’s feesAttorney's fees may be awarded when exemplary damages are awarded, or a party is compelled to litigate or incur expenses to protect his interest or where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim.
Attorney’s feesCommencement of an action does not per se make the action wrongful and subject the action to damages, for the law could not have meant to impose a penalty on the right to litigate.
Exemplary damagesAwarded by way of example or correction for the public good, may be recovered in contractual obligations, if defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner; they are designed by our civil law to permit the courts to reshape behavior that is socially deleterious in its consequence by creating negative incentives or deterrents against such behavior.
Moral damagesAn award of moral damages, in breaches of contract, is in order upon a showing that the defendant acted fraudulently or in bad faith.
Moral damagesBreach of a known duty through some motive, interest or ill will that partakes of the nature of fraud; finding of bad faith entitles the offended party to moral damages.

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