G.R. No. 174364 ; July 30, 2009
NORTHWEST AIRLINES, Petitioner, vs. DELFIN S. CATAPANG, Respondent.

FACTS

Delfin S. Catapang, a lawyer and bank officer, purchased an airline ticket through petitioner Northwest Airlines’ authorized agent, First United Travel, Inc. (FUT). The ticket, issued for a business trip with a personal extension to the United States, explicitly contained an annotation on its restriction portion stating: “No end./7 days adv. Purchase US$50 rebooking/re-routing/cancellation fee.” This condition was agreed upon after FUT informed Catapang via telephone that Northwest would accommodate his rebooking request for an additional US$50 per change. However, upon arriving in New York, Catapang was informed by Northwest’s office that his ticket was not rebookable. At Northwest’s World Trade Center ticket office, an employee rudely insisted the ticket was a restricted type and demanded an upgrade payment of US$644 for rebooking. Compelled by his travel needs, Catapang paid under protest.
After returning to the Philippines, Catapang sent a demand letter to Northwest detailing the breach of contract and the humiliating treatment, seeking damages. Upon receiving no response, he filed a complaint for damages. The Regional Trial Court ruled in his favor, awarding actual, moral, exemplary damages, and attorney’s fees. The Court of Appeals affirmed but reduced the moral damages.

ISSUE

Whether petitioner Northwest Airlines is liable for damages arising from breach of contract and whether the awards for moral and exemplary damages and attorney’s fees are proper.

RULING

Yes, petitioner is liable. The Supreme Court affirmed the finding of breach of contract of carriage. Northwest, through its accredited agent FUT, entered into a contract with Catapang with a clear condition allowing rebooking for a US$50 fee. The subsequent refusal to honor this term at its New York office, coupled with the coercive demand for a higher payment, constituted a willful breach. The Court upheld the award of moral damages in the reduced amount of ₱400,000.00. While moral damages are not typically recoverable in mere breach of contract cases, an exception exists when the breach is palpably wanton, fraudulent, or oppressive. Here, the rude and humiliating treatment by Northwest’s employee, which caused Catapang wounded feelings, embarrassment, and humiliation, brought the case within this exception.
The award of exemplary damages was also sustained. Exemplary damages are proper in contracts of adhesion, like airline tickets, to serve as a deterrent against future misconduct when the defendant acted in a wanton, fraudulent, or oppressive manner. Northwest’s arbitrary refusal to honor its own ticket condition and its employee’s discourteous conduct justified this award. However, the Court deleted the award of attorney’s fees for lack of factual and legal basis, as the trial court failed to state justification and no evidence of a retainer agreement was presented. The award for filing fees as actual damages was also deleted, as these are considered part of judicial costs, not actual damages.