G.R. No. 190601 ; February 7, 2011
SPOUSES LUIGI M. GUANIO and ANNA HERNANDEZ-GUANIO, Petitioners, vs. MAKATI SHANGRI-LA HOTEL and RESORT, INC., also doing business under the name of SHANGRI-LA HOTEL MANILA, Respondent.

FACTS

Petitioners, Spouses Luigi M. Guanio and Anna Hernandez-Guanio, booked their wedding reception at the Shangri-la Hotel Makati, operated by respondent Makati Shangri-La Hotel & Resort, Inc. Prior to the event, there were issues during food tastings regarding the number of persons catered for and the size and price of the salmon. A Banquet and Meeting Services Contract was finalized. During the reception on July 28, 2001, petitioners alleged multiple breaches: respondent’s key representatives did not show up as assured; there was a delay in dinner service; certain menu items were unavailable; waiters were rude; and they were billed for a time extension despite a promise of no charge. They also claimed that wine and liquor they brought under an open bar arrangement were not served, forcing guests to pay. Petitioners sent a complaint letter and received an apologetic reply from the hotel’s Executive Assistant Manager, Krister Svensson. They subsequently filed a complaint for breach of contract and damages before the RTC of Makati City. Respondent countered that its representatives were present, the delay was due to a sudden increase in guests from a guaranteed 350-380 to 470, and the letter was merely to maintain goodwill, not an admission of liability. The RTC ruled in favor of petitioners, heavily relying on Svensson’s letter which admitted the services were “unacceptable and definitely not up to our standards,” and awarded damages. The Court of Appeals reversed, holding that the proximate cause of the injury was the unexpected increase in guests, which was attributable to petitioners.

ISSUE

Whether the Court of Appeals erred in applying the doctrine of proximate cause to a case arising from a breach of contract, and consequently, whether respondent is liable for damages for breaching its contractual obligations to petitioners.

RULING

Yes. The Supreme Court held that the doctrine of proximate cause is applicable only in actions for quasi-delicts, not in actions for breach of contract. The case involves a breach of a pre-existing contractual obligation (the Banquet and Meeting Services Contract), thus the applicable law is Article 1170 of the Civil Code, which holds obligors liable for damages if guilty of fraud, negligence, delay, or any contravention of the tenor of the obligation. In culpa contractual, the mere proof of the contract and the failure of its compliance justify, prima facie, a right to relief. The Court found that respondent failed to perform its contractual obligations in accordance with its tenor, as evidenced by the admitted service failures. The Court reversed the decision of the Court of Appeals and reinstated the RTC decision with modification, awarding nominal damages in lieu of the actual, moral, and exemplary damages originally granted, due to insufficient proof of the precise monetary loss, and deleted the award for attorney’s fees.