G.R. No. 94590. July 29, 1992.
CHINA AIRLINES LIMITED, petitioner, vs. COURT OF APPEALS and MANUEL J. OCAMPO, respondents.

FACTS

Private respondent Manuel J. Ocampo purchased a discounted round-trip Group Tour (GV-10) ticket from petitioner China Airlines (CAL) for Manila-San Francisco-Manila. The ticket required a stay in the U.S. of at least 14 days but not exceeding 35 days, with a scheduled return from San Francisco on May 24, 1979. Ocampo needed to return earlier to Manila due to business meetings and his family’s travel plans. Through his travel agency and secretary, he arranged with CAL Manila to change his return flight to May 18, 1979. CAL Manila provided a revised schedule, entered it into Ocampo’s reservation card, and instructed him to reconfirm with CAL San Francisco. In San Francisco, CAL San Francisco initially declined to confirm the change because the ticket still showed May 24. Despite telex communications between CAL offices confirming all segments of the revised May 18 flight (San Francisco-Honolulu-Taipei-Manila), and specific instructions from CAL Manila to CAL San Francisco to accept Ocampo due to the prior arrangement, CAL San Francisco did not allow him to board on May 18. Ocampo was constrained to take a Philippine Airlines flight on May 20. Upon his return, CAL Manila admitted a mistake by an employee who sent a negative reply without checking the reservation card. Ocampo filed a complaint for damages. The trial court dismissed the complaint but ordered CAL to reimburse Ocampo $601 (the cost difference for his alternative flight). The Court of Appeals reversed, finding CAL guilty of bad faith and awarding moral damages (P200,000), exemplary damages (P200,000), and attorney’s fees (P50,000).

ISSUE

Whether the Court of Appeals erred in: (1) concluding that CAL was liable based on a confirmed reservation contrary to the trial court’s finding; (2) concluding that CAL acted in bad faith; and (3) awarding damages that are excessive and unwarranted.

RULING

The Supreme Court partially granted the petition. It agreed with the Court of Appeals that CAL breached its contract of carriage by failing to honor the confirmed revised schedule for Ocampo’s return flight on May 18, 1979, as evidenced by the stream of telex communications between CAL offices. However, it reversed the finding of bad faith. The Court held that the breach was not attended by fraud, bad faith, malice, or wanton conduct. The actions of CAL’s employees constituted negligence or mistake, not a willful, fraudulent, or malevolent act. Consequently, under Articles 1170 and 2220 of the Civil Code, moral and exemplary damages are not recoverable for a breach of contract effected in good faith. Liability is limited to the natural and probable consequences of the breach. The Court modified the damages awarded. Petitioner CAL was ordered to pay private respondent Ocampo: (1) the Philippine Peso equivalent of US$2,101.00 (comprising the $601 reimbursement ordered by the trial court and an additional US$1,500.00 as reasonable expenses due to the delay) as compensatory damages; (2) attorney’s fees of P15,000.00; and (3) costs. The counterclaim was dismissed.