University of the Philippines College of Law

Block F2021

Topic Nature and Effect of Obligations Modes of Breach Fraud

Case No. G.R. No. 108253
Case Geraldez v. Court of Appeals
Name
Ponente Regalado, J.

RELEVANT FACTS

Petitioner Lydia L. Geraldez found out about private respondent Kenstar Travel
Corporation from numerous advertisements in newspapers of general circulation
regarding tours in Europe
Geraldez contacted Kenstar, and the latter sent its representative Alberto Vito Cruz
to discuss the four available tour packages. Geraldez chose the package VOLARE
3 covering a 22-day tour of Europe for $2,990.00. She paid a total equivalent
amount of P190,000.00 for her and her sister.
Petitioner Geraldez claimed that during the tour, she was disappointed because:
1. there was no tour manager for their group of tourists;
2. the hotels were not first-class;
3. the UGC Leather Factory specifically highlighted in the tour package was not
visited; and
4. the Filipino lady tour guide was a first-timer
Geraldez moved for the issuance of a writ of preliminary attachment against Kenstar
on the ground of fraud in contracting an obligation. This was granted by the court,
but was subsequently lifted upon filing of the private respondent of a counterbond
amounting to P990,000.00.
On July 9, 1991, the court rendered its decision ordering private respondent to pay
petitioner P500,000 as moral damages, P50,000 attorneys fees, and costs. On
appeal, the respondent court deleted the award for moral and exemplary damages,
and reduced the awards for nominal damages and attorneys fees to P30,000 and
P10,000, respectively.

ISSUE

Whether or not private respondent acted in bath faith or with gross negligence in
discharging its contractual obligations by failing to faithfully comply with its
commitments under the Volare 3 tour program
Whether or not the provision in the contract signed by the tourists limiting the
responsibility of Kenstar Travel Corporation to booking and making arrangements as
agents is a valid defense

RATIO DECIDENDI

Issue Ratio
Whether or not private YES.
respondent acted in
bath faith or with gross Private respondent committed fraudulent
negligence in misrepresentations amounting to bad faith, to the
discharging its prejudice of petitioner and the members of the tour
contractual obligations group.
by failing to faithfully - Providing the tour group an inexperience member
 University of the Philippines College of Law
Block F2021

comply with its manifested its indifference to the convenience,

commitments under satisfaction, and peace of mind of its clients during the
the Volare 3 tour trip, despite its express commitment to provide such.
program - The inability of the group to visit the leather factory
which was a highlight of the tour package displays the
tour guides incompetence, which can be attributed to
the lack of due diligence on part of private respondent.
- Private respondent contends that its partner
organization Kuoni Travel of Switzerland is the European
tour manager, but the court helt that a cursory reading
of the advertisement will readily reveal the express
representation that the contemplated European tour
manager is a natural person, since an organization
cannot be so knowledgeable about Europe, there is
hardly a question he cant answer
- Grave misrepresentation was committed when private
respondent assured that the hotels it had chosen
provides complete amenities. Petitioner testified that
some hotels even had no toilet paper, soap, and towels.
This testimony was corroborated by another tourist Luz
Sui Haw and her husband.
Whether or not the No.
provision in the
contract signed by the The contract is a contract of adhesion, therefore it is
tourists limiting the strictly construed against the party who drafted it.
responsibility of Kenstar Even assuming arguendo that the contractual limitation is
Travel Corporation to enforceable, private respondent still cannot be exculpated
booking and making because responsibility arising from fraudulent acts cannot be
arrangements as stipulated against by reason of public policy.
agents is a valid
defense

RULING

WHEREFORE, premises considered, the decision of respondent Court of Appeals is hereby

SET ASIDE, and another one rendered, ordering private respondent Kenstar Travel
Corporation to pay petitioner Lydia L. Geraldez the sums of P100,000.00 by way of moral
damages, P50,000.00 as exemplary damages, and P20,000.00 as and for attorney's fees,
with costs against private respondent. The award for nominal damages is hereby deleted.

NO SEPARATE OPINION