FIRST DIVISION

[G.R. No. 199767. March 13, 2019.]

AIR FRANCE, petitioner, vs. CHARLES AUGUSTE RAYMOND M.

ZANI, respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, First Division, issued a Resolution
dated March 13, 2019 which reads as follows:
"G.R. No. 199767 (Air France v. Charles Auguste Raymond M.
Zani). — This is a petition for review on certiorari 1 assailing the Decision 2
dated November 24, 2011 of the Court of Appeals (CA) in CA-G.R. CV No.
94429. The CA affirmed the Decision 3 dated February 16, 2009 of Branch 58
of the Regional Trial Court (RTC) of Makati City, awarding moral and
exemplary damages, and attorney's fees in favor of respondent Charles
Auguste Raymond M. Zani due to petitioner Air France's breach of the
contract of carriage between them.
On September 13, 1995, petitioner and respondent executed a credit
agreement 4 allowing respondent to purchase airline tickets on credit and at
a fixed price from petitioner. Their agreement contained the following
payment terms:
A. Tickets purchased from the 1st to the 15th of the month
is [sic] due and payable to Air France Manila at the end of the month.
B. Tickets purchased from the 16th of the month to end of
the month is [sic] due and payable to Air France Manila on the 15th of
the following month. 5
Respondent purchased several airline tickets from petitioner under this
agreement. Despite the payment terms, however, by May 17, 2000,
respondent had an outstanding balance of P1,738,180.00, prompting
petitioner to send a demand letter 6 to respondent. Attached to petitioner's
demand letter is respondent's statement of account 7 indicating the latter's
purchases and payments to petitioner. On July 14, 2000, petitioner, through
its counsel, wrote respondent informing him that he will be refused carriage
on any of petitioner's network or flights until respondent settles his
outstanding balance. 8
Due to respondent's failure to pay, petitioner filed in the RTC a
collection case against respondent entitled Air France/GSR Air Afrique v.
Charles Zani Consultants docketed as Civil Case No. 00-1424. The RTC ruled
in favor of petitioner, which the CA affirmed in its Decision dated September
29, 2008. We affirmed the RTC and the CA through our Minute Resolution
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 dated March 18, 2009. 9
Meanwhile, on July 11, 2000, respondent purchased and booked flights
through ANSCOR Travel Corporation, a travel agency. Respondent's trip was
from July 12-24, 2000; covered different destinations; and involved several
airlines, including petitioner. The travel agency issued confirmed Conjunction
Tickets No. 6183315948394/95 with the following itinerary: 10 CAIHTE

Date of Point of Departure Airline

Departure Destination

July 12, 2000 Manila to Singapore Singapore Airlines

(SAL)

July 12, 2000 Singapore to Dubai SAL

July 13, 2000 Dubai to Mahe Island Air Seychelles

July 18, 2000 Mahe Island to Paris Air France

July 19, 2000 Paris to Nice Air France

July 23, 2000 Nice to Paris Air France

July 23, 2000 Paris to Singapore SAL

July 24, 2000 Singapore to Manila SAL

The first three legs of the conjunction flight proceeded as scheduled.

For his July 18, 2000 flight from Mahe Island to Paris, respondent decided to
rebook his confirmed flight to an earlier date. He communicated with
petitioner's Paris office and got confirmation via telephone for a July 16,
2000 flight, two days earlier than originally scheduled. 11 Per instructions
from petitioner, respondent proceeded to the former's office in Mahe Island
on the morning of July 15, 2000, and personally received another
confirmation, 12 for which a confirmation sticker was placed on his ticket.13
On the evening of July 15, 2000, however, petitioner's manager in
Mahe Island informed respondent via telephone call that he will not be
allowed embarkation on the confirmed flight the following day. 14
On July 16, 2000, respondent was refused boarding. Petitioner's
manager in Mahe Island executed a written document 15 which detailed the
supposed reason for the refusal of embarkation. The letter reads, in part:
This refusal is linked to Article 7, of the general terms and
condition of transportation — passengers and luggage — stating:
<<The airline carrier may, at any boarding gate,
and/or at any connection gate, refuse the boarding of a
passenger or the loading of a luggage, if he has
previously informed the passenger in writing that he does
not want to carry him/her anymore or if any of the
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 following cases has happened:
- the applicable air-fare or all due
expenses or taxes have not been paid or,
- credit arrangements have not been
made between the air-carrier and the passenger (or
the person who buys the ticket)>>. 16
Aggrieved, respondent filed a complaint for damages 17 against
petitioner and SAL docketed as Civil Case No. 01-832. He claims that
petitioner's refusal was a breach of the contract of carriage between him,
petitioner, and SAL, which caused him actual and moral damages.
Petitioner, on the other hand, argued that at the time of the incident,
respondent was indebted to it in the aggregate amount of P1,738,180.00,
which is a clear violation of their credit arrangement. Thus, when petitioner
refused carriage to respondent, it was merely enforcing its rights under
Article VII (1) (g) of the General Conditions of Carriage, Passenger, and
Baggage. 18
In a Decision dated February 16, 2009, the RTC ruled in respondent's
favor. It held that petitioner and respondent had a perfected contract when
the former confirmed the latter's tickets twice, and that petitioner's refusal
to let respondent board was a breach of their contract, notwithstanding
respondent's pending obligation to it. The RTC dismissed respondent's claim
against SAL on the ground that there was no showing that SAL is petitioner's
principal. The dispositive portion reads:
WHEREFORE, foregoing considered, judgment is hereby
rendered ordering defendant AIR FRANCE as follows:
1. To pay plaintiff the sum of P500,000.00 as moral
damages;
2. To pay plaintiff the sum of P500,000.00 as
exemplary damages;
3. To pay plaintiff the amount equivalent to 25% of
the sum awarded attorney's fees [sic]; and
4. Costs of suit.
Upon the facts and jurisprudence applicable, the complaint
against Singapore Airlines is hereby DISMISSED and so is also its
counterclaim for lack of merit.
SO ORDERED. 19

The RTC also denied the parties' respective motions for reconsideration
via its Order 20 dated June 11, 2009.
The CA, in the assailed Decision dated November 24, 2011, affirmed
the RTC Decision in toto. 21 DETACa

Hence, this petition.

Petitioner argues that the CA's award of moral and exemplary
damages, as well as attorney's fees, in favor of respondent is contrary to law
and applicable jurisprudence. Its refusal to transport respondent is pursuant
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 to a right arising from the binding terms of the contract of carriage as the
tickets issued to respondent are subject to certain conditions. 22 These
conditions are embodied in petitioner's General Conditions of Carriage,
Passenger, and Baggage, 23 Article VII of which reads:
1. Right to refuse carriage
The Carrier may, at any point of embarkation and/or point of
connection, refuse the carriage of any Passenger or Passenger's
Baggage if the Carrier has notified the Passenger in writing that it
would [not], at any time after the date of such Notice carry him/her on
its Flights or, if one or more of the following have occurred or may
occur:
xxx xxx xxx
(g) the applicable fare or any charge or tax payable have
not been paid or relevant credit arrangements agreed between the
Carrier and the Passenger (or the person paying for the Ticket) have
not been complied with; x x x 24
More, respondent's tickets are subject to the conditions set by the
International Air Transport Association (IATA), one of which states:
CARRIER RESERVES THE RIGHT TO REFUSE CARRIAGE TO ANY
PERSON WHO HAS ACQUIRED A TICKET IN VIOLATION OF APPLICABLE
LAW OR CARRIER'S TARIFFS, RULES OR REGULATIONS. 25
Petitioner argues that given respondent's unpaid ticket purchases
amounting to P1,738,180.00, there was a violation of the terms of the credit
agreement and petitioner's rules and regulations, which justifies the latter's
exercise of its right to refuse carriage to respondent.
Further, assuming that the award is proper, petitioner contends that
the amounts are unconscionable, exorbitant, and plainly inconsistent with
jurisprudence. 26
On the other hand, respondent anchors his claim for damages against
petitioner on the latter's alleged breach of their contract of carriage when
petitioner refused to allow him to board the aircraft on July 16, 2000. 27
We affirm the RTC and CA's finding that there was breach of contract of
carriage but modify the award of damages.
I
A contract of carriage is defined as one whereby a certain person or
association of persons obligate themselves to transport persons, things, or
news from one place to another for a fixed price. 28 Thus, an airline's
issuance of confirmed tickets is a guarantee to the passenger that the airline
would honor the tickets, assure him of a space in the flight, and transport
him for that segment of his trip corresponding to the confirmed ticket. 29
Meanwhile, breach of contract is defined as the failure, without legal
reason, to comply with the terms of a contract, or the failure, without legal
excuse, to perform any promise which forms the whole or part of the
contract. 30 For contracts of air carriage, Philippine Airlines, Incorporated v.
Court of Appeals 31 is instructive:
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 When an airline issues a ticket to a passenger,
confirmed for a particular flight on a certain date, a contract
of carriage arises. The passenger has every right to expect that he
be transported on that flight and on that date, and it becomes the
airline's obligation to carry him and his luggage safely to the agreed
destination without delay. If the passenger is not so transported
or if in the process of transporting, he dies or is injured, the
carrier may be held liable for a breach of contract of carriage.
32 (Emphasis supplied.)

In Singapore Airlines Limited v. Fernandez, 33 We further explained:

The contract of air carriage is a peculiar one. Imbued with
public interest, the law requires common carriers 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. In an action for 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 is necessary to
prove is the existence of the contract and the fact of its non-
performance by the carrier. 34 (Citations omitted.)
Undoubtedly, a contract of carriage existed between petitioner and
respondent. Respondent carried confirmed tickets covering several flights
with petitioner: 1) Mahe Island to Paris (scheduled on July 18, 2000 and
rebooked to July 16, 2000); 2) Paris to Nice (scheduled on July 19, 2000); and
3) Nice to Paris (scheduled on July 23, 2000). Further to their contract,
respondent had the right to expect that he would fly from Mahe Island to
Paris on July 16, 2000. Since petitioner refused to transport him, petitioner
evidently breached their contract of carriage and respondent had every right
to sue petitioner for this breach. aDSIHc

Petitioner argues that respondent's previous unpaid purchases violated

the General Conditions of Carriage, Passenger, and Baggage to which his
ticket for the July 16, 2000 flight is subjected, and consequently justified
petitioner's exercise of its right to refuse carriage.
We agree with petitioner that the General Conditions of Carriage,
Passenger, and Baggage, as well as the IATA conditions of carriage, are part
of the contract of carriage between petitioner and respondent as they set
forth the terms and conditions of the contract between petitioner and its
passengers, including respondent. Thus, when respondent purchased his
tickets, he was instantaneously bound by the terms and conditions of the
contract of carriage 35 which include petitioner's right to refuse to carry
respondent when the applicable fare or charge has not been paid or a credit
arrangement between petitioner and respondent has not been complied
with. It is unclear, however, whether this condition applies to previous ticket
purchases respondent made or is limited to the July 16, 2000 flight.
We hold that petitioner can only refuse carriage due to non-payment of
the fare or credit arrangement when what remains unpaid, or the credit
arrangement which remains unsettled, is the fare for that particular ticket or
flight, in this case, the July 16, 2000 flight from Mahe Island to Paris. This, in
fact, is consistent with petitioner's understanding and practice, as confirmed
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 by petitioner's own witness, Patricia Michelle Alfonso Casas, Flying Blue
Mileage Coordinator for Ticketing and Reservations Department at KLM
Royal Dutch Airlines. Relevant portions of her testimony provide:
Atty. Vera:
Q: In issuing tickets, would you be familiar with the conditions
governing the tickets issued by Air France?
Witness:
A: Generally, yes, sir.
Atty. Vera:
Q: And would you tell us where [you can] find those conditions?
Witness:
A: Basically in each ticket would refer the passenger to the general
conditions of carriage of the air line but of course, there is
specific book [sic] containing the general conditions of carriage of
Air France.
xxx xxx xxx
Court:
xxx xxx xxx
Q: What is the specific book you are mentioning?
Witness:
A: It's the General Conditions of Carriage of Passenger and Baggage
of Air France, Your Honor.
xxx xxx xxx
Atty. Vera:
    Previously, you testified that you are familiar with the General
Conditions of Carriage for Passenger and Baggage. Now I will ask
you, you mentioned that it's a thick book.
Q: The passenger[s], how were they informed of the general terms
and conditions of passenger and baggage?
Witness:
A: Behind each ticket that the [passengers] buy, we will basically
advice [sic] them that there are general conditions of carriage for
each air line.
xxx xxx xxx
Atty. Vera:
  When the passenger receives a ticket, you previously mentioned
that the ticket would only refer the passenger to the general
terms and conditions.
Q: Does this mean that the general terms and conditions embodied
in the booklet that you're holding are not contained in the ticket?
Atty. Sugayan:
  Objection, Your Honor. The question is leading.
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 Court:
  Witness may answer.
Q: Are they contained in the ticket?
Witness:
A: Your Honor, the entire booklet cannot be contained in the ticket.
xxx xxx xxx
Atty. Vera:
Q: And so if the passenger (will inquire) about the terms and
conditions of carriage, how would the passenger do it?
Atty. Sugayan:
  Objection, Your Honor. The question is speculative. ETHIDa

Court:
  If she knows, witness may answer.
Q: How would the passenger know?
Witness:
A: If the passenger has to inquire upon purchase of the ticket, we
would readily be able to show the passenger at the ticket counter
this book. We would be able to present them the specific
paragraph. 36
On her cross-examination, the witness further testified:
Court:
  Please read back.
Stenographer:
Q: With regard to the plane ticket issued by Air France and likewise
confirmed by Air France and the ticket having been fully paid
from that passenger, is not a policy of Air France that it has to
honor the plane ticket issued by Air France to the passenger?
A: If Air France issues the ticket, Air France would honor the ticket
except that upon check-in, this should be verified if the
passenger has the right documents.
Q: And assuming that the passenger has the right documents, you
would honor the ticket?
xxx xxx xxx
A: x x x [I]f the ticket is issued by Air France[,] we would honor the
ticket but it also depends if the passenger paid, in the form of
payment of ticket because if it is a ticket issued against credit
line or a credit account, sometimes there are credit line [sic] that
gave a fifteen (15)-day period to pay for the entire ticket,
sometimes thirty (30)-day period, sometimes they issued the
ticket, say, May 1 or May 2 but then by the time he flies in July,
the client has not paid, for then he has a debt in Air France. In
that case, the airline, Air France[,] would have an option not to
board if the credit line, the balance was not paid for. 37
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 As explained by its witness, petitioner would dishonor a ticket and
disallow a passenger from boarding a flight if the ticket for the particular
flight is not yet paid. In this case, respondent's unpaid obligation to
petitioner did not include the payment for the July 16, 2000 flight. It refers to
previous purchases respondent made pursuant to his credit arrangement
with petitioner.
We are aware that Item (l), Article VII (Refusal and Limitation on
Carriage) of the General Conditions of Carriage, Passenger, and Baggage
stipulates that petitioner may also refuse to carry a passenger when "the
Passenger has previously committed one of the acts or omissions referred to
above." 38 The notice petitioner gave to respondent, however, did not cite
this provision as petitioner's basis for its refusal to carry respondent. As
petitioner did not indicate that its refusal to carry respondent is in relation to
his previous acts of not paying for his ticket or not settling his credit
arrangement, petitioner cannot now claim that respondent's unsettled credit
arrangement for his previous purchase of tickets is the basis of petitioner's
refusal to carry him on board.
Indeed, the ambiguities in the contract, being one of adhesion, should
be construed against the party that caused its preparation 39 — in this case,
petitioner.
As petitioner's exercise of its right to refuse to carry respondent was
unjustified, We find that petitioner breached its contract of carriage with
respondent.
II
We, however, disagree with the CA's award of moral and exemplary
damages, as well as attorney's fees, in favor of respondent.
Under Article 2220 of the Civil Code, moral damages may be awarded
in breaches of contract when the defendant acted fraudulently or in bad
faith. In Cathay Pacific Airways, Ltd. v. Vazquez , 40 we explained this rule as
applied to breaches of contract of carriage:
Moral damages predicated upon a breach of contract of
carriage may only be recoverable in instances where the
carrier is guilty of fraud or bad faith or where the mishap
resulted in the death of a passenger. Where in breaching the
contract of carriage the airline is not shown to have acted
fraudulently or in bad faith, liability for damages is limited to the
natural and probable consequences of the breach of the obligation
which the parties had foreseen or could have reasonably foreseen. In
such a case the liability does not include moral and exemplary
damages. 41 (Citations omitted and emphasis supplied.)
Also, We have held that in situations where the negligence of the
carrier is so gross and reckless as to virtually amount to bad faith, moral
damages may also be awarded to the passenger. 42 Gross negligence
implies a want or absence of or failure to exercise slight care or diligence, or
the entire absence of care. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them. 43
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 In sustaining the award of moral damages, the CA held that petitioner
was guilty of gross negligence amounting to bad faith when it arbitrarily
cancelled respondent's confirmed flights hours before the schedule. We do
not agree with the CA's findings. cSEDTC

I n Armovit v. Court of Appeals, 44 We held that the gross negligence

committed by the airline in the issuance of the tickets with erroneous entries
as to the time of the flight, the failure to correct such erroneous entries, and
the manner by which petitioners were rudely informed that they were
bumped off amounted to bad faith. 45 In Singson v. Court of Appeals, 46 We
held that the airline's staff's acts of improperly detaching the passenger's
flight coupons, compounded by several other independent acts of
negligence, constituted gross negligence no different from fraud and bad
faith. In Philippine Airlines, Incorporated v. Court of Appeals, 47 We held that
the airline's failure to exercise utmost care in handling the indemnity bond,
which resulted in its loss and which was the proximate cause why the
unaccompanied minors were unable to take their connecting flight, was
negligence so gross and reckless that it amounted to bad faith.
The circumstances in the said cases are different from those obtaining
here. Here, there is no showing that petitioner committed an act indicating
its utter lack of care and diligence in its dealing with respondent. While
petitioner may have been negligent in interpreting and applying the
conditions of the contract of carriage and in not informing respondent earlier
that he will not be allowed to board the flight, We cannot conclude that
petitioner's negligence is so gross and reckless that it already amounts to
bad faith.
As for exemplary damages, Article 2232 of the Civil Code provides that
in a contractual or quasi-contractual relationship, exemplary damages may
be awarded only if the defendant had acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner. Article 2234 of the Civil Code
further requires that to be entitled to exemplary damages, the claimant
must show that he is entitled to moral, temperate, or compensatory
damages. Since respondent is not entitled to any of these damages, the
award of exemplary damages must be deleted.
Respondent is likewise not entitled to attorney's fees and litigation
costs. We explained when attorney's fees are awarded:
While Article 2208 of the Civil Code allows attorney's fees to be
awarded if the claimant is compelled to litigate with third persons or
to incur expenses to protect his interest by reason of an unjustified
act or omission of the party from whom it is sought, there must be a
showing that the losing party acted willfully or in bad faith and
practically compelled the claimant to litigate and incur litigation
expenses. In view of the declared policy of the law that awards of
attorney's fees are the exception rather than the rule, it is necessary
for the trial court to make express findings of facts and law that
would bring the case within the exception and justify the grant of
such award. x x x
xxx xxx xxx
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 Thus, the matter of attorney's fees cannot be touched upon
only in the dispositive portion of the decision. The text itself must
state the reasons why attorney's fees are being awarded. x x x 48
While the dispositive portion of the RTC Decision provided for the
award of attorney's fees and costs of suit, neither the RTC Decision nor the
CA Decision provided the factual or legal justification for the awards. Thus,
for lack of sufficient basis in fact, law, or equity, together with the absence of
bad faith, the award of attorney's fees and costs must be deleted.
The most that can be adjudged in favor of respondent is nominal
damages under Article 2221 of the Civil Code:
Art. 2221. Nominal damages are adjudicated in order that a
right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose
of indemnifying the plaintiff for any loss suffered by him.
Nominal damages are recoverable if no actual, substantial, or specific
damages were shown to have resulted from the breach. The amount of such
damages is addressed to the sound discretion of the court, taking into
account the relevant circumstances. 49 Taking into consideration the
circumstances that respondent was forced to rebook his flight, rearrange his
schedule and business meetings, and suffer confusion and frustration
because of his missed flight, the award of P50,000.00 as nominal damages is
proper.
WHEREFORE, the Court of Appeals' Decision dated November 24,
2011 is AFFIRMED WITH MODIFICATION. The award of moral and
exemplary damages, as well as attorney's fees and costs, is hereby deleted
for lack of basis. Petitioner is ORDERED to pay nominal damages in the
amount of P50,000.00 to respondent. SDAaTC

SO ORDERED."

Very truly yours,

(SGD.) LIBRADA C. BUENA

Division Clerk of Court

Footnotes
1. Rollo , pp. 21-54.
2. Id. at 60-75; penned by Presiding Justice Andres B. Reyes, Jr. (now a Member of
the Court) and concurred in by Associate Justices Mariflor Punzalan-Castillo
and Franchito N. Diamante.
3. Id. at 150-155; rendered by Presiding Judge Eugene C. Paras.
4. Id. at 169-169-A.

5. Id. at 169.
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 6. Id. at 170.
7. Id. at 171.
8. Id. at 126.
9. Rollo , pp. 27, 35-36; Charles Zani Consultants v. Air France/GSR Air Afrique, G.R.
No. 185856.
10. Id. at 61, 99.
11. Id. at 61-62.

12. Id. at 61-62, 150.

13. Id. at 62.
14. Id.
15. Rollo , pp. 178-180.
16. Id. at 179.

17. Id. at 92-98.

18. Id. at 118-125.

19. Id. at 155.

20. Id. at 168.

21. Id. at 75.

22. Id. at 29-44.

23. Id. at 175-177.

24. Id. at 176.

25. Id. at 182.

26. Id. at 29, 44-50.

27. Id. at 367-389.

28. Cathay Pacific Airways v. Reyes , G.R. No. 185891, June 26, 2013, 699 SCRA
725, 737, citing Crisostomo v. Court of Appeals, G.R. No. 138334, August 25,
2003, 409 SCRA 528, 533.
29. See Lufthanza German Airlines v. Court of Appeals, G.R. No. 83612, November
24, 1994, 238 SCRA 290, 300.

30. Cathay Pacific Airways, Ltd. v. Vazquez , G.R. No. 150843, March 14, 2003, 399
SCRA 207, 219, citing Black's Law Dictionary 171 (5th ed.).
31. G.R. No. 123238, September 22, 2008, 566 SCRA 124.

32. Id. at 132-133, citing Japan Airlines v. Asuncion , G.R. No. 161730, January 28,
2005, 449 SCRA 544, 548.
33. G.R. No. 142305, December 10, 2003, 417 SCRA 474.

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 34. Id. at 480.

35. See Philippine Airlines, Inc. v. Ramos , G.R No. 92740, March 23, 1992, 207
SCRA 461, 471.
36. Transcript of Stenographic Notes (TSN) dated March 20, 2006, pp. 10-21.

37. TSN dated May 2, 2006, pp. 18-21.

38. Rollo , p. 177.

39. Savellano v. Northwest Airlines, G.R. No. 151783, July 8, 2003, 405 SCRA 416,
424.

40. Supra note 30.

41. Id. at 222-223.

42. Singson v. Court of Appeals, G.R. No. 119995, November 18, 1997, 282 SCRA
149, 160. Citation omitted.
43. BPI Investment Corporation v. D.G. Carreon Commercial Corp., G.R. No.
126524, November 29, 2001, 371 SCRA 58, 69-70.

44. G.R. No. 88561, April 20, 1990, 184 SCRA 476.
45. Id. at 481-482.

46. Supra note 42.

47. Supra note 31.

48. Buñing v. Santos, G.R. No. 152544, September 19, 2006, 502 SCRA 315, 321-
323. Citations omitted.

49. Savellano v. Northwest Airlines, supra note 39 at 430. Citations omitted.

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