Cathay Pacific v.

Vazquez

G.R. No. 150843; 14 March 2003

Facts:

Sps. Dr. Daniel and Maria Luisa Vazquez, resposdents, together with their maid and two friends went to
Hongkong for pleasure and business. On their return flight, they booked Cathay Pacific Airways. While
boarding, they were advised that there was a seat change from Business Class to First Class. Dr. Vazquez
refused the upgrade for the reason that it would not look nice for them as hosts to travel First Class and
their guests, in the Business Class; and that they were going to discuss business matter during the flight.
Cathay informed the Vazquezes that the Business Class was fully booked, and that since they are Marco
Polo Club members, they had the priority to be upgraded to first class. Dr. Vazquez eventually gave in,
after being prohibited to take the flight if they would not avail themselves of the privilege. Upon their
return to Manila, the Vazquezes filed a complaint and demanded to be indemnified for the humiliation
and embarrassment caused by Cathay’s employees.

Issues:

Are the Vazquezes obliged to avail the privilege and take the First Class flight?

Held:

No. A contract of carriage existed between Cathay and the Vazquezes. They voluntarily and freely gave
their consent to an agreement whose object was the transportation of the Vazquezes from Manila to
Hong Kong and back to Manila, with seats in the Business Class Section of the aircraft, and whose cause
or consideration was the fare paid by the Vazquezes to Cathay. The Vazquezes should have been
consulted first whether they wanted to avail themselves of the privilege or would consent to a change of
seat accommodation before their seat assignments were given to other passengers. It should not have
been imposed on them over their vehement objection. By insisting on the upgrade, Cathay breached its
contract of carriage with the Vazquezes.

Art. 1244. The debtor of a thing cannot compel the creditor to receive a different one, although the
latter may be of the same value as, or more valuable than that which is due.

In obligations to do or not to do, an act or forbearance cannot be substituted by another act or

forbearance against the obligee’s will.
G.R. No. 158911 : March 4, 2008MANILA ELECTRIC COMPANY

Petitioner,

vs.

MATILDE MACABAGDAL RAMOY, BIENVENIDO RAMOY, ROMANA RAMOY-RAMOS,

ROSEMARIERAMOY, OFELIA DURIAN and CYRENE PANADO

Respondents

FACTS:

In the year 1987, the National Power Corporation (NPC) filed with the MTC Quezon City a casefor
ejectment against several persons allegedly illegally occupying its properties in Baesa, Quezon
City.among the defendants in the ejectment case was Leoncio Ramoy, one of the plaintiffs in the case at
bar.On April 28, 1989 the MTC rendered judgment for MERALCO to demolish or remove the building
andstructure they built on the land of the plaintiff and to vacate the premises. On June 20, 1999 NPC
wroteto MERALCO requesting the immediate disconnection of electric power supply to all residential
andcommercial establishments beneath the NPC transmission lines along Baesa, Quezon City.In a letter
dated August 17, 1990 MERALCO requested NPC for a joint survey to determine all theestablishments
which are considered under NPC property. In due time, the electric service connection of the plaintiffs
was disconnected. During the ocular inspection ordered by the Court, it was found out thatthe residence
of the plaintiffs-spouses was indeed outside the NPC property.

ISSUES: (1)

WON the Court of Appeals gravely erred when it found MERALCO negligent when itdisconnected the
subject electric service of respondents.

(2)

WON the Court of Appeals gravely erred when it awarded moral and exemplary damages

and attorney’s fees

against MERALCO under the circumstances that the latter acted in goodfaith in the disconnection of the
electric services of the respondents.

RULING:

(1)

No. The Court agrees with the CA that under the factual milieu of the present case, MERALCO failedto
exercise the utmost degree of care and diligence required of it, pursuant to Articles 1170 & 1173 of the
Civil Code. It was not enough for MERALCO to merely rely on the Decision of the MTC
withoutascertaining whether it had become final and executory. Verily, only upon finality of the said
Decisioncan it be said with conclusiveness that respondents have no right or proper interest over the
subjectproperty, thus, are not entitled to the services of MERALCO.

(2)

No. MERALCO willfully caused injury to Leoncio Ramoy by withholding from him and his tenants
thesupply of electricity to which they were entitled under the Service Contract. This is contrary to
publicpolicy because, MERALCO, being a vital public utility, is expected to exercise utmost care and
diligence i

the performance of its obligation. Thus, MERALCO’s failure to exercise utmost care and diligence in the

performance of its obligation to Leoncio Ramoy is tantamount to bad faith. Leoncio Ramoy testified
thathe suffered wounded feelings because

of MERALCO’s actions. Furthermore, due to the lack of power

supply, the lessees of his four apartments on subject lot left the premises. Clearly, therefore
LeoncioRamoy is entitled to moral damages in the amount awarded by the CA. Nevertheless, Leoncio is
the soleperson entitled to moral damages as he is the only who testified on the witness stand of his
wounded

feelings. Pursuant to Article 2232 of the Civil Code, exemplary damages cannot be awarded as

MERALCO’s acts cannot be considered wanton, fraudul

ent, reckless, oppressive or malevolent. Since the

Court does not deem it proper to award exemplary damages in this case then the CA’s award of
attorney’s fees should likewise be deleted, as pursuant to Article 2208 of the Civil Code of which the

grounds were not present.

Areola v CA G.R. No. 95641 September 22, 1994

J. Romero

Facts:

Prudential Guarantee cancelled Areola’s personal accident insurance on the grounds that the latter
failed to pay his premiums 7 months after issuing the policy. Areola was supposed to pay the total
amount of P1,609.65 which included the premium of P1,470.00, documentary stamp of P110.25 and 2%
premium tax of P29.40. The statement of account had a stipulation not considering it a receipt. It also
reminded the customer to ask for a receipt after payment. There was also a stipulation calling for a
demand for a provisional receipt after payment to an agent. A provisional receipt was sent to petitioner
telling him that the provisional receipt would be confirmed by an official one. The company then
cancelled the policy for non-payment of premiums. After being surprised, Areola confronted a company
agent and demanded an official receipt. The latter told him that it was a mistake, but never gave him an
official receipt. Areola sent a letter demanding that he be reinstated or he would file for damages if his
demand was not met. The company then told him that his payments weren’t in full yet. The company
replied to Areola by telling him that there was reason to believe that no payment has been made since
no official receipt was issued. The company then told him that they would still hold him under the
policy. The company then confirmed that he paid the premium and that they would extend the policy by
one year.

Thereby, the company offered to reinstate same policy it had previously cancelled and even proposed to
extend its lifetime on finding that the cancellation was erroneous and that the premiums were paid in
full by petitioner-insured but were not remitted by the company's branch manager, Mr. Malapit.

However, they were too late for Areola already filed an action for breach of contract in the trial court.

The company’s defense lay in rectifying its omission; hence, there was no breach of contract.

The court ruled in favor of Areola and asked Prudential to pay 250,000 pesos in moral and exemplary
damages. The court held that the company was in bad faith in cancelling the policy. Had the insured met
an accident at that time, he wouldn’t be covered by the policy.

This ruling was challenged on appeal by respondent insurance company, denying bad faith in unilaterally
cancelling the policy. The AC absolved Prudential on the grounds that it was not motivated by
negligence, malice or bad faith in cancelling subject policy. Rather, the cancellation of the insurance
policy was based on what the existing records showed. The court even added that the errant manager
who didn’t remit the profits was forced to resign. Areola then filed for a petition in the Supreme Court.

Issue:

1. Did the erroneous act of cancelling subject insurance policy entitle petitioner-insured to payment of
damages?
2. Did the subsequent act of reinstating the wrongfully cancelled insurance policy by respondent
insurance company, in an effort to rectify such error, obliterate whatever liability for damages it may
have to bear, thus absolving it?

Held: Yes. No. Petition granted.

Ratio:

1. Petitioner alleged that the manager’s misappropriation of his premium payments is the proximate
cause of the cancellation of the insurance policy. Subsequent reinstatement could not possibly absolve
respondent insurance company from liability, due to the breach of contract. He contended that damage
had already been done.

Prudential averred that the equitable relief sought by petitioner-insured was granted to the filing of the
complaint, petitioner-insured is left without a cause of action. Reinstatement effectively restored
petitioner-insured to all his rights under the policy.

The court held that Malapit's fraudulent act of misappropriating the premiums paid by petitioner-
insured is directly imputable to respondent insurance company. A corporation, such as respondent
insurance company, acts solely thru its employees. The latters' acts are considered as its own. Malapit
represented its interest and acted in its behalf. His act of receiving the premiums collected is well within
the province of his authority. Thus, his receipt of said premiums is receipt by private respondent
insurance company who, by provision of law is bound by the acts of its agent.

Article 1910 thus reads:

Art. 1910. The principal must comply with all the obligations which the agent may have contracted
within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, the principal is not bound except when
he ratifies it expressly or tacitly.

Malapit's failure to remit the premiums he received cannot constitute a defense for private respondent
insurance company; no exoneration from liability could result therefrom. The fact that private
respondent insurance company was itself defrauded due to the anomalies that took place does not free
the same from its obligation to petitioner Areola. As held in Prudential Bank v. Court of Appeals

“A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of
dealings of the officers in their representative capacity but not for acts outside the scope of their
authority. Accordingly, a banking corporation is liable to innocent third persons where the
representation is made in the course of its business by an agent acting within the general scope of his
authority even though the agent is secretly abusing his authority and attempting to perpetrate a fraud
upon his principal or some other person.”

Prudential is liable for damages for the fraudulent acts committed by Malapit. Reinstating the insurance
policy can not obliterate the injury inflicted. A contract of insurance creates reciprocal obligations for
both insurer and insured. Reciprocal obligations are those which arise from the same cause and in which
each party is both a debtor and a creditor of the other, such that the obligation of one is dependent
upon the obligation of the other.

2. Due to the agreement to enter into a contract of insurance where Prudential promised to extend
protection to petitioner-insured against the risk insured, there was a debtor creditor relation ship
between the two parties. Under Article 1191, the injured party is given a choice between fulfillment or
rescission of the obligation in case one of the obligors fails to comply with what is incumbent upon him.
However, said article entitles the injured party to payment of damages, regardless of whether he
demands fulfillment or rescission of the obligation.

The damages would be nominal because the insurance company took steps to rectify the contract .
There was also no actual or substantial damage inflicted. Nominal damages are "recoverable where a
legal right is technically violated and must be vindicated against an invasion that has produced no actual
present loss of any kind, or where there has been a breach of contract and no substantial injury or actual
damages whatsoever have been or can be shown.”