British Airways, Inc. vs. Court of Appeals and First International Trading and General Services

A consensual contract "to carry" is perfected upon the airline's acceptance of a prepaid ticket advice, even without issuance of tickets, and breach of that contract through unjustified failure to transport passengers entitles the aggrieved party to moral and exemplary damages for bad faith — but actual damages cannot be awarded where the claimant's expenses have already been reimbursed and no pecuniary loss is duly proved.

Private respondent First International Trading and General Services Co. was a duly licensed domestic recruitment and placement agency that recruited Filipino contract workers on behalf of its foreign principal, ROLACO Engineering and Contracting Services in Jeddah, Saudi Arabia. Petitioner British Airways, Inc. operated commercial flights between Manila and Jeddah. The dispute arose from the interaction between these parties in the context of overseas contract worker deployment, where visas were valid for only 45 days and the Bureau of Employment Services required that contract workers be sent to the job site within 30 days, making timely transportation critical.

On February 15, 1981, private respondent First International Trading and General Services Co., a duly licensed domestic recruitment and placement agency, received a telex message from its principal ROLACO Engineering and Contracting Services in Jeddah, Saudi Arabia, instructing it to recruit Filipino contract workers on behalf of said principal. During the early part of March 1981, ROLACO prepaid airfare tickets for 93 contract workers at the Jeddah branch of petitioner British Airways, Inc., with specific instruction to transport said workers to Jeddah on or before March 30, 1981. Upon receiving the prepaid ticket advice (PTA) from its Jeddah branch, petitioner immediately informed private respondent that 93 prepaid tickets had been forwarded. Private respondent then instructed its travel agent, ADB Travel and Tours, Inc., to book the 93 workers with petitioner, but the latter failed to fly said workers. This compelled private respondent to borrow ₱304,416.00 to purchase airline tickets from other airlines, as evidenced by cash vouchers, because the workers' visas were valid for only 45 days and the Bureau of Employment Services mandated deployment within 30 days.

Sometime in the first week of June 1981, private respondent was again informed by petitioner that a PTA had been received from its Jeddah branch for 27 contract workers. Private respondent's travel agent booked the workers with petitioner, but only 16 seats were confirmed on the June 9, 1981 flight. On the date of the scheduled flight, only 9 workers boarded while the remaining 7 were rebooked to June 30, 1981 — bookings that were again cancelled by petitioner without prior notice. The 7 workers were then rebooked to the July 4, 1981 flight with 6 additional workers, but those confirmed bookings were likewise cancelled and rebooked to July 7, 1981. On July 6, 1981, private respondent paid the travel tax as required by petitioner, but when the receipt was submitted, petitioner informed private respondent that it could confirm only 12 seats on the July 7 flight. Those confirmed seats were again cancelled without prior notice. The 12 workers finally departed for Jeddah after private respondent purchased tickets from other airlines.

As a result of these incidents, private respondent sent a letter to petitioner demanding compensation for damages incurred by the latter's repeated failure to transport its contract workers despite confirmed bookings and payment of travel taxes. On July 23, 1981, private respondent's counsel sent another letter demanding ₱350,000.00 representing damages and unrealized profit, which petitioner denied. On August 8, 1981, private respondent received a telex from its principal cancelling the hiring of the remaining recruited workers due to the delay in transporting the workers to Jeddah. On January 27, 1982, private respondent filed a complaint for damages against petitioner with the Regional Trial Court of Manila, Branch 1.

Petitioner, in its Answer with counterclaims, alleged that it received a telex from Jeddah on March 20, 1981 advising that the principal had prepaid airfares for 100 persons to transport workers from Manila to Jeddah on or before March 30, 1981, but due to the unavailability of space and limited time, petitioner had to return the PTA to its sponsor in Jeddah, and not even one of the alleged 93 workers was booked. Regarding the June and July flights, petitioner claimed that its travel agent booked only 10 workers for the June 9 flight, of which only 9 boarded and 1 did not show up. For the July 4 flight, the travel agent cancelled 2 bookings while 3 passengers did not show up. For the July 7 flight, 12 workers were booked subject to reconfirmation, but petitioner's computer system broke down on July 6, 1981, resulting in failure to obtain reconfirmation from Saudi Arabia Airlines and automatic cancellation of the bookings. Petitioner's computer system was reinstalled on the morning of July 7, and it attempted to reinstate the bookings with Gulf Air or Saudi Arabia Airlines, but both replied that no seats were available. This information was relayed to private respondent and the workers before the scheduled flight.

• No Cause of Action: Petitioner contended that private respondent had no cause of action against it because no perfected contract of carriage existed between them, no ticket having been issued to private respondent's contract workers, and therefore the obligation to transport said workers did not arise. Petitioner further argued that private respondent's failure to attach any ticket in the complaint proved that it was never a party to the alleged transaction.
• Actual Damages Already Reimbursed: Petitioner contended that the appellate court erred in awarding actual damages in the amount of ₱308,016.00 since all expenses had already been subsequently reimbursed by private respondent's principal, ROLACO Engineering.

• Existence of Contract of Carriage: Whether private respondent had a cause of action against petitioner despite the non-issuance of tickets, such that a perfected contract of carriage existed between the parties.
• Award of Actual Damages: Whether the award of actual damages in the amount of ₱308,016.00 was proper given that private respondent's expenses had already been reimbursed by its principal.
• Award of Moral and Exemplary Damages: Whether the award of moral and exemplary damages was proper in light of petitioner's conduct.

• Existence of Contract of Carriage: Yes. A consensual contract "to carry" was perfected upon petitioner's acceptance of the prepaid ticket advice, even without issuance of tickets, and private respondent had a valid cause of action for damages arising from petitioner's breach.
• Award of Actual Damages: No. The award of actual damages was deleted because private respondent's expenses had already been reimbursed by its principal, and actual or compensatory damages must be duly proved with a reasonable degree of certainty.
• Award of Moral and Exemplary Damages: Yes. The awards of moral and exemplary damages were affirmed, petitioner's repeated failure to transport the workers and its unilateral cancellation and rebooking of confirmed flights without prior notice constituting malice and evident bad faith.

• Existence of Contract of Carriage: The Court adopted the distinction between two aspects of a contract of common carriage of passengers: (a) the contract "to carry (at some future time)," which is consensual and perfected by mere consent under Article 1356 of the Civil Code, and (b) the contract "of carriage" itself, which is a real contract that arises only when the carrier is actually used. The contract involved here was the consensual contract "to carry." Private respondent's consent was manifested by its instruction to its travel agent to book the workers, while petitioner's consent was manifested by its acceptance of the PTA advising that ROLACO Engineering had prepaid the airfares. Even though a PTA is merely an advice authorizing the airline to issue a ticket and no ticket was yet issued, the passage had already been paid for by the principal and the airline had accepted such payment — an undisputed fact. The object certain was the transport of passengers from Manila to Jeddah as stated in the telex. All three essential requisites of a contract — consent, object, and cause — were present. Private respondent had fully complied with its obligation through payment of the fare and willingness to deploy the workers, while petitioner was remiss in its obligation to transport them despite confirmed bookings. Petitioner knew time was of the essence, as the PTA specified the period of compliance, and should have refused acceptance of the PTA or at least informed private respondent that it could not accommodate the workers.

• Award of Actual Damages: The appellate court awarded ₱308,016.00 as actual damages, referring to expenses not reimbursed by ROLACO Engineering. However, the complaint itself alleged that the actual damages of ₱308,016.00 represented money borrowed from friends and financiers — ₱304,416.00 for the 93 airline tickets and ₱3,600.00 for the travel tax of the 12 workers — expenses which were already reimbursed by the principal. Private respondent's managing director, Mrs. Bienvenida Brusellas, admitted in open court that the principal had reimbursed all expenses, including processing fees, on a staggered basis. Under Article 2199 of the Civil Code, one is entitled to adequate compensation only for such pecuniary loss as has been duly proved. Actual or compensatory damages cannot be presumed but must be proved with a reasonable degree of certainty; a court cannot rely on speculation, conjecture, or guesswork. Because private respondent had consistently admitted full reimbursement, no pecuniary loss was suffered, and the award of actual damages could not be sustained.

• Award of Moral and Exemplary Damages: Petitioner's conduct demonstrated patent bad faith in the performance of its obligation. There was complete failure to transport the 93 workers on or before March 30, 1981 despite receipt of payment and acceptance of the PTA with specific instructions, and no previous notice was ever given that compliance was impossible. This was followed by unilateral cancellation, booking, and rebooking of the workers' flights from June to July 1981 without prior notice. These actuations constituted malice and evident bad faith that caused damage and besmirched the reputation and business image of private respondent. The awards of moral and exemplary damages were therefore proper. Petitioner's counterclaims were likewise rejected, the record showing that no claim for said damages was ever made immediately after their alleged occurrence, rendering them mere afterthoughts.

• Contract "to Carry" vs. Contract "of Carriage" — The contract of common carriage of passengers has two aspects: (a) the contract "to carry (at some future time)," which is consensual and perfected by mere consent under Article 1356 of the Civil Code, and (b) the contract "of carriage" or "of common carriage" itself, which is a real contract arising only when the carrier is actually used. In this case, the contract "to carry" was perfected upon the airline's acceptance of a prepaid ticket advice, even without issuance of tickets, because all three essential requisites — consent, object certain, and cause — were present.

• Actual or Compensatory Damages Must Be Duly Proved — Under Article 2199 of the Civil Code, actual or compensatory damages cannot be presumed but must be duly proved with a reasonable degree of certainty. A court cannot rely on speculation, conjecture, or guesswork as to the fact and amount of damages. Where the claimant's expenses have already been reimbursed by a third party, no pecuniary loss is suffered and actual damages cannot be awarded.

• Moral and Exemplary Damages for Bad Faith in Breach of Contract — Moral and exemplary damages may be awarded for breach of contract where the defendant acted in malice or evident bad faith. Repeated failure to transport passengers despite confirmed bookings and payment, coupled with unilateral cancellation and rebooking without prior notice, constitutes patent bad faith warranting such awards.

• "In dealing with the contract of common carriage of passengers for purpose of accuracy, there are two (2) aspects of the same, namely: (a) the contract 'to carry (at some future time),' which contract is consensual and is necessarily perfected by mere consent (See Article 1356, Civil Code of the Philippines), and (b) the contract 'of carriage' or 'of common carriage' itself which should be considered as a real contract for not until the carrier is actually used can the carrier be said to have already assumed the obligation of a carrier." — This passage, quoted by the Supreme Court from the Court of Appeals' decision, articulates the controlling distinction between the consensual contract "to carry" and the real contract "of carriage," which is the ratio decidendi for finding a perfected contract despite the non-issuance of tickets.

• "Even if a PTA is merely an advice from the sponsors that an airline is authorized to issue a ticket and thus no ticket was yet issued, the fact remains that the passage had already been paid for by the principal of the appellee, and the appellant had accepted such payment." — This passage establishes that acceptance of a prepaid ticket advice, coupled with acceptance of payment, suffices to perfect a consensual contract "to carry" even in the absence of issued tickets.

• "Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved, and proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have suffered and on evidence of the actual amount thereof." — This is the canonical formulation relied upon by the Court in deleting the award of actual damages, frequently cited in subsequent jurisprudence on the standard of proof required for compensatory damages.

• Rebollido vs. Court of Appeals, 170 SCRA 800 (1989) — Cited for the definition of a cause of action as an act or omission of one party in violation of the legal right or rights of the other, supporting the finding that private respondent had a valid cause of action against petitioner.

• Dichoso vs. Court of Appeals, 192 SCRA 169 (1990) — Cited for the principle that actual or compensatory damages cannot be presumed but must be duly proved with a reasonable degree of certainty, supporting the deletion of the actual damages award.

• Article 1356, Civil Code of the Philippines — Cited in support of the proposition that the consensual contract "to carry" is perfected by mere consent, establishing that acceptance of the PTA sufficed to perfect the contract between the parties.

• Article 2199, Civil Code of the Philippines — Provides that one is entitled to adequate compensation only for such pecuniary loss suffered as has been duly proved, referred to as actual or compensatory damages. Applied to delete the actual damages award because private respondent's expenses had been fully reimbursed and no pecuniary loss was duly proved.

Narvasa, C.J., Feliciano, Regalado, and Campos, Jr., JJ., concurred.