FACTS:

The case involves two separate civil cases filed against Philippine Airlines, Inc. (PAL). In Civil Case No. 7047, the plaintiffs allege that they made reservations and bought tickets from PAL for a flight, but were not allowed to board the plane. In Civil Case No. 7307, the plaintiff alleges that he bought a plane ticket but was not given a seat. In both cases, the plaintiffs claim damages and allege breach of contract by PAL.

The lower court found that PAL breached the contract of carriage by not accommodating the plaintiffs on the flight. The court also found that PAL's actions constituted bad faith and gross negligence, causing the plaintiffs embarrassment, humiliation, and mental anguish. The court awarded moral damages, exemplary damages, actual damages, and attorney's fees to the plaintiffs.

The lower court granted the plaintiffs' motion for reconsideration and increased the award of moral and exemplary damages, citing a Supreme Court case that involved discrimination by PAL's employees.

The plaintiffs filed a petition for review on certiorari to reverse the decision of the respondent court, which affirmed the decision of the lower court with modifications.

The lower court rendered a decision in favor of the plaintiffs, ordering the defendants to vacate certain lands and pay damages. The court awarded actual damages, moral damages, and attorney's fees to the plaintiffs. The defendants appealed the decision to the respondent court, which affirmed the decision but made modifications to the amounts of damages awarded.

Thus, the plaintiffs filed a petition for review, raising several questions for the Court's consideration.

ISSUES:

1. Is a passenger entitled to moral damages when the failure to accommodate the passenger resulted from unlawful acts of third parties against the carrier's personnel?

2. Are respondents entitled to exemplary damages when there is no sufficient evidence to show reckless, oppressive, or malevolent conduct by the carrier?

3. Can a passenger claim damages when she voluntarily gave her confirmed seat to another passenger?

4. Can a trial court increase damages in a motion for reconsideration?

5. Whether the failure of the petitioner airline to accommodate the private respondents constitutes a breach of contract of carriage.

6. Whether the petitioner can be held liable for damages for the breach of contract.

7. Whether the alleged unlawful acts of third persons constitute a fortuitous event that exempts the petitioner from liability.

8. Whether the petitioner can be held liable for breach of contract of carriage

9. Whether the petitioner can invoke fortuitous event as a defense

10. Whether the award of moral and exemplary damages, as well as attorney's fees, is proper

11. Whether the increase in the damages awarded by the lower court is proper

RULING:

1. Yes, a passenger is entitled to moral damages when the failure to accommodate the passenger resulted from unlawful acts of third parties against the carrier's personnel.

2. Yes, respondents are entitled to exemplary damages even without sufficient evidence of reckless, oppressive, or malevolent conduct by the carrier.

3. A passenger cannot validly claim damages if she voluntarily gave her confirmed seat to another passenger.

4. No, a trial court cannot increase damages in a motion for reconsideration.

5. Yes, the failure of the petitioner airline to accommodate the private respondents constitutes a breach of contract of carriage. A contract of air carriage generates a relation attended with a public duty, and the operation of a common carrier is a business affected with public interest and must serve the comfort and convenience of passengers.

6. The petitioner can be held liable for damages for the breach of contract. In case of a breach in bad faith of a contract of carriage, the award of damages is in order. Bad faith, in this context, refers to a breach of a known duty through some motive of interest or ill-will.

7. No, the alleged unlawful acts of third persons do not constitute a fortuitous event that exempts the petitioner from liability. For a fortuitous event to be considered, it must be independent of the will of the obligor. In this case, the alleged fortuitous event was caused by the act of the petitioner's agents in allowing the third persons to board the flight in excess of the allotted number of passengers. The impossibility of accommodating the private respondents was foreseeable, and therefore, the petitioner cannot claim the occurrence as a fortuitous event.

8. The petitioner can be held liable for breach of contract of carriage because the findings show that it breached its contract in bad faith and in wanton disregard of the respondents' rights as passengers.

9. The petitioner cannot invoke fortuitous event as a defense because its lack of diligence and failure to accommodate the passengers in the class contracted for amounted to bad faith and fraud.

10. The award of moral and exemplary damages, as well as attorney's fees, is proper based on the petitioner's breach of contract in bad faith. Exemplary damages are necessary to deter the petitioner and other airlines from committing similar breaches in the future.

11. The increase in the damages awarded by the lower court is proper as it was made by the respondent court, not sub silentio, and was within the discretion of the court. The amount of damages need not be specifically pleaded in the complaint as it is left to the court's discretion.

PRINCIPLES:

• Moral damages are recoverable in a breach of contract of carriage where the air carrier acted fraudulently or in bad faith.

• Exemplary damages can be awarded even without sufficient evidence of reckless, oppressive, or malevolent conduct by the carrier.

• A passenger is not entitled to damages if she voluntarily gave her confirmed seat to another passenger.

• A trial court cannot increase damages in a motion for reconsideration.

• A contract of air carriage generates a relation attended with a public duty.

• The operation of a common carrier is a business affected with public interest and must serve the comfort and convenience of passengers.

• In case of a breach in bad faith of a contract of carriage, the award of damages is in order.

• Bad faith, in the context of a breach of contract of carriage, refers to a breach of a known duty through some motive of interest or ill-will.

• For a fortuitous event to exempt the obligor from liability, it must be independent of the will of the obligor, unforeseeable or inevitable, render it impossible to fulfill the obligation in a normal manner, and the obligor must be free from any participation in aggravating the injury to the obligee or creditor.

• Common carriers have a special obligation to give utmost consideration to the convenience of their customers.

• Inattention and lack of care on the part of the carrier resulting in the failure of the passenger to be accommodated in the class contracted for amounts to bad faith or fraud.

• Moral damages may be awarded in cases of breach of contract of carriage.

• Exemplary damages may be awarded to deter similar breaches of contract in the future.

• Awards for damages and attorney's fees are left to the sound discretion of the court.