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108253 February 23, 1994

FACTS: Petitioner Geraldez filed an action for damages by reason of contractual breach against respondent Kenstar Travel Corp. Petitioner booked the Volare 3 tour with Kenstar. The tour covered a 22-day tour of Europe for $2,990.00 which she paid the total equivalent amount of P190,000.00 charged by private respondent for her and her sister, Dolores. At the tour, petitioner claimed that what was alleged in the brochure was not what they experienced. There was no European tour manager as stated in the brochure, the hotels where they stayed in which were advertised as first class were not, the UGC leather factory which was specifically included as a highlight of the tour was not visited and The Filipino tour guide provided by Kenstar was a first timer thus inexperienced. The Quezon City RTC rendered a decision ordering respondent Kenstar to pay moral, nominal, and exemplary damages totalling P1,000,000 and P50,000 attorney’s fees. On appeal, respondent Court of Appeals deleted the award for moral and exemplary damages and reduced the nominal damages and attorney’s fees to P30,000 and P10,000 respectively. ISSUES: (1) Whether or not Kenstar acted in bad faith or with gross negligence in discharging its obligations in the contract? (2)Whether or not the Court of Appeals erred in removing the moral and exemplary damages

HELD: (1) Yes, Kenstar acted in bad faith and with gross negligence in discharging its obligation. Kenstar’s choice of the tour guide is a manifest disregard of its specific assurances to the tour group, and which deliberate omission is contrary to the rules of good faith and fair play. Providing the Volare 3 group with an inexperienced first timer as a tour guide, Kenstar manifested indifference to the satisfaction, convenience and peace of mind to its clients. The election of the tour guide was a deliberate and conscious choice on the part of Kenstar in order to afford her on-the job-training making the tour group her unknowing guinea pigs, furthermore the inability to visit the UGC leather factory is reflective of the ineptness and neglect of the tour guide. The failure of Kenstar to provide a European Tour Manager although it specifically advertised and promised to do so is also a contractual breach. Kenstar expressly stated in its advertisement that a European Tour Manager would be present. Kenstar’s contention that the European Tour Manager does not refer to a natural person but a juridical personality does not hold because a corporate entity could not possibly accompany the tour group. Lastly Kenstar committed grave misrepresentation when it assured in its tour package that the hotels provided would provide complete amenities and would be conveniently located along the way for the daily itineraries. Testimonies by petitioner and private respondent show that the hotels were unsanitary

and sometimes did not even provide towels and soap. Further testimonies claim that the hotels were also located in locations far from the city making it difficult to go to. The fact that Kenstar could only book them in such hotels because of budget constraints is not the fault of the tour group. Kenstar should not have promised such accommodations if they couldn’t afford it. Kenstar should have increased the price to ensure accommodations.

(2) Yes, the Court of Appeals erred in removing the moral and exemplary damages. Moral damages may be awarded in breaches of contract where the obligor acted fraudulently or in bad faith. Kenstar can be faulted with fraud in the inducement which is employed by a party in securing the consent of the other. This fraud or dolo which is present or employed at the time of birth or perfection of the contract may either be dolo causante or dolo incidente. The first, or causal fraud referred to in Article 1338 are those deceptions or misrepresentations of a serious character employed by one party and without which the other party would not have entered into the contract, Dolo incidente, or incidental fraud which is referred to in Article 1344, are those which are not serious in character and without which the other party would still have entered into the contract. In either case, whether Kenstar has committed dolo causante or dolo incidente, it is liable for damages both moral and exemplary.