China Airlines Limited v. Court of Appeals

Summary

Manuel Ocampo purchased a discounted group tour airline ticket from China Airlines with restrictions on early departure. He requested and received confirmation from CAL Manila for an earlier return flight, supported by extensive telex communications between CAL offices confirming seat availability. However, CAL San Francisco refused to honor the confirmed reservation due to internal communication breakdown, forcing Ocampo to take an alternative flight. The Supreme Court found CAL liable for breach of contract but distinguished between contractual breach in good faith versus bad faith. While the Court of Appeals awarded substantial moral and exemplary damages, the Supreme Court limited recovery to compensatory damages, holding that moral and exemplary damages require clear proof of bad faith, fraud, or malice, which was not established. The case clarifies the Civil Code's framework for damages in contractual breaches based on the obligor's state of mind.