SPOUSES GUANIO vs. SHANGRI-LA HOTEL MANILA (February 7, 2011)

Facts: A couple sought the services of a five-star hotel for their wedding reception.

A week before their wedding reception, the hotel scheduled a food tasting. Eventually, the parties agreed to a package where the final price was P1,150.00 per person.

According to the complainants, when the actual reception took place, their guests complained of the delay in the service of the dinner; certain items listed in the published menu were unavailable; and despite the Hotel’s promise that there would be no charge for the extension of the reception beyond 12:00 midnight, they were billed and paid P8,000 per hour for the three-hour extension of the event up to 4:00 A.M. the next day. They sent a letter-complaint to hotel and received an apologetic reply from the hotel’s Executive Assistant Manager in charge of Food and Beverage.

They nevertheless filed a complaint for breach of contract and damages before the Regional Trial Court (RTC).

The hotel argued that while there was a delay in the service of the meals, the same was occasioned by the sudden increase of guests to 470 from the guaranteed expected minimum number of guests of 350 to a maximum of 380, as stated in the Banquet Event Order (BEO); and the Banquet Service Director, in fact, relayed the delay in the service of the meals to complainant’s father.

The RTC, relying heavily on the letter of the hotel’s Executive Assistant ruled in favor of the complainants and awarded damages in their favor.

The Court of Appeals reversed the decision, noting that the proximate cause of the complainant’s injury was the unexpected increase in the number of their guests.

ISSUE: Whether or not the doctrine of proximate cause is applicable in obligations arising from contracts.

HELD: The doctrine of proximate cause is applicable only in actions for quasi-delicts, not in actions involving breach of contract. x x x The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In such a case, the obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties, it is the parties themselves who create the obligation, and the function of the law is merely to regulate the relation thus created.

What applies in the present case is Article 1170 of the Civil Code which reads:

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in any manner contravene the tenor thereof, are liable for damages.

RCPI v. Verchez, et al. enlightens:

In culpa contractual x x x the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief.  A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered.  The remedy serves to preserve the interests of the promissee that may include his expectation interestwhich is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed, or his reliance interest, which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made; or his restitution interestwhich is his interest in having restored to him any benefit that he has conferred on the other party.  Indeed, agreements can accomplish little, either for their makers or for society, unless they are made the basis for action.  The effect of every infraction is to create a new duty, that is, to make RECOMPENSE to the one who has been injured by the failure of another to observe his contractual obligation unless he can show extenuating circumstances, like proof of his exercise of due diligence x x x or of the attendance of fortuitous eventto excuse him from his ensuing liability. (emphasis and underscoring in the original; capitalization supplied)

In resolving the matter, the Supreme Court relied on the terms and conditions of the contract between the parties, particularly the pertinent provisions of the Banquet and Meeting Services Contract between the parties which read:

“4.3 The ENGAGER shall be billed in accordance with the prescribed rate for the minimum guaranteed number of persons contracted for, regardless of under attendance or non-appearance of the expected number of guests, except where the ENGAGER cancels the Function in accordance with its Letter of Confirmation with the HOTEL. Should the attendance exceed the minimum guaranteed attendance, the ENGAGER shall also be billed at the actual rate per cover in excess of the minimum guaranteed attendance.

x x x x

4.5. The ENGAGER must inform the HOTEL at least forty eight (48) hours before the scheduled date and time of the Function of any change in the minimum guaranteed covers. In the absence of such notice, paragraph 4.3 shall apply in the event of under attendance. In case the actual number of attendees exceed the minimum guaranteed number

by ten percent (10%), the HOTEL shall not in any way be held liable for any damage or inconvenience which may be caused thereby. The ENGAGER shall also undertake to advise the guests of the situation and take positive steps to remedy the same.”

In absolving the hotel from damages, the Supreme Court noted that petitioners were remiss in their obligation to inform respondent of the change in the expected number of guests. Petitioners’ failure to discharge such obligation thus excused, as the above-quoted paragraph 4.5 of the parties’ contract provide, respondent from liability for “any damage or inconvenience” occasioned thereby”

Nevertheless, on grounds of equity, the High Court awarded P50,000.00 in favor of the complainants and justified it by saying:

The exculpatory clause notwithstanding, the Court notes that respondent could have managed the “situation” better, it being held in high esteem in the hotel and service industry. Given respondent’s vast experience, it is safe to presume that this is not its first encounter with booked events exceeding the guaranteed cover. It is not audacious to expect that certain measures have been placed in case this predicament crops up. That regardless of these measures, respondent still received complaints as in the present case, does not amuse.

Respondent admitted that three hotel functions coincided with petitioners’ reception. To the Court, the delay in service might have been avoided or minimized if respondent exercised prescience in scheduling events. No less than quality service should be delivered especially in events which possibility of repetition is close to nil. Petitioners are not expected to get married twice in their lifetimes.