SUPREME COURT REPORTS ANNOTATED
Guanio v Makati Shangri-La Hotel and Resort
I. Recit-ready summary
Petitioner-plaintiff: Sps. Luigi Guanio and Anna Hernandez-
Guanio
Respondent-defendant: Makati Shangri-La Hotel and Resort, Inc
Cause of action: Breach of contract and damages.
Petitioner booked at respondent’s hotel in Makati for the former’s
wedding reception. Their contract was finalized a day before the
event, agreeing on a set menu for a price of P1150 per person and for
a minimum of 350 guests to a maximum of 380 guests.
On the day itself, there were delays in the service of the meal and
other inconveniences. The petitioners sent a letter-complaint to the
respondent and received an apologetic reply from respondent’s
executive assistant manager. The petitioners later filed a complaint
for breach of contract and damages before the RTC of Makati. In its
defense, the respondent claimed that the delays and inconveniences
were caused by the sudden increase of guests to 470.
The RTC ruled in favor of petitioners, holding that the reply of
respondent’s executive assistant manager was admission of its
liability. The trial court awarded actual, moral, and exemplary
damages as well as attorney’s fees.
The CA reversed, holding that the proximate cause of plaintiff’s
injury was an unexpected increase in their guests.
The SC held that the doctrine of proximate cause is inapplicable to
the case at bar because said doctrine is applicable only in actions for
quasi-delicts, not in actions involving breach of contracts. The
applicable provision is Art 1170 of the NCC.
Breach of contract is defined as the failure without legal reason to
comply with the terms of a contract. It is also defined as the failure,
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Guanio v Makati Shangri-La Hotel and Resort
without legal excuse, to perform any promise which forms the whole
or part of the contract.
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 injured party which
may include: (1) the expectation interest, or the interest in being
placed in the position he would have been had the contract been
performed; (2) the reliance interest, or the interest in being placed in
the position where he would have been had the contract never been
made; and (3) restitution interest, or the interest in having restored to
him whatever benefits he may have conferred on the other party.
In this case, the breach of contract happened when the petitioner
failed to inform the respondent of the increase in the number of the
expected guests. However, the court still awarded nominal damages
to the petitioner under considerations of equity for the respondent’s
failure to “manage” the situation better, the latter being esteemed in
the hotel and service industry.
Decision of CA partially reversed. Award of P50k by way of
nominal damages to petitioners.
II. Facts of the case
Facts:
For their wedding reception, Sps. Guanio booked at the Shangri-La
Hotel Makati. A day before the event, the parties finalized and
forged their contract, agreeing on a set menu which included black
cod, salmon, and angel hair pasta with wild mushroom sauce for the
main course for a final price of P1150 per person.
Plaintiff’s claim:
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Guanio v Makati Shangri-La Hotel and Resort Guanio v Makati Shangri-La Hotel and Resort

Petitioners claim that during the reception, respondent’s The CA reversed the trial court’s decision, holding that the
representatives did not show despite their assurance that they would; proximate cause of plaintiff’s injury was an unexpected increase in
their guests complained of delay in service certain items listed in the their guests, which “set the chain of events which resulted in the
published menu were unavailable; the hotel’s waiters were rude and alleged inconveniences.”
unapologetic; and an additional charge for extension despite a III. Issue/s
previous promise that there would be no such charge.
Main issue: WON the defendant is liable for breach of contract and
Petitioners sent a letter-complaint to the respondent and received an hence, the payment of damages to plaintiff? Liable for nominal
apologetic reply. Nevertheless, they filed a complaint for breach of damages only.
contract and damages before the RTC of Makati City.
Sub-issue: Is the doctrine of proximate cause applicable? No.
Respondent’s answer:
In its answer, respondent claimed that representatives were present;
that while there was a delay in the service of the meals, it was
IV. Ratio/Legal Basis
because of the sudden increase of guests to 470 from the guaranteed
expected minimum number of guests of 350 to a maximum of 380
Doctrine of proximate cause – not applicable.
(350-380); and that such delay was relayed to the petitioner Luigi’s
The doctrine of proximate cause is applicable only in actions for
father. Furthermore, the apologetic reply from the respondent’s
quasi-delicts, not in actions involving breach of contract. The
executive assistant manager denied the admission of liability and was
doctrine is a device for imputing liability to a person where there is
claimed to mean goodwill to its customers.
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
RTC decision:
contractual relation between the parties, it is the parties themselves
The RTC rendered a decision in favor of the plaintiffs. It ordered the
who create the obligation, and the function of the law is merely to
defendant the plaintiff the following:
regulate the relation thus created.
1. Actual damages – P350k
2. Moral damages – P250k
Applicable law: Art 1170.
3. Exemplary damages – P100k
4. Attorney’s fees – P100k
What applies in the present case is Art 1170, to wit:
The RTC relied heavily on the Executive Assistant Manager’s reply,
Those who in the performance of their obligations are
and notes that from “the tenor of the letter, the defendant admits that
guilty of fraud, negligence, or delay, and those who in any
the services that the plaintiff received were unacceptable and
manner contravene the tenor thereof, are liable for
definitely not up to their standards.”
damages.
CA decision:
RCPI v Verchez enlightens: (Note: I broke down the paragraph)

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 SUPREME COURT REPORTS ANNOTATED
Guanio v Makati Shangri-La Hotel and Resort
In culpa contractual . . . the mere proof of the existence of the
contract and the failure of its compliance justify, prima facie, a
corresponding right of relief. The law, recognizing the obligatory
force of contracts, will not permit a party to be set free from liability
for any kind of misperformance of the contractual undertaking or a
contravention of the tenor thereof. 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 interest," which 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 interest," which 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
. . . or of the attendance of fortuitous event, to excuse him from his
ensuing liability.
Application to case: there was breach of contract on the part of
plaintiff.
The pertinent provisions of the Banquet and Meeting Services
Contract between the parties indicate that: “The Engager (plaintiff)
must inform the Hotel (defendant) at least 48 hours before the
scheduled date and time of the Function of any change in the
minimum guaranteed covers. … In case the actual number of
attendees exceed the minimum guaranteed number by 10% (in this
case, by 35 people, or a maximum of 385 people) the Hotel shall not
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in any way be held liable for any damage or inconvenience which
may be caused thereby.
Breach of contract is defined as the failure without legal reason to
comply with the terms of a contract. It is also defined as the failure,
without legal excuse, to perform any promise which forms the whole
or part of the contract.
Hence, plaintiff’s failure to inform defendant of the change in the
expected number of guests excused the latter from liability for “any
damage or inconvenience” occasioned thereby.
But award of damages to plaintiff on equitable considerations.
Exculpatory clause aside, the Court notes that respondent could
have managed the situation better, it being held in high esteem in the
hotel and service industry. 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, which in this case is a marriage reception.
In the present petition, under considerations of equity, the Court
deems it just to award the amount of P50k by way of nominal
damages to petitioners (plaintiff) for the discomfiture that they were
subjected to during the event. The Court recognizes that every person
is entitled to respect of his dignity, personality, privacy, and peace of
mind. Respondent’s lack of prudence is an affront to this right.
V. Disposition
WHEREFORE, the Court of Appeals Decision dated July 27, 2009 is
PARTIALLY REVERSED. Respondent is, in light of the foregoing
discussion, ORDERED to pay the amount of P50,000.00 to
petitioners by way of nominal damages.
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Guanio v Makati Shangri-La Hotel and Resort Guanio v Makati Shangri-La Hotel and Resort

VI. Notes
Legal basis for court’s award of nominal damages:
CIVIL CODE, Article 2222. The court may award nominal damages
in every obligation arising from any source enumerated in Article
1157, or in every case where any property right has been invaded.
Transcript notes:
Why is proximate cause not applicable? Because in breach of K
cases, there is a pre-existing contractual relation between the parties.
Here, the vinculum juris is the breach of the K itself. You only need
to prove the K and the breach. But in quasi-delicts, the vinculum
juris is the negligent act. Thus, the plaintiff has the burden to prove
proximate cause. He must prove that it was indeed the defendant’s
negligent act that caused the injury.
Whenever a contract is breached, there is an award of damages.
And the award of damages in breach of contract cases is
supposed to protect 3 interests of the plaintiff. What are those 3
interests?
(1) Expectation interest – Interest of the plaintiff in being placed
in the position where he would have been had the contract
been performed;
(2) Reliance interest – Interest of the plaintiff in being placed in
the position where he would have been had the contract never
been made; and
(3) Restitution interest – Interest of the plaintiff in having restored
to him whatever benefits, in the meantime, he may have
conferred on the other party.

While Spouses Guanio breached the contract for failing to inform

the hotel of an increase in the number of guests. The contract
stipulated that the number of guests would range from 350
(minimum) to 380 (maximum). Clause 4.5 states that the Spouses
must inform the hotel in case of an increase in this number. And in
case the actual number of attendees exceed the minimum number of
guests by 10%, then the hotel will not incur any liability.

In this case, 470 guests attended the reception. 470 guests far
exceeded the 10% allowance in Clause 4.5 of the contract.
Therefore, the contract was breached by the Spouses.

In cases of breach of contract, the plaintiff only needs to prove that

there was a contract, and that the contract was breached in order to
establish a prima facie meritorious case.

How did the Court define breach of contract, by the way?

It is the failure to comply with the terms of a contract without just or
legal cause.

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