Spouses Fernando Viloria and Lourdes Viloria vs Continental Airlines, Inc.

September 23, 2012
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Business Organization – Partnership, Agency, Trust – Elements of Agency – Estoppel

In 1997, while the spouses Viloria were in the United States, they approached Holiday Travel, a travel agency working for Continental Airlines, to purchase tickets from Newark to San Diego. The travel agent, Margaret Mager, advised the couple that they cannot travel by train because it was already fully booked; that they must purchase plane tickets for Continental Airlines; that if they won’t purchase plane tickets; they’ll never reach their destination in time. The couple believed Mager’s representations and so they purchased two plane tickets worth $800.00.

Later however, the spouses found out that the train trip wasn’t really fully booked and so they purchased train tickets and went to their destination by train instead. Then they called up Mager to request for a refund for the plane tickets. Mager referred the couple to Continental Airlines. As the couple were now in the Philippines, they filed their request with Continental Airline’s office in Ayala. The spouses Viloria alleged that Mager misled them into believing that the only way to travel was by plane and so they were fooled into buying expensive plane tickets.

Continental Airlines refused to refund the amount of the tickets and so the spouses sued the airline company. In its defense, Continental Airlines claimed that the tickets sold to them by Mager were non-refundable; that, if any, they were not bound by the misrepresentations of Mager because there’s no contract of agency existing between Continental Airlines and Mager.

The trial court ruled in favor of spouses Viloria but the Court of Appeals reversed the ruling of the RTC.

ISSUE: Whether or not a contract of agency exists between Continental Airlines and Mager.

HELD: Yes. All the elements of agency are present, to wit:

    1. there is consent, express or implied of the parties to establish the relationship;
    2. the object is the execution of a juridical act in relation to a third person;
    3. the agent acts as a representative and not for himself, and
    4. the agent acts within the scope of his authority.

The first and second elements are present as Continental Airlines does not deny that it concluded an agreement with Holiday Travel to which Mager is part of, whereby Holiday Travel would enter into contracts of carriage with third persons on the airlines’ behalf. The third element is also present as it is undisputed that Holiday Travel merely acted in a representative capacity and it is Continental Airlines and not Holiday Travel who is bound by the contracts of carriage entered into by Holiday Travel on its behalf. The fourth element is also present considering that Continental Airlines has not made any allegation that Holiday Travel exceeded the authority that was granted to it.

Continental Airlines also never questioned the validity of the transaction between Mager and the spouses. Continental Airlines is therefore in estoppel. Continental Airlines cannot be allowed to take an altogether different position and deny that Holiday Travel is its agent without condoning or giving imprimatur to whatever damage or prejudice that may result from such denial or retraction to Spouses Viloria, who relied on good faith on Continental Airlines’ acts in recognition of Holiday Travel’s authority. Estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will befall an innocent party due to its injurious reliance, the failure to apply it in this case would result in gross travesty of justice.

 

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