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Chapter 5: Breach of Contract of Transportation

1. Roldan vs. Lim Ponzo and Co.

Facts: Roldan, the plaintiff, filed an action against defendant herein, Lim for the
latters failure to fulfil its obligation concerning the delivery of 2,244 packages of
sugar from plaintiffs hacienda to Iloilo. The defendant admits the existence of
the contract but denies liability averring that the sugar was lost in a wreck
without the fault on the part of the owner, the patron, or the crew of the vessel.
Accordingly, among the 2,244 packages, only 1,022 were saved in a more or
less damaged condition from the wreckage. The trial court however dismissed
the case ruling that the plaintiff failed to comply with the provisions of section
366 of the Commercial Code which provides that a claim must be submitted
to the carrier within 24 hours upon the receipt of the goods for bringing an
action on account of damages on the goods delivered and failure to do so
prescribes the right of the consignee to claim damages against the carrier.
Plaintiff then sought for the appeal of the RTCs decision.
Issue: WON the filing of claim when the consignee wishes to bring action against
the carrier on account of damaged goods applicable to plaintiffs action for
recovery based on failure to comply with the contractual obligation.
Held: No. Article 366 Commercial Coded is limited to cases of claims for
damage to goods actually turned over by the carrier and received by the
consignee. Clearly it has no application in cases wherein the goods entrusted to
the carrier are not delivered by the carrier to the consignee. The claim for
damages then arises exclusively out of the failure to make delivery.

2. Philippine American General Insurance Co. vs Sweet Lines Inc.
Facts: PR herein was contracted for the shipment of goods deliverable to
petitioner Tagum Plastic Inc. who contracted with petitioner herein PHILAMGEN
for the insurance of said goods. Upon receipt of the consignee(TGI) of the
goods, a survey was conducted revealed a shortage, that only 5,413 bags of
Low Density Polyethylene 647 in good condition out of 7,000 bags were
delivered. Before trial, both parties entered into a compromise agreement
where the defendant in lieu of the shortage and damaged goods, would pay
PHILAMGEN, as subrogee of the insured TPI. The lower court then caused the
dismissal of the case in view of the settlement entered by the parties. However,
the CA reversed the decision on the ground of prescription as provided on the
stipulation in the bill of lading. Petitioner filed for an appeal contending that the
CA erred in holding prescription for causing the reversal because SLI failed to
adduce evidence in support thereof and that the bill of lading containing said
prescription period were never offered in evidence. SLI on the other hand asserts
the existence of said BOL as it is a standard in its operation to issue such for
carriage and the same was in record.
Issue: WON the failure of PR to adduce BOL as an evidence bars them from
raising the defense of prescription inscribed in said BOL.
Since petitioners are suing upon SLIs contractual obligation under the contract
of carriage as contained in the bill of lading, such BOL can be considered as an
actionable document which must be pleaded as causes of action or defences.
Its genuineness and due execution are deemed admitted unless denied by the
adverse party. Such rule(must be pleaded) apply to both a cause of action or
defense based on said documents.
Par. of the Bill of Lading:
Claims for shortage/damages must be made at the time of delivery
Claims for non-delivery, misdelivery, loss/damage must be filed
Suits arising said causes shall be instituted WITHIN 60 days FROM
The court added that petitioners failure to deny the existence amounts to an
admission. Negative pregnant a denial pregnant with the admission of the
substantial facts in the pleading responded to which are not squarely denied.
Thus petitioners objection to the validity of such agreement amounted to an
implied admission of the existence of the BOL.
Validity of the Agreement: shorter prescriptive period.
The court ruled that it is valid finding the necessity of such considering the rigors
and risks of shipping industry and to balance out the legal presumption of
Filing the claim is a Condition Precedent.

3. DOLE Philippines v. Maritime Co. of the Philippines
Facts: The cargos at issue in this case were delivered to the consignee, DOLE,
plaintiff and petitioner herein, on December 18, 1971 by Maritime, the carrier, PR
herein. Petitioner then filed a claim against the defendant on May 4, 1972 for
the damages sustained by the cargo. On june 11, 1973, plaintiff then
proceeded with the filing of an action against the defendant. The case was
however dismissed. A subsequent action was then filed by the plaintiff to which
the defendant raised the defence of prescription as prescribed by the provisions
of the Carriage of Goods by Sea Act. The said law provides that the carrier and
the ship shall be discharged from liability in respect of loss or damages UNLESS
suit is brought within ONE YEAR from receipt of goods or the date when the
goods should have been delivered. DOLE however asserts that said law is
subject to the provision of Article 1155 of the new civil code which provides that
the prescription of actions is interrupted by the making of an extrajudicial written
demand by the creditor is applicable to action brought under said law.
Issue: WON civil code applies?
Held: NO.
The court already ruled in previous cases in the negative stating that such
application would have the effect of extending the one-year prescriptive period
fixed by law. it is desirable that matters affecting transportation of goods by sea
be decided in as short time as possible; the application of the civil code would
unnecessarily extend the period and permit delays in the settlement of questions
affecting transportation, which is contrary to the clear intent and purpose of
Assuming arguendo that if such did toll the prescription, the effect of such extra-
judicial demand would have been to renew the one-year prescriptive period
from the date of its making which was on May 04, 1972. Petitioner DOLE only
filed their complaint on June 11, 1973, still a month late.

4. Zulueta vs. Pan American World Airways, Inc.
Facts: Spouses Rafael and Telly Zulueta and their daughter Carolinda were
passengers of defendant airline Pan American(Panam) from Honolulu to Manila
via Wake Island. On their stop in Wake Island, the passengers were advised that
they could disembark for a 30-minute stopover. Plaintiff Rafael testified that
since the CR inside the terminal was occupied, he went 100 yards outside near
the beach to relieve himself.
The flight then announced its departure but noticed Rafaels absence thus a
search was conducted causing the flights delay. When Rafael arrived he
remarked towards the employees you people almost made me miss your flight,
you have a defective announcing system and I was not paged.
The airport manager(AM) then stopped them at the gate and ordered Rafael to
turnover his baggage claim checks. However only 3 out of 4 bags were
unloaded and after which the AM ordered Rafael to open the bags to which
the latter refused. Due to his insistent refusal, he was off-loaded. The wife and his
child was however allowed to continue their voyage back to Manila.
Upon arriving in Manila, Telly demanded from Panam to reroute her husband at
their expense to which Panam denied. Telly was forced to pay for his new ticket
and send him money.
Panam: 1. The real reason why Rafael did not board was because the Sps.
Zulueta were fighting.
2. Order for inspection of baggage were valid because someone told the
captain that the bags contained bombs.
3. the off-loading was called for due to Rafaels irrational behaviour and refusal
to have his bags examined.
Contetion: no evidence at all indicating such happening. The evidence of
the defense also tends to show that Rafael was indeed off-loaded.
The court also added that Rafael would not have returned back to the
airport/plane from the beach if indeed he wanted to be left behind.
Issue on validity of checking the bags to which Rafael refused which became
the reason allegedly why he was off-loaded:
The court ruled that there was nothing to justify the belief that the luggage of
the missing person should be searched in order to ascertain whether there was a
bomb in it. Defendant failed to identify the informant and failed to ascertain
whether said informant was indeed from the State Department.
RTCs justification for ruling in favour of the Zuluetas:
1. Defendant failed to inquire from anyone who knew the Zuluetas who
were frequent flyers, with regards to their character which was nice as
2. Defendant never identified the alleged State Department men.
3. Defendant failed to make steps to place the alleged luggage with bombs
far away from the plane.
4. Defendant continued with the flight knowing that 1 of the 4 bags was still
5. Defendant manager took Rafael with his 3 bags allegedly with bombs to
his car then to the hotel.
6. Etc.
Contention: Zulueta entitled only to actual damages since Rafael was the
first to commit a breach of contract for leaving 200 yards away from the
SC: PANAM failed to point out which part of the contract Rafael allegedly
breached. SC added that the damages awarded to the Zuluetas was due to
PANAMs deliberate act of leaving him at wake island and the embarrassment
caused. Not to their failure t page plaintiff.
Cotention: Rafael is guilty of contributory negligence for his failure to reboard
the plane within 30 minutes as announced.
SC: Such contention is justified only when: 1. The plaintiff have been left
UNWITTINGLY/UNKOWINGLY due to the negligence of PANAM personell; or 2.
KNOWLINGLY, if he could not be found.
In the instant case, Rafael showed up before the plane took off and was off-
loaded intentionally among others.

5. Air France vs. Carrascoso
Facts: Plaintiff Rafael Carrascoso, herein private respondent, was a passenger of
defendant Air France, petitioner herein. PR bought a ticket from petitioner
through the latters authorized agent PAL. The ticket issued was a first class round
trip from Manila to Rome through Bangkok. When the plane was about to
depart from Bangkok to continue its voyage, defendant airlines manager
forced plaintiff to vacate the first class seat that he was occupying in favour of a
white man who had a better right to the seat. The PR refused which resulted to a
commotion within the plane. Eventually PR reluctantly gave his first class seat in
the plane through the pacification of his companions. During the flight, PR
refused to have his ticked to be noted as having been transferred from first class
to tourist class as this would indicate his acceptance of the transfer. PR was
forced to take another airline going back to Manila to avoid repetition of what
he experienced. Both the RTC and CA ruled in favour of PR awarding him
actual, moral and exemplary damages. Petitioner contends among others that
the said ticket did not represent true and complete intent and agreement of the
parties; that the same did not guarantee a first class ride as it was subject to
availability of seats and prior confirmation. Petitioner also assails that moral
damage cannot be awarded since the action is one of breach of contract and
that no averment of fraud or bad faith was made to merit such an award.
Issue: Whether or not moral damages may be awarded in favour of Carrascoso
despite absence of allegation of fraud or bad faith in the complaint.
Held: YES.
The court in sustaining the award for moral damages based its finding on the
following; first, there was a contract to furnish plaintiff a first class passage;
second, that the said contract was breached when petitioner failed to furnish
first class transportation at Bangkok; and third, that there was BAD FAITH when
petitioners employees forced Rafael Carrascoso to leave his first class
accommodation after he was already seated and took a seat in the tourist class
to which he suffered inconvenience and humiliation thus causing mental
anguish resulting in moral damages.
Although no specific mention of bad faith was made in the complaint, said bad
faith may be inferred from the facts and circumstances attendant especially
from the fact that there was wrongful expulsion. The said deficiency was also
cured by the evidence since it was plaintiffs intent to prove that he was ousted
from his seat wrongfully and that no objection was made by the petitioner when
the evidence of bad faith in the fulfilment of the contract was presented.
The court added that tortious acts of employers employees make the former
liable for the latter. Neglect or malfeasance of the carriers employees could
give ground for an action for damages against the carrier, the employer. It was
stated that passengers do not merely contract for transportation but are entitled
to be treated by the carriers employees with kindness, respect, courtesy, and
due consideration.
Petitioners contract with Carrascoso is on attended with public duty. The act of
wrongful expulsion amounted to violation of public duty by the petitioner air
carrier a case of quasi-delict. Damages are proper.

6. Trans World Asia vs. Court of Appeals
Facts: Private respondent herein Rogelio Vinluan entered into a contract for air
carriage for valuable consideration with Japan Airlines first class from Manila to
Tokyo, Moscow, Paris, Hamburg, Zurich, NY, LA, Honolulu, and back to Manila
thru the same airline and other airlines it represents for which he was issued the
corresponding first class tickets for the entire trip. Two days before departure of
his trip from New York to San Francisco, PR, while in Paris, confirmed his
reservation for the first class accommodation said flight. On the date of his flight,
he again reconfirmed his reservation and was even given the choice of his
preferred seat. However, upon check-in, PR was informed that there was no first
class seat available and was denied any explanation. PR was forced to take the
economy seat offered to him to avoid delay on his schedule. He later found out
that some Caucasians who checked-in much later than him was
accommodated in the first class seats. PR then filed an action. Both the RTC and
the CA ruled in favour of Vinluan awarding him actual, moral, and exemplary
damages. Petitioner, TWA, appealed the decision to the SC maintaining that
because of maintenance problems of the aircraft, they were constrained to
change the aircraft for the voyage which was smaller than the original one
scheduled for said flight. Petitioners added due to the change, passengers with
first class reservation had to be accommodated on a first-come, first-served
basis. PR asserts that he did not hear such announcement. Petitioner assails the
finding as well that they acted maliciously which is the basis of the moral
Issue: Whether or not moral damages may be rewarded to PR in view of the
Held: Yes.
PR had a first class ticket which was confirmed twice but nevertheless was
denied. Upon his protest he was arrogantly threatened by one of the petitioners
employees. Worst still, several Caucasians who arrived much later than PR was
accommodated in first class seats. The court ruled that discrimination and
humiliation was apparent. It was later found out that the change of aircraft was
due to the few confirmed economy class passengers thus prompting them to
change to a smaller plane and not because of maintenance problems.
Petitioner sacrificed the comfort of its first class passengers including PR for the
sake of economy.
Such intention and lack of care for the interest of its passengers who are entitled
to its utmost consideration, particularly as to their convenience, AMOUNT to BAD
FAITH which entitles passengers to the award of moral damages.

7. Armovit vs. Court of Appeals
Facts: Petitioners herein Spouses Dr. Herman and Dora Armovit with their
daughter Jacqueline, bought 3 round trip tickets from US to Manila and Manila
to US. The tickets representing their trip back to the US posited that the
departure time from Manila to Tokyo would be January 1710:30AM. On their
return trip, petitioners arrived at the airport one hour and fifteen minutes ahead
of the departure time marked in the ticket. Petitioners were then informed that
they cannot be accommodated because their flight scheduled at 9:15am was
already taking off and the 10:30AM flight time entered in their plane tickets was
erroneous. Petitioners however averred that they reconfirmed their reservations
and the same, during that time, was not changed when reconfirmed. Dr.
Herman Armovit protested and suffered anguish due to the fact that he will be
missing appointments with his patients. Due to PRs refusal to pay petitioner, the
latter filed an action against PR. The RTC ruled in favour of petitioners awarding
them actual, moral, and exemplary damages. The CA on appeal affirmed the
award for actual damages but deleted moral damages ruling that petitioners
failed to testify their social humiliation and that the breach of contract was not
malicious or fraudulent.
Issue: Whether or not moral damages may be awarded to petitioner despite
failure to take witness stand and absence of bad faith upon breach of contract.
Held: Yes.
A contract to transport passengers is one mainly involved with travelling
passengers. The contract of air carriage is thus attended with public duty.
Passengers do note merely contract for transportation but are entitled as well to
be treated by the carriers eployees with kindness, respect, courtesy, and due
consideration. They are entitled to protection from personal misconduct and
abuses from such employees. Thus any rude or discourteous conduct on the
part of the employees towards a passenger gives the latter an action for
damages against the carrier.
The gross negligence committed by PR in issuance of the tickets with entries as
to the time of the flight; the failure to correct such erroneous entries; and the
manner by which petitioners were rudely informed that they were bumped off
are clear indicia of such malice and bad faith and establish that private
respondent committed a breach of contract which entitles petitioners to moral
the court ruled that petitioners absence was justified taking in consideration the
events that transpired in the Philippines regarding Aquinos assassination to
which the petitioners were advised not to fly back to the Philippines.
Nevertheless, Atty. Raymund Armovit, brother of Herman, took the witness stand
and his testimony was adequate and sufficient to establish the serious anxiety,
wounded feelings and social humiliations that petitioners suffered from since he
was with petitioners from the time they were checked in up to the time of their
ultimate departure.

8. PAL vs CA
Ruling: The court ruled that moral damages are recoverable in breach of
contract of carriage where the air carrier through its agents acted fraudulently
or in bad faith. In the instant case, the agents acted in bad faith in bumping off
private respondents. They knew and were aware that what they were doing
was wrong.
Said ruling was based on the following observations:
1. PAL allowed 2 passengers to board in Virac which caused overloading.
The agents knew that in allowing said 2 passengers to board in the plane
and in the event that said 2 passengers would refuse to deplane in Naga,
they would be in a position to violate the contracts of carriage for the 2
2. The situation was aggravated when the employees allowed 2 passengers
from another flight(Sorsogon connecting flight which was cancelled) to
board in instead of Bagadiong and Sto Tomas whose reservations were
already confirmed and whose luggage were already loaded.
PAL employees contention that passengers from Sorsogon arrived first at
the ticket counter is untenable because plaintiffs already had confirmed
Defense of caso foruito is untenable since the requisite that it should be free
from human will is absent as when the employees allowed the governor and
the mayor in boarding in the plane.