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Alfredo Ramos vs China Southern Airlines Co. Ltd.
G.R. No. 213418. September 21, 2016
When an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract
of carriage arises, and the passenger has every right to expect that he would fly on that flight and on that
date. If that does not happen, then the carrier opens itself to a suit for breach of contract of carriage.
In an action based on a breach of contract of carriage, the aggrieved party does not have to prove that the
common carrier was at fault or was negligent. All he has to prove is the existence of the contract and the fact
of its nonperformance by the carrier, through the latter’s failure to carry the passenger to its destination.
Facts
Petitioners purchased five China Southern Airlines roundtrip plane tickets from Active Travel Agency that will
be leaving Manila to Xiamen and back. Nothing eventful happened during petitioners’ flight going to Xiamen
as they were able to successfully board the plane which carried them to Xiamen International Airport.
On their way back to the Manila, however, petitioners were prevented from taking their designated flight even
though they already checked in all their baggages and were given the corresponding claim stubs and after
they had paid the terminal fees. Airlines’ agent said that petitioners were merely chance passengers but they
may be allowed to join the flight if they are willing to pay an additional cost per person. When petitioners
refused to defray the additional cost, their baggages were offloaded from the plane and China Southern
Airlines flight then left Xiamen International Airport without them. Petitioners were compelled to rent a car and
take the train to the nearest airport where they bought new sets of plane tickets from another airline that could
fly them home.
Petitioners initiated an action for damages before the RTC of Manila against China Southern Airlines and
Active Travel. China Southern Airlines denied liability by alleging that petitioners were not confirmed
passengers of the airlines but were merely chance passengers and are required to reconfirm all their
bookings at least 72 hours before their scheduled time of departures but they failed to do so which resulted
in the automatic cancellation of their bookings.
RTC rendered a Decision in favor of the petitioners and ordered China Southern Airlines to pay damages.
CA modified the RTC Decision by deleting the award for moral and exemplary damages. According to the
appellate court, petitioners failed to prove that China Southern Airlines’ breach of contractual obligation was
attended with bad faith, hence, this petition.
Issue
Whether or not there is breach of contract of carriage when the ground personnel of the airline company
unjustly and unreasonably refused to board petitioners to the plan and entitled to actual, moral and exemplary
damages.
Held
Yes. Petitioner is entitled to actual, moral and exemplary damages.
When an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract
of carriage arises, and the passenger has every right to expect that he would fly on that flight and on that
date. If that does not happen, then the carrier opens itself to a suit for breach of contract of carriage. In an
action based on a breach of contract of carriage, the aggrieved party does not have to prove that the common
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carrier was at fault or was negligent. All he has to prove is the existence of the contract and the fact of its
non-performance by the carrier, through the latter's failure to carry the passenger to its destination.
There is no doubt that petitioners are entitled to actual or compensatory damages. Both the RTC and the CA
uniformly held that there was a breach of contract committed by China Southern Airlines when it failed to
deliver petitioners to their intended destination, a factual finding that we do not intend to depart from in the
absence of showing that it is unsupported by evidence. As the aggrieved parties, petitioners had satisfactorily
proven the existence of the contract and the fact of its nonperformance by China Southern Airlines; the
concurrence of these elements called for the imposition of actual or compensatory damages.
With respect to moral damages, the same is awarded in cases of breaches of contract where the defendant
acted fraudulently or in bad faith. The Court finds that the airline company acted in bad faith in insolently
bumping petitioners off the flight after they have completed all the pre- departure routine. Bad faith is evident
when the ground personnel of the airline company unjustly and unreasonably refused to board petitioners to
the plane which compelled them to rent a car and take the train to the nearest airport where they bought new
sets of plane tickets from another airline that could fly them home. Petitioners have every reason to expect
that they would be transported to their intended destination after they had checked in their luggage and had
gone through all the security checks. Instead, China Southern Airlines offered to allow them to join the flight
if they are willing to pay additional cost; this amount is on top of the purchase price of the plane tickets. The
requirement to pay an additional fare was insult upon injury.
China Southern Airlines is also liable for exemplary damages as it acted in a wantonly oppressive manner as
succinctly discussed above against the petitioners. Exemplary damages which are awarded by way of
example or correction for the public good, may be recovered in contractual obligations, as in this case, if
defendant acted in wanton, fraudulent, reckless, oppressive or malevolent manner.
2
Federal Phoenix Assurance Co., Ltd vs Fortune Sea Carrier, Inc.
G.R. No. 188118, November 23, 2015
Facts
Fortune Sea agreed to lease its vessel M/V Ricky Rey to Northern Mindanao Transport Co., Inc. (Northern
Transport) through a Time Charter Party agreement for 90 days, and extended the same for another 90 days,
to carry bags of cement to different ports of destination.
Northern Transport ordered bales of abaca fibers to be shipped on board M/V Ricky Rey by shipper Manila
Hemp Trading Corporation, for delivery to consignee Newtech Pulp Inc. (Newtech) in Iligan City. The
shipment was covered by Bill of Lading No. 1 and was insured by petitioner Federal Phoenix Assurance Co.
Upon arrival of M/V Ricky Rey at the Iligan City port the stevedores started to discharge the abaca shipment
the following clay. Cargoes of abaca had caught on fire which resulted in damages incurred. Federal Phoenix
was subrogated to the rights of Newtech and pursued its claim against Fortune Sea.
For its defense, Fortune Sea insisted that it was acting as a private carrier at the time the incident occurred.
It alleged that the Time Charter Party agreement executed by the parties expressly provided that M/V Ricky
Rey shall be under the orders and complete control of Northern Transport.
RTC rendered a Decision in favor of Federal Phoenix and ordered Fortune Sea to pay actual damages,
attorney's fees and cost of suit. Fortune Sea filed a Motion for Reconsideration but was denied. Aggrieved,
Fortune Sea appealed to the CA.
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CA reversed and set aside the Decision of the RTC and ordered the dismissal of the complaint for sum of
money for lack of merit. According to the CA, although the agreement between Fortune Sea and Northern
Transport was denominated as Time Charter Party, it found compelling reasons to hold that the contract was
one of bareboat or demise. Hence, Federal Phoenix filed this instant petition.
Issue
Whether or not the time-charter converted Fortune Sea into a private carrier.
Held
Yes, the time-charter converted Fortune Sea into a private carrier.
The Court have ruled that "[i]n determining the nature of a contract, courts are not bound by the title or name
given by the parties. The decisive factor in evaluating an agreement is the intention of the parties, as shown,
not necessarily by the terminology used in the contract but by their conduct, words, actions and deeds prior
to, during and immediately alter executing the agreement."
As correctly observed by the CA, the Time Charter Party agreement executed by Fortune Sea and Northern
Transport clearly shows that the charter includes both the vessel and its crew thereby making Northern
Transport the owner pro hac vice (for this occasion) of M/V Ricky Rey during the whole period of the voyage.
M/V Ricky Rey was converted into a private carrier notwithstanding the existence of the Time Charter Party
agreement with Northern Transport since the said agreement was not limited to the ship only but extends
even to the control of its crew. Despite the denomination as Time Charter by the parties, their agreement
undoubtedly reflected that their intention was to enter into a Bareboat Charter Agreement.
In this case, the master and all the crew of the ship were all made subject to the direct control and supervision
of the charterer. In fact, the instructions on the voyage and other relative directions or orders were handed
out by Northern Transport. Thus, the CA correctly ruled that the nature of the vessel's charter is one of
bareboat or demise charter.
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