[G.R. No. 150751.
September 20, 2004] Round Logs and undertook to transport said shipment to Manila for delivery to
CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE
COMPANY OF NORTH AMERICA, respondent.
DECISION
PANGANIBAN, J.:
A common carrier is presumed to be at fault or negligent. It shall be liable for
the loss, destruction or deterioration of its cargo, unless it can prove that the
sole and proximate cause of such event is one of the causes enumerated in
Article 1734 of the Civil Code, or that it exercised extraordinary diligence to
prevent or minimize the loss. In the present case, the weather condition
encountered by petitioners vessel was not a storm or a natural disaster
comprehended in the law. Given the known weather condition prevailing
during the voyage, the manner of stowage employed by the carrier was
insufficient to secure the cargo from the rolling action of the sea. The carrier
took a calculated risk in improperly securing the cargo. Having lost that risk, it
cannot now disclaim any liability for the loss.
The Case
Before the Court is a Petition for Review[1] under Rule 45 of the Rules of Court,
seeking to reverse and set aside the March 23, 2001 Decision[2] of the Court
of Appeals (CA) in CA-GR CV No. 48915. The assailed Decision disposed as
follows:
WHEREFORE, the decision of the Regional Trial Court of Makati City, Branch
148 dated August 4, 1994 is hereby MODIFIED in so far as the award of
attorneys fees is DELETED. The decision is AFFIRMED in all other
respects.[3]
The CA denied petitioners Motion for Reconsideration in its November 7, 2001
Resolution.[4]
The Facts
The factual antecedents, summarized by the trial court and adopted by the
appellate court, are as follows:
On July 25, 1990 at Puerto Princesa, Palawan, the [petitioner] received on
board its vessel, the M/V Central Bohol, 376 pieces [of] Philippine Apitong
Alaska Lumber Co., Inc.
The cargo was insured for P3,000,000.00 against total loss under
[respondents] Marine Cargo Policy No. MCPB-00170.
On July 25, 1990, upon completion of loading of the cargo, the vessel left
Palawan and commenced the voyage to Manila.
At about 0125 hours on July 26, 1990, while enroute to Manila, the vessel
listed about 10 degrees starboardside, due to the shifting of logs in the hold.
At about 0128 hours, after the listing of the vessel had increased to 15
degrees, the ship captain ordered his men to abandon ship and at about 0130
hours of the same day the vessel completely sank. Due to the sinking of the
vessel, the cargo was totally lost.
[Respondent] alleged that the total loss of the shipment was caused by the
fault and negligence of the [petitioner] and its captain and as direct
consequence thereof the consignee suffered damage in the sum of
P3,000,000.00.
The consignee, Alaska Lumber Co. Inc., presented a claim for the value of the
shipment to the [petitioner] but the latter failed and refused to settle the claim,
hence [respondent], being the insurer, paid said claim and now seeks to be
subrogated to all the rights and actions of the consignee as against the
[petitioner].
[Petitioner], while admitting the sinking of the vessel, interposed the defense
that the vessel was fully manned, fully equipped and in all respects seaworthy;
that all the logs were properly loaded and secured; that the vessels master
exercised due diligence to prevent or minimize the loss before, during and after
the occurrence of the storm.
It raised as its main defense that the proximate and only cause of the sinking
of its vessel and the loss of its cargo was a natural disaster, a tropical storm
which neither [petitioner] nor the captain of its vessel could have foreseen.[5]
The RTC was unconvinced that the sinking of M/V Central Bohol had been
caused by the weather or any other caso fortuito. It noted that monsoons,
which were common occurrences during the months of July to December,
could have been foreseen and provided for by an ocean-going vessel.
Applying the rule of presumptive fault or negligence against the carrier, the trial
court held petitioner liable for the loss of the cargo. Thus, the RTC deducted
1
the salvage value of the logs in the amount of P200,000 from the principal
claim of respondent and found that the latter was entitled to be subrogated to
the rights of the insured. The court a quo disposed as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
the [respondent] and against the [petitioner] ordering the latter to pay the
following:
1) the amount of P2,800,000.00 with legal interest thereof from the filing of this
complaint up to and until the same is fully paid;
2) P80,000.00 as and for attorneys fees;
3) Plus costs of suit.[6]
Ruling of the Court of Appeals
The CA affirmed the trial courts finding that the southwestern monsoon
encountered by the vessel was not unforeseeable. Given the season of rains
and monsoons, the ship captain and his crew should have anticipated the
perils of the sea. The appellate court further held that the weather disturbance
was not the sole and proximate cause of the sinking of the vessel, which was
also due to the concurrent shifting of the logs in the hold that could have
resulted only from improper stowage. Thus, the carrier was held responsible
for the consequent loss of or damage to the cargo, because its own negligence
had contributed thereto.
The CA found no merit in petitioners assertion of the vessels seaworthiness.
It held that the Certificates of Inspection and Drydocking were not conclusive
proofs thereof. In order to consider a vessel to be seaworthy, it must be fit to
meet the perils of the sea.
Found untenable was petitioners insistence that the trial court should have
given greater weight to the factual findings of the Board of Marine Inquiry (BMI)
in the investigation of the Marine Protest filed by the ship captain, Enriquito
Cahatol. The CA further observed that what petitioner had presented to the
court a quo were mere excerpts of the testimony of Captain Cahatol given
during the course of the proceedings before the BMI, not the actual findings
and conclusions of the agency. Citing Arada v. CA,[7] it said that findings of
the BMI were limited to the administrative liability of the owner/operator,
officers and crew of the vessel. However, the determination of whether the
carrier observed extraordinary diligence in protecting the cargo it was
transporting was a function of the courts, not of the BMI.
The CA concluded that the doctrine of limited liability was not applicable, in
view of petitioners negligence -- particularly its improper stowage of the logs.
Hence, this Petition.[8]
Issues
In its Memorandum, petitioner submits the following issues for our
consideration:
(i) Whether or not the weather disturbance which caused the sinking of the
vessel M/V Central Bohol was a fortuitous event.
(ii) Whether or not the investigation report prepared by Claimsmen Adjustment
Corporation is hearsay evidence under Section 36, Rule 130 of the Rules of
Court.
(iii) Whether or not the finding of the Court of Appeals that the logs in the hold
shifted and such shifting could only be due to improper stowage has a valid
and factual basis.
(iv) Whether or not M/V Central Bohol is seaworthy.
(v) Whether or not the Court of Appeals erred in not giving credence to the
factual finding of the Board of Marine Inquiry (BMI), an independent
government agency tasked to conduct inquiries on maritime accidents.
(vi) Whether or not the Doctrine of Limited Liability is applicable to the case at
bar.[9]
The issues boil down to two: (1) whether the carrier is liable for the loss of the
cargo; and (2) whether the doctrine of limited liability is applicable. These
issues involve a determination of factual questions of whether the loss of the
cargo was due to the occurrence of a natural disaster; and if so, whether its
sole and proximate cause was such natural disaster or whether petitioner was
partly to blame for failing to exercise due diligence in the prevention of that
loss.
The Courts Ruling
The Petition is devoid of merit.
First Issue:
2
Liability for Lost Cargo
From the nature of their business and for reasons of public policy, common
carriers are bound to observe extraordinary diligence over the goods they
transport, according to all the circumstances of each case.[10] In the event of
loss, destruction or deterioration of the insured goods, common carriers are
responsible; that is, unless they can prove that such loss, destruction or
deterioration was brought about -- among others -- by flood, storm,
earthquake, lightning or other natural disaster or calamity.[11] In all other
cases not specified under Article 1734 of the Civil Code, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence.[12]
In the present case, petitioner disclaims responsibility for the loss of the cargo
by claiming the occurrence of a storm under Article 1734(1). It attributes the
sinking of its vessel solely to the weather condition between 10:00 p.m. on July
25, 1990 and 1:25 a.m. on July 26, 1990.
At the outset, it must be stressed that only questions of law[13] may be raised
in a petition for review on certiorari under Rule 45 of the Rules of Court.
Questions of fact are not proper subjects in this mode of appeal,[14] for [t]he
Supreme Court is not a trier of facts.[15] Factual findings of the CA may be
reviewed on appeal[16] only under exceptional circumstances such as, among
others, when the inference is manifestly mistaken,[17] the judgment is based
on a misapprehension of facts,[18] or the CA manifestly overlooked certain
relevant and undisputed facts that, if properly considered, would justify a
different conclusion.[19]
In the present case, petitioner has not given the Court sufficient cogent
reasons to disturb the conclusion of the CA that the weather encountered by
the vessel was not a storm as contemplated by Article 1734(1). Established is
the fact that between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July 26,
1990, M/V Central Bohol encountered a southwestern monsoon in the course
of its voyage.
The Note of Marine Protest,[20] which the captain of the vessel issued under
oath, stated that he and his crew encountered a southwestern monsoon about
2200 hours on July 25, 1990, and another monsoon about 2400 hours on July
26, 1990. Even petitioner admitted in its Answer that the sinking of M/V Central
Bohol had been caused by the strong southwest monsoon.[21] Having made
such factual representation, it cannot now be allowed to retreat and claim that
the southwestern monsoon was a storm.
The pieces of evidence with respect to the weather conditions encountered by
the vessel showed that there was a southwestern monsoon at the time.
Normally expected on sea voyages, however, were such monsoons, during
which strong winds were not unusual. Rosa S. Barba, weather specialist of the
Philippine Atmospheric Geophysical and Astronomical Services
Administration (PAGASA), testified that a thunderstorm might occur in the
midst of a southwest monsoon. According to her, one did occur between 8:00
p.m. on July 25, 1990, and 2 a.m. on July 26, 1990, as recorded by the
PAGASA Weather Bureau.[22]
Nonetheless, to our mind it would not be sufficient to categorize the weather
condition at the time as a storm within the absolutory causes enumerated in
the law. Significantly, no typhoon was observed within the Philippine area of
responsibility during that period.[23]
According to PAGASA, a storm has a wind force of 48 to 55 knots,[24]
equivalent to 55 to 63 miles per hour or 10 to 11 in the Beaufort Scale. The
second mate of the vessel stated that the wind was blowing around force 7 to
8 on the Beaufort Scale.[25] Consequently, the strong winds accompanying
the southwestern monsoon could not be classified as a storm. Such winds are
the ordinary vicissitudes of a sea voyage.[26]
Even if the weather encountered by the ship is to be deemed a natural disaster
under Article 1739 of the Civil Code, petitioner failed to show that such natural
disaster or calamity was the proximate and only cause of the loss. Human
agency must be entirely excluded from the cause of injury or loss. In other
words, the damaging effects blamed on the event or phenomenon must not
have been caused, contributed to, or worsened by the presence of human
participation.[27] The defense of fortuitous event or natural disaster cannot be
successfully made when the injury could have been avoided by human
precaution.[28]
Hence, if a common carrier fails to exercise due diligence -- or that ordinary
care that the circumstances of the particular case demand -- to prevent or
minimize the loss before, during and after the occurrence of the natural
disaster, the carrier shall be deemed to have been negligent. The loss or injury
is not, in a legal sense, due to a natural disaster under Article 1734(1).[29]
We also find no reason to disturb the CAs finding that the loss of the vessel
was caused not only by the southwestern monsoon, but also by the shifting of
the logs in the hold. Such shifting could been due only to improper stowage.
The assailed Decision stated:
Notably, in Master Cahatols account, the vessel encountered the first southwestern
monsoon at about 1[0]:00 in the evening. The monsoon was coupled with heavy rains
and rough seas yet the vessel withstood the onslaught. The second monsoon attack
occurred at about 12:00 midnight. During this occasion, the master felt that the logs in
the hold shifted, prompting him to order second mate Percival Dayanan to look at the
bodega. Complying with the captains order, 2nd mate Percival Dayanan found that
there was seawater in the bodega. 2nd mate Dayanans account was:
3
14.T Kung inyo pong natatandaan ang mga pangyayari, maari mo bang isalaysay ang
naganap na paglubog sa barkong M/V Central Bohol?
S Opo, noong ika-26 ng Julio 1990 humigit kumulang alas 1:20 ng umaga (dst) habang
kami ay nagnanabegar patungong Maynila sa tapat ng Cadlao Island at Cauayan
Island sakop ng El Nido, Palawan, inutusan ako ni Captain Enriquito Cahatol na tingnan
ko ang bodega; nang ako ay nasa bodega, nakita ko ang loob nang bodega na
maraming tubig at naririnig ko ang malakas na agos ng tubig-dagat na pumapasok sa
loob ng bodega ng barko; agad bumalik ako kay Captain Enriquito Cahatol at sinabi ko
ang malakas na pagpasok ng tubig-dagat sa loob nang bodega ng barko na ito ay
naka-tagilid humigit kumulang sa 020 degrees, nag-order si Captain Cahatol na
standby engine at tinawag ang lahat ng mga officials at mga crew nang maipon kaming
lahat ang barko ay naka-tagilid at ito ay tuloy-tuloy ang pagtatagilid na ang ilan sa mga
officials ay naka-hawak na sa barandilla ng barko at di-nagtagal sumigaw nang
ABANDO[N] SHIP si Captain Cahatol at kami ay nagkanya-kanya nang talunan at
languyan sa dagat na malakas ang alon at nang ako ay lumingon sa barko ito ay di ko
na nakita.
Additionally, [petitioners] own witnesses, boatswain Eduardo Vias Castro and oiler
Frederick Perena, are one in saying that the vessel encountered two weather
disturbances, one at around 10 oclock to 11 oclock in the evening and the other at
around 12 oclock midnight. Both disturbances were coupled with waves and heavy
rains, yet, the vessel endured the first and not the second. Why? The reason is plain.
The vessel felt the strain during the second onslaught because the logs in the bodega
shifted and there were already seawater that seeped inside.[30]
The above conclusion is supported by the fact that the vessel proceeded through the
first southwestern monsoon without any mishap, and that it began to list only during the
second monsoon immediately after the logs had shifted and seawater had entered the
hold. In the hold, the sloshing of tons of water back and forth had created pressures
that eventually caused the ship to sink. Had the logs not shifted, the ship could have
survived and reached at least the port of El Nido. In fact, there was another motor
launch that had been buffeted by the same weather condition within the same area, yet
it was able to arrive safely at El Nido.[31]
In its Answer, petitioner categorically admitted the allegation of respondent in
paragraph 5 of the latters Complaint [t]hat at about 0125 hours on 26 July 1990, while
enroute to Manila, the M/V Central Bohol listed about 10 degrees starboardside, due
to the shifting of logs in the hold. Further, petitioner averred that [t]he vessel, while
navigating through this second southwestern monsoon, was under extreme stress. At
about 0125 hours, 26 July 1990, a thud was heard in the cargo hold and the logs therein
were felt to have shifted. The vessel thereafter immediately listed by ten (10) degrees
starboardside.[32]
Yet, petitioner now claims that the CAs conclusion was grounded on mere speculations
and conjectures. It alleges that it was impossible for the logs to have shifted, because
they had fitted exactly in the hold from the port to the starboard side.
After carefully studying the records, we are inclined to believe that the logs did indeed
shift, and that they had been improperly loaded.
According to the boatswains testimony, the logs were piled properly, and the entire
shipment was lashed to the vessel by cable wire.[33] The ship captain testified that out
of the 376 pieces of round logs, around 360 had been loaded in the lower hold of the
vessel and 16 on deck. The logs stored in the lower hold were not secured by cable
wire, because they fitted exactly from floor to ceiling. However, while they were placed
side by side, there were unavoidable clearances between them owing to their round
shape. Those loaded on deck were lashed together several times across by cable wire,
which had a diameter of 60 millimeters, and were secured from starboard to port.[34]
It is obvious, as a matter of common sense, that the manner of stowage in the lower
hold was not sufficient to secure the logs in the event the ship should roll in heavy
weather. Notably, they were of different lengths ranging from 3.7 to 12.7 meters.[35]
Being clearly prone to shifting, the round logs should not have been stowed with nothing
to hold them securely in place. Each pile of logs should have been lashed together by
cable wire, and the wire fastened to the side of the hold. Considering the strong force
of the wind and the roll of the waves, the loose arrangement of the logs did not rule out
the possibility of their shifting. By force of gravity, those on top of the pile would naturally
roll towards the bottom of the ship.
The adjusters Report, which was heavily relied upon by petitioner to strengthen its claim
that the logs had not shifted, stated that the logs were still properly lashed by steel
chains on deck. Parenthetically, this statement referred only to those loaded on deck
and did not mention anything about the condition of those placed in the lower hold.
Thus, the finding of the surveyor that the logs were still intact clearly pertained only to
those lashed on deck.
The evidence indicated that strong southwest monsoons were common occurrences
during the month of July. Thus, the officers and crew of M/V Central Bohol should have
reasonably anticipated heavy rains, strong winds and rough seas. They should then
have taken extra precaution in stowing the logs in the hold, in consonance with their
duty of observing extraordinary diligence in safeguarding the goods. But the carrier took
a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now
escape responsibility for the loss.
Second Issue:
Doctrine of Limited Liability
The doctrine of limited liability under Article 587 of the Code of Commerce[36] is not
applicable to the present case. This rule does not apply to situations in which the loss
or the injury is due to the concurrent negligence of the shipowner and the captain.[37]
It has already been established that the sinking of M/V Central Bohol had been caused
by the fault or negligence of the ship captain and the crew, as shown by the improper
stowage of the cargo of logs. Closer supervision on the part of the shipowner could
have prevented this fatal miscalculation.[38] As such, the shipowner was equally
negligent. It cannot escape liability by virtue of the limited liability rule.
WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution
AFFIRMED. Costs against petitioner.
SO ORDERED.
4
G.R. No. 181375, July 13, 2016 be deemed extinguished only upon SSSICI's payment of the insurance proceeds. The
PHIL-NIPPON KYOEI, CORP., Petitioner, v. ROSALIA T. GUDELOSAO, ON HER dispositive portion of the LA Decision reads:ChanRoblesVirtualawlibrary
BEHALF AND IN BEHALF OF MINOR CHILDREN CHRISTY MAE T. GUDELOSAO WHEREFORE, premises considered, CAPT. OSCAR ORBETA, [TEMMPC], [TMCL],
AND ROSE ELDEN T. GUDELOSAO, CARMEN TANCONTIAN, ON HER BEHALF and PHIL-NIPPON KYOEI CORPORATION are hereby directed to pay solidarily the
AND IN BEHALF OF THE CHILDREN CAMELA B. TANCONTIAN, BEVERLY B. complainants as follows:
TANCONTIAN, AND ACE B. TANCONTIAN, Respondents.
DECISION chanRoblesvirtualLawlibrary
JARDELEZA, J.:
This is a petition for review on certiorari1 under Rule 45 of the Revised Rules of Court Death Burial 10% atty's
filed by Phil-Nippon Kyoei, Corp. (Petitioner) from the Decision2 of the Court of Appeals Benefits Expenses [fees]
(CA) dated October 4, 2007 (CA Decision) and its Resolution3 dated January 11, 2008
in CA-G.R. SP No. 95456. The CA reinstated the Labor Arbiter's Decision4 dated 1. ROSALIA T.
US$50,000 US$1,000 US$5,100
August 5, 2004 (LA Decision) with the modification, among others, that petitioner is GUDELOSAO:
liable to respondents under the insurance cover it procured from South Sea Surety &
Insurance Co., Inc. (SSSICI). The CA ruled that petitioner's liability would be 2. CARMEN B.
US$50,000 US$1,000 US$5,100
extinguished only upon payment by SSSICI of the insurance proceeds to TANCONTIAN:
respondents.5chanrobleslaw
Facts 3. CARMELA B.
US$7,000 US$700
TANCONTIAN:
Petitioner, a domestic shipping corporation, purchased a "Ro-Ro" passenger/cargo
vessel "MV Mahlia" in Japan in February 2003.6 For the vessel's one month conduction 4. BEVERLY B.
US$7,000 US$700
voyage from Japan to the Philippines, petitioner, as local principal, and Top Ever TANCONTIAN:
Marine Management Maritime Co., Ltd. (TMCL), as foreign principal, hired Edwin C.
Gudelosao, Virgilio A. Tancontian, and six other crewmembers. They were hired 5. ACE B. TANCONTIAN: US$7,000 US$700
through the local manning agency of TMCL, Top Ever Marine Management Philippine
Corporation (TEMMPC). TEMMPC, through their president and general manager,
Capt. Oscar Orbeta (Capt. Orbeta), and the eight crewmembers signed separate Further, respondent SOUTH SEA SURETY & INSURANCE CO., INC. is hereby
contracts of employment. Petitioner secured a Marine Insurance Policy (Maritime Policy directed to pay as beneficiaries complainants ROSALIA T. GUDELOSAO and
No. 00001) from SSSICI over the vessel for P10,800,000.00 against loss, damage, and CARMEN B. TANCONTIAN [P]3,240,000.00 each for the proceeds of the Personal
third party liability or expense, arising from the occurrence of the perils of the sea for Accident Policy Cover it issued for each of the deceased seafarers EDWIN C.
the voyage of the vessel from Onomichi, Japan to Batangas, Philippines. This Marine GUDELOSAO and VIRGILIO A. TANCONTIAN plus 10% attorney's fees thereof at
Insurance Policy included Personal Accident Policies for the eight crewmembers for [P]324,000.00 each thereof or a total of [P]648,000.00.
P3,240,000.00 each in case of accidental death or injury. 7chanrobleslaw
Nevertheless, upon payment of said proceeds to said widows by respondent SOUTH
On February 24, 2003, while still within Japanese waters, the vessel sank due to SEA SURETY & INSURANCE CO., INC., respondent PHIL-NIPPON
extreme bad weather condition. Only Chief Engineer Nilo Macasling survived the CORPORATION'S liability to all the complainants is deemed extinguished.
incident while the rest of the crewmembers, including Gudelosao and Tancontian,
perished.8chanrobleslaw Any other claim is hereby dismissed for lack of merit.

Respondents, as heirs and beneficiaries of Gudelosao and Tancontian, filed separate
complaints for death benefits and other damages against petitioner, TEMMPC, Capt.
Orbeta, TMCL, and SSSICI, with the Arbitration Branch of the National Labor Relations
Commission (NLRC).9chanrobleslaw
On August 5, 2004, Labor Arbiter (LA) Pablo S. Magat rendered a Decision 10 finding
solidary liability among petitioner, TEMMPC, TMCL and Capt. Orbeta. The LA also
found SSSICI liable to the respondents for the proceeds of the Personal Accident
Policies and attorney's fees. The LA, however, ruled that the liability of petitioner shall
SO ORDERED.11chanroblesvirtuallawlibrary
On appeal, the NLRC modified the LA Decision in a Resolution12 dated February 28,
2006, the dispositive portion of which reads:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, the Appeals of Complainants and PNKC are
GRANTED but only partially in the case of Complainants' Appeal, and the Appeal of
[SSSICI] is DISMISSED for lack of merit. Accordingly, the Decision is SUSTAINED
subject to the modification that [SSSICI] is DIRECTED to pay Complainants in addition
to their awarded claims, in the appealed decision, additional death benefits of
US$7,000 each to the minor children of Complainant Gudelosao, namely, Christy Mae
T. Gudelosao and Rose Elden T. Gudelosao.

5
 petitioner Rosalia T. Gudelosao, namely, Christy Mae T. Gudelosao and Rose Elden
As regards the other issues, the appealed Decision is SUSTAINED. T. Gudelosao.

SO ORDERED.13chanroblesvirtuallawlibrary Respondent SOUTH SEA SURETY & INSURANCE CO., INC. is hereby directed to
The NLRC absolved petitioner, TEMMPC and TMCL and Capt. Orbeta from any liability pay as beneficiaries complainants ROSALIA T. GUDELOSAO and CARMEN B.
based on the limited liability rule.14 It, however, affirmed SSSICI's liability after finding TANCONTIAN [P]3,240,000.00 each for the proceeds of the Personal Accident Policy
that the Personal Accident Policies answer for the death benefit claims under the Cover it issued for each of the deceased seafarers EDWIN C. GUDELOSAO and
Philippine Overseas Employment Administration Standard Employment Contract VIRGILIO A. TANCONTIAN plus 10% attorney's fees thereof at [P]324,000.00 each
(POEA-SEC).15 Respondents filed a Partial Motion for Reconsideration which the thereof or a total of [P]648,000.00.
NLRC denied in a Resolution dated May 5, 2006.16chanrobleslaw
Nevertheless, upon payment of said proceeds to said widows by respondent SOUTH
Respondents filed a petition for certiorari17 before the CA where they argued that the SEA SURETY & INSURANCE CO., INC. respondent PHIL-NIPPON
NLRC gravely abused its discretion in ruling that TEMMPC, TMCL, and Capt. Orbeta CORPORATION'S liability to all the complainants is deemed extinguished.
are absolved from the terms and conditions of the POEA-SEC by virtue of the limited
liability rule. Respondents also argued that the NLRC gravely abused its discretion in SO ORDERED.18chanroblesvirtuallawlibrary
ruling that the obligation to pay the surviving heirs rests solely on SSSICI. The CA The CA found that the NLRC erred when it ruled that the obligation of petitioner,
granted the petition, the dispositive portion thereof reads:ChanRoblesVirtualawlibrary TEMMPC and TMCL for the payment of death benefits under the POEA-SEC was ipso
WHEREFORE for being impressed with merit the petition is hereby GRANTED. facto transferred to SSSICI upon the death of the seafarers. TEMMPC and TMCL
Accordingly, the Resolution dated February 28, 2006, and Resolution, dated May 5, cannot raise the defense of the total loss of the ship because its liability under POEA-
2006, of the public respondent NLRC are hereby SET ASIDE. The Decision of the SEC is separate and distinct from the liability of the shipowner. 19 To disregard the
Labor Arbiter dated [August 5, 2004] is REINSTATED, subject to the following contract, which has the force of law between the parties, would defeat the purpose of
modifications: the Labor Code and the rules and regulations issued by the Department of Labor and
Employment (DOLE) in setting the minimum terms and conditions of employment for
chanRoblesvirtualLawlibrary(1) [Respondents CAPT. OSCAR ORBETA, [TEMMPC] the protection of Filipino seamen.20 The CA noted that the benefits being claimed are
and [TMCL] (the manning agency), are hereby directed to pay solidarily the not dependent upon whether there is total loss of the vessel, because the liability
complainants as follows: attaches even if the vessel did not sink.21 Thus, it was error for the NLRC to absolve
TEMMPC and TMCL on the basis of the limited liability rule.
chanRoblesvirtualLawlibrary
Significantly though, the CA ruled that petitioner is not liable under the POEA-SEC, but
Death Burial 10% atty's by virtue of its being a shipowner.22 Thus, petitioner is liable for the injuries to
Benefits Expenses [fees] passengers even without a determination of its fault or negligence. It is for this reason
that petitioner obtained insurance from SSSICI - to protect itself against the
ROSALIA T. GUDELOSAO: US$50,000 US$1,000 US$5,100 consequences of a total loss of the vessel caused by the perils of the sea.
Consequently, SSSICI's liability as petitioner's insurer directly arose from the contract
CARMEN B. of insurance against liability (i.e., Personal Accident Policy).23 The CA then ordered that
US$50,000 US$1,000 US$5,100
TANCONTIAN: petitioner's liability will only be extinguished upon payment by SSSICI of the insurance
proceeds.24chanrobleslaw
CARMELA B.
US$7,000 US$700
TANCONTIAN: Petitioner filed a Motion for Reconsideration 25cralawred dated November 5, 2007 but
this was denied by the CA in its Resolution26 dated January 11, 2008. On the other
BEVERLY B. hand, since SSSICI did not file a motion for reconsideration of the CA Decision, the CA
US$7,000 US$700
TANCONTIAN: issued a Partial Entry of Judgment27 stating that the decision became final and
executory as to SSSICI on October 27, 2007.
ACE B. TANCONTIAN: US$7,000 US$700
Hence, this petition where petitioner claims that the CA erred in ignoring the
fundamental rule in Maritime Law that the shipowner may exempt itself from liability by
Further, [respondents] CAPT. OSCAR ORBETA, [TEMMPC] and [TMCL] (the manning abandoning the vessel and freight it may have earned during the voyage, and the
agency) are hereby directed to pay solidarity the complainants in addition to their proceeds of the insurance if any. Since the liability of the shipowner is limited to the
awarded claims, additional death benefits of US$7,000 each to the minor children of value of the vessel unless there is insurance, any claim against petitioner is limited to

6
the proceeds arising from the insurance policies procured from SSSICI. Thus, there is
no reason in making petitioner's exoneration from liability conditional on SSSICI's
payment of the insurance proceeds.
On December 8, 2008, TEMMPC filed its Manifestation28 informing us of TEMMPC and
TMCL's Joint Motion to Dismiss the Petition and the CA's Resolution29 dated January
11, 2008 granting it. The dismissal is based on the execution of the Release of All
Rights and Full Satisfaction Claim30 (Release and Quitclaim) on December 14, 2007
between respondents and TEMMPC, TMCL, and Capt. Orbeta. In a Resolution 31dated
January 28, 2009, we noted that TEMMPC, TMCL, and Capt. Orbeta will no longer
comment on the Petition.
On the other hand, SSSICI filed its Comment32 to the petition dated September 3, 2010.
It alleged that the NLRC has no jurisdiction over the insurance claim because claims
on the Personal Accident Policies did not arise from employer-employee relations. It
also alleged that petitioner filed a complaint for sum of money 33 in the Regional Trial
Court (RTC) of Manila, Branch 46, where it prays for the payment of the insurance
proceeds on the individual Marine Insurance Policy with a Personal Accident Policy
covering the crewmembers of MV Mahlia. This case was eventually dismissed and is
now subject of an appeal34 before the CA. SSSICI prays that this matter be considered
in resolving the present case.35
Issues
I. Whether the doctrine of real and hypothecary nature of maritime law (also
known as the limited liability rule) applies in favor of petitioner.
II. Whether the CA erred in ruling that the liability of petitioner is extinguished only
upon SSSICI's payment of insurance proceeds.
Discussion
I. Liability under the POEA Standard Employment Contract.
At the outset, the CA erred in absolving petitioner from the liabilities under the POEA-
SEC. Petitioner was the local principal of the deceased seafarers for the conduction
trip of MV Mahlia. Petitioner hired them through TMCL, which also acted through its
agent, TEMMPC. Petitioner admitted its role as a principal of its agents TMCL,
TEMMPC and Capt. Orbeta in their Joint Partial Appeal36 before the NLRC.37 As such,
it is solidarily liable with TEMMPC and TMCL for the benefits under the POEA-SEC.
Doctrine of limited liability is not applicable to claims under POEA-SEC.
In this jurisdiction, the limited liability rule is embodied in Articles 587, 590 and 837
under Book III of the Code of Commerce, viz:ChanRoblesVirtualawlibrary
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third
persons which arise from the conduct of the captain in the care of the goods which the
vessel carried; but he may exempt himself therefrom by abandoning the vessel with all
her equipment and the freightage he may have earned during the voyage.
Art. 590. The co-owners of a vessel shall be civilly liable, in the proportion of their
contribution to the common fund, for the results of the acts of the captain, referred to in
Art. 587.
Each part-owner may exempt himself from this liability by the abandonment before a
notary of the part of the vessel belonging to him.
Art. 837. The civil liability incurred by the shipowners in the cases prescribed in this
section, shall be understood as limited to the value of the vessel with all its
appurtenances and freightage earned during the voyage.
Article 837 applies the limited liability rule in cases of collision. Meanwhile, Articles 587
and 590 embody the universal principle of limited liability in all cases wherein the
shipowner or agent may be properly held liable for the negligent or illicit acts of the
captain.38 These articles precisely intend to limit the liability of the shipowner or agent
to the value of the vessel, its appurtenances and freightage earned in the voyage,
provided that the owner or agent abandons the vessel.39 When the vessel is totally lost,
in which case abandonment is not required because there is no vessel to abandon, the
liability of the shipowner or agent for damages is extinguished. 40 Nonetheless, the
limited liability rule is not absolute and is without exceptions. It does not apply in cases:
(1) where the injury or death to a passenger is due either to the fault of the shipowner,
or to the concurring negligence of the shipowner and the captain; (2) where the vessel
is insured; and (3) in workmen's compensation claims.41chanrobleslaw
In Abueg v. San Diego,42 we ruled that the limited liability rule found in the Code of
Commerce is inapplicable in a liability created by statute to compensate employees
and laborers, or the heirs and dependents, in cases of injury received by or inflicted
upon them while engaged in the performance of their work or employment, to
wit:ChanRoblesVirtualawlibrary
The real and hypothecary nature of the liability of the shipowner or agent embodied in
the provisions of the Maritime Law, Book III, Code of Commerce, had its origin in the
prevailing conditions of the maritime trade and sea voyages during the medieval ages,
attended by innumerable hazards and perils. To offset against these adverse conditions
and to encourage shipbuilding and maritime commerce, it was deemed necessary to
confine the liability of the owner or agent arising from the operation of a ship to the
vessel, equipment, and freight, or insurance, if any, so that if the shipowner or agent
abandoned the ship, equipment, and freight, his liability was extinguished.
But the provisions of the Code of Commerce invoked by appellant have no room in the
application of the Workmen's Compensation Act which seeks to improve, and aims at
the amelioration of, the condition of laborers and employees. It is not the liability for the
damage or loss of the cargo or injury to, or death of, a passenger by or through the
misconduct of the captain or master of the ship; nor the liability for the loss of the ship
as a result of collision; nor the responsibility for wages of the crew, but a liability created
by a statute to compensate employees and laborers in cases of injury received by or
inflicted upon them, while engaged in the performance of their work or employment, or
the heirs and dependents of such laborers and employees in the event of death caused
7
by their employment. Such compensation has nothing to do with the provisions of the
Code of Commerce regarding maritime commerce. It is an item in the cost of production
which must be included in the budget of any well-managed industry.43 (Underscoring
supplied.)
We see no reason why the above doctrine should not apply here.
Act No. 3428, otherwise known as The Workmen's Compensation Act 44 is the first law
on workmen's compensation in the Philippines for work-related injury, illness, or death.
This was repealed on November 1, 1974 by the Labor Code,45 and was further
amended on December 27, 1974 by Presidential Decree No. 626. 46 The pertinent
provisions are now found in Title II, Book IV of the Labor Code on Employees
Compensation and State Insurance Fund.
The death benefits granted under Title II, Book IV of the Labor Code are similar to the
death benefits granted under the POEA-SEC.47 Specifically, its Section 20(A)(l) and
(4)(c) provides that:ChanRoblesVirtualawlibrary
1. In case of work-related death of the seafarer, during the term of his contract
the employer shall pay his beneficiaries the Philippine Currency equivalent to
the amount of Fifty Thousand US dollars (US$50,000) and an additional
amount of Seven Thousand US dollars (US$7,000) to each child under the
age of twenty-one (21) but not exceeding four (4) children, at the exchange
rate prevailing during the time of payment.
xxx
4. The other liabilities of the employer when the seafarer dies as a result of work-
related injury or illness during the term of employment are as follows:
xxx
c. The employer shall pay the beneficiaries of the seafarer the [Philippine]
currency equivalent to the amount of One Thousand US dollars (US$1,000) for
burial expenses at the exchange rate prevailing during the time of payment.
Akin to the death benefits under the Labor Code, these benefits under the POEA-SEC
are given when the employee dies due to a work-related cause during the term of his
contract.48 The liability of the shipowner or agent under the POEA-SEC has likewise
nothing to do with the provisions of the Code of Commerce regarding maritime
commerce. The death benefits granted under the POEA-SEC is not due to the death
of a passenger by or through the misconduct of the captain or master of the ship; nor
is it the liability for the loss of the ship as result of collision; nor the liability for wages of
the crew. It is a liability created by contract between the seafarers and their employers,
but secured through the State's intervention as a matter of constitutional and statutory
duty to protect Filipino overseas workers and to secure for them the best terms and
conditions possible, in order to compensate the seafarers' heirs and dependents in the
event of death while engaged in the performance of their work or employment. The
POEA-SEC prescribes the set of standard provisions established and implemented by
the POEA containing the minimum requirements prescribed by the government for the
employment of Filipino seafarers. While it is contractual in nature, the POEA-SEC is
designed primarily for the protection and benefit of Filipino seamen in the pursuit of
their employment on board ocean-going vessels.49 As such, it is deemed incorporated
in every Filipino seafarers' contract of employment.50 It is established pursuant to
POEA's power "to secure the best terms and conditions of employment of Filipino
contract workers and ensure compliance therewith" and "to protect the well-being of
Filipino workers overseas"51 pursuant to Article 17 of the Labor Code as amended by
Executive Order (EO) Nos. 79752 and 247.53chanrobleslaw
But while the nature of death benefits under the Labor Code and the POEA-SEC are
similar, the death benefits under the POEA-SEC are intended to be separate and
distinct from, and in addition to, whatever benefits the seafarer is entitled to under
Philippine laws, including those benefits which may be claimed from the State
Insurance Fund.54chanrobleslaw
Thus, the claim for death benefits under the POEA-SEC is the same species as the
workmen's compensation claims under the Labor Code - both of which belong to a
different realm from that of Maritime Law. Therefore, the limited liability rule does not
apply to petitioner's liability under the POEA-SEC.
Nevertheless, the Release and Quitclaim benefit petitioner as a solidary debtor.
All the same, the Release and Quitclaim executed between TEMMPC, TMCL and Capt.
Oscar Orbeta, and respondents redounded to the benefit of petitioner as a solidary
debtor.
Petitioner is solidarity liable with TEMMPC and TMCL for the death benefits under the
POEA-SEC. The basis of the solidary liability of the principal with the local manning
agent is found in the second paragraph of Section 10 of the Migrant Workers and
Overseas Filipino Act of 1995,55 which, in part, provides: "[t]he liability of the
principal/employer and the recruitment/placement agency for any and all claims under
this section shall be joint and several." This provision, is in turn, implemented by Section
1 (e)(8), Rule 2, Part II of the POEA Rules and Regulations Governing the Recruitment
and Employment of Seafarers, which requires the undertaking of the manning agency
to "[a]ssume joint and solidary liability with the employer for all claims and liabilities
which may arise in connection with the implementation of the employment contract [and
POEA-SEC]."
We have consistently applied the Civil Code provisions on solidary obligations,
specifically Articles 121756and 1222,57 to labor cases.58 We explained in Varorient
Shipping Co., Inc. v. NLRC59 the nature of the solidary liability in labor cases, to
wit:ChanRoblesVirtualawlibrary
x x x The POEA Rules holds her, as a corporate officer, solidarily liable with the local
licensed manning agency. Her liability is inseparable from those of Varorient and
Lagoa. If anyone of them is held liable then all of them would be liable for the same
obligation. Each of the solidary debtors, insofar as the creditor/s is/are concerned,
is the debtor of the entire amount; it is only with respect to his co-debtors that
he/she is liable to the extent of his/her share in the obligation. Such being the
case, the Civil Code allows each solidary debtor, in actions filed by the creditor/s,
to avail himself of all defenses which are derived from the nature of the obligation
and of those which are personal to him, or pertaining to his share. He may also
avail of those defenses personally belonging to his co-debtors, but only to the extent of
their share in the debt. Thus, Varorient may set up all the defenses pertaining to
Colarina and Lagoa; whereas Colarina and Lagoa are liable only to the extent to which
8
Varorient may be found liable by the court. The complaint against Varorient, Lagoa and
Colarina is founded on a common cause of action; hence, the defense or the appeal
by anyone of these solidary debtors would redound to the benefit of the others.
xxx
x x x If Varorient were to be found liable and made to pay pursuant thereto, the entire
obligation would already be extinguished even if no attempt was made to enforce the
judgment against Colarina. Because there existed a common cause of action
against the three solidary obligors, as the acts and omissions imputed against
them are one and the same, an ultimate finding that Varorient was not liable
would, under these circumstances, logically imply a similar exoneration from
liability for Colarina and Lagoa, whether or not they interposed any
defense.60 (Emphasis supplied.)
Thus, the rule is that the release of one solidary debtor redounds to the benefit of the
others.61Considering that petitioner is solidarily liable with TEMMPC and TMCL, we
hold that the Release and Quitclaim executed by respondents in favor of TEMMPC and
TMCL redounded to petitioner's benefit. Accordingly, the liabilities of petitioner under
Section 20(A)(l) and (4)(c) of the POEA-SEC to respondents are now deemed
extinguished. We emphasize, however, that this pronouncement does not foreclose the
right of reimbursement of the solidary debtors who paid (i.e., TEMMPC and TMCL) from
petitioner as their co-debtor.
II. Liability under the Personal Accident Policies.
The NLRC has jurisdiction over the claim on the Personal Accident Policies.
We find that the CA correctly upheld the NLRC's jurisdiction to order SSSICI to pay
respondents the value of the proceeds of the Personal Accident Policies.
The Migrant Workers and Overseas Filipinos Act of 1995 gives the Labor Arbiters of
the NLRC the original and exclusive jurisdiction over claims arising out of an employer-
employee relationship or by virtue of any law or contract involving Filipino workers for
overseas deployment, including claims for actual, moral, exemplary and other forms of
damage. It further creates a joint and several liability among the principal or employer,
and the recruitment/placement agency, for any and all claims involving Filipino
workers, viz:ChanRoblesVirtualawlibrary
SEC. 10. Money Claims. - Notwithstanding any provision of law to the contrary,
the Labor Arbiters of the National Labor Relations Commission (NLRC) shall
have the original and exclusive jurisdiction to hear and decide, within ninety (90)
calendar days after the filing of the complaint, the claims arising out of an employer-
employee relationship or by virtue of any law or contract involving Filipino workers
for overseas deployment including claims for actual, moral, exemplary and other
forms of damages. Consistent with this mandate, the NLRC shall endeavor to update
and keep abreast with the developments in the global services industry.
The liability of the principal/employer and the recruitment/placement agency for any
and all claims under this section shall be joint and several. This provision shall be
incorporated in the contract for overseas employment and shall be a condition
precedent for its approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be answerable for all money
claims or damages that may be awarded to the workers. If the recruitment/placement
agency is a juridical being, the corporate officers and directors and partners as the case
may be, shall themselves be jointly and solidarily liable with the corporation or
partnership for the aforesaid claims and damages. x x x (Emphasis supplied.)
In Finman General Assurance Corp. v. Inocencio,62 we upheld the jurisdiction of the
POEA to determine a surety's liability under its bond. We ruled that the adjudicatory
power to do so is not vested with the Insurance Commission exclusively. The POEA
(now the NLRC) is vested with quasi-judicial powers over all cases, including money
claims, involving employer-employee relations arising out of or by virtue of any law or
contract involving Filipino workers for overseas employment. 63 Here, the award of the
insurance proceeds arose out of the personal accident insurance procured by petitioner
as the local principal over the deceased seafarers who were Filipino overseas workers.
The premiums paid by petitioner were, in actuality, part of the total compensation paid
for the services of the crewmembers.64 Put differently, the labor of the employees is the
true source of the benefits which are a form of additional compensation to them.
Undeniably, such claim on the personal accident cover is a claim under an insurance
contract involving Filipino workers for overseas deployment within the jurisdiction of the
NLRC.
It must also be noted that the amendment under Section 37-A of the Migrant Workers
and Overseas Filipinos Act of 1995 on Compulsory Insurance Coverage does not
apply. The amendment requires the claimant to bring any question or dispute in the
enforcement of any insurance policy before the Insurance Commission for mediation
or adjudication. The amendment, however, took effect on May 8, 2010 long after the
Personal Accident Policies in this case were procured in 2003. Accordingly, the NLRC
has jurisdiction over the claim for proceeds under the Personal Accident Policies.
In any event, SSSICI can no longer assail its liability under the Personal Accident
Policies. SSSICI failed to file a motion for reconsideration on the CA Decision. In a
Resolution dated April 24, 2008, the CA certified in a Partial Entry of Judgment that the
CA Decision with respect to SSSICI has become final and executory and is recorded
in the Book of Entries of Judgments.65 A decision that has acquired finality becomes
immutable and unalterable. This quality of immutability precludes the modification of a
final judgment, even if the modification is meant to correct erroneous conclusions of
fact and law. This holds true whether the modification is made by the court that
rendered it or by the highest court in the land. Thus, SSSICI's liability on the Personal
Accident Policies can no longer be disturbed in this petition.
SSSICI's liability as insurer under the Personal Accident Policies is direct.
We, however, find that the CA erred in ruling that "upon payment of [the insurance]
proceeds to said widows by respondent SOUTH SEA SURETY & INSURANCE CO.,
INC., respondent PHIL-NIPPON CORPORATION'S liability to all the complainants is
deemed extinguished."66chanrobleslaw
This ruling makes petitioner's liability conditional upon SSSICI's payment of the
insurance proceeds. In doing so, the CA determined that the Personal Accident Policies
are casualty insurance, specifically one of liability insurance. The CA determined that
9
petitioner, as insured, procured from SSSICI the Personal Accident Policies in order to
protect itself from the consequences of the total loss of the vessel caused by the perils
of the sea. The CA found that the liabilities insured against are all monetary claims,
excluding the benefits under the POEA-SEC, of respondents in connection with the
sinking of the vessel.
We rule that while the Personal Accident Policies are casualty insurance, they do not
answer for petitioner's liabilities arising from the sinking of the vessel. It is an indemnity
insurance procured by petitioner for the benefit of the seafarers. As a result, petitioner
is not directly liable to pay under the policies because it is merely the policyholder of
the Personal Accident Policies.
Section 176 (formerly Sec. 174) of The Insurance Code 67 defines casualty insurance
as follows:ChanRoblesVirtualawlibrary
SEC. 174. Casualty insurance is insurance covering loss or liability arising from
accident or mishap, excluding certain types of loss which by law or custom are
considered as falling exclusively within the scope of other types of insurance
such as fire or marine. It includes, but is not limited to, employer's liability insurance,
motor vehicle liability insurance, plate glass insurance, burglary and theft
insurance, personal accident and health insurance as written by non-life
insurance companies, and other substantially similar kinds of insurance. (Emphasis
supplied.)
Based on Section 176, casualty insurance may cover liability or loss arising from
accident or mishap. In a liability insurance, the insurer assumes the obligation to pay
third party in whose favor the liability of the insured arises. 68 On the other hand,
personal accident insurance refers to insurance against death or injury by accident or
accidental means.69 In an accidental death policy, the accident causing the death is the
thing insured against.70chanrobleslaw
Notably, the parties did not submit the Personal Accident Policies with the NLRC or the
CA. However, based on the pleadings submitted by the parties, SSSICI admitted that
the crewmembers of MV Mahlia are insured for the amount of P3,240,000.00, payable
upon the accidental death of the crewmembers. 71It further admitted that the insured
risk is the loss of life or bodily injury brought about by the violent external event or
accidental means.72 Based on the foregoing, the insurer itself admits that what is being
insured against is not the liability of the shipowner for death or injuries to passengers
but the death of the seafarers arising from accident.
The liability of SSSICI to the beneficiaries is direct under the insurance
contract.73 Under the contract, petitioner is the policyholder, with SSSICI as the insurer,
the crewmembers as the cestui que vie or the person whose life is being insured with
another as beneficiary of the proceeds,74 and the latter's heirs as beneficiaries of the
policies. Upon petitioner's payment of the premiums intended as additional
compensation to the crewmembers, SSSICI as insurer undertook to indemnify the
crewmembers' beneficiaries from an unknown or contingent event. 75 Thus, when the
CA conditioned the extinguishment of petitioner's liability on SSSICI's payment of the
Personal Accident Policies' proceeds, it made a finding that petitioner is subsidiarily
liable for the face value of the policies. To reiterate, however, there is no basis for such
finding; there is no obligation on the part of petitioner to pay the insurance proceeds
because petitioner is, in fact, the obligee or policyholder in the Personal Accident
Policies. Since petitioner is not the party liable for the value of the insurance proceeds,
it follows that the limited liability rule does not apply as well.
One final note. Petitioner's claim that the limited liability rule and its corresponding
exception (i.e., where the vessel is insured) apply here is irrelevant because petitioner
was not found liable under tort or quasi-delict. Moreover, the insurance proceeds
contemplated under the exception in the case of a lost vessel are the insurance over
the vessel and pending freightage for the particular voyage. 76 It is not the insurance in
favor of the seafarers, the proceeds of which are intended for their beneficiaries. Thus,
if ever petitioner is liable for the value of the insurance proceeds under tort or quasi-
delict, it would be from the Marine Insurance Policy over the vessel and not from the
Personal Accident Policies over the seafarers.
WHEREFORE, the petition is PARTLY GRANTED. The CA Decision dated October 4,
2007 and the Resolution dated January 11, 2008 of the Court of Appeals
are AFFIRMED WITH THE FOLLOWING MODIFICATIONS:
chanRoblesvirtualLawlibrary
(1) The death benefits are limited to the amount granted under the Release of All
Rights and Full Satisfaction of Claim dated December 14, 2007 executed
between respondents and Top Ever Marine Management Company Ltd., Top
Ever Marine Management Philippine Corporation, and Captain Oscar Orbeta;
(2) As a solidary co-debtor, petitioner's liability to respondents under the POEA-
SEC is also extinguished by virtue of the Release of All Rights and Full
Satisfaction of Claim dated December 14, 2007; and
(3) The last paragraph of the dispositive portion of the CA Decision dated October
4, 2007 stating: "Nevertheless, upon payment of said proceeds to said widows
by respondent SOUTH SEA SURETY & INSURANCE CO., INC., respondent
PHIL-NIPPON CORPORATION'S liability to all the complainants is deemed
extinguished..." is DELETED.
SO ORDERED.chanRoblesvirtualLawlibrary
10

[G.R. No. 138334. August 25, 2003]
ESTELA L. CRISOSTOMO, petitioner, vs. THE COURT OF
APPEALS and CARAVAN TRAVEL & TOURS INTERNATIONAL,
INC., respondents.
DECISION
YNARES-SANTIAGO, J.:
In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent
Caravan Travel and Tours International, Inc. to arrange and facilitate her booking,
ticketing and accommodation in a tour dubbed Jewels of Europe. The package tour
included the countries of England, Holland, Germany, Austria, Liechstenstein,
Switzerland and France at a total cost of P74,322.70. Petitioner was given a 5%
discount on the amount, which included airfare, and the booking fee was also waived
because petitioners niece, Meriam Menor, was respondent companys ticketing
manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a
Wednesday to deliver petitioners travel documents and plane tickets. Petitioner, in turn,
gave Menor the full payment for the package tour. Menor then told her to be at the
Ninoy Aquino International Airport (NAIA) on Saturday, two hours before her flight on
board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday, June 15,
1991, to take the flight for the first leg of her journey from Manila to Hongkong. To
petitioners dismay, she discovered that the flight she was supposed to take had already
departed the previous day. She learned that her plane ticket was for the flight
scheduled on June 14, 1991. She thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the British Pageant
which included England, Scotland and Wales in its itinerary. For this tour package,
petitioner was asked anew to pay US$785.00 or P20,881.00 (at the then prevailing
exchange rate of P26.60). She gave respondent US$300 or P7,980.00 as partial
payment and commenced the trip in July 1991.
Upon petitioners return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum she paid
for Jewels of Europe and the amount she owed respondent for the British Pageant tour.
Despite several demands, respondent company refused to reimburse the amount,
contending that the same was non-refundable.[1] Petitioner was thus constrained to file
a complaint against respondent for breach of contract of carriage and damages, which
was docketed as Civil Case No. 92-133 and raffled to Branch 59 of the Regional Trial
Court of Makati City.
In her complaint,[2] petitioner alleged that her failure to join Jewels of Europe was due
to respondents fault since it did not clearly indicate the departure date on the plane
ticket.Respondent was also negligent in informing her of the wrong flight schedule
through its employee Menor. She insisted that the British Pageant was merely a
substitute for the Jewels of Europe tour, such that the cost of the former should be
properly set-off against the sum paid for the latter.
For its part, respondent company, through its Operations Manager, Concepcion
Chipeco, denied responsibility for petitioners failure to join the first tour. Chipeco
insisted that petitioner was informed of the correct departure date, which was clearly
and legibly printed on the plane ticket. The travel documents were given to petitioner
two days ahead of the scheduled trip.Petitioner had only herself to blame for missing
the flight, as she did not bother to read or confirm her flight schedule as printed on the
ticket.
Respondent explained that it can no longer reimburse the amount paid for Jewels of
Europe, considering that the same had already been remitted to its principal in
Singapore, Lotus Travel Ltd., which had already billed the same even if petitioner did
not join the tour. Lotus European tour organizer, Insight International Tours Ltd.,
determines the cost of a package tour based on a minimum number of projected
participants. For this reason, it is accepted industry practice to disallow refund for
individuals who failed to take a booked tour.[3]
Lastly, respondent maintained that the British Pageant was not a substitute for the
package tour that petitioner missed. This tour was independently procured by petitioner
after realizing that she made a mistake in missing her flight for Jewels of Europe.
Petitioner was allowed to make a partial payment of only US$300.00 for the second
tour because her niece was then an employee of the travel agency. Consequently,
respondent prayed that petitioner be ordered to pay the balance of P12,901.00 for the
British Pageant package tour.
After due proceedings, the trial court rendered a decision, [4] the dispositive part of which
reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty
Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three Centavos
(P53,989.43) with legal interest thereon at the rate of twelve percent (12%) per annum
starting January 16, 1992, the date when the complaint was filed;
2. Ordering the defendant to pay the plaintiff the amount of Five Thousand (P5,000.00)
Pesos as and for reasonable attorneys fees;
3. Dismissing the defendants counterclaim, for lack of merit; and
4. With costs against the defendant.
SO ORDERED.[5]
The trial court held that respondent was negligent in erroneously advising petitioner of
her departure date through its employee, Menor, who was not presented as witness to
rebut petitioners testimony. However, petitioner should have verified the exact date and
time of departure by looking at her ticket and should have simply not relied on Menors
verbal representation. The trial court thus declared that petitioner was guilty of
contributory negligence and accordingly, deducted 10% from the amount being claimed
as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties to be
at fault. However, the appellate court held that petitioner is more negligent than
respondent because as a lawyer and well-traveled person, she should have known
better than to simply rely on what was told to her. This being so, she is not entitled to
any form of damages. Petitioner also forfeited her right to the Jewels of Europe tour
and must therefore pay respondent the balance of the price for the British Pageant
tour. The dispositive portion of the judgment appealed from reads as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court dated
October 26, 1995 is hereby REVERSED and SET ASIDE. A new judgment is hereby
ENTERED requiring the plaintiff-appellee to pay to the defendant-appellant the amount
of P12,901.00, representing the balance of the price of the British Pageant Package
Tour, the same to earn legal interest at the rate of SIX PERCENT (6%) per annum, to
be computed from the time the counterclaim was filed until the finality of this decision.
11
After this decision becomes final and executory, the rate of TWELVE PERCENT (12%)
interest per annum shall be additionally imposed on the total obligation until payment
thereof is satisfied. The award of attorneys fees is DELETED. Costs against the
plaintiff-appellee.
SO ORDERED.[6]
Upon denial of her motion for reconsideration, [7] petitioner filed the instant petition
under Rule 45 on the following grounds:
I The object of petitioners contractual relation with respondent is the latters service
It is respectfully submitted that the Honorable Court of Appeals committed a reversible
error in reversing and setting aside the decision of the trial court by ruling that the
petitioner is not entitled to a refund of the cost of unavailed Jewels of Europe tour she
being equally, if not more, negligent than the private respondent, for in the contract of
carriage the common carrier is obliged to observe utmost care and extra-ordinary
diligence which is higher in degree than the ordinary diligence required of the
passenger. Thus, even if the petitioner and private respondent were both negligent, the
petitioner cannot be considered to be equally, or worse, more guilty than the private
respondent. At best, petitioners negligence is only contributory while the private
respondent [is guilty] of gross negligence making the principle of pari delicto
inapplicable in the case;
II
The Honorable Court of Appeals also erred in not ruling that the Jewels of Europe tour
was not indivisible and the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the petitioner the consequential damages
due her as a result of breach of contract of carriage.[8]
Petitioner contends that respondent did not observe the standard of care required of a
common carrier when it informed her wrongly of the flight schedule. She could not be
deemed more negligent than respondent since the latter is required by law to exercise
extraordinary diligence in the fulfillment of its obligation. If she were negligent at all, the
same is merely contributory and not the proximate cause of the damage she suffered.
Her loss could only be attributed to respondent as it was the direct consequence of its
employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain person
or association of persons obligate themselves to transport persons, things, or news
from one place to another for a fixed price.[9] Such person or association of persons are
regarded as carriers and are classified as private or special carriers and common or
public carriers.[10] A common carrier is defined under Article 1732 of the Civil Code as
persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air, for compensation,
offering their services to the public.
It is obvious from the above definition that respondent is not an entity engaged in the
business of transporting either passengers or goods and is therefore, neither a private
nor a common carrier. Respondent did not undertake to transport petitioner from one
place to another since its covenant with its customers is simply to make travel
arrangements in their behalf. Respondents services as a travel agency include
procuring tickets and facilitating travel permits or visas as well as booking customers
for tours.
While petitioner concededly bought her plane ticket through the efforts of respondent
company, this does not mean that the latter ipso facto is a common carrier. At most,
respondent acted merely as an agent of the airline, with whom petitioner ultimately
contracted for her carriage to Europe. Respondents obligation to petitioner in this
regard was simply to see to it that petitioner was properly booked with the airline for the
appointed date and time. Her transport to the place of destination, meanwhile,
pertained directly to the airline.
of arranging and facilitating petitioners booking, ticketing and accommodation in the
package tour. In contrast, the object of a contract of carriage is the transportation of
passengers or goods. It is in this sense that the contract between the parties in this
case was an ordinary one for services and not one of carriage. Petitioners submission
is premised on a wrong assumption.
The nature of the contractual relation between petitioner and respondent is
determinative of the degree of care required in the performance of the latters obligation
under the contract. For reasons of public policy, a common carrier in a contract of
carriage is bound by law to carry passengers as far as human care and foresight can
provide using the utmost diligence of very cautious persons and with due regard for all
the circumstances.[11] As earlier stated, however, respondent is not a common carrier
but a travel agency. It is thus not bound under the law to observe extraordinary diligence
in the performance of its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the standard of
care required of respondent is that of a good father of a family under Article 1173 of the
Civil Code.[12] This connotes reasonable care consistent with that which an ordinarily
prudent person would have observed when confronted with a similar situation. The test
to determine whether negligence attended the performance of an obligation is: did the
defendant in doing the alleged negligent act use that reasonable care and caution
which an ordinarily prudent person would have used in the same situation? If not, then
he is guilty of negligence.[13]
In the case at bar, the lower court found Menor negligent when she allegedly informed
petitioner of the wrong day of departure. Petitioners testimony was accepted as
indubitable evidence of Menors alleged negligent act since respondent did not call
Menor to the witness stand to refute the allegation. The lower court applied the
presumption under Rule 131, Section 3 (e)[14] of the Rules of Court that evidence
willfully suppressed would be adverse if produced and thus considered petitioners
uncontradicted testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor was negligent and
maintains that petitioners assertion is belied by the evidence on record. The date and
time of departure was legibly written on the plane ticket and the travel papers were
delivered two days in advance precisely so that petitioner could prepare for the trip. It
performed all its obligations to enable petitioner to join the tour and exercised due
diligence in its dealings with the latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut petitioners testimony could
not give rise to an inference unfavorable to the former. Menor was already working in
France at the time of the filing of the complaint, [15] thereby making it physically
impossible for respondent to present her as a witness. Then too, even if it were possible
for respondent to secure Menors testimony, the presumption under Rule 131, Section
3(e) would still not apply. The opportunity and possibility for obtaining Menors testimony
12
belonged to both parties, considering that Menor was not just respondents employee, WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the
but also petitioners niece. It was thus error for the lower court to invoke the presumption Court of Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner is
that respondent willfully suppressed evidence under Rule 131, Section 3(e). Said ordered to pay respondent the amount of P12,901.00 representing the balance of the
presumption would logically be inoperative if the evidence is not intentionally omitted price of the British Pageant Package Tour, with legal interest thereon at the rate of 6%
but is simply unavailable, or when the same could have been obtained by both per annum, to be computed from the time the counterclaim was filed until the finality of
parties.[16] this Decision. After this Decision becomes final and executory, the rate of 12% per
In sum, we do not agree with the finding of the lower court that Menors negligence annum shall be imposed until the obligation is fully settled, this interim period being
concurred with the negligence of petitioner and resultantly caused damage to the deemed to be by then an equivalent to a forbearance of credit. [23]
latter. Menors negligence was not sufficiently proved, considering that the only SO ORDERED.
evidence presented on this score was petitioners uncorroborated narration of the
events. It is well-settled that the party alleging a fact has the burden of proving it and a
mere allegation cannot take the place of evidence. [17] If the plaintiff, upon whom rests
the burden of proving his cause of action, fails to show in a satisfactory manner facts
upon which he bases his claim, the defendant is under no obligation to prove his
exception or defense.[18]
Contrary to petitioners claim, the evidence on record shows that respondent exercised
due diligence in performing its obligations under the contract and followed standard
procedure in rendering its services to petitioner. As correctly observed by the lower
court, the plane ticket[19] issued to petitioner clearly reflected the departure date and
time, contrary to petitioners contention. The travel documents, consisting of the tour
itinerary, vouchers and instructions, were likewise delivered to petitioner two days prior
to the trip. Respondent also properly booked petitioner for the tour, prepared the
necessary documents and procured the plane tickets. It arranged petitioners hotel
accommodation as well as food, land transfers and sightseeing excursions, in
accordance with its avowed undertaking.
Therefore, it is clear that respondent performed its prestation under the contract as well
as everything else that was essential to book petitioner for the tour. Had petitioner
exercised due diligence in the conduct of her affairs, there would have been no reason
for her to miss the flight. Needless to say, after the travel papers were delivered to
petitioner, it became incumbent upon her to take ordinary care of her concerns. This
undoubtedly would require that she at least read the documents in order to assure
herself of the important details regarding the trip.
The negligence of the obligor in the performance of the obligation renders him liable for
damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor
consists in his failure to exercise due care and prudence in the performance of the
obligation as the nature of the obligation so demands. [20] There is no fixed standard of
diligence applicable to each and every contractual obligation and each case must be
determined upon its particular facts. The degree of diligence required depends on the
circumstances of the specific obligation and whether one has been negligent is a
question of fact that is to be determined after taking into account the particulars of each
case.[21]
The lower court declared that respondents employee was negligent. This factual
finding, however, is not supported by the evidence on record. While factual findings
below are generally conclusive upon this court, the rule is subject to certain exceptions,
as when the trial court overlooked, misunderstood, or misapplied some facts or
circumstances of weight and substance which will affect the result of the case. [22]
In the case at bar, the evidence on record shows that respondent company performed
its duty diligently and did not commit any contractual breach. Hence, petitioner cannot
recover and must bear her own damage.

13

Central Shipping Company, Inc v Insurance Company of North America
(Insurance)
[G.R. No. 150751. September 20, 2004]
CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF
NORTH AMERICA,
respondent.
FACTS:
On July 25, 1990 at Puerto Princesa, Palawan, Central Shipping Company received on
board its vessel, the M/V ‘Central Bohol’, 376 pieces [of] Philippine Apitong Round Logs
and undertook to transport said shipment to Manila for delivery to Alaska Lumber Co.,
Inc.
“The cargo was insured for P3,000,000.00 against total loss under Insurance Company
of North America’s Marine Cargo Policy No. MCPB- 00170. The vessel completely
sank. Due to the sinking of the vessel, the cargo was totally lost. The consignee, Alaska
Lumber Co. Inc., presented a claim for the value of the shipment to Central Shipping
but the latter failed and refused to settle the claim, hence Insurance company, being
the insurer, paid said claim and now seeks to be subrogated to all the rights and actions
of the consignee as against Central Shipping. Central Shipping raised as its main
defense that the proximate and only cause of the sinking of its vessel and the loss of
its cargo was a natural disaster, a tropical storm which neither Central Shipping nor the
captain of its vessel could have foreseen.
DECISION OF LOWER COURTS:
(1) RTC: Central Shipping Liable. RTC was unconvinced that the sinking of M/V Central
Bohol had been caused by the weather or any other caso fortuito. It noted that
monsoons, which were common occurrences during the months of July to December,
could have been foreseen and provided for by an ocean-going vessel.
(2) CA: affirmed RTC. Given the season of rains and monsoons, the ship captain and
his crew should have anticipated the perils of the sea. The CA found no merit in
petitioner’s assertion of the vessel’s seaworthiness. It held that the Certificates of
Inspection and Drydocking were not conclusive proofs thereof. In order to consider a
vessel to be seaworthy, it must be fit to meet the perils of the sea.
ISSUES & RULING:
(1) Whether the carrier is liable for the loss of the cargo; and
Yes.
A common carrier is presumed to be at fault or negligent. It shall be liable for the loss,
destruction or deterioration of its cargo, unless it can prove that the sole and proximate
cause of such event is one of the causes enumerated in Article 1734 of the Civil Code,
or that it exercised extraordinary diligence to prevent or minimize the loss. In the
present case, the weather condition encountered by petitioner’s vessel was not a
“storm” or a natural disaster comprehended in the law. Given the known weather
condition prevailing during the voyage, the manner of stowage employed by the carrier
was insufficient to secure the cargo from the rolling action of the sea. The carrier took
a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now
disclaim any liability for the loss.
Established is the fact that between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July
26, 1990, M/V Central Bohol encountered a southwestern monsoon in the course of its
voyage. Having made such factual representation in its Note of Marine Protest,
petitioner cannot now be allowed to retreat and claim that the southwestern monsoon
was a “storm.” Normally expected on sea voyages, however, were such monsoons,
during which strong winds were not unusual.
According to PAGASA, a storm has a wind force of 48 to 55 knots, equivalent to 55 to
63 miles per hour or 10 to 11 in the Beaufort Scale. The second mate of the vessel
stated that the wind was blowing around force 7 to 8 on the Beaufort Scale.
Consequently, the strong winds accompanying the southwestern monsoon could not
be classified as a “storm.” Such winds are the ordinary vicissitudes of a sea voyage.
Also, even if it were a storm, it was not the proximate and only cause of the loss. The
loss of the vessel was caused not only by the southwestern monsoon, but also by the
shifting of the logs in the hold. Such shifting could been due only to improper stowage.
(2) Whether the doctrine of limited liability is applicable
No. The doctrine of limited liability under Article 587 of the Code of Commerce is not
applicable to the present case. This rule does not apply to situations in which the loss
or the injury is due to the concurrent negligence of the shipowner and the captain.
PHIL-NIPPON KYOEI v. ROSALIA T. GUDELOSAO, GR No. 181375, 2016-07-13
Facts:
Phil-Nippon Kyoei, Corp.
a domestic shipping corporation
,... purchased a "Ro-Ro" passenger/cargo vessel "MV Mahlia" in Japan in February
2003.
For the vessel's one month conduction voyage from Japan to the Philippines, petitioner,
as local principal, and Top Ever Marine Management Maritime Co., Ltd. (TMCL), as
foreign principal, hired Edwin C. Gudelosao, Virgilio A. Tancontian, and six other
crewmembers.
They were hired through the local manning agency of TMCL, Top Ever Marine
Management Philippine Corporation (TEMMPC). TEMMPC, through their president
and general manager, Capt. Oscar Orbeta (Capt. Orbeta), and the eight crewmembers
signed separate contracts of employment. Petitioner secured a Marine Insurance Policy
(Maritime Policy No. 00001) from SSSICI over the vessel for P10,800,000.00 against
loss, damage, and third party liability or expense, arising from the occurrence of the
perils of the sea for the voyage of the vessel from Onomichi, Japan to Batangas,
Philippines. This Marine Insurance Policy included Personal Accident Policies for the
eight crewmembers for P3,240,000.00 each in case of accidental death or injury.
On February 24, 2003, while still within Japanese waters, the vessel sank due to
extreme bad weather condition. Only Chief Engineer Nilo Macasling survived the
incident while the rest of the crewmembers, including Gudelosao and Tancontian,
perished.
Respondents, as heirs and beneficiaries of Gudelosao and Tancontian, filed separate
complaints for death benefits and other damages against peti... tioner, TEMMPC, Capt.
14
Orbeta, TMCL, and SSSICI, with the Arbitration Branch of the National Labor Relations
Commission (NLRC).
Labor Arbiter
Magat rendered a Decision... finding solidary liability among petitioner, TEMMPC,
TMCL and Capt. Orbeta.
The LA also found SSSICI liable to the respondents for the proceeds of the Personal
Accident Policies and attorney's fees. The LA, however, ruled that the liability of
petitioner shall be deemed extinguished only upon SSSICI's payment of the insurance
proceeds.
On appeal, the NLRC modified the LA Decision in a Resolution
The NLRC absolved petitioner, TEMMPC and TMCL and Capt. Orbeta from any liability
based on the limited liability rule.
It, however, affirmed SSSICI's liability after finding that the Personal Accident Policies
answer for the death benefit claims under the Philippine Overseas Employment
Administration Standard Employment Contract (POEA-SEC)
The CA found that the NLRC erred when it ruled that the obligation of petitioner,
TEMMPC and TMCL for the payment of death benefits under the POEA-SEC was ipso
facto transferred to SSSICI upon the death of the seafarers
TEMMPC and TMCL cannot raise the defense of the total loss of the ship because its
liability under POEA-SEC is separate and distinct from the liability of the shipowner.
To disregard the contract, which has the force of law between the parties, would defeat
the purpose of the Labor Code and the rules and regulations issued by the Department
of Labor and Employment (DOLE) in setting the minimum terms and conditions of
employment for the protection of Filipino seamen.
The CA noted that the benefits being claimed are not dependent upon whether there is
total loss of the vessel, because the liability attaches even if the vessel did not sink.
Thus, it was error for the NLRC to absolve TEMMPC and TMCL on the basis of the
limited liability rule.
Significantly though, the CA ruled that petitioner is not liable under the POEA-SEC, but
by virtue of its being a shipowner.
hus, petitioner is liable for the injuries to passengers even without a determination of
its fault or negligence. It is for this reason that petitioner obtained insurance from
SSSICI - to protect itself against the consequences of a total loss of the vessel caused
by the perils of the sea.
onsequently, SSSICI's liability as petitioner's insurer directly arose from the contract of
insurance against liability
The CA then ordered that petitioner's liability will only be extinguished upon payment
by SSSICI of the insurance proceeds.
Issues:
Whether the doctrine of real and hypothecary nature of maritime law (also known as
the limited liability rule) applies in favor of petitioner.
I. Whether the doctrine of real and hypothecary nature of maritime law (also known as
the limited liability rule) applies in favor of petitioner.
Doctrine of limited liability is not applicable to claims under POEA-SEC.
Ruling:
Doctrine of limited liability is not applicable to claims under POEA-SEC.
Article 837 applies the limited liability rule in cases of collision. Meanwhile, Articles 587
and 590 embody the universal principle of limited liability in all cases wherein the
shipowner or agent may be properly held liable for the negligent or illicit acts of the
captain.[
These articles precisely intend to limit the liability of the shipowner or agent to the value
of the vessel, its appurtenances and freightage earned in the voyage, provided that the
owner or agent abandons the vessel.
When the vessel is totally lost, in which case abandonment is not required because
there is no vessel to abandon, the liability of the shipowner or agent for damages is
extinguished.
Nonetheless, the limited liability rule is not absolute and is without exceptions. It does
not apply in cases: (1) where the injury or death to a passenger is due either to the fault
of the shipowner, or to the concurring negligence of the shipowner and the captain; (2)
where the vessel is insured; and (3) in workmen's compensation claims.
In Abueg v. San Diego,... we ruled that the limited liability rule found in the Code of
Commerce is inapplicable in a liability created by statute to compensate employees
and laborers, or the heirs and dependents, in cases of injury received by or inflicted
upon them while engaged in the performance of their work or employment, to wit:
The real and hypothecary nature of the liability of the shipowner or agent embodied in
the provisions of the Maritime Law, Book III, Code of Commerce, had its origin in the
prevailing conditions of the maritime trade and sea voyages during the medieval ages,
attended by innumerable hazards and perils. To offset against these adverse conditions
and to encourage shipbuilding and maritime commerce, it was deemed necessary to
confine the liability of the owner or agent arising from the operation of a ship to the
vessel, equipment, and freight, or insurance, if any, so that if the shipowner or agent
abandoned the ship, equipment, and freight, his liability was extinguished.
But the provisions of the Code of Commerce invoked by appellant have no room in the
application of the Workmen's Compensation Act which seeks to improve, and aims at
the amelioration of, the condition of laborers and employees. It is not the liability for the
damage or loss of the cargo or injury to, or death of, a passenger by or through the
misconduct of the captain or master of the ship; nor the liability for the loss of the ship
as a result of collision; nor the responsibility for wages of the crew, but a liability created
by a statute to compensate employees and laborers in cases of injury received by or
inflicted upon them, while engaged in the performance of their work or employment, or
the heirs and dependents of such laborers and employees in the event of death caused
by their employment.
We see no reason why the above doctrine should not apply here.
Thus, the claim for death benefits under the POEA-SEC is the same species as the
workmen's compensation claims under the Labor Code - both of which belong to a
different realm from that of Maritime Law. Therefore, the limited liability rule does not
apply to petitioner's liability under the POEA-SEC.
Crisostomo v. CA, 409 SCRA 528 (2003)
Problem:
Estela L. Crisostomo contracted the services of Caravan Travel and Tours
International, Inc. to arrange and facilitate her booking, ticketing and accommodation
in a tour dubbed "Jewels of Europe". The package tour cost her P74, 322.70. She was
given a 5% discount on the amount, which included airfare, and the booking fee was
also waived because petitioner’s niece, Meriam Menor, was former’s company’s
ticketing manager.
15
Menor went to her aunt’s residence on a Wednesday to deliver petitioner’s travel
documents and plane tickets. Estela, in turn, gave Menor the full payment for the
package tour. Menor then told her to be at the Ninoy Aquino International Airport (NAIA)
on Saturday, two hours before her flight on board British Airways.
Without checking her travel documents, Estela went to NAIA on Saturday, to take the
flight for the first leg of her journey from Manila to Hongkong. She discovered that the
flight she was supposed to take had already departed the previous day. She learned
that her plane ticket was for the flight scheduled on June 14, 1991. She thus called up
Menor to complain.
Subsequently, Menor prevailed upon Estela to take another tour the "British Pageant”,
which cost P20, 881.00. She gave caravan travel and tours P7, 980.00 as partial
payment and commenced the trip in July 1991.
While Estela concededly bought her plane ticket through the efforts of respondent
company, this does not mean that the latter ipso facto is a common carrier. At most,
Caravan Travel and Tours acted merely as an agent of the airline, with whom the former
ultimately contracted for her carriage to Europe.
B) No.
The negligence of the obligor in the performance of the obligation renders him liable for
damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor
consists in his failure to exercise due care and prudence in the performance of the
obligation as the nature of the obligation so demands.

Upon petitioner’s return from Europe, she demanded from respondent the
reimbursement of P61, 421.70, representing the difference between the sum she paid
for "Jewels of Europe" and the amount she owed respondent for the "British Pageant"
tour. Despite several demands, respondent company refused to reimburse the amount,
contending that the same was non-refundable.
Estela filed a complaint against Caravan travel and Tours for breach of contract of
carriage and damages.
In the case at bar, Caravan Travel and Tours exercised due diligence in performing its
obligations under the contract and followed standard procedure in rendering its services
to Estela. The plane ticket issued to petitioner clearly reflected the departure date and
time, contrary to Estela’s contention. The travel documents, consisting of the tour
itinerary, vouchers and instructions, were likewise delivered to her two days prior to the
trip. The Caravan Travel and Tours also properly booked Estela for the tour, prepared
the necessary documents and procured the plane tickets. It arranged Estela’s hotel
accommodation as well as food, land transfers and sightseeing excursions, in
accordance with its avowed undertaking.

A) Will the action prosper? From the foregoing, it is clear that the Caravan Travel and Tours performed its
prestation under the contract as well as everything else that was essential to book
B) Will she be entitled to damages? Estela for the tour.
Hence, Estela cannot recover and must bear her own damage.
Answer:

No, for there was no contract of carriage.

By definition, a contract of carriage or transportation is one whereby a certain person

or association of persons obligate themselves to transport persons, things, or news
from one place to another for a fixed price.

From the above definition, Caravan Travel and Tours is not an entity engaged in the
business of transporting either passengers or goods and is therefore, neither a private
nor a common carrier. Caravan Travel and Tours did not undertake to transport Estela
from one place to another since its covenant with its customers is simply to make travel
arrangements in their behalf. Caravan travel and tour’s services as a travel agency
include procuring tickets and facilitating travel permits or visas as well as booking
customers for tours.

16