636 Phil.

396

THIRD DIVISION

[ G.R. No. 186312, June 29, 2010 ]

SPOUSES DANTE CRUZ AND LEONORA CRUZ, PETITIONERS, VS. SUN

HOLIDAYS, INC., RESPONDENT.

DECISION
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January
[1]
25, 2001 against Sun Holidays, Inc. (respondent) with the Regional Trial
Court (RTC) of Pasig City for damages arising from the death of their son
Ruelito C.
Cruz (Ruelito) who perished with his wife on September 11, 2000 on
board the boat M/B Coco Beach III that capsized en route to Batangas from
Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach
Island Resort (Resort) owned and operated by
respondent.

The stay of the newly wed Ruelito and his wife at the Resort from September 9
to 11, 2000 was by virtue of a tour package-contract with respondent that
included transportation to and from the Resort and the point of departure in
Batangas.

[2]
Miguel C. Matute (Matute), a scuba diving instructor and one of the
survivors, gave his account of the incident that led to the filing of the
complaint as follows:

Matute stayed at the Resort from September 8 to 11, 2000.  He was originally
scheduled to leave the Resort in the afternoon of September 10, 2000, but was
advised to stay for another night because of strong winds and heavy rains.

On September 11, 2000, as it was still windy, Matute and 25 other Resort
guests including petitioners' son and his wife trekked to the other side of the
Coco Beach mountain that was sheltered from the wind where they boarded
M/B Coco Beach III, which was to ferry them to
Batangas.

Shortly after the boat sailed, it started to rain.  As it moved farther away from
Puerto Galera and into the open seas, the rain and wind got stronger, causing
the boat to tilt from side to side and the captain to step forward to the front,
leaving the wheel to one of the
crew members.

The waves got more unwieldy.  After getting hit by two big waves which came
one after the other, M/B Coco Beach III capsized putting all passengers
underwater.

The passengers, who had put on their life jackets, struggled to get out of the
boat. Upon seeing the captain, Matute and the other passengers who reached
the surface asked him what they could do to save the people who were still
trapped under the boat.  The captain replied
"Iligtas niyo na lang ang sarili
niyo" (Just save yourselves).

Help came after about 45 minutes when two boats owned by Asia Divers in
Sabang, Puerto Galera passed by the capsized M/B Coco Beach III.  Boarded
on those two boats were 22 persons, consisting of 18 passengers and four crew
members, who were brought to Pisa
Island.  Eight passengers, including
petitioners' son and his wife, died during the incident.

At the time of Ruelito's death, he was 28 years old and employed as a

contractual worker for Mitsui Engineering & Shipbuilding Arabia, Ltd. in
Saudi Arabia, with a basic monthly salary of $900.[3]

Petitioners, by letter of October 26, 2000,[4] demanded indemnification from

respondent for the death of their son in the amount of at least P4,000,000.

[ ]
Replying, respondent, by letter dated November 7, 2000,[5] denied any
responsibility for the incident which it considered to be a fortuitous event.  It
nevertheless offered, as an act of commiseration, the amount of P10,000 to
petitioners upon their
signing of a waiver.

As petitioners declined respondent's offer, they filed the Complaint, as earlier

reflected, alleging that respondent, as a common carrier, was guilty of
negligence in allowing M/B Coco Beach III to sail notwithstanding storm
warning bulletins issued by the Philippine
Atmospheric, Geophysical and
Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of
September 11, 2000.[6]

In its Answer,[7] respondent denied being a common carrier, alleging that its
boats are not available to the general public as they only ferry Resort guests
and crew members.  Nonetheless, it claimed that it exercised the utmost
diligence in ensuring
the safety of its passengers; contrary to petitioners'
allegation, there was no storm on September 11, 2000 as the Coast Guard in
fact cleared the voyage; and M/B Coco Beach III was not filled to capacity and
had sufficient life jackets for its passengers.  By way of
Counterclaim,
respondent alleged that it is entitled to an award for attorney's fees and
litigation expenses amounting to not less than P300,000.

Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort
customarily requires four conditions to be met before a boat is allowed to sail,
to wit: (1) the sea is calm, (2) there is clearance from the Coast Guard, (3)
there is clearance from the captain and
(4) there is clearance from the Resort's
assistant manager.[8] He added that M/B Coco Beach III met all four
conditions on September 11, 2000,[9] but a subasco or squall, characterized by
strong winds and big waves,
suddenly occurred, causing the boat to capsize.
[10]

By Decision of February 16, 2005,[11] Branch 267 of the Pasig RTC dismissed
petitioners' Complaint and respondent's Counterclaim.

Petitioners' Motion for Reconsideration having been denied by Order dated

September 2, 2005,[12] they appealed to the Court of Appeals.

By Decision of August 19, 2008,[13] the appellate court denied petitioners'

appeal, holding, among other things, that the trial court correctly ruled that
respondent is a private carrier which is only required to observe ordinary
diligence; that respondent
in fact observed extraordinary diligence in
transporting its guests on board M/B Coco Beach III; and that the proximate
cause of the incident  was a squall, a fortuitous event.

Petitioners' Motion for Reconsideration having been denied by Resolution

dated January 16, 2009,[14] they filed the present Petition for Review.[15]

Petitioners maintain the position they took before the trial court, adding that
respondent is a common carrier since by its tour package, the transporting of
its guests is an integral part of its resort business. They inform that another
division of the appellate court in fact
held respondent liable for damages to the
other survivors of the incident.

Upon the other hand, respondent contends that petitioners failed to present
evidence to prove that it is a common carrier; that the Resort's ferry services
for guests cannot be considered as ancillary to its business as no income is
derived therefrom; that it exercised
extraordinary diligence as shown by the
conditions it had imposed before allowing M/B Coco Beach III to sail; that the
incident was caused by a fortuitous event without any contributory negligence
on its part; and that the other case wherein the appellate court held it
liable for
damages involved different plaintiffs, issues and evidence.[16]

The petition is impressed with merit.

Petitioners correctly rely on De Guzman v. Court of Appeals[17] in

characterizing respondent as a common carrier.

The Civil Code defines "common carriers" in the following terms:

Article 1732.  Common carriers are 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.

The above article makes no distinction between one whose

principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary
activity (in local idiom, as "a sideline").  Article 1732
also carefully
avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or unscheduled
basis. 
Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits
business only from a narrow segment of the general
population. 
We think that Article 1733 deliberately refrained from making such
distinctions.

So understood, the concept of "common carrier" under Article 1732 may

be seen to coincide neatly with the notion of "public service," under the
Public Service Act (Commonwealth Act No. 1416, as amended) which at
least partially supplements the law on common carriers set forth in
the
Civil Code.  Under Section 13, paragraph (b) of the Public Service Act,
"public service" includes:

 . . . every person that now or hereafter may own, operate, manage,

or control in the Philippines, for hire or compensation, with general
or limited clientele, whether permanent, occasional or accidental,
and done for general business purposes, any common carrier,
railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of
any class, express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of passengers
or freight or both, shipyard, marine repair shop, wharf or dock, ice
plant, ice-refrigeration plant, canal, irrigation system, gas, electric
light, heat and power, water supply and power petroleum, sewerage
system, wire or wireless communications systems, wire or wireless
[18]
broadcasting stations and other similar public services . . .  
(emphasis and underscoring supplied.)

Indeed, respondent is a common carrier.  Its ferry services are so intertwined

with its main business as to be properly considered ancillary thereto.  The
constancy of respondent's ferry services in its resort operations is underscored
by its having its own Coco
Beach boats. And the tour packages it offers, which
include the ferry services, may be availed of by anyone who can afford to pay
the same.  These services are thus available to the public.

That respondent does not charge a separate fee or fare for its ferry services is
of no moment.  It would be imprudent to suppose that it provides said services
at a loss.  The Court is aware of the practice of beach resort operators offering
tour packages to factor the
transportation fee in arriving at the tour package
price.  That guests who opt not to avail of respondent's ferry services pay the
same amount is likewise inconsequential.  These guests may only be deemed
to have overpaid.

As De Guzman instructs, Article 1732 of the Civil Code defining "common

carriers" has deliberately refrained from making distinctions on whether the
carrying of persons or goods is the carrier's principal business, whether it is
offered on a regular basis, or whether it
is offered to the general public.  The
intent of the law is thus to not consider such distinctions.  Otherwise, there is
no telling how many other distinctions may be concocted by unscrupulous
businessmen engaged in the carrying of persons or goods in order to avoid
the
legal obligations and liabilities of common carriers.

Under the Civil Code, common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary diligence for
the safety of the passengers transported by them, according to all the
circumstances of each case.[19]  They are bound to carry the passengers safely
as far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with due regard for all the circumstances.[20]

When a passenger dies or is injured in the discharge of a contract of carriage,

it is presumed that the common carrier is at fault or negligent.  In fact, there is
even no need for the court to make an express finding of fault or negligence on
the part of the common
carrier. This statutory presumption may only be
overcome by evidence that the carrier exercised extraordinary diligence.[21]

Respondent nevertheless harps on its strict compliance with the earlier

mentioned conditions of voyage before it allowed M/B Coco Beach III to sail
on September 11, 2000.  Respondent's position does not impress.

The evidence shows that PAGASA issued 24-hour public weather forecasts and
tropical cyclone warnings for shipping on September 10 and 11, 2000 advising
of tropical depressions in Northern Luzon which would also affect the
province of Mindoro.[22]  By
the testimony of Dr. Frisco Nilo, supervising
weather specialist of PAGASA, squalls are to be expected under such weather
condition.[23]

A very cautious person exercising the utmost diligence would thus not brave
such stormy weather and put other people's lives at risk.  The extraordinary
diligence required of common carriers demands that they take care of the
goods or lives entrusted to their hands as if
they were their own. This
respondent failed to do.

Respondent's insistence that the incident was caused by a fortuitous event

does not impress either.

The elements of a "fortuitous event" are: (a) the cause of the unforeseen and
unexpected occurrence, or the failure of the debtors to comply with their
obligations, must have been independent of human will; (b) the event that
constituted the caso fortuito must have been
impossible to foresee or, if
foreseeable, impossible to avoid; (c) the occurrence must have been such as to
render it impossible for the debtors to fulfill their obligation in a normal
manner; and (d) the obligor must have been free from any participation in the
aggravation of
the resulting injury to the creditor.[24]

To fully free a common carrier from any liability, the fortuitous event must
have been the proximate and only cause of the loss.  And it should have
exercised due diligence to prevent or minimize the loss before, during and
after the occurrence of the
fortuitous event.[25]

Respondent cites the squall that occurred during the voyage as the fortuitous
event that overturned M/B Coco Beach III.  As reflected above, however, the
occurrence of squalls was expected under the weather condition of September
11, 2000.  Moreover, evidence
shows that M/B Coco Beach III suffered engine
trouble before it capsized and sank.[26]  The incident was, therefore, not
completely free from human intervention.

The Court need not belabor how respondent's evidence likewise fails to
demonstrate that it exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the squall.

Article 1764[27] vis-א-vis Article 2206[28] of the Civil Code holds the
common carrier in breach of its contract of carriage that results in the death of
a passenger liable to pay the following: (1) indemnity for death, (2)
indemnity
for loss of earning capacity and (3) moral damages.

Petitioners are entitled to indemnity for the death of Ruelito which is fixed at
P50,000.[29]

As for damages representing unearned income, the formula for its

computation is:

Net Earning life expectancy x (gross annual income - reasonable and

=
Capacity necessary living expenses).

Life expectancy is determined in accordance with the formula:

2 / 3 x [80 -- age of deceased at the time of death][30]

The first factor, i.e., life expectancy, is computed by applying the formula (2/3
x [80 -- age at death]) adopted in the American Expectancy Table of Mortality
or the Actuarial of Combined Experience Table of Mortality.[31]

The second factor is computed by multiplying the life expectancy by the net
earnings of the deceased, i.e., the total earnings less expenses necessary in the
creation of such earnings or income and less living and other incidental
expenses.[32] 
The loss is not equivalent to the entire earnings of the deceased,
but only such portion as he would have used to support his dependents or
heirs.  Hence, to be deducted from his gross earnings are the necessary
expenses supposed to be used by the deceased for his own
needs.[33]

In computing the third factor - necessary living expense, Smith Bell Dodwell
Shipping Agency Corp. v. Borja[34] teaches that when, as in this case, there is
no showing that the living expenses constituted the smaller percentage of the
gross income,
the living expenses are fixed at half of the gross income.

Applying the above guidelines, the Court determines Ruelito's life expectancy
as follows:

Life expectancy = 2/3 x [80 - age of deceased at the time of death]

2/3 x [80 - 28]

2/3 x [52]

Life expectancy = 35

Documentary evidence shows that Ruelito was earning a basic monthly salary
of $900[35] which, when converted to Philippine peso applying the annual
average exchange rate of $1 = P44 in 2000,[36] amounts to P39,600. Ruelito's
net
earning capacity is thus computed as follows:

Net Earning Capacity = life expectancy x (gross annual income - reasonable

and necessary living expenses).

= 35 x (P475,200 - P237,600)

= 35 x (P237,600)

Net Earning Capacity = P8,316,000

Respecting the award of moral damages, since respondent common carrier's

breach of contract of carriage resulted in the death of petitioners' son,
following Article 1764 vis-א-vis Article 2206 of the Civil Code,  petitioners
are entitled to moral damages.

Since respondent failed to prove that it exercised the extraordinary diligence

required of common carriers, it is presumed to have acted recklessly, thus
warranting the award too of exemplary damages, which are granted in
contractual obligations if the defendant acted in a
wanton, fraudulent,
reckless, oppressive or malevolent manner.[37]

Under the circumstances, it is reasonable to award petitioners the amount of

[38]
P100,000 as moral damages and P100,000 as exemplary damages.[38]

Pursuant to Article 2208[39] of the Civil Code, attorney's fees may also be
awarded where exemplary damages are awarded. The Court finds that  10% of
the total amount adjudged against respondent is reasonable for the purpose.

Finally, Eastern Shipping Lines, Inc. v. Court of Appeals[40] teaches that

when an obligation, regardless of its source, i.e., law, contracts, quasi-
contracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for
payment of interest in the concept of actual and compensatory
damages, subject to the following rules, to wit --

 1.   When the obligation is breached, and it consists in the payment of a

sum of money, i.e., a loan or forbearance of money, the interest due
should be that which may have been stipulated in writing. Furthermore,
the interest due shall itself earn legal
interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12%
per annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of Article 1169
of the Civil Code.

2.   When an obligation, not constituting a loan or forbearance of money,

is breached, an interest on the amount of damages awarded may be
imposed at the discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims
or damages
except when or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code)
but when such
certainty cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the judgment of
the court is made (at which time the quantification of damages may be
deemed to have been reasonably ascertained). The
actual base for the
computation of legal interest shall, in any case, be on the amount finally
adjudged.

3.   When the judgment of the court awarding a sum of money becomes
final and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period
being deemed to be by
then an equivalent to a forbearance of credit. (emphasis supplied).

Since the amounts payable by respondent have been determined with certainty
only in the present petition, the interest due shall be computed upon the
finality of this decision at the rate of 12% per annum until satisfaction, in
accordance with paragraph number 3 of the
immediately cited guideline in
Easter Shipping Lines, Inc.

  WHEREFORE, the Court of Appeals Decision of August 19, 2008 is

REVERSED and SET ASIDE.  Judgment is rendered in favor of petitioners
ordering respondent to pay petitioners the following: (1) P50,000 as
indemnity for the death of Ruelito Cruz; (2)
P8,316,000 as indemnity for
Ruelito's loss of earning capacity; (3) P100,000 as moral damages;  (4)
P100,000 as exemplary damages; (5) 10% of the total amount adjudged
against respondent as attorneys fees; and (6) the costs of suit.

The total amount adjudged against respondent shall earn interest at the rate of
12% per annum computed from the finality of this decision until full payment.

SO ORDERED.

Brion, Bersamin, Abad,* and Villarama, Jr., JJ., concur.

*  Additional member per Special Order No. 843 dated May 17, 2010.

[1] Records, pp. 2-6.

[2] TSN of September 12, 2002, pp. 2-22.

[3] Vide TSN of May 2, 2002, pp. 5-7; records, p. 4.

[4] Records, pp. 19-20.

[5] Id. at 21-22.

[6]
[6] Vide Complaint, supra note 1.

[7] Records, pp. 28-35.

[8] Vide TSN of February 4, 2003, pp. 6-7.

[9] Id. at 8.

[10] TSN of March 4, 2003, pp. 5-6.

[11] Records, pp. 488-496.

[12] Id. at 581-585.

[13] Penned by Associate Justice Normandie B. Pizarro, with the concurrence

of Associate Justices Edgardo P. Cruz and Fernanda Lampas Peralta; CA rollo,
pp. 135-147.

[14] Id. at 190-191.

[15] Rollo, pp. 18-31.

[16] Vide Comment, id. at 60-81.

[17] G.R. No. L-47822, December 22, 1988,168 SCRA 612.

[18] Id. at 617-618.

[19] Civil Code, Art. 1733.

[20] Id., Art. 1755.

[21] Diaz v. Court of Appeals, G.R. No. 149749, July 25, 2006, 496 SCRA 468,
472.

[22] Vide records, pp. 268-276.

[23] Vide TSN of December 13, 2001, pp. 3-19.

[24]   Lea Mer Industries, Inc. v. Malayan Insurance Co., Inc., G.R. No.
161745, September 30, 2005, 471 SCRA 698, 707-708.

[25] Ibid.

[26] Records, pp. 279-280.

[27] Art. 1764.  Damages in cases comprised in this Section shall be awarded in
accordance with Title XVIII of this Book concerning Damages.  Article 2206
shall also apply to the death of a passenger caused by the breach of contract by
a common
carrier.

[28] Art. 2206. The amount of damages for death caused by a crime or quasi-
delict shall be at least three thousand pesos, even though there may have been
mitigating circumstances. In addition:

(1)  The defendant shall be liable for the loss of the earning capacity of the
deceased, and the indemnity shall be paid to the heirs of the latter; such
indemnity shall in every case be assessed and awarded by the court, unless the
deceased on account of permanent physical
disability not caused by the
defendant, had no earning capacity at the time of his death;

(2)  If the deceased was obliged to give support according to the provisions of
article 291, the recipient who is not an heir called to the decedent's inheritance
by the law of testate or intestate succession, may demand support from the
person causing the death, for a
period not exceeding five years, the exact
duration to be fixed by the court;

(3) The spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the
death of the deceased.

[29] Tiu v. Arriesgado, G.R. No. 138060, September 1, 2004, 437 SCRA 426,
451-452.

[30] Candano Shipping Lines, Inc. v. Sugata-on, G.R. No. 163212, March 13,
2007, 578 SCRA 221, 235.

[31] Lambert v. Heirs of Ray Castillon, G.R. No. 160709, February 23, 2005,
452 SCRA 285, 294.

[32] Ibid.

[33] Magbanua v. Tabusares, Jr., G.R. No. 152134, June 4, 2004, 431 SCRA
99, 104.

[34] G.R. No. 143008, June 10, 2002, 383 SCRA 341, 351.

[35] Vide records, pp. 258-259.

[36] For reference, vide Bangko Sentral ng Pilipinas Treasury

Department Reference Exchange Rate Bulletins at
www.bsp.gov.ph/dbank_reports/ExchangeRates.

[37] Vide Yobido v. Court of Appeals, 346 Phil. 1, 13 (1997).

[38] Vide Victory Liner, Inc. v. Gammad, G.R. No. 159636,  November 25,
2004, 444 SCRA 355, 370.

[39] Art. 2208. In the absence of stipulation, attorney's fees and expenses of
litigation, other than judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

[40] G.R. No. 97412, July 12, 1994, 234 SCRA 78, 95-97.