In a ruling concerning the sinking of the M/V Princess of the Orient, the Supreme Court affirmed the awarding of temperate and exemplary damages against Sulpicio Lines, Inc. (now Philippine Span Asia Carrier Corporation). The Court found the shipping company liable due to its failure to exercise extraordinary diligence required of common carriers, particularly in the navigation and handling of the vessel during adverse weather conditions. This decision reinforces the responsibility of common carriers to prioritize passenger safety and to act prudently to avoid reckless endangerment, especially in contractual obligations where lives are at stake.

Sailing into Negligence: When a Ship’s Misfortune Leads to Accountability

The case stems from the tragic sinking of the M/V Princess of the Orient on September 18, 1998. Respondents Major Victorio Karaan, Spouses Napoleon and Herminia Labrague, and Ely Liva, all passengers on the ill-fated voyage, filed a complaint against Sulpicio Lines, Inc., citing breach of contract of carriage and seeking various damages. The central issue revolved around whether Sulpicio Lines acted negligently, thereby entitling the respondents to both temperate and exemplary damages.

During trial, the respondents recounted their harrowing experiences, emphasizing the lack of assistance from the ship’s crew and the chaos that ensued as the vessel sank. Their testimonies painted a picture of panic and abandonment, highlighting the absence of proper safety measures and guidance. On the other hand, Sulpicio Lines presented testimonies attempting to demonstrate that the vessel was seaworthy and that the crew acted responsibly.

The Regional Trial Court (RTC) initially awarded actual, moral, exemplary, and nominal damages to the respondents. However, the Court of Appeals (CA) modified the decision, replacing actual damages with temperate damages due to insufficient documentary evidence of the actual losses claimed. The CA also maintained the award of exemplary damages, finding that Sulpicio Lines failed to prove the extraordinary diligence required of common carriers.

The Supreme Court agreed with the CA’s decision regarding temperate damages, explaining that under Article 2224 of the Civil Code, temperate damages are appropriate when pecuniary loss is evident but the exact amount cannot be determined with certainty. It states:

Article 2224. Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with certainty.

The Court emphasized that the respondents undeniably suffered losses during the sinking, justifying the award of temperate damages in lieu of actual damages, as no concrete evidence was provided beyond their testimonies. This underscores the principle that while actual damages require precise proof, temperate damages serve as a recourse when loss is evident but difficult to quantify.

Building on this principle, the Court delved into the propriety of awarding exemplary damages. Article 2232 of the Civil Code governs the award of exemplary damages in contracts and quasi-contracts, stating that:

Article. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

The Supreme Court referenced its earlier ruling in Sulpicio Lines, Inc. v. Sesante et al., which also involved claims arising from the M/V Princess of the Orient sinking. In that case, the Court elaborated on the criteria for awarding exemplary damages, noting that:

Clearly, the petitioner and its agents on the scene acted wantonly and recklessly. Wanton and reckless are virtually synonymous in meaning as respects liability for conduct towards others. Wanton means characterized by extreme recklessness and utter disregard for the rights of others; or marked by or manifesting arrogant recklessness of justice or of rights or feelings of others. Conduct is reckless when it is an extreme departure from ordinary care, in a situation in which a high degree of danger is apparent.

The Court highlighted the findings of the Board of Marine Inquiry (BMI), which concluded that the captain of the vessel made “erroneous maneuvers” that contributed to the sinking. The captain failed to reduce speed despite the vessel’s vulnerability to strong winds and high waves, thus worsening the vessel’s tilted position. These actions were deemed a clear departure from the standard of care expected of a common carrier.

Moreover, the Court noted several deficiencies in the actions of Sulpicio Lines and its crew, before and during the sinking. These included negligent navigation by the Captain, the failure to make stability calculations or create a cargo stowage plan, and the radio officer’s failure to send an SOS message through the proper international channels. The Court emphasized that exemplary damages serve to “reshape behavior that is socially deleterious in its consequence by creating negative incentives or deterrents against such behavior.” The recklessness displayed by the petitioner, resulting in the loss of numerous lives, justified the imposition of exemplary damages.

The Court also modified the interest rate applicable to the monetary awards, imposing a rate of six percent (6%) per annum from the finality of the decision until full payment, aligning with prevailing jurisprudence.

The ruling underscores the high standard of care required of common carriers, particularly those responsible for maritime transport. It serves as a stern reminder that negligence and recklessness will not be tolerated and will be met with significant financial consequences, including both temperate and exemplary damages. By holding Sulpicio Lines accountable, the Supreme Court reinforced the importance of prioritizing passenger safety and adhering to the highest standards of diligence in maritime operations. This approach contrasts with a more lenient stance, where carriers might be tempted to cut corners or overlook safety protocols.

What was the key issue in this case?	The key issue was whether Sulpicio Lines acted negligently, justifying the award of temperate and exemplary damages to the passengers of the sunken M/V Princess of the Orient. The Court examined the actions of the vessel’s captain and crew to determine if they met the standard of care required of common carriers.
What are temperate damages?	Temperate damages are awarded when a court finds that some pecuniary loss has been suffered, but the amount cannot be proven with certainty. They are more than nominal but less than compensatory damages, serving as a fair compensation when the actual loss is evident but not quantifiable.
What are exemplary damages and why were they awarded?	Exemplary damages are imposed to set an example or to correct behavior for the public good, in addition to other forms of damages. They were awarded in this case because the Court found that Sulpicio Lines acted recklessly and wantonly in its operation of the vessel, leading to the tragic sinking.
What evidence supported the finding of negligence?	The finding of negligence was supported by the Board of Marine Inquiry’s report, which highlighted the captain’s erroneous maneuvers and failure to reduce speed in adverse weather conditions. The Court also noted deficiencies in the crew’s actions, including the failure to make stability calculations and the improper handling of the SOS message.
What is the standard of care required of common carriers?	Common carriers are required to exercise extraordinary diligence in ensuring the safety of their passengers. This includes taking all reasonable precautions to prevent accidents and ensuring that the vessel is seaworthy and properly operated.
How did the Court modify the interest rate on the damages?	The Court modified the interest rate to six percent (6%) per annum on the total amount of monetary awards, computed from the date of finality of the decision until full payment. This aligns with the guidelines set forth in Eastern Shipping Lines, Inc. v. CA and Nacar v. Gallery Frames, et al.
What was the effect of the Board of Marine Inquiry’s findings?	The Board of Marine Inquiry’s findings were critical in establishing the negligence of the vessel’s captain. The BMI report detailed the captain’s errors in navigation and decision-making, which directly contributed to the sinking of the M/V Princess of the Orient.
How does this case impact maritime transportation companies?	This case serves as a reminder to maritime transportation companies of their duty to exercise extraordinary diligence in ensuring passenger safety. It highlights the potential for significant financial penalties, including exemplary damages, in cases of negligence and recklessness.
Can exemplary damages be awarded even if not specifically pleaded?	Yes, exemplary damages can be awarded even if not specifically pleaded, as long as the evidence warrants it. The courts have discretion to award exemplary damages to prevent socially deleterious behavior, as long as there is proof of moral, temperate, or compensatory damages.
What is the significance of proving actual damages versus temperate damages?	Actual damages require concrete proof, such as receipts and documents, to substantiate the claimed losses. Temperate damages, on the other hand, can be awarded when there is clear evidence of loss, but the exact amount cannot be precisely determined.

The Supreme Court’s decision in Sulpicio Lines, Inc. v. Major Victorio Karaan, et al., reaffirms the high standard of care expected of common carriers and the serious consequences of failing to meet that standard. It emphasizes the importance of prioritizing passenger safety and acting prudently in all maritime operations, particularly during adverse weather conditions. This ruling serves as a guide for future cases involving maritime accidents and underscores the need for accountability and diligence in the transportation industry.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Sulpicio Lines, Inc. v. Major Victorio Karaan, et al., G.R. No. 208590, October 03, 2018