In the case of Spouses Dante Cruz and Leonora Cruz vs. Sun Holidays, Inc., the Supreme Court held Sun Holidays liable as a common carrier for the death of passengers, underscoring the high standard of diligence required for passenger safety. This decision clarifies that businesses providing transportation as part of their services are considered common carriers, regardless of whether it’s their primary activity or offered for free, thus ensuring greater protection for individuals relying on such services. This ruling reaffirms the judiciary’s commitment to prioritizing public safety and upholding the responsibilities of service providers in the tourism sector.

Coco Beach Tragedy: Defining Common Carrier Obligations in Island Resorts

The legal battle stemmed from a tragic incident where Ruelito Cruz and his wife died when the M/B Coco Beach III, owned by Sun Holidays, Inc., capsized en route from their Coco Beach Island Resort. The spouses Cruz sued Sun Holidays for damages, alleging negligence as the cause of their son’s death. The central issue was whether Sun Holidays, by providing transportation to its resort guests, operated as a common carrier and was therefore bound by extraordinary diligence for passenger safety. The resolution of this question hinged on whether the ferry services were an integral part of Sun Holidays’ resort business, making them liable under the stringent standards applicable to common carriers.

The Supreme Court turned to Article 1732 of the Civil Code, which defines common carriers as entities engaged in transporting passengers or goods for compensation, offering their services to the public. The Court emphasized that the law makes no distinction between businesses whose primary activity is transportation and those for whom it is an ancillary service. Crucially, the Court referenced De Guzman v. Court of Appeals, stating:

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.

Building on this principle, the Court determined that Sun Holidays’ ferry services were indeed intertwined with its resort business, making it a common carrier. The constancy of the ferry services, the ownership of the Coco Beach boats, and the inclusion of transportation in tour packages available to anyone who could afford them all pointed to the public nature of the service. That Sun Holidays did not charge a separate fee for the ferry services was irrelevant. The Court acknowledged that such costs were factored into the overall tour package price.

Having established Sun Holidays as a common carrier, the Court then addressed the standard of care required. Article 1733 of the Civil Code states that common carriers are bound to observe extraordinary diligence for the safety of their passengers. This means they must carry passengers safely, using the utmost diligence of very cautious persons, with due regard for all circumstances. The legal framework thus shifted the burden to Sun Holidays to prove they exercised such diligence.

The Court found that Sun Holidays failed to meet this burden. Despite the company’s insistence on complying with voyage conditions, the evidence revealed that PAGASA had issued warnings of tropical depressions affecting Mindoro, indicating the likelihood of squalls. The Court emphasized that a very cautious person exercising utmost diligence would not have braved such stormy weather. The extraordinary diligence required of common carriers demands they care for the lives entrusted to them as if they were their own.

Sun Holidays’ defense of a fortuitous event also failed. The elements of a fortuitous event, as the Court noted, include independence from human will, impossibility to foresee or avoid, impossibility to fulfill the obligation, and freedom from participation in aggravating the injury. Citing Lea Mer Industries, Inc. v. Malayan Insurance Co., Inc., the Court emphasized that:

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.

In this case, the squall was foreseeable given the weather conditions, and there was evidence of engine trouble on the M/B Coco Beach III. Therefore, the incident was not entirely free from human intervention, and Sun Holidays failed to demonstrate due diligence in preventing or minimizing the loss. Consequently, the Court held Sun Holidays liable for damages.

The Court then outlined the damages payable under Article 1764 in relation to Article 2206 of the Civil Code, including indemnity for death, loss of earning capacity, and moral damages. The indemnity for death was fixed at P50,000. The formula for computing loss of earning capacity was detailed as follows:

Net Earning Capacity

=

Life expectancy x (gross annual income – reasonable and necessary living expenses)

The Court used the American Expectancy Table of Mortality to determine life expectancy and calculated Ruelito’s net earning capacity to be P8,316,000. Additionally, the Court awarded P100,000 for moral damages and P100,000 for exemplary damages, given Sun Holidays’ reckless disregard for passenger safety.

Finally, the Court addressed the matter of interest, citing Eastern Shipping Lines, Inc. v. Court of Appeals. As the amounts payable were determined with certainty only in the present petition, the interest was set at 12% per annum from the finality of the decision until full payment.

FAQs

What was the key issue in this case?	The primary issue was whether Sun Holidays, Inc. should be considered a common carrier and thus held to a higher standard of care regarding passenger safety, particularly after a fatal boat accident involving their resort guests.
What is a common carrier, according to the Civil Code?	Article 1732 of the Civil Code defines common carriers as individuals, corporations, firms, or associations engaged in the business of transporting passengers or goods for compensation, offering their services to the public. This definition includes entities for whom transportation is an ancillary activity.
What level of diligence is required of common carriers?	Common carriers are required to exercise extraordinary diligence for the safety of their passengers, meaning they must take the utmost care and foresight to prevent accidents. This is a higher standard than ordinary diligence.
What happens when a passenger dies in an accident involving a common carrier?	When a passenger dies or is injured, the common carrier is presumed to be at fault or negligent. The burden then shifts to the carrier to prove that it exercised extraordinary diligence to prevent the accident.
What is a fortuitous event, and how does it relate to liability?	A fortuitous event is an unforeseen and unexpected occurrence independent of human will. For a common carrier to be absolved of liability, the fortuitous event must be the sole and proximate cause of the loss, and the carrier must have exercised due diligence to prevent or minimize the loss.
What damages can be awarded in case of a passenger’s death due to a common carrier’s negligence?	Damages can include indemnity for death, compensation for loss of earning capacity, moral damages, and exemplary damages if the carrier acted recklessly or wantonly. Attorney’s fees and costs of the suit may also be awarded.
How is the loss of earning capacity calculated?	The formula is: Net Earning Capacity = Life expectancy x (gross annual income – reasonable and necessary living expenses). Life expectancy is determined using a mortality table.
What was the outcome of the case?	The Supreme Court reversed the Court of Appeals’ decision, holding Sun Holidays liable for damages. The Court ordered Sun Holidays to pay the petitioners indemnity for death, loss of earning capacity, moral damages, exemplary damages, attorney’s fees, and costs of the suit.

This case underscores the stringent responsibilities of businesses providing transportation services, particularly in the tourism sector. By clarifying the definition of a common carrier and upholding the standard of extraordinary diligence, the Supreme Court has reinforced the importance of passenger safety and accountability. This ruling serves as a reminder to businesses to prioritize safety and ensure they meet the highest standards of care.

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: Spouses Dante Cruz and Leonora Cruz, Petitioners, vs. Sun Holidays, Inc., Respondent, G.R. No. 186312, June 29, 2010