G.R. No. 163212 - Candano Shipping Lines, Inc. vs. Sugata-on

Candano Shipping Lines, Inc. is a domestic corporation engaged in coastwise trading within the Philippines and is the petitioner in this case.
Florentina J. Sugata-on, the respondent, is the wife and heir of Melquiades Sugata-on, who was employed by Candano Shipping.
Melquiades Sugata-on was employed as a Third Marine Engineer on board M/V David, Jr. with a monthly salary of P7,800.00.

On 25 March 1996, M/V David, Jr. departed from Davao City with cargo and 20 crew members.
On 27 March 1996, while traversing Lianga Bay, Surigao del Sur, the vessel encountered rough seas and strong winds causing it to tilt progressively from 3 degrees up to a dangerous 30 degrees.
Despite efforts to salvage control by altering course, the ship sank at around 11:00 p.m. at Bakulin Point, Lianga Bay.
Among the 20 crew members, twelve survived, one died, and seven went missing, with Melquiades being one of the missing, leading to the presumption of his death given the lapse of time and the absence of recovery of his body.

Upon learning of her husband’s disappearance, Florentina immediately sought to claim death benefits from Candano Shipping, which the company refused to pay.
As a result, she instituted an action on 31 January 1997 before the Regional Trial Court (RTC) of Manila, Branch 20, alleging indemnity for the death of her husband under Article 1711 of the New Civil Code.
Florentina’s claim for indemnity was based on the employer’s obligation to compensate for a death arising out of and in the course of employment, even if such death is due to a fortuitous or accidental cause.

The RTC rendered a decision ordering Candano Shipping to pay actual damages computed using the loss of earning capacity formula, along with moral and exemplary damages and attorney’s fees.
On appeal, the Court of Appeals (CA) modified the RTC ruling by reducing the actual damages from P988,400.00 to P608,400.00 and deleting the awards for moral and exemplary damages as well as attorney’s fees, citing insufficient basis for the latter.
Candano Shipping petitioned the Supreme Court for review on certiorari, challenging the application of Article 194 of the Labor Code and the computation of indemnification.

The Court of Appeals, in arriving at its modified computation, applied the standard formula under Article 194 of the Labor Code, which involves the method for computing death benefits—including a multiplier based on life expectancy.
The calculation considered Melquiades’ life expectancy based on the formula: 2/3 x [80 - age of deceased]. Since Melquiades was 56 years old, his remaining life expectancy was computed to be 16 years.
Using the formula for loss of earning capacity (life expectancy x [gross annual income less living expenses]), the actual damages were ultimately computed, although later re-computed in the Supreme Court’s analysis.

Whether the formula for fixing the amount of death compensation under Article 194 of the Labor Code should apply in determining the compensation claimed by the heir of a deceased employee under Article 1711 of the Civil Code.

Whether it is proper for the Court of Appeals, on ordinary appeal, to apply Article 194 of the Labor Code to a death compensation claim initially filed and tried under the New Civil Code and on the basis of civil indemnity.

Whether the application of Article 194 of the Labor Code on the claim for death compensation effectively ousts the jurisdiction of the regular courts (including the CA) over such cases originally filed under civil indemnity.
If the Supreme Court rules that the CA’s application of Article 194 is improper, whether the respondent is still entitled to recover death compensation under her original theory of the case as pleaded and tried before the RTC.