G.R. No. 181375 - Phil-Nippon Kyoei, Corp. vs. Gudelosao

Petitioner, 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 acted as the local principal while Top Ever Marine Management Maritime Co., Ltd. (TMCL) acted as the foreign principal.
The crewmembers, including Edwin C. Gudelosao, Virgilio A. Tancontian, and six others, were hired through TMCL’s local manning agency, Top Ever Marine Management Philippine Corporation (TEMMPC), under separate employment contracts signed by TEMMPC’s president and general manager, Capt. Oscar Orbeta, and each crewmember.
Petitioner procured a Marine Insurance Policy from South Sea Surety & Insurance Co., Inc. (SSSICI) covering the vessel for ₱10,800,000.00 against loss, damage, and third-party liability arising from perils of the sea.
The insurance policy included Personal Accident Policies for each of the eight crewmembers, with a coverage amount of ₱3,240,000.00 for accidental death or injury.

On February 24, 2003, while still in Japanese waters, the vessel sank due to extreme weather conditions.
Chief Engineer Nilo Macasling was the sole survivor, while the remaining crewmembers, including Gudelosao and Tancontian, perished.

Heirs and beneficiaries of the deceased (respondents) filed separate complaints for death benefits and other damages against petitioner, TEMMPC, TMCL, Capt. Orbeta, and SSSICI before the Arbitration Branch of the National Labor Relations Commission (NLRC).
On August 5, 2004, Labor Arbiter Pablo S. Magat rendered a decision finding solidary liability among petitioner, TEMMPC, TMCL, and Capt. Orbeta for death benefits, burial expenses, and attorney’s fees, and also held SSSICI liable to pay the Personal Accident Policy proceeds.
The Labor Arbiter specified that petitioner’s liability would be extinguished only upon SSSICI’s payment of the insurance proceeds.

Respondents appealed, prompting the NLRC to modify the Labor Arbiter’s Decision in a resolution dated February 28, 2006.
The modified decision reaffirmed solidary liability of TEMMPC, TMCL, and Capt. Orbeta for the death benefits and additionally ordered extra death benefits for minor children of one of the deceased seafarers.
The NLRC absolved petitioner, TEMMPC, TMCL, and Capt. Orbeta from additional liability under the limited liability rule, except that petitioner’s liability was conditioned on SSSICI’s eventual payment of the insurance proceeds.

Respondents filed a petition for certiorari before the CA, challenging the NLRC’s absolute exemption of TEMMPC, TMCL, and Capt. Orbeta under the limited liability rule and the ruling that petitioner’s liability depended solely on SSSICI’s payment.
The CA granted the petition, reinstating the labor arbiter’s Decision with modifications.
The CA held that petitioner, as a shipowner, is liable for work-related benefits independent of tort or negligence, while noting that liability under the POEA-SEC is separate from maritime insurance liability.

Petitioner obtained the Personal Accident Policies to cover compensation of seafarers, part of the total compensation package for their services, and not as a liability coverage for third-party damage.
SSSICI later argued that the NLRC lacked jurisdiction over the insurance claim and pursued a separate complaint in the Regional Trial Court, which was dismissed and is subject to appeal.
Petitioner filed a Motion for Reconsideration before the CA (filed November 5, 2007), which was denied by a CA Resolution dated January 11, 2008.
Respondents, TEMMPC, TMCL, and Capt. Orbeta also executed a Release and Quitclaim, which affected the extent of petitioner’s solidary liability.

Whether the doctrine of real and hypothecary nature of maritime law (the limited liability rule) applies in favor of petitioner.

The petitioner contended that as a shipowner, its liability should be limited to the value of the vessel and any freight, consistent with the traditional maritime law exemption if the vessel is abandoned.

Whether the CA erred in ruling that petitioner’s liability is extinguished only upon SSSICI’s payment of the insurance proceeds.

The issue centers on whether the contractual relation as insurer and policyholder, particularly regarding the Personal Accident Policies, should condition petitioner’s liability on insurance proceeds, or whether such liability stands independently as a statutory workmen’s compensation claim.