G.R. No. 167938 - Hanjin Heavy Industries and Construction Company, Ltd. vs. Court of Appeals

The case involves a dispute between Trans-Asia Shipping Lines, Inc. (petitioner), a corporation engaged in inter-island shipping, and a passenger, private respondent Atty. Renato T. Arroyo, who purchased a ticket for a scheduled voyage from Cebu City to Cagayan de Oro City on November 12, 1991.
The vessel involved, M/V Asia Thailand, underwent repair work on its engine prior to departure. Despite the ongoing repairs, the vessel was allowed to commence its voyage with only one functioning engine.

The vessel departed Cebu City at around 11:00 p.m. on November 12, 1991, with only one engine operational, after the plaintiff had boarded at approximately 5:30 p.m. and observed the repair works on the engine.
Shortly after departure, the vessel’s performance was disrupted when it began a slow voyage due to the compromised operation of the sole functioning engine, later stopping near Kawit Island where it anchored.
During the stoppage, some passengers, including the private respondent, lost confidence in the vessel’s ability to safely complete the voyage and demanded to be taken back to Cebu City.

Upon being allowed to disembark at Cebu City, the private respondent later boarded another vessel the following day for his intended destination, alleging that the failure to transport him on the scheduled trip constituted a breach of contract.
In his original complaint filed in Civil Case No. 91-491, the private respondent asserted that:

The vessel’s engine malfunction endangered the passengers, causing mental distress and exposing them to unforeseen dangers.
Adequate precautions were not observed, and passengers were “dumped” unceremoniously without proper instructions or safety measures.
He suffered pecuniary loss, additional expenses, and mental anguish due to the carrier’s alleged wanton, reckless, and willful acts.

The trial court, applying provisions of the Civil Code (Articles 1170, 1172, 1173, and 2201), ruled that there was no evidence of fraud, negligence, bad faith, or malice by the carrier and dismissed the complaint as well as the counterclaim.

Dissatisfied with the trial court’s findings, the private respondent appealed the decision to the Court of Appeals.
The Court of Appeals reversed the trial court’s decision by:

Awarding moral and exemplary damages to the private respondent, emphasizing that the carrier’s conduct in allowing an unseaworthy vessel to sail with only one engine evidenced a breach of duty.
Applying Article 1755 in relation to other relevant Civil Code provisions, it held that common carriers must exercise “utmost diligence” in the performance of their obligations.
Rejecting the claim for actual or compensatory damages on the basis that no demonstrable delay was proven, particularly as any delay after disembarkation was due to the respondent’s own decision.

The award for attorney’s fees was not granted due to the lack of specific proof and the failure to include it as a separate prayer in the pleadings.

The petitioner later filed a petition for review on certiorari under Rule 45, raising questions on whether:

The absent specific provision in the contract of carriage should allow the application of either the vague Civil Code common carrier provisions or Article 698 of the Code of Commerce.
The right of the passenger was to be determined solely by the provisions governing common carriers.

The Supreme Court clarified that the matter for resolution was centered on the carrier’s liability for damages resulting from an interruption of the voyage when the vessel, already known to be unseaworthy, was still allowed to sail with a defective engine.
The decision was analyzed in the context of established obligations under the Civil Code regarding common carriers, particularly relating to the duty to exercise extraordinary diligence.

Determination of the Appropriate Standard for Liabilities of a Common Carrier

Whether the failure of the carrier to complete the contracted voyage safely (due to the vessel’s engine troubles and subsequent interruption) constituted a breach of its duty to transport the passenger safely.
Whether such duty should be governed by the general provisions on common carriers in the Civil Code or specifically by Article 698 of the Code of Commerce.

Whether the carrier’s decision to sail with only one engine—despite ongoing repair work—amounted to negligence, bad faith, or a wanton attitude.
Whether such conduct entailed a breach of the duty to exercise “utmost diligence” as mandated by Article 1755 of the Civil Code.

Whether the passenger was entitled to compensatory, moral, and exemplary damages under the circumstances.
Whether the failure to prove an actual delay (as required by Article 1169 for compensatory damages) precluded an award of purely compensatory damages.
Whether the award for attorney’s fees was justified under Article 2208 given the nature of the damages claimed.