Title
Sulpicio Lines, Inc. vs. Karaan
Case
G.R. No. 208590
Decision Date
Oct 3, 2018
Passengers of M/V Princess of the Orient sued Sulpicio Lines for breach of contract after the vessel sank in 1998. Courts awarded temperate, moral, and exemplary damages due to insufficient proof of actual losses and the carrier's negligence. Interest rate set at 6% per annum.
passengers
sunken vessel
damages
A

Case Summary (G.R. No. 134831-32)

Facts Established at Trial

Respondents testified that while aboard the vessel during adverse weather, they heard a loud sound, the ship listed and began to take on water, lights and engines failed, and passengers panicked. They describe a lack of visible crew assistance, difficulty accessing exits because of falling debris and oil, abandonment into the sea, prolonged immersion or exposure until rescue the following day, and property losses. The Labragues’ eight‑year‑old daughter was lost and later recovered deceased. Respondents presented no contemporaneous receipts or documentary proof of pecuniary losses beyond their testimony.

Petitioner's Defense and Proffered Evidence

Petitioner relied on testimonies from ship officers and personnel in a related proceeding: the second mate and other crew described lifesaving equipment deployment, issuance of abandonment signals, and efforts to assist passengers; the radio operator testified regarding weather reports and distress communications; the company’s passenger‑service officer described rescue and assistance operations and company payments to victims; the Philippine Coast Guard inspector testified that the vessel had been cleared as seaworthy and properly documented. Petitioner argued crew actions and vessel condition did not amount to the wanton or reckless conduct required for certain damages.

Procedural History

Respondents filed suit for breach of contract of carriage on June 30, 1999. The Regional Trial Court (Branch 19, Cebu City) issued a decision (May 15, 2008) and an order (June 5, 2008) awarding specified actual, moral, exemplary and nominal damages and attorney’s fees. The Court of Appeals, in a decision dated October 25, 2012, modified the damages (deleting nominal damages, substituting temperate damages in lieu of actual damages for lack of documentary proof, and setting particular amounts), and imposed 12% interest per annum. Petitioner filed a petition for review on certiorari to the Supreme Court.

Issues Presented to the Supreme Court

  1. Whether temperate damages may be awarded when actual damages were claimed and allegedly proven. 2. Whether exemplary damages may be awarded absent a finding of conduct falling within Article 2232 (wanton, fraudulent, reckless, oppressive or malevolent acts).

Supreme Court Disposition — Overview

The petition was denied. The Court affirmed the Court of Appeals’ modification of damages but reduced the applicable interest rate. The Court applied the 1987 Constitution and relevant Civil Code provisions in reaching its rulings.

Analysis — Temperate Damages

The Court agreed with the Court of Appeals that temperate damages were appropriate in lieu of the respondents’ claimed actual damages because the latter were not supported by documentary proof. Article 2224 of the Civil Code permits temperate damages — amounts greater than nominal but less than full compensatory damages — when the court finds that some pecuniary loss occurred but its amount cannot be established with certainty. The trial record showed respondents suffered losses from the sinking, but their claims were principally based on their own testimony without receipts or other corroborating documents establishing the precise monetary amounts. Given this evidentiary insufficiency, the Court affirmed the CA’s substitution of temperate damages and its quantified awards.

Analysis — Exemplary Damages

The Court affirmed the award of exemplary damages. Relevant Civil Code provisions state that exemplary damages may be imposed in contracts and quasi‑contracts if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner (Article 2232), and that exemplary damages are discretionary (Article 2233) and ancillary to moral, temperate or compensatory damages (Article 2234). The Court found respondents had established entitlement to moral and temperate damages, satisfying the prerequisite to consider exemplary damages. The Court also concluded that petitioner failed to prove it exercised the extraordinary diligence expected of a common carrier. The Court relied on prior precedent addressing the same carrier and vessel, including a Board of Marine Inquiry finding of erroneous maneuvers and imprudent navigation that contributed to loss of stability, and on trial record indications of crew and command shortcomings (failure to reduce speed appropriately, deficient cargo stowage/stability precautions, communication shortcomings). Exemplary damages were deemed appropriate as corrective and deterrent measures given the gravity of the carrier’s failures and the resulting loss of lives.

Interest and Attorney’s Fees

The Court modified the interest imposed by the Court of Appeals, reducing the rate to si

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