SULPICIO LINES v. NAPOLEON SESANTE, GR No.

172682, 2016-07-27
Facts:
On September 18, 1998, at around 12:55 p.m., the M/V Princess of the Orient, a passenger vessel
owned and operated by the petitioner, sank near Fortune Island in Batangas. Of the 388 recorded
passengers, 150 were lost.[3] Napoleon Sesante, then a member of the Philippine National Police
(PNP) and a lawyer, was one of the passengers who survived the sinking. He sued the petitioner for
breach of contract and damages.[4]
Sesante alleged in his complaint that the M/V Princess of the Orient left the Port of Manila while
Metro Manila was experiencing stormy weather; that at around 11:00 p.m., he had noticed the
vessel listing starboard, so he had gone to the uppermost deck where he witnessed the strong
winds and big waves pounding the vessel; that at the same time, he had seen how the passengers
had been panicking, crying for help and frantically scrambling for life jackets in the absence of the
vessel's officers and crew; that sensing danger, he had called a certain Vency Ceballos through his
cellphone to request him to inform the proper authorities of the situation; that thereafter, big
waves had rocked the vessel, tossing him to the floor where he was pinned by a long steel bar; that
he had freed himself only after another wave had hit the vessel;[5] that he had managed to stay
afloat after the vessel had sunk, and had been carried by the waves to the coastline of Cavite and
Batangas until he had been rescued; that he had suffered tremendous hunger, thirst, pain, fear,
shock, serious anxiety and mental anguish; that he had sustained injuries,[6] and had lost money,
jewelry, important documents, police uniforms and the .45 caliber pistol issued to him by the PNP;
and that because it had committed bad faith in allowing the vessel to sail despite the storm signal,
the petitioner should pay him actual and moral damages
In its defense, the petitioner insisted on the seaworthiness of the M/V Princess of the Orient due to
its having been cleared to sail from the Port of Manila by the proper authorities; that the sinking
had been due to force majeure; that it had not been negligent; and that its officers and crew had
also not been negligent because they had made preparations to abandon the vessel because they
had launched life rafts and had provided the passengers assistance in that regard.
On October 12, 2001, the RTC rendered its judgment in favor of the respondent,... The petitioner
sought reconsideration, but the RTC only partly granted its motion by reducing the temperate
damages from P500,000.00 to P300,000.00
Dissatisfied, the petitioner appealed.[12] It was pending the appeal in the CA when Sesante passed
away. He was substituted by his heirs.
On June 27, 2005, the CA promulgated its assailed decision. It lowered the temperate damages to
P120,000.00, which approximated the cost of Sesante's lost personal belongings; and held that
despite the seaworthiness of the vessel, the petitioner remained civilly liable because its officers
and crew had been negligent in performing their duties
Issues:
(1) Is the complaint for breach of contract and damages a personal action that does not survive the
death of the plaintiff?; (2) Is the petitioner liable for damages under Article 1759 of the Civil Code?;
and (3) Is there sufficient basis for awarding moral and temperate damages?
Ruling:
The appeal lacks merit.
An action for breach of contract of carriage survives the death of the plaintiff
Section 16, Rule 3 of the Rules of Court lays down the proper procedure in the event of the death of
a litigant, viz.:Section 16. Death of party; duty of counsel. - Whenever a party to a pending action
dies, and the claim is not thereby extinguished, it shall be the duty of his counsel to inform the
court within thirty (30) days after such death of the fact thereof, and to give the name and address
of his legal representative or representatives. Failure of counsel to comply with his duty shall be a
ground for disciplinary action.The heirs of the deceased may be allowed to be substituted for the
deceased, without requiring the appointment of an executor or administrator and the court may
appoint a guardian ad litem for the minor heirs.
A contract of carriage generates a relation attended with public duty, neglect or malfeasance of the
carrier's employees and gives ground for an action for damages.[19] Sesante's claim against the
petitioner involved his personal injury caused by the breach of the contract of carriage. Pursuant to
the aforecited rules, the complaint survived his death, and could be continued by his heirs following
the rule on substitution.
The petitioner is liable for breach of contract of carriage
The petitioner submits that an action for damages based on breach of contract of carriage under
Article 1759 of the Civil Code should be read in conjunction with Article 2201 of the same code; that
although Article 1759 only provides for a presumption of negligence, it does not envision automatic
liability; and that it was not guilty of bad faith considering that the sinking of M/V Princess of the
Orient had been due to a fortuitous event, an exempting circumstance under Article 1174 of the
Civil Code.
Article 1759 of the Civil Code does not establish a presumption of negligence because it explicitly
makes the common carrier liable in the event of death or injury to passengers due to the negligence
or fault of the common carrier's employees. It reads:Article 1759. Common carriers are liable for
the death or injuries to passengers through the negligence or willful acts of the former's employees,
although such employees may have acted beyond the scope of their authority or in violation of the
orders of the common carriers.This liability of the common carriers does not cease upon proof that
they exercised all the diligence of a good father of a family in the selection and supervision of their
employees.The liability of common carriers under Article 1759 is demanded by the duty of
extraordinary diligence required of common carriers in safely carrying their passengers.[
On the other hand, Article 1756 of the Civil Code lays down the presumption of negligence against
the common carrier in the event of death or injury of its passenger, viz.:Article 1756. In case of
death of or injuries to passengers, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extraordinary diligence as prescribed in
Articles 1733 and 1755.
Clearly, the trial court is not required to make an express finding of the common carrier's fault or
negligence.[21] Even the mere proof of injury relieves the passengers from establishing the fault or
negligence of the carrier or its employees.[22] The presumption of negligence applies so long as
there is evidence showing that: (a) a contract exists between the passenger and the common
carrier; and (b) the injury or death took place during the existence of such contract.[23] In such
event, the burden shifts to the common carrier to prove its observance of extraordinary diligence,
and that an unforeseen event or force majeure had caused the injury.
Sesante sustained injuries due to the buffeting by the waves and consequent sinking of M/V
Princess of the Orient where he was a passenger. To exculpate itself from liability, the common
carrier vouched for the seaworthiness of M/V Princess of the Orient, and referred to the BMI report
to the effect that the severe weather condition - a force majeure - had brought about the sinking of
the vessel.
A common carrier may be relieved of any liability arising from a fortuitous event pursuant to Article
1174[25] of the Civil Code. But while it may free a common carrier from liability, the provision still
requires exclusion of human agency from the cause of injury or loss.[26] Else stated, for a common
carrier to be absolved from liability in case of force majeure, it is not enough that the accident was
caused by a fortuitous event. The common carrier must still prove that it did not contribute to the
occurrence of the incident due to its own or its employees' negligence.
The petitioner has attributed the sinking of the vessel to the storm notwithstanding its position on
the seaworthiness of M/V Princess of the Orient. Yet, the findings of the BMI directly contradicted
the petitioner's attribution,... The Captain's erroneous maneuvers of the M/V Princess of the Orient
minutes before she sunk [sic] had caused the accident. It should be noted that during the first two
hours when the ship left North Harbor, she was navigating smoothly towards Limbones Point.
During the same period, the ship was only subjected to the normal weather stress prevailing at the
time. She was then inside Manila Bar. The waves were observed to be relatively small to endanger
the safety of the ship. It was only when the MV Princess of the Orient had cleared Limbones Pt.
while navigating towards the direction of the Fortune Island when this agonizing misfortune struck
the ship.
Initially, a list of three degrees was observed. The listing of the ship to her portside had
continuously increased. It was at this point that the captain had misjudged the situation. While the
ship continuously listed to her portside and was battered by big waves, strong southwesterly winds,
prudent judgement [sic] would dictate that the Captain should have considerably reduced the ship's
speed. He could have immediately ordered the Chief Engineer to slacken down the speed.
Meanwhile, the winds and waves continuously hit the ship on her starboard side. The waves were
at least seven to eight meters in height and the wind velocity was a[t] 25 knots. The MV Princess of
the Orient being a close-type ship (seven decks, wide and high superstructure) was vulnerable and
exposed to the howling winds and ravaging seas. Because of the excessive movement, the solid and
liquid cargo below the decks must have shifted its weight to port, which could have contributed to
the tilted position of the ship.
Even assuming the seaworthiness of the MA/ Princess of the Orient, the petitioner could not escape
liability considering that, as borne out by the aforequoted findings of the BMI, the immediate and
proximate cause of the sinking of the vessel had been the gross negligence of its captain in
maneuvering the vessel
The Court also notes that Metro Manila was experiencing Storm Signal No. 1 during the time of the
sinking.[31] The BMI observed that a vessel like the M/V Princess of the Orient, which had a volume
of 13.734 gross tons, should have been capable of withstanding a Storm Signal No. 1 considering
that the responding fishing boats of less than 500 gross tons had been able to weather through the
same waves and winds to go to the succor of the sinking vessel and had actually rescued several of
the latter's distressed passengers
We agree with the petitioner that moral damages may be recovered in an action upon breach of
contract of carriage only when: (a) death of a passenger results, or (b) it is proved that the carrier
was guilty of fraud and bad faith, even if death does not result.[33] However, moral damages may
be awarded if the contractual breach is found to be wanton and deliberately injurious, or if the one
responsible acted fraudulently or with malice or bad faith.
Principles:
In order to be considered a fortuitous event, however, (1) the cause of the unforeseen and
unexpected occurrence, or the failure of the debtor to comply with his obligation, must be
independent of human will; (2) it must be impossible to foresee the event which constitute the caso
fortuito, or if it can be foreseen it must be impossible to avoid; (3) the occurrence must be such as
to render it impossible for the debtor to fulfill his obligation in any manner; and (4) the obligor must
be free from any participation in the aggravation of the injury resulting to the creditor.
[T]he principle embodied in the act of God doctrine strictly requires that the act must be occasioned
solely by the violence of nature. Human intervention is to be excluded from creating or entering
into the cause of the mischief. When the effect is found to be in part the result of the participation
of man, whether due to his active intervention or neglect or failure to act, the whole occurrence is
then humanized and removed from the rules applicable to the acts of God.

Pantaleon v. American Express

International, Inc. G.R. No. 174269 (May
8, 2009)
Facts:

1. The petitioner (Pantaleon) and his family, joined an escorted tour of Western Europe.
2. In Coster Diamond House, Amsterdam, Mrs. Pantaleon (wife) was about to bought a
2.5 karat diamond brilliant cut, a pendant and a chain, all of which totaled U.S.
$13,826.00.
3. To pay these purchases, around 9:15am, Pantaleon presented his American Express
Credit Card together with his passport.
4. By 9:40am, Pantaleon was already worried about further inconveniencing the tour
group, he asked the store clerk to cancel the sale. the store manager though asked him
to wait a few more minutes.
5. Around 10:00am (around 45 minutes after Pantaleon had presented his AmexCard),
Coster decided to release the items even without American Express International,
 Inc.’s (herein respondent, Amex for brevity) approval of the purchase. This was 30
minutes after the tour group was supposed to have left the store.
6. The spouses Pantelon returned. Their offers of apology were met by their tourmates
with stony silence. The tour group’s visible irritation was aggravated when the tour
guide announced that the city tour of Amsterdam was to be canceled due to lack of
remaing time. Mrs. Pantaleon ended up weeping.
7. After the star-crossed tour had ended, the Pantaleon family proceeded to the United
States before returning to Manila. While in the United States, Pantaleon continued to
use his AmEx card, several times without hassle or delay, but with two other incidents
similar to the Amsterdam brouhaha.

Issue/s:

1. Whether or not Amex was in default or mora.

2. Whether Amex (Credit Card Company) is in mora solvendi or in mora accipiendi.

Ruling:

1. Yes. The Court is convinced that Amex’s delay constituted breach of its contractual
obligation to act on his use of the card abroad “with special handling.:

Notwithstanding the popular notion that credit card purchases are approved “WITHIN
SECONDS,” there really is no strict, legally determinative point of demarcation on how
long must it take for a credit car company to approve or disapprove a customer’s purchase,
much less one specifically contracted upon by the parties. yet this is one of those instances
when “you’d know it what you’d see it,” and one hour appears to be an awfully long,
patently unreasonable length of time to approve or disapprove a credit card purchases. It
is long enough time for the customer to walk to a bank a kilometer away, withdraw money
over the counter, and return to the store.

The Credit Authorization System (CAS) record on the Amsterdam transaction shows how
Amexco Netherlands viewed the delay as unusually frustrating. In sequence expressed in
Phoenix time from 01:20 when the charge purchased was referred for authorization:

01:22 – the authorization is referred to manila Amexco.

01:32 – Netherlands gives information that the identification of the card member has
been presented and he is buying jewelries worth US $13,826

01:33 – Netherlands asks “How long will this take?”

02:08 – Netherlands is still asking “How long will this take?”

The Amex has a right to verify whether the credit it is extending upon on a particular
purchase was indeed contracted by the cardholder, and that the cardholder is within his
means to make such transaction. The culpable failure of respondent herein is not the
failure to timely approve petitioner’s purchase, but the more elemental failure to timely
act on the same, whether favorably or unfavorably. Even assuming the respondent’s credit
authorizers did not have sufficient basis on hand to make a judgment, we see no reason
why Amex could not have promptly informed petitioner the reason for the delay, and duly
advised him that resolving the same could take some time. In that way, petitioner would
have had informed basis on whether or not to pursue the transaction at Coster, given the
attending circumstances. instead, Pantaleon was left uncomfortably dangling in the chilly
autumn winds in a foreign land and soon forced to confront the wrath of foreign folk.

The delay committed by Amex was clearly attended by unjustified neglect and bad faith,
since it alleges to have consumed more than one hour to simply go over Pantaleon’s pas
credit history with Amex, his payment record and his credit and bank references, when
all such data are already stored and readily available from its computer. There is nothing
in Pantaleon’s billing history that would warrant the imprudent suspension of action by
Amex in processing the purchase.

2. Amex is in mora solvendi. Generally, the relationship between a credit card provided
and its card holder is that of creditor-debtore, with the card company as a the creditor
extending loans and credit to the card holder, who as debtor is obliged to repay the
creditor. The relationship already takes exception to the general rule that as between
a bank and its depositors, the bank is deemed as the debtor while the depositor is
considered as the creditor. In the present case, we should shift perspectives and again
see the credit card company as the debtor/obligor, insofar as it has the obligation to
the customer as creditor/obligee to act promptly on its purchases on credit.

If there was delay on the part of Amex in its normal role as creditor to the cardholder,
such delay would not have been in acceptance of the performance of the debtor’s
obligation (i.e., the repayment of the debt), but it would be delay in the extension of the
credit in the first place. Such delay would not fall under mora accipiendi, which
contemplates that the obligation of the debtor, such as the actual purchases on credit has
already been instituted. The establishment of the debt itself (purchases on credit of the
jewelry) had not yet been perfected, as it remained pending the approval or consent of the
credit card company.

Notes / Doctrine:

Requisites of Mora Solvendi (delay of debtor)

1. Obligation is demandable and liquidated;

2. debtor delays performance; and
3. the creditor judicially or extrajudicially required the debtor’s performance.

Requisites of Mora Accipiendi

1. An offer of performance by the debtor who has the required capacity;

2. offer must be to comply with the prestation as it should be performed; and
3. creditor refuses the performance without just cause.

Moral damages

 Can be availed in cases of breach of contract where the defendant acted fraudulently
or in bad faith.
 In the present case, there was a deadline for the completion of that purchase by
Pantaleon before any delay would redound to the injury of his several traveling
companions – gave rise to the moral shock, mental anguish, serious anxiety, wounded
feelings and social humiliation sustained by Panaleon family. These circumstances are
fairly unusual, and should not give rise to a general entitlement for damages under a
more mundane set of facts.
 There is no hard-and-fast rule in determining what would be a fair and reasonable
amount of moral damages, since each case must be governed by its own peculiar facts,
however, it must be commensurate to the loss or injury suffered.

TOPIC: Breach of Obligation

Comsavings Bank (now GSIS Family Bank) v. Sps. Danilo and Estrella Capistrano
G.R. No. 170942, August 28, 2013
Facts: Respondents were the owners of a residential lot in Bacoor, Cavite. Desirous of
building their own house on the lot, they availed themselves of the UHLP implemented
by the National Home Mortgage Finance Corporation (NHMFC). They executed a
construction contract with Carmencita CruzBay, the proprietor of GCB Builders. To
finance the construction, GCB Builders facilitated their loan application with
Comsavings Bank, an NHFMCaccredited originator. They executed in favor of GCB
Builders a deed of assignment. Comsavings Bank informed respondent Estrella
Capistrano that she would have to sign various documents as part of the requirements for
the release of the loan. Among the documents was a certificate of house completion and
acceptance. Comsavings Bank informed respondents of the approval of the interimfinancing loan
which was given to GCB Builders as construction cost.
Respondents inquired from GCB Builder when their house would be completed
considering that their contract stipulated a completion period of 75 days. CruzBay gave
various excuses for the delay. The year 1992 ended with the construction of the house
unfinished. When respondents demanded the completion of the house, GCB Builder’s
asked for an additional construction cost. Respondents received a letter from NHMFC
advising that they should already start paying their monthly amortizations because their
loan had been released directly to Comsavings Bank. Estrella Capistrano went to the
construction site and found to her dismay that the house was still unfinished. Respondents
wrote to NHMFC protesting the demand for amortization payments considering that they
had not signed any certification of completion and acceptance, and that even if there was
such a certification of completion and acceptance, it would have been forged.
Respondents sued GCB Builders and Comsavings Bank for breach of contract and
damages, and amended their complaint to implead NHMFC as an additional defendant.
The RTC rendered a decision in favor of respondents. The CA promulgated the appealed
decision, affirming the RTC subject to the modification that NHMFC was absolved of
liability, and that the moral and exemplary damages were reduced. Hence, Comsavings
Bank appealed the case to the Supreme Court.
Issue: Whether petitioner bank liable with GCB Builders for breach of obligation
Held: Yes. The CA rightfully declared Comsavings Bank solidarily liable with GCB
Builders for the damages sustained by respondents. However, the Court pointed out that
such liability did not arise from Comsavings Bank’s breach of warranties under its
purchase of loan agreement with NHMFC. Under the purchase of loan agreement, it
undertook, for value received, to sell, transfer and deliver to NHMFC the loan
agreements, promissory notes and other supporting documents that it had entered into and
executed with respondents, and warranted the genuineness of the loan documents and the
“construction of the residential units.” Having made the warranties in favor of NHMFC,
it would be liable in case of breach of the warranties to NHMFC, not respondents,
eliminating breach of such warranties as a source of its liability towards respondents.
Instead, the liability of Comsavings Bank towards respondents was based on Article 20
and Article 1170 of the Civil Code. Based on the provisions, a banking institution like
Comsavings Bank is obliged to exercise the highest degree of diligence as well as high
standards of integrity and performance in all its transactions because its business is
imbued with public interest. Gross negligence connotes want of care in the performance
of one’s duties; it is a negligence characterized by the want of even slight care, acting or
omitting to act in a situation where there is duty to act, not inadvertently but willfully and
intentionally, with a conscious indifference to consequences insofar as other persons may
be affected. It evinces a thoughtless disregard of consequences without exerting any
effort to avoid them.
There is no question that Comsavings Bank was grossly negligent in its dealings with
respondents because it did not comply with its legal obligation to exercise the required
diligence and integrity. As a banking institution serving as an originator under the UHLP
and being the maker of the certificate of acceptance/completion, it was fully aware that
the purpose of the signed certificate was to affirm that the house had been completely
constructed according to the approved plans and specifications, and that respondents had
thereby accepted the delivery of the complete house. Given the purpose of the certificate,
it should have desisted from presenting the certificate to respondents for their signature
without such conditions having been fulfilled. Had Comsavings Bank been fair towards
them as its clients, it should not have made them presign the certificate until it had
confirmed that the construction of the house had been completed.
Comsavings Bank asserts that it submitted the certificate to NHMFC after the
construction of the house had been completed. The assertion could not be true, however,
because Atty. Corona of NHMFC testified that he had inspected the house on August 4,
1993 and had found the construction to be incomplete and defective. Had Comsavings
Bank complied with its duty of observing the highest degree of diligence, it would have
checked first whether the pictures carried the signatures of respondents on their dorsal
sides, and whether the house depicted on the pictures was really the house of respondents,
before releasing the proceeds of the loan to GCB Builders and before submitting the
pictures to NHMFC for the reimbursement. Again, this is an indication of Comsavings
Bank’s gross negligence.