They said at least 127 people from the M/B Kim Nirvana were rescued by nearby fishing boats and coast guard personnel or swam to safety off Ormoc city on Leyte Island.
Coast guard spokesman Armand Balilo said the wooden outrigger ferry was leaving Ormoc for the Camotes Islands, about 44 kilometers (27 miles) to the south, when it was lashed by strong waves.
He said the captain and some of the crew were rescued and are in custody pending an investigation.
Mary Jane Drake, who was traveling with her mother and American husband, said the ferry was pulling slowly out of the port when it suddenly flipped to the left in strong waves and overturned, trapping her and other passengers. She, her mother and husband swam to safety from underneath the ferry.
"No one was able to jump out because it overturned very swiftly. There was no time to jump," she said.
"I jumped out of my seat and ran to the front as far as I could, and tried to lean over. I am a big guy, and tried to push the boat back over but it was way too late," he said.
Many of the passengers screaming in panic, he said.
TV footage showed coast guard rescuers carrying survivors from rubber boats to a beach. Not far away, the bottom part of the vessel could be seen protruding from the water.
A brewing storm in the Pacific was 550 kilometers (344 miles) east of Ormoc and was too far away to affect any part of the Philippine archipelago, according to forecasters. They said winds in the Ormoc region were not strong enough to whip up dangerous waves.
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