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Luzon Stevedoring Corporation vs.

CA

Facts: A maritime collision occurred between the tanker CAVITE owned by LSCO and
MV Fernando Escano (a passenger ship) owned by Escano, as a result the passenger ship
sunk. An action in admiralty was filed by Escano against Luzon. The trial court held that
LSCO Cavite was solely to blame for the collision and held that Luzon’s claim that its
liability should be limited under Article 837 of the Code of Commerce has not been
established. The Court of Appeals affirmed the trial court. The SC also affirmed the CA.
Upon two motions for reconsideration, the Supreme Court gave course to the petition.

Issue: Whether or not in order to claim limited liability under Article 837 of the Code of
Commerce, it is necessary that the owner abandon the vessel

Held: Yes, abandonment is necessary to claim the limited liability wherein it shall be
limited to the value of the vessel with all the appurtenances and freightage earned in the
voyage. However, if the injury was due to the ship owner’s fault, the ship owner may not
avail of his right to avail of limited liability by abandoning the vessel.

The real nature of the liability of the ship owner or agent is embodied in the Code of
Commerce. Articles 587, 590 and 837 are intended to limit the liability of the ship
owner, provided that the owner or agent abandons the vessel. Although Article 837 does
not specifically provide that in case of collision there should be abandonment, to enjoy
such limited liability, said article is a mere amplification of the provisions of Articles 587
and 590 which makes it a mere superfluity.

The exception to this rule in Article 837 is when the vessel is totally lost in which case
there is no vessel to abandon, thus abandonment is not required. Because of such loss,
the liability of the owner or agent is extinguished. However, they are still personally
liable for claims under the Workmen’s Compensation Act and for repairs on the vessel
prior to its loss.

In case of illegal or tortious acts of the captain, the liability of the owner and agent is
subsidiary. In such cases, the owner or agent may avail of Article 837 by abandoning the
vessel. But if the injury is caused by the owner’s fault as where he engages the services of
an inexperienced captain or engineer, he cannot avail of the provisions of Article 837 by
abandoning the vessel. He is personally liable for such damages.

In this case, the Court held that the petitioner is a t fault and since he did not abandon
the vessel, he cannot invoke the benefit of Article 837 to limit his liability to the value of
the vessel, all appurtenances and freightage earned during the voyage.