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THIRD DIVISION Upon failure of PISC to fulfill its obligations under the said

promissory note, Citibank sent to private respondent CBC a letter


[G.R. No. 128661. August 8, 2000]
dated March 25, 1983 drawing on Letter of Credit No. 79/4174.
PHILIPPINE NATIONAL BANK/NATIONAL INVESTMENT In this letter, Citibank certified that the draft attached thereto for
DEVELOPMENT CORPORATION, petitioners, vs. THE COURT OF US$242,225.00 represented the principal balance due to
APPEALS, CHINA BANKING CORPORATION, respondents. Citibank as of March 17, 1983 under the promissory note
executed by PISC, the proceeds of which were used for the repair
DECISION and conversion of M/V Asean Liberty. Thus, on March 30, 1983,
GONZAGA-REYES, J.: CBC instructed its correspondent Irving Trust Co., by cable, to
pay to Citibank the amount of US$242,225.00. On the same date,
In this petition for review on certiorari under Rule 45 of the Rules Irving Trust Co. advised private respondent CBC by mail that the
of Court, petitioners seek the reversal of the 21 March 1997 amount of US$242,225.00 had been debited against CBCs
decisioni[1] of the Court of Appeals in C.A.-G.R. No. CV-38131. Account No. 8033278269 and remitted to Citibank.viii[8]
The assailed decision set aside the Orderii[2] dated 4 March 1992
of the Regional Trial Court of Makati City, Branch 146 in Civil On May 10, 1983, for failure of PISC to settle its obligations in the
Case No. 7119 insofar as it dismissed the complaint-in- amount of US$64,789,470.96, petitioner PNB conducted, thru
intervention of private respondent China Banking Corporation. the Sheriffs Office, an auction sale of the mortgaged vessels,
except for the vessel M/V Asean Objective. Petitioner NIDC
The facts of the case are as follows: emerged as the highest bidder in these auctions.ix[9]
To finance the acquisition of seven (7) ocean-going vessels, On May 27, 1983, claiming that the foreclosure sale of its
namely M/V Asean Liberty, M/V Asean Independence, M/V mortgaged vessels was illegal, unjust, irregular, and oppressive,
Asean Mission, M/V Asean Knowledge, M/V Asean Nations, M/V PISC instituted before the Regional Trial Court of Makati, a civil
Asean Greatness, and M/V Asean Objectives, the Philippine casex[10] against petitioners for the annulment of the foreclosure
International Shipping Corporation (hereinafter PISC) applied for and auction sale of its vessels and damages.
and was granted by petitioner National Investment and
Development Corporation (hereinafter NIDC) the following As accurately narrated in the trial courts Order and adopted by
guaranty accommodations: the Court of Appeals in its Decision of March 21, 1997, the
following proceedings transpired in the lower court:
a. US$9.44 Million in favor of Ultrafin A.G. of Zurich,
Switzerland as Agent for the banks/financial institutions as Records show that on May 27, 1983, PISC (Philippine
evidenced by and subject to the terms and conditions of a International Shipping Corporation) filed suit against National
Guaranty Agreement dated December 7, 1978 to partly finance Investment and Development Corporation (NIDC, for short) and
the acquisition of two (2) ocean-going vessels; Philippine National Bank (PNB, for short) for annulment of
foreclosure of mortgage and auction sale with damages vis--vis
b. US$23.60 Million in favor of the Philippine National the sale on foreclosure of vessels Asean Mission, Asean
Bank (hereinafter PNB as evidenced by and subject to the terms Knowledge, Asean Nations and Asean Greatness (as well as Asean
and conditions of a Consolidated Amendatory Agreement dated Liberty and Asean Independence). NIDC answered the complaint,
January 25, 1979 to finance the acquisition cost of four (4) and in an amended answer impleaded additional counterclaim
additional ocean-going vessels; and defendants. In an Order dated September 29, 1984, then Judge
c. US$1.291 Million in favor of PNB as evidenced by and Jose L. Coscolluela, Jr. dismissed the complaint as against PNB
subject to the terms and conditions of that Second Consolidated and the counterclaimed defendants. And under date of November
Amendatory Agreement dated July 17, 1979 to finance the 3, 1986, the complaint itself against and the NIDC counterclaims
additional acquisition cost of one (1) ocean-going vessel.iii[3] were dismissed with prejudice.

As security for these guaranty accommodations, PISC executed In the meantime, NIDC acquired the vessels as highest bidder in
in favor of petitioners the following mortgage documents: the foreclosure thereof initiated by PNB, NIDC having thereafter
disposed of said vessels in favor of the National Steel Corporation
a. Deed of Chattel Mortgage dated September 14, 1979 (NSC).
constituted on M/V Asean Liberty and M/V Asean Nation and
recorded on September 25, 1979 with the Philippine Coast Guard Complaints in intervention were filed by and for Unitor Ships
Headquarters; Services PTE, Ltd., IMO Industries AB, UDDVALLARVARVET AB,
Hyundai, Shipyard Co., Lloyds, China bank, Chiang Tung
b. Supplemental Chattel Mortgage dated October 2, 1979 Enterprises Co., Ltd., Pan Asia, Inc., and HANMF Marine Service,
constituted on M/V Asean Independence, M/V Asean Mission, Co., Ltd., for recovery upon maritime liens against the proceeds
M/V Asean Knowledge, and M/V Asean Objectives and recorded of the sale of the foreclosed vessels. The parties concerned, except
with the Philippine Coast Guard Headquarters on February 13, for intervenors Lloyds and China Bank, eventually submitted a
1980; and Compromise Agreement dated July 12, 1989, and made the basis
c. Supplemental Chattel Mortgage constituted on M/V for the Decision of August 23, 1989.
Asean Greatness and recorded with the Philippine Coast Guard As first stated, there now remain only Lloyds and China Bank
Headquarters on February 3, 1981.iv[4] claims in intervention, recovery upon which is covered by a PNB
Meanwhile, on March 12, 1979, PISC entered into a Contract bank guarantee therefor if found matters of entitlement (sic) by
Agreement with Hong Kong United Dockyards, Ltd. for the repair said intervenors.
and conversion of the vessel M/V Asean Liberty at a contract price Intervenor Lloyds claim is for the service of herein intervenor
of HK$2,200,000.00 variable as provided therein.v[5] Lloyds Register of Shipping to class aforementioned vessels (M/V
On May 28, 1979, the Central Bank of the Philippines authorized Asean Nations and Asean Greatness) during the period covering
PISC to open with private respondent China Banking Corporation July 22, 1981 to July 14, 1983 and the cost for said maritime
(hereinafter CBC) a standby letter of credit for US$545,000.00 in surveys in the sum of HK$65,930.00, UKC10,363.45 and
favor of Citibank, N.A. (hereinafter Citibank) to cover the repair P9,653.00 said to have been unpaid by PISC despite demands.
and partial conversion of the vessel M/V Asean Liberty. This was NIDC traversed the Lloyds claim as not being preferred maritime
pursuant to the letter of the Central Bank of the Philippines dated liens and in any event inferior in nature.
May 28, 1979 as amended on June 20, 1979.vi[6] Intervenor China Banks claims are predicated on (i) a China Bank
On June 15, 1979, PISC executed an Application and Agreement Standby Letter of Credit in favor of Citibank, N. A. purportedly to
for Commercial Letter of Credit for $545,000.00 with private cover repair and partial conversion of M/V Asean Liberty, to the
respondent CBC in favor of Citibank. Pursuant to this application extent of US$242,225.00 paid by China Bank to Citibank, and
and agreement, private respondent CBC issued on September 12, said to be now owing by PISC together with stipulated interest;
1979 its Irrevocable Standby Letter of Credit No. 79/4174 for (ii) a China Bank loan of US$2,700,000.00 as evidenced by a
US$545,000.00 in favor of Citibank for account of PISC. promissory note, the loan proceeds said to have allowed PISC to
reduce overhead expenses and afford it competitive advantage in
On September 17, 1979, a Promissory note for US$545,000.00 overseas shipping, and to pay for bunker fuel, defray port
was executed by PISC in favor of Citibank pursuant to the Loan expenses and storage, container rental and insurance, as well as
Agreement for US$545,000.00 between PISC, as borrower, and salaries and wages of crew members; and (iii) a China bank
Citibank, as lender.vii[7] commercial letter of credit to PISC in favor of Bank of America,
particularly a BA Draft for US$648,002.54 said to have been b) assuming that the loans are not themselves maritime
applied towards vessel repair and conversion by the China liens, the trial court erred in holding that the China Banking
Shipbuilding Corporation of Taiwan, together with stipulated Corporation did not acquire the maritime liens of Philippine
interests due from PISC. China Banks claims are premised on the International Shipping Corporation's creditors by subrogation.
above as being preferred maritime liens. NIDC rejects said claims
For its part, herein petitioners PNB/NIDC raised as an issue in
as not being maritime liens, much less preferred maritime liens.
its Appellees Brief before the Court of Appeals the lack of
Shortly after the undersigned penning Judge assumed his duties jurisdiction of the appellate court to entertain and pass upon the
in this Court, Lloyds and China Bank were enjoined to furnish appeal interposed by CBC on the ground that the issues raised
opposite counsel with copies of the documentation of their therein were purely legal; and that the appeal of CBC should have
respective claims, to obviate the necessity of adducing evidence been lodged with the Supreme Court by petition for review on
in point on matters capable of stipulation. Thus, failing certiorari.xii[12]
formulation of any amicable settlement in the manner arrived at
On March 21, 1997, the Court of Appeals promulgated its
by all other intervenors, pre-trial proceedings for the subject last
questioned decision, the dispositive portion of which states:
remaining claims in intervention by and for Lloyds and China
Bank resulted in an August 9, 1991 Pre-Trial Order which set WHEREFORE, insofar as the appellant CBC is concerned, the
forth- appealed Order is hereby SET ASIDE and judgment is rendered:
A. NATURE OF THE CASE (a) Directing the appellee Philippine National
Bank/National Investment and Development Corporation to pay
Claimant-intervenor Lloyds Register of Shipping seeks recovery
the appellant China Banking Corporation from the proceeds of
as unpaid creditor of HK$65,930., UK Pounds C10,363.45 and
the foreclosure sale of M/V Asean Liberty the amount of
P9,653.00 as being in the nature of preferred maritime liens on
US$242,225.00 or its Philippine Peso Equivalent at the time of
the vessels M/V ASEAN NATIONS and ASEAN GREATNESS,
payment, with interest thereon at the legal rate from November 7,
representing costs for maritime services rendered for said vessels
1984, the date of filing of CBCs complaint-in-intervention, until
for the period July 22, 1981 to July 14, 1983.
fully paid; and
Intervenor-claimant China Banking Corporation seeks recovery,
(b) Ordering the appellee Philippine International Shipping
as being in the nature of a preferred maritime lien, of the sum of
Corporation to pay the same CBC the amounts of US$648,002.54
US$3,890,227.53, representing the totality of loans extended by
and US$2.7 Million plus stipulated interests, arrangement fees,
said intervenor-claimant said to have been expended in financing
swap premiums, expenses, losses, taxes and penalties,
repair and conversion costs, for expenses and storage container
rentals and insurance premium paid out by it. xxx
Plaintiffs admit the recoverability of said claims as being in the SO ORDERED.xiii[13]
nature of preferred maritime liens, whereas PNB-NIDC contests
the said claims. In the said decision, the appellate court held petitioners
PNB/NIDC liable to CBC only for the amount of US$242,225.00,
B. STIPULATIONS AND ADMISSIONS. which was used for the repair and conversion of the M/V Asean
Liberty, as it was only this amount which CBC was able to prove
Plaintiffs, PNB-NIDC and intervenor-claimant Lloyds Register of
as being a preferred maritime lien. Moreover, such amount was
Shipping stipulate and admit that the totality of its claims as fully
to be paid by petitioners PNB/NIDC from the proceeds of the
supported by documentation already verified by the parties are in
foreclosure sale of the vessel M/V Asean Liberty. Private
the sums of HK$65,930,00, UKC10,363.45 and P9,653.00.
respondent CBCs other claims of US$648,000.54 and US$2.7
Plaintiffs, PNB-NIDC and intervenor-claimant China Banking Million were found by the appellate court as not being in the
Corporation stipulate and admit that the totality of its claim is in nature of maritime liens and as such, recoverable only from PISC,
the sum of US$3,870,227.53 as fortified by documentation not from herein petitioners PNB/NIDC.
already verified in point.
Not satisfied with the decision of the appellate court, petitioners
C. ISSUES. PNB/NIDC institute the present petition for review on certiorari
where they raise the following issues:
The parties have agreed to limit the resolution of the last two
remaining claims in intervention aforementioned to the following I.
legal questions:
WHETHER OR NOT THE COURT OF APPEALS HAS APPELLATE
i. Whether or not said claims, in the JURISDICTION TO ENTERTAIN AND PASS UPON THE APPEAL
context in which they sought to be INTERPOSED BY PRIVATE RESPONDENT CBC FROM THE
recovered, are preferred maritime lien ORDER OF THE TRIAL COURT OF MARCH 4, 1992 WHICH
as would entitle said claims to INVOLVED PURE QUESTIONS OF LAW.
recover, and
II.
ii. Whether or not assuming
WHETHER OR NOT PRIVATE RESPONDENT CBCS CLAIM FOR
recoverability thereon as being in the
US$242,225.OO AS EVIDENCED BY ITS IRREVOCABLE LETTER
nature of maritime liens, such
OF CREDIT NO. 79/4174 OF SEPTEMBER 12, 1979 IS IN THE
recovery may be allowed in relation
NATURE OF A MARITIME LIEN UNDER THE PROVISIONS OF
with PNBs being the mortgagee of the
P.D. NO. 1521; AND IF SO, WHETHER OR NOT SAID MARITIME
assets from which recovery is sought.
LIEN IS PREFERRED OVER THE MORTGAGE LIEN OF
Considering that the issues to be addressed are purely legal in PETITIONER PNB/NIDC ON THE FORECLOSED VESSEL M/V
nature, presentation of evidence and/or witnesses in point is ASEAN LIBERTY.
unnecessary.xi[11]
On the first issue, petitioners argue that the Court of Appeals
After the parties submitted their respective memoranda, the trial committed grave error in law in taking cognizance of the appeal
court issued on March 4, 1992 an Order dismissing the interposed by private respondent CBC from the Order of the trial
complaint-in-intervention filed by private respondent CBC for court dated 4 March 1992 involving as it does pure questions of
lack of merit. In dismissing the complaint-in-intervention, the law. They claim that the Court of Appeals had no jurisdiction to
trial court ruled that the claim of private respondent CBC was not entertain and pass upon the appeal interposed by private
a preferred maritime lien but was merely a loan extended to PISC respondent CBC as the issues raised therein are purely legal. As
by CBC. such, petitioners continue, the appeal of CBC should have been
lodged directly with the Supreme Court by way of petition for
Private respondent CBC appealed the Order of the trial court to
review on certiorari under Rule 45 of the Revised Rules of Court.
the Court of Appeals. In its appeal, private respondent CBC
Citing the pronouncement of this Court en banc in Anacleto
imputed the following errors allegedly committed by the trial
Murillo vs. Rodolfo Consulxiv[14], the petitioners conclude that the
court:
appeal made by private respondent CBC to the Court of Appeals
a) the trial court erred in holding that the loans extended should have been dismissed by the respondent court for lack of
by China Banking Corporation to the Philippine International jurisdiction.
Shipping Corporation did not create maritime liens.
It is true that the decisions of the Regional Trial Court may be mixed questions of fact and of law are involved over which this
directly reviewed by the Supreme Court on petition for review if Court has jurisdiction.xviii[18]
pure questions of law are raised. Circular 2-90,xv[15] which
Thus, in resolving the issues raised by private respondent in the
petitioners cite and which outlined the applicable rules of
Court of Appeals, the appellate court had to make a factual
procedure on this matter at that time, indirectly states that cases
inquiry, among others, on the nature and terms of the contracts
from the Regional Trial Court raising only questions of law should
among the different parties, the relationship of the different
be taken to the Supreme Court. Paragraphs No. 4(c) and (d) of the
parties with one another and with respect to the vessels involved
said Circular provide as follows:
in the case, how the proceeds of the loans were used, and the
4. Erroneous Appeals. An appeal taken to either the Supreme correct dates when the maritime and mortgage liens were
Court of the Court of Appeals by the wrong or inappropriate mode constituted on the vessels. The determination of these facts is
shall be dismissed. crucial as it will resolve whether the amount advanced by
respondent CBC is in the nature of a maritime lien and if so,
xxx xxx xxx
whether the lien is superior to the mortgage lien of petitioners. If
(c) Raising issues purely of law in the Court of Appeals or the appellate court, in the exercise of its review power, finds that
appeal by wrong mode. If an appeal under Rule 41 is taken from the amount advanced by CBC was used for the repair of the
the Regional Trial Court to the Court of Appeals and therein the vessels, then a mortgage lien was indubitably established over the
appellant raises only questions of law, the appeal shall be shipping vessels. Moreover, a determination of the dates when the
dismissed, issues purely of law not being reviewable by said respective liens of the parties were constituted over the vessels
court. xxx will answer the question as to which lien is preferred over the
other. In short, in order to address fully the issues raised by the
(d) No transfer of appeals erroneously taken. No transfers parties in their pleadings, the appellate court necessarily had to
of appeals erroneously taken to the Supreme Court or to the make factual findings.
Court of Appeals to whichever of these Tribunals has appropriate
appellate jurisdiction will be allowed; continued ignorance or Verily, the issues raised by private respondent in the appellate
willful disregard of the law on appeals will not be tolerated. court were cognizable by the said court, the issues being mixed
questions of fact and law. Respondent court was therefore acting
From the cited provisions, it is clear that the Court of Appeals within its jurisdiction when it promulgated its questioned
does not have jurisdiction over appeals from the Regional Trial decision.
Court that raise purely questions of law. Appeals of this nature
should be raised to the Supreme Court.xvi[16] Furthermore, The next issue brought up by petitioners is whether or not private
transfer of erroneous appeals is not allowed and the tribunal respondent CBCs claim for US$242,225.00 is in the nature of a
which receives the erroneous appeal should perforce dismiss the maritime lien. It is the contention of petitioners that (t)he Court
same for lack of jurisdiction. of Appeals gravely erred in law in holding that private respondent
CBCs claim under its Standby Letter of Credit No. 79/4174 is a
Notwithstanding this legal rule, the appeal brought before the maritime lien, and that said maritime lien is preferred over the
Court of Appeals by the private respondent CBC must first be mortgage lien of petitioners PNB/NIDC on the foreclosed vessel
analyzed as to whether the same raised questions or errors of law M/V Asean Liberty.xix[19]
alone. If the petition raised only questions of law, then the Court
of Appeals had no jurisdiction to take cognizance of the case and The applicable law on the matter is Presidential Decree No. 1521,
should have dismissed the case outright. On the other hand, if otherwise known as the Ship Mortgage Decree of 1978. Sections
the petition raised only questions of fact or questions of both fact 17 and 21 of the said Presidential Decree provides as follows:
and law, then the Court of Appeals correctly exercised jurisdiction
Sec. 17. Preferred Maritime Liens, Priorities, Other Liens (a) Upon
over the issue.xvii[17]
the sale of any mortgaged vessel in any extra-judicial sale or by
As such, even if, as in this case, the documentary evidence order of a district court of the Philippines in any suit in rem in
adduced by the parties was admitted without objection, a admiralty for the enforcement of a preferred mortgage lien
question of fact is still involved when the query necessarily invites thereon, all pre-existing claims on the vessel, including any
the calibration of the whole evidence including the relevancy of possessory common-law lien of which a lienor is deprived under
surrounding circumstances and their relation to each other. the provisions of Section 16 of this Decree, shall be held
terminated and shall thereafter attach, in like amount and in
On this point, we note with approval the following justification accordance with the priorities established herein to the proceeds
made by the respondent court in assuming jurisdiction over the of the sale. The preferred mortgage lien shall have priority over all
case: claims against the vessel, except the following claims in the order
A question of fact has been distinguished from a question of law stated: (1) expenses and fees allowed and costs taxed by the court
in this wise: and taxes due to the government; (2) crews wages; (3) general
average; (4) salvage; including contract salvage; (5) maritime liens
At this point, the distinction between a question of fact and a arising prior in time to the recording of the preferred mortgage;
question of law must be clear. As distinguished from a question and (6) damages arising out of tort; and (7) preferred mortgage
of law which exists when the doubt or difference arises as to what registered prior in time.
the law is on certain state of facts there is a question of fact when
the doubt or difference arises as to the truth or the falsehood of (b) If the proceeds of the sale should not be sufficient to pay all
alleged facts; or when the query necessarily invites calibration of creditors included in one number or grade, the residue shall be
the whole evidence considering mainly the credibility of divided among them pro rata. All credits not paid, whether fully
witnesses, existence and relevancy of specific surrounding or partially shall subsist as ordinary credits enforceable by
circumstances, their relation to each other and to the whole and personal action against the debtor. The record of judicial sale or
probabilities of the situation.(Bernardo vs. Court of Appeals, 216 sale by public auction shall be recorded in the Record of Transfers
SCRA 224) & Encumbrances of Vessels in the port of documentation.
Stated differently, a question of law does not involve an Sec. 21. Maritime Lien for Necessaries; persons entitled to such
examination of the probative value of the evidence presented by lien. Any person furnishing repairs, supplies, towage, use of dry
the litigants or any of them; otherwise, if such examination and dock or maritime railway, or other necessaries to any vessel,
re-evaluation of the evidence is called for, a question of fact is whether foreign or domestic, upon the order of the owner, shall
raised. have a maritime lien on the vessel, which may be enforced by suit
in rem, and it shall be necessary to allege or prove that credit was
In the decision from which the CBC appealed, the trial court given to the vessel.
primarily held that the former is a mere money lender and not a
maritime lienor. In its appeal, the CBC argues that in so holding, Under these provisions, any person furnishing repairs, supplies,
the trial court disregarded the maritime purposes for which the or other necessaries to a vessel on credit will have a maritime lien
loans it extended to the Philippine International Shipping on the said vessel. Such maritime lien, if it arose prior to the
Corporation (PISC) were availed of and used. The issue thus recording of a preferred mortgage lien, shall have priority over the
raised cannot be judiciously resolved without reviewing the said mortgage lien.
probative weight of the evidence on record consisting in the main In the instant case, it was Hongkong United Dockyards, Ltd.
of the various documents, contracts and transactions attached to which originally possessed a maritime lien over the vessel M/V
CBCs complaint-in-intervention. It is, therefore, indubitable that Asean Liberty by virtue of its repair of the said vessel on credit.
Under the Contract Agreement dated March 12, 1979 between that the loan due from PISC was used to finance partially the
Hongkong United Dockyards, Ltd. and PISC, the former, as conversion cost of the vessel M/V Asian Liberty;
contractor, obligated itself to repair and convert the vessel M/V
(g) On March 30, 1983, private respondent CBC instructed
Asean Liberty, which was owned by PISC. Section 7 of the said
by cable its correspondent, Irving Trust Co., to pay Citibank
Agreement provides as follows:
US$242,225.00. On the same date, Irving Trust Co., advised
(7) a) The Owner will, before the commencement of private respondent CBC by mail that the sum of US$242,225.00
work, provide an Irrevocable Documentary was debited against CBCs Account No. 8033278269 and remitted
Credit for the Contract Price plus an estimate to the Citibank Foreign Currency Deposit Unit, Makatixxvii[27];
to cover the cost of extra work. The banks and
From the documentary evidence thus presented, it is clear that
wording of the Credit are to be agreed by the
private respondents claim is predicated on the payment it made
Contractor.
to Citibank by virtue of the Irrevocable Letter of Credit it
b) Payment will be: established in the latters favor. Per express provisions of the
Letter of Credit, the same was established to guarantee your
(1) Before departure of vessel from
(Citibank) loan in the principal amount of US$545,000.00 to
Contractors yard: 20% of contract
Philippine International Shipping Corporation, the proceeds of
price;
which loan, according to accountee, are to finance partially the
(2) 60 days from departure of vessel from conversion cost of the vessel M/V Asean Liberty.xxviii[28]
Contractors yard: 40% of contract
In short, private respondent CBC was a guarantor of the loan
price;
extended by Citibank to PISC. It was Citibank, which advanced
(3) 90 days from departure of vessel from the money to PISC. It was only upon the failure of PISC to fulfill
Contractors yard: 40% of contract its obligations under its promissory note to Citibank that private
price.xx[20] respondent CBC was called upon by Citibank to exercise its
duties under the Standby Letter of Credit.
The foregoing provision of the contract agreement indubitably
shows that credit was given to the vessel M/V Asean Liberty by It is the holding of the appellate court, however, that private
Hongkong United Dockyards, Ltd. and as a result, a maritime lien respondent stepped into the shoes of Hongkong United
in favor of Hongkong United Dockyards, Ltd. was constituted on Dockyards, Ltd. by legal subrogation and thus acquired the
the said vessel by virtue of Section 21 of the Ship Mortgage Decree maritime lien of the latter over the vessel M/V Asean Liberty.
of 1978. Thus:
It is the contention of private respondent CBC however, that it It is not disputed that CBCs claim for US$242,225.00 and
ultimately acquired the maritime lien of Hongkong United US$648,002.54 refer to the repair and conversion of two (2) of
Dockyards, Ltd. over the vessel M/V Asean Liberty. As shown by PISCs vessels, namely M/V Asean Liberty and M/V Asean
the documentary evidence offered by private respondent CBC, its Mission, undertaken by Hongkong United Dockyards, Ltd. and
proof that it acquired said maritime lien is as follows: the China Shipbuilding Corporation of Taiwan, respectively, upon
the order of the owner, as deposed by George Lim, the President
(a) On March 12, 1979, PISC entered into a Contract of the PISC. Such being the case, maritime liens on the vessels
Agreement with Hongkong United Dockyards, Ltd., as contractor, concerned arose conformably with the aforequoted provision of
for the repair and conversion of its vessel M/V Asean Liberty for Section 21 of P.D. No. 1521. True it is that under the law the
a contract price of HK$2,200,000.00xxi[21]; persons entitled to the lien are the Hongkong United Dockyards,
(b) On May 28, 1979, the Central Bank of the Philippines Ltd. and the China Shipbuilding Corporation of Taiwan, they
approved PISCs request to open with private respondent China being the ones who furnished the repair works. However, since it
Banking Corporation a Standby Letter of Credit for was CBC who paid off these lienors, it stepped into the shoes of
US$545,000.00 in favor of Hongkong United Dockyards, Ltd. This the latter by subrogation. This is the prevailing doctrine in
May 28, 1979 letter stated that the credit for US$545,000 would American jurisprudence which holds that: A creditor who
be used to cover the partial conversion cost of the vessel Asean advances money specifically for the purpose of discharging a
Liberty. On June 20, 1979, the Central Bank approved the maritime lien is subrogated to the lienors rights. Significantly, the
request of PISC to change the beneficiary of the said Standby Federal Maritime Lien Act, like our Ship Mortgage Decree of 1978,
Letter of Credit from Hongkong United Dockyards, Ltd. to provides that, any person furnishing repairs, supplies, towage,
Citibankxxii[22]; use of drydock or marine railway, or other necessaries, to any
foreign or domestic vessel on the order of the owner of such
(c) On June 15, 1979, PISC executed an Application and vessel, or of a person authorized by the owner of such vessel, or
Agreement with private respondent CBC for the opening of a of a person authorized by the owner has a maritime lien on the
Standby Letter of Credit for US$545,000.00 in favor of Citibank, vessel which may be enforced by suit in rem. The only difference
N.A., Makati, Metro Manila as beneficiary. The agreement is that under the Federal Maritime Lien Act, it is not necessary to
confirmed that the letter of credit would be used to guarantee the allege or prove that the credit was given to the vessel. Hence,
loan in the amount of US$545,000.00, the proceeds of which will insofar as the creation of the lien and the persons entitled to the
be used to finance partially the conversion cost of the vessel MV lien are concerned, American jurisprudence is highly persuasive.
ASIAN LIBERTYxxiii[23]; Furthermore, Article 1302 (2) of our Civil Code explicitly provides:
(d) On September 12, 1979, private respondent CBC issued Art. 1302 (2). It is presumed that there is legal subrogation:
an Irrevocable Standby Letter of Credit in favor of Citibank for
any sum or sums not exceeding a total of US$545,000.00. Per xxx xxx xxx
express terms of the Letter of Credit, its purpose was to guarantee (2) When a third person not interested in the obligation pays with
(Citibanks) loan to Philippine International Shipping Corporation, the express or tacit approval of the debtor;
the proceeds of which loan, according to accountee, are to finance
partially the conversion cost of the vessel M/V ASIAN xxx xxx xxx.
LIBERTYxxiv[24];
Accordingly, since CBCs payment to the lienors was with
(e) Pursuant to its loan agreement with Citibank, PISC the express consent of the debtor owner of the vessels
executed on September 17, 1979 a promissory note for repaired, legal subrogation took place in CBCs favor.
US$545,000.00 in favor of Citibank, promising to pay the latter
Petitioners do not question the abovequoted rationale of the Court
the principal sum of US$545,000.00 in nine (9) consecutive semi-
of Appeals. It takes exception however to the appellate courts
annual installments of US$60,555.00 commencing one (1) year
finding and conclusion that it was ultimately private respondent
from date hereof or on September 17, 1980 until September 17,
CBC which paid off the maritime lienor and that the
1984xxv[25];
US$545,000.00 advanced by Citibank was actually paid to the
(f) On March 25, 1983, Citibank sent a letter to private persons who furnished the repairs on the vessels. On this point,
respondent CBC calling and drawing on CBCs Letter of Credit No. petitioners argue that the entirety of the documentary evidence of
79/4174 and certifying that the draft attached thereto for private respondent CBC does not show that the latter actually
US$242,225.00 represents the principal balance due to Citibank paid off the maritime lienholder for the repair of M/V Asean
as of March 17, 1983 under PISCs Promissory Note of September Liberty as required by Section 21 of the Ship Mortgage Act of
17, 1979xxvi[26]. This March 25, 1983 letter likewise indicated 1978.xxix[29] Furthermore, petitioners claim that the respondent
court committed serious error in law when it considered and gave lienor, Hongkong United Dockyards, Ltd. As a person not
credence to the written deposition of Mr. George Lim, the interested in the fulfillment of the obligation between PISC and
President of PISC, as basis for the said finding considering that Hongkong United Dockyards, Ltd., Citibank was subrogated to
the same had earlier been denied admission by the trial court. the rights of Hongkong United Dockyards, Ltd. as maritime lienor
over the vessel, by virtue of Article 1302, par. 2 of the New Civil
There is no merit in the contentions of petitioners.
Code. By definition, subrogation is the transfer of all the rights of
The provisions of our Ship Mortgage Decree of 1978 were the creditor to a third person, who substitutes him in all his
patterned quite closely after the U.S. Ship Mortgage Act of rights.xxxvii[37] Considering that Citibank paid off the debt of
1920.xxx[30] Significantly, the Federal Maritime Lien Act of the PISC to Hongkong United Dockyards, Ltd. it became the
United States, like our Ship Mortgage Decree of 1978, provides transferee of all the rights of Hongkong United Dockyards, Ltd.
that any person furnishing repairs, supplies, towage, use of as against PISC, including the maritime lien over the vessel M/V
drydock, or marine railway, or other necessaries, to any foreign Asean Liberty.
or domestic vessel on the order of the owner of such vessel, or of
Private respondent CBC, as guarantor, was itself subrogated to
a person authorized by the owner has a maritime lien on the
all the rights of Citibank as against PISC, the latters debtor.
vessel, which may be enforced by suit in rem.xxxi[31] Being of
Article 2067 of the New Civil Code provides that (t)he guarantor
foreign origin, the provisions of the Ship Mortgage Decree of 1978
who pays is subrogated by virtue thereof to all the rights which
may thus be construed with the aid of foreign jurisprudence from
the creditor had against the debtor. Private respondent, having
which they are derived except insofar as they conflict with existing
paid off the debt of PISC to Citibank, was therefore, subrogated
laws or are inconsistent with local customs and institutions.
to all the rights Citibank had against its debtor PISC. Considering
As held by the public respondent Court of Appeals, those who that Citibank had a maritime lien over the vessel M/V Asean
provide credit to a master of a vessel for the purpose of Liberty, private respondent was likewise subrogated to this right
discharging a maritime lien also acquire a lien over the said when it paid off Citibank under the contract of guarantee.
vessel. Under American jurisprudence, (f)urnishing money to a
Having thus established that private respondent CBC possessed
master in good faith to obtain repairs or supplies or to remove
a maritime lien over the vessel M/V Asean Liberty, the next issue
liens, in order to forward the voyage of the vessel, raises a lien
is whether the said maritime lien is preferred over the mortgage
just as though the things (for which) money was obtained to pay
lien of petitioners.
for had been furnished by the lender.xxxii[32] Likewise,
(a)dvances to discharge maritime liens create a lien on the vessel, In the case at bench, petitioners mortgage lien arose on
and one advancing money to discharge a valid lien gets a lien of September 25, 1979 when the said mortgage was registered with
equal dignity with the one discharged.xxxiii[33] There is no the Philippine Coast Guard Headquarters.xxxviii[38] As such, in
reason why these doctrines cannot be given persuasive order for the maritime lien of private respondent CBC to be
application in the instant case considering that they do not violate preferred over the mortgage lien of petitioners, the same must
or contravene any of our existing laws. Moreover, as pointed out have arisen prior to the recording of the mortgage on September
by the appellate court, these doctrines are in accord with our 25, 1979.
provisions on subrogation particularly Art. 1302, paragraph 2 of
On this point, petitioners argue that inasmuch as the Standby
the New Civil Code which provides that there is legal subrogation
Letter of Credit was in the nature of a guarantee, the right of
when a third person, not interested in the fulfillment in the
private respondent CBC to claim or to collect the maritime lien
obligation, pays with the express or tacit approval of the debtor.
arose only at the time CBC actually paid off the said lien to
Under these doctrines, a person who extends credit for the Citibank on March 30, 1983. Otherwise stated, it is the
purpose of discharging a maritime lien is not entitled to the said contention of petitioners that private respondent CBCs maritime
lien where the funds were not furnished to the ship on the order lien under its Standby Letter of Credit No. 79/4174 arose only on
of the master and there was no evidence that the money was March 30, 1983 when CBC actually paid off the outstanding
actually used to pay debts secured by the lien.xxxiv[34] As obligation of PISC to Citibank.xxxix[39] Considering that its
applied in the instant case, it becomes necessary to prove that mortgage lien arose on September 25, 1979, petitioners thus
the credit advanced by Citibank to PISC was actually utilized for conclude that its lien is preferred as against private respondent
the repair and conversion of the vessel M/V Asean Liberty. CBCs maritime lien.
Otherwise, Citibank could not have acquired the maritime lien of
There is no merit in this contention.
Hongkong United Dockyards, Ltd. over the vessel M/V Asean
Liberty. As stated by a noted commentator on the subject, a maritime lien
constitutes a present right of property in the ship, a jus in re, to
On this point, we agree with the position of private respondent
be afterward enforced in admiralty by process in rem. From the
that the question of whether or not the proceeds of the loans
moment the claim or privilege attaches, it is inchoate, and when
extended by Citibank were used for the repair and conversion of
carried into effect by legal process, by a proceeding in rem, it
M/V Asean Liberty is a factual issuexxxv[35] which the Court
relates back to the period when it first attached.xl[40]
cannot review absent a showing that it was arbitrarily
resolved.xxxvi[36] In the case at bench, the maritime lien over the vessel M/V Asean
Liberty arose or was constituted at the time Hongkong United
Contrary to the assertions of petitioners, the records are replete
Drydocks, Ltd. made repairs on the said vessel on credit. As such,
with documents that show that the proceeds of the loans were
as early as March 12, 1979, the date of the contract for the repair
used for the repair and conversion of the vessel M/V Asean
and conversion of M/V Asean Liberty, a maritime lien had already
Liberty. Even without the written deposition of Mr. George Lim,
attached to the said vessel. When Citibank advanced the amount
there is still sufficient documentary evidence in the records
of US$242,225.00 for the purpose of paying off PISCs debt to
supporting the appellate courts findings. The correspondences
Hongkong United Dockyards, Ltd., it acquired the existing
between PISC and the Central Bank, the Application and
maritime lien over the vessel. When private respondent honored
Agreement, and the Standby Letter of Credit itself explicitly state
its contract of guarantee with Citibank on March 30, 1983, it
that the proceeds of the loan applied for by PISC are to be used
likewise acquired by subrogation the maritime lien that was
to finance partially the conversion cost of the vessel M/V Asean
already existing over the vessel M/V Asean Liberty. Thus, when
Liberty. Moreover, the March 25, 1983 letter of Citibank to private
private respondent CBC chose to exercise its right to the maritime
respondent CBC drawing on the latters letter of credit, confirmed
lien during the proceedings in the trial court, it was actually
that the loan due from PISC was used to finance partially the
enforcing a privilege that attached to the ship as early as March
conversion cost of the said vessel.
12, 1979.
In the presence of such documentary evidence, which were
The maritime lien of private respondent CBC thus arose prior in
admitted without objection from the petitioners, we cannot say
time to the recording of petitioners mortgage on September 25,
that the Court of Appeals resolved the issue arbitrarily. The
1979. As such, the said maritime lien has priority over the said
appellate courts finding that the amount sought to be recovered
mortgage lien. Pursuant to Section 17 of the Ship Mortgage
by petitioner was actually used for the repair and conversion of
Decree of 1978, a preferred mortgage lien shall have priority over
the vessel M/V Asean Liberty is based on substantial evidence.
all claims against the vessel except, among others, maritime liens
From the foregoing, it is clear that the amount used for the repair arising prior in time to the recording of the preferred mortgage.
of the vessel M/V Asean Liberty was advanced by Citibank and The respondent court thus committed no reversible error when it
was utilized for the purpose of paying off the original maritime
ruled that the maritime lien of private respondent CBC is superior SO ORDERED.
to the mortgage lien of petitioners.
Melo, (Chairman), Vitug, Panganiban, and Purisima, JJ., concur.
WHERFORE, in view of the foregoing, the petition is denied and
the decision of the Court of Appeals dated March 21, 1997 in CA-
G.R. CV. No. 38131 is hereby AFFIRMED.

of the captain in the care of the goods which the vessel


carried; but he may exempt himself therefrom by
abandoning the vessel with all her equipments and the
freight he may have earned during the voyage.
The provisions accords a shipowner or agent the right of
abandonment; and by necessary implication, his liability is
confined to that which he is entitled as of right to abandon — "the
Republic of the Philippines vessel with all her equipments and the freight it may have earned
SUPREME COURT during the voyage." It is true that the article appears to deal only
Manila with the limited liability of shipowners or agents for damages
arising from the misconduct of the captain in the care of the goods
EN BANC which the vessel carries, but this is a mere deficiency of language
G.R. No. L-47447-47449 October 29, 1941 and in no way indicates the true extent of such liability. The
consensus of authorities is to the effect that notwithstanding the
TEODORO R. YANGCO, ETC., petitioner, language of the aforequoted provision, the benefit of limited
vs. liability therein provided for, applies in all cases wherein the
MANUEL LASERNA, ET AL., respondents. shipowner or agent may properly be held liable for the negligent
or illicit acts of the captain. Dr. Jose Ma. Gonzalez de Echavarri
Claro M. Recto for petitioner.
y Vivanco, commenting on said article, said:
Powell & Vega for respondents.
La letra del Codigo, en el articulo 587, presenta una
gravisima cuestion. El derecho de abandono, si se
MORAN, J.: atiende a lo escrito, solo se refiere a las indemnizaciones
a que dierQe lugar la conducta del Capitan en la custodia
At about one o'clock in the afternoon of May 26, 1927, the
de los efectos que cargo en el buque.
steamer S.S. Negros, belonging to petitioner here, Teodoro R.
Yangco, left the port of Romblon on its retun trip to Manila. ¿Es ese el espiritu del legislador? No; ¿habra derecho de
Typhoon signal No. 2 was then up, of which fact the captain was abandono en las responsabilidades nacidas de
duly advised and his attention thereto called by the passengers obligaciones contraidas por el Capitan y de otros actos
themselves before the vessel set sail. The boat was overloaded as de este? Lo reputamos evidente y, para fortalecer
indicated by the loadline which was 6 to 7 inches below the nuestra opinion, basta copiar el siguiente parrafo de la
surface of the water. Baggage, trunks and other equipments were Exposicion de motivos:
heaped on the upper deck, the hold being packed to capacity. In
"El proyecto, al aplicar estos principios, se
addition, the vessel carried thirty sacks of crushed marble and
inspira tambien en los intereses del comercio
about one hundred sacks of copra and some lumber. The
maritimo, que quedaran mas asegurados
passengers, numbering about 180, were overcrowded, the
ofreciendo a todo el que contrata con el naviero
vessel's capacity being limited to only 123 passengers. After two
o Capitan del buque, la garantia real del
hours of sailing, the boat encountered strong winds and rough
mismo, cualesquiera que sean las facultades o
seas between the islands of Banton and Simara, and as the waves
atribuciones de que se hallen investidos."
splashed the ladies' dresses, the awnings were lowered. As the
(Echavarri, Codigo de Comercio, Tomo 4, 2. a
sea became increasingly violent, the captain ordered the vessel to
ed., pags. 483-484.)
turn left, evidently to return to port, but in the manuever, the
vessel was caught sidewise by a big wave which caused it to A cursory examination will disclose that the principle of liomited
capsize and sink. Many of the passengers died in the mishap, liability of a shipowner or agent is provided for in but three
among them being Antolin Aldaña and his son Victorioso, articles of the Code of Commerce — article 587 aforequoted and
husband and son, respectively, of Emilia Bienvenida who, article 590 and 837. Article 590 merely reiterates the principle
together with her other children and a brother-in-law, are embodied in article 587, applies the same principle in cases of
respondents in G.R. No. 47447; Casiana Laserna, the daughter collision, and it has been observed that said article is but "a
of respondents Manuel Laserna and P.A. de Laserna in G.R. necessary consequences of the right to abandon the vessel given
47448; and Genaro Basaña, son of Filomeno Basaña, respondent to the shipowner in article 587 of the Code, and it is one of the
in G.R. No. 47449. These respondents instituted in the Court of many superfluities contained in the Code." (Lorenzo Benito,
First Instance of Capiz separate civil actions against petitioner Lecciones 352, quoted in Philippine Shipping Co. vs. Garcia, 6
here to recover damages for the death of the passengers Phil. 281, 282.) In effect, therefore, only articles 587 and 590 are
aforementioned. The court awarded the heirs of Antolin and the provisions conatined in our Code of Commerce on the matter,
Victorioso Aldana the sum of P2,000; the heirs of Casiana and the framers of said code had intended those provisions to
Laserna, P590; and those of Genaro Basana, also P590. After the embody the universal principle of limited liability in all cases.
rendition of the judgment to this effcet, petitioner, by a verified Thus, in the "Exposicon de Motivos" of the Code of Commerce, we
pleading, sought to abandon th evessel to the plainitffs in the read:
three cases, together with all its equipments, without prejudice
to his right to appeal. The abandonment having been denied, an The present code (1829) does not determine the juridical
appeal was taken to the Court of Appeals, wherein all the status of the agent where such agent is not himself the
judgmnets were affirmed except that which sums was increased owner of the vessel. This omission is supplied by the
to P4,000. Petitioner, now deceased, appealed and is here proposed code, which provides in accordance with the
represented by his legal representative. principles of maritime law that by agent it is to be
understood the person intrusted with the provisioning
Brushing aside the incidental issues, the fundamental question of the vessel, or the one who represents her in the port
here raised is: May the shipowner or agent, notwithstanding the in which she happens to be. This person is the only one
total loss of the vessel as a result of the negligence of its captain, who represents the vessel — that is to say, the only one
be properly held liable in damages for the consequent death of its who represents the interests of the owner of the vessel.
passengers? We are of the opinion and so hold that this question This provision has therefore cleared the doubt which
is controlled by the provisions of article 587 of the Code of existed as to the extent of the liability, both of the agent
Commerce. Said article reads: and of the owner of the vessel. Such liability is limited
by the proposed code to the value of the vessel and other
The agent shall also be civilly liable for the indemnities
things appertaining thereto.
in favor of third persons which arise from the conduct
with the vessel and freight money and both
In Philippine Shipping Co. vs. Garcia (6 Phil., 281, 284-286), we may be lost through the accidents of
have expressed ourselves in such a comprehensive manner as to navigation it is only just that the maritime
leave no room for doubt on the applicability of our ratio decidendi creditor have some means to obviating this
precarious nature of his rights by detaining the
not only to cases of collision but also to those of shipwrecks, etc.
ship, his only security, before it is lost.
We said:
"The liens, tacit or legal, which may exist upon
This is the difference which exists between the lawful
the vessel and which a purchaser of the same
acts and lawful obligations of the captain and the
liability which he incurs on account of any unlawful act would be obliged to respect and recognize are
— in addition to those existing in favor of the
committed by him. In the first case, the lawful acts and
State by virtue of the privileges which are
obligations of the captain beneficial to the vessel may be
granted to it by all the laws — pilot, tonnate,
enforced as against the agent for the reason that such
and port dues and other similar charges, the
obligations arise from te the contract of agency
wages of the crew earned during the last
(provided, however, that the captain does not exceed his
voyage as provided in article 646 of the Code of
authority), while as to any liability incurred by the
Commerce, salvage dues under article 842, the
captain through his unlawful acts, the ship agent is
indemnification due to the captain of the vessel
simply subsidiarily civilly liable. This liability of the
in case his contract is terminated on account
agent is limited to the vessel and it does not extend
of the voluntary sale of the ship and the
further. For this reason the Code of Commerce makes
the agent liable to the extent of the value of the vessel, insolvency of the owner as provided in article
608, and all other liabilities arising from
as the codes of the principal maritime nations provide
collisions under articles 837 and 838."
with the vessel, and not individually. Such is also the
spirit of our Code. We are shared in this conclusion by the eminent commentators
on the subject. Agustin Vicente y Gella, asserting, in his
The spirit of our code s accurately set forth in a treatise
"Introduccion al Derecho Mercantil Comparado" 1929 (pages 374-
on maritime law, from which we deem proper to quote
the following as the basis of this decision:lawphil.net 375), the like principle of limited liability of shipowners or agent
in cases of accidents, collisions, shipwrecks, etc., said:
"That which distinguishes the maritime from
De las responsabilities que pueden resultar como
the civil law and even from the mercantile law
in general is the real and hypothecary nature consequencia del comercio maritimo, y no solo por
of the former, and the many securities of a real hechos propios sino tambien por las que se ocasionen
por los del capitan y la tripulacion, responde frente a
nature that maritime customs from time
tercero el naviero que representa el buque; pero el
immemorial, the laws, the codes, and the later
derecho maritimo es sobre todo tradicional y siguiendo
jurisprudence, have provided for the protection
un viejo principio de la Edad Media la responsabilidad
of the various and conflicting interests which
del naviero se organiza de un modo especifico y
are ventured and risked in maritime
particularisimo que no encuentra similar en el derecho
expeditions, such as the interests of the vessel
general de las obligaciones.
and of the agent, those of the owners of the
cargo and consignees, those who salvage the Una forma corrientisima de verificarse el comercio
ship, those who make loans upon the cargo, maritimo durante la epoca medieval, era prestar un
those of the sailors and members of the crew propietario su navio para que cargase en el mercancias
as to their wages, and those of a constructor determinada persona, y se hiciese a la mar, yendo al
as to repairs made to the vessel. frente de la expedicion un patron del buque, que llegado
"As evidence of this real nature of the maritime al puerto de destino se encargaba de venderlas y
retornaba al de salida despues de adquirir en aquel
law we have (1) the limitation of the liability of
otros efectos que igualmente revendia a su regreso,
the agents to the actual value of the vessel and
verificado lo cual los beneficios de la expedicion se
the freight money, and (2) the right to retain
repartian entre el dueño del buque, el cargador y el
the cargo and the embargo and detention of the
capitan y tripulantes en la proporcion estipulada. El
vessel even in cases where the ordinary civil
derecho maritimo empezo a considerar la asociacion asi
law would not allow more than a personal
formada como una verdadera sociedad mercantil, de
action against the debtor or person liable. It
responsabilidad limitada, y de acuerdo con los
will be observed that these rights are
principios que gobiernan aquella en los casos de
correlative, and naturally so, because if the
accidentes, abordajes, naufragios, etc., se resolvia que
agent can exempt himself from liability by
el dueño del buque perdia la nave, el cargador las
abandoning the vessel and freight money, thus
mercancias embarcadas y el capitan y la tripulacion su
avoiding the possibility of risking his whole
trabajo, sin que en ningun caso el tercer acreedor
fortune in the business, it is also just that his
pudiese reclamar mayor cantidad de ninguno de ellos,
maritime creditor may for any reason attach
porque su responsabilidad quedaba limitada a lo que
the vessel itself to secure his claim without
cada uno aporto a la sociedad. Recogidas estas ideas en
waiting for a settlement of his rights by a final
el derecho comercial de tiempos posteriores, la
judgment, even to the prejudice of a third
person. responsabilidad del naviero se edifico sobre aquellos
principios, y derogando la norma general civil de que del
"This repeals the civil law to such an extent cumplimiento de sus obligaciones responde el deudor
that, in certain cases, where the mortgaged con todos sus bienes presentes y futuros, la
property is lost no personal action lies against responsabilidad maritima se considero siempre limitada
the owner or agent of the vessel. For instance, ipso jure al patrimonio de mar. Y este es el origen de la
where the vessel is lost the sailors and regla trascendental de derecho maritimo segun la cual
members of the crew cannot recover their el naviero se libera de toda responsabilidad
wages; in case of collision, the liability of the abandonando el buque y el flete a favor de los
agent is limited as aforesaid, and in case of acreedores.
shipwreck, those who loan their money on the
From the Enciclopedia Juridica Española, Vol. 23, p. 347, we read:
vessel and cargo lose all their rights and
cannot claim reimbursement under the law. Ahora bien: ¿hasta donde se extiende esta
responsabilidad del naviero? ¿sobre que bienes pueden
"There are two reasons why it is impossible to
los acreedores resarcirse? Esta es otra especialidad del
do away with these privileges, to wit: (1) The
Derecho maritimo; en el Derecho comun la
risk to which the thing is exposed, and (2) the
real nature of the maritime law, exclusively responsabilidad es limitada; tambien lo era en el antiguo
Derecho maritimo romano; es daba la actio exercitoria
real, according to which the liability of the
contra el exercitor navis sin ninguna restriccion, pero en
parties is limited to a thing which is at the
mercy of the waves. If the agent is only liable
The history of the limitation of liability of shipowners is
matter of common knowledge. The learned opinion of
la Edad Media una idea nueva se introdujo en los usos
Judge Ware in the case of The Rebecca, 1 Ware, 187-
maritimos. Las cargas resultantes de las expediciones
maritimas se consideraron limitadas por los 194, leaves little to be desired on the subject. He shows
that it originated in the maritime law of modern Europe;
propietarios de las naves a los valores comprometidos
that whilst the civil, as well as the common law, made
por ellos en cada expedicion; se separo ficticiamente el
patrimonio de los navieros en dos partes que todavia se the owner responsible to the whole extent of damage
designan de una manera bastante exacta; fortuna de caused by the wrongful act or negligence of the matter
or crew, the maritime law only made then liable (if
tierra y fortuna de mar o flotante; y se admitio la teoria
personally free from blame) to the amount of their
de que esta era la que respondia solo de las deudas
provinientes de los actos del capitan o de la tripulacion, interest in the ship. So that, if they surrendered the
ship, they were discharged.
es decir, que el conjunto del patrimonio del naviero
escaparia a estas cargas desde el momento en que Grotius, in his law of War and Peace, says that men
abandonara la nave y los fletes a los acreedores. . . . would be deterred from investing in ships if they thereby
Escriche in his Diccionario de la Legislacion y Jurisprudencia, Vol. incurred the apprehension of being rendered liable to an
1, p. 38, observes: indefinite amount by the acts of the master and,
therefore, in Holland, they had never observed the
La responsabilidad del naviero, en el caso expuesto, se Roman Law on that subject, but had a regulation that
funda en el principio de derecho comun de ser the ship owners should be bound no farther than the
responsable todo el que pone al frente de un value of their ship and freight. His words are: Navis et
establecimiento a una persona, de los daños o perjuicios eorum quae in navi sunt," "the ship and goods therein."
que ocasionare esta desempeñando su cometido, y en But he is speaking of the owner's interest; and this, as
que estando facultado el naviero para la eleccion de to the cargo, is the freight thereon, and in that sense he
capitan de la nave, viene a tener indirectamente culpa is understood by the commentators. Boulay Paty, Droit
en la negligencia o actos de este que o casionaron daños Maritime, tit. 3, sec. 1, p. 276; Book II, c. XI, sec. XIII.
o perjuicios, puesto que no se aseguro de su pericia o The maritime law, as codified in the celebrated French
buena fe. Limitase, sin embargo, la responsabilidad del Ordonance de la Marine, in 1681, expressed the rule
naviero a la perdida de la nave, sus aparejos, y fletes thus: 'The proprietors of vessels shall be responsible for
devengados durante el viaje; porque no pudiendo vigilar the acts of the master, but they shall be discharged by
de un modo directo e inmediato la conducta del capitan, abandoning the ship and freight.' Valin, in his
hubiera sido duro hacerla extensiva a todos sus bienes commentary on this passage, lib. 2, tit. 8, art. 2, after
que podria comprometer el capitan con sus faltas o specifying certain engagements of the master which are
delitos. binding on the owners, without any limit of
responsibility, such as contracts for the benefit of the
The views of these learned commentators, including those of
vessel, made during the voyage (except contracts of
Estasen (Derecho Mercantil, Vol. 4, 259) and Supino (Derecho
bottomry) says: "With these exceptions it is just that the
Mercantil, pp. 463-464), leave nothing to be desired and nothing
owner should not be bound for the acts of the master,
to be doubted on the principle. It only remains to be noted that
except to the amount of the ship and freight. Otherwise
the rule of limited liability provided for in our Code of Commerce
he would run the risk of being ruined by the bad faith
reflects merely, or is but a restatement, imperfect though it is, of
or negligence of his captain, and the apprehension of
the almost universal principle on the subject. While previously
this would be fatal to the interests of navigation. It is
under the civil or common law, the owner of a vessel was liable to
quite sufficient that he be exposed to the loss of his ship
the full amount for damages caused by the misconduct of the
and of the freight, to make it his interest, independently
master, by the general maritime law of modern Europe, the
of any goods he may have on board to select a reliable
liability of the shipowner was subsequently limited to his interest
captain." Pardessus says: 'The owner is bound civilly for
in the vessel. (Norwich & N. Y. Trans. Co. v. Wright, 80 U. S. 104,
all delinquencies committed by the captain within the
20 Law. ed. 585.) A similar limitation was placed by the British
scope of his authority, but he may discharge himself
Parliament upon the liability of Englosh shipowners through a
therefrom by abandoning the ship and freight; and, if
series of statutes beginning in 1734 with the Act of 7 George II,
they are lost, it suffices for his discharge, to surrender
chapter 15. The legislatures of Massachusetts and Maine followed
all claims in respect of the ship and its freight," such as
suit in 1818 and 1821, and finally, Congress enacted the Limited
insurance, etc. Droit Commercial, part 3, tit. 2, c. 3, sec.
Liability Act of March 3, 1851, embodying most of the provisions
2.
contained in the British Statutes (see 24 R. C. L. pp. 1387-1389).
Section 4283 of the Revised Statutes (sec. 183, Tit. 46, Code of The same general doctrine is laid down by many other
Laws of U. S. A.) reads: writers on maritime law. So that it is evident that, by
this law, the owner's liability was coextensive with his
LIABILITY OF OWNER NOT TO EXCEED INTEREST. —
interest in the vessel and its freight, and ceased by his
The liability of the owner of any vessel, for any
abandonment and surrender of these to the parties
embezzlement, loss, or destruction, by any person, of
sustaining loss.
any property, goods, or merchandise, shipped or put on
board of such vessel, or for any loss, damage, or injury In the light of all the foregoing, we therefore hold that if the
by collision, or for any act, matter or thing, loss, shipowner or agent may in any way be held civilly liable at all for
damage, or forfeiture, done, occasioned, or incurred injury to or death of passengers arising from the negligence of the
without the privity, or knowledge of such owner or captain in cases of collisions or shipwrecks, his liability is merely
owners, shall in no case exceed the amount or value of co-extensive with his interest in the vessel such that a total loss
the interest of such owner in such vessel, and her freight thereof results in its extinction. In arriving at this conclusion, we
then pending. have not been unmindful of the fact that the ill-fated steamship
Negros, as a vessel engaged in interisland trade, is a common
The policy which the rule is designed to promote is the
carrier (De Villata v. Stanely, 32 Phil., 541), and that the as a
encouragement of shipbuilding and investment in maritime
vessel engaged in interisland trade, is a common carrier (De
commerce. (Vide: Norwich & N. Y. Trans. Co. v. Wright, supra;
Villata v. Stanely, 32 Phil., 541), and that the relationship
The Main v. Williams, 152 U. S. 122; 58 C. J. 634.) And it is in
between the petitioner and the passengers who died in the
that spirit that the American courts construed the Limited
mishap rests on a contract of carriage. But assuming that
Liability Act of Congress whereby the immunities of the Act were
petitioner is liable for a breach of contract of carriage, the
applied to claims not only for lost goods but also for injuries and
exclusively "real and hypothecary nature" of maritime law
"loss of life of passengers, whether arising under the general law
operates to limit such liability to the value of the vessel, or to the
of admiralty, or under Federal or State statutes." (The City of
insurance thereon, if any. In the instant case it does not appear
Columbus, 22 Fed. 460; The Longfellow, 104 Fed. 360; Butler v.
that the vessel was insured.
Boston & Savannah Steamship Co., 32 Law. ed. 1017; Craig v.
Continental Insurance Co., 35 Law. ed. 836.) The Supreme Court Whether the abandonment of the vessel sought by the petitioner
of the United States in Norwich & N. Y. Trans. Co. v. Wright, 80 in the instant case was in accordance with law of not, is
U. S. 104, 20 Law. ed. 585, 589-590, accounting for the history
of the principle, clinches our exposition of the supporting
authorities:
an emergency electrical power system. The
special permit authorized the vessel to carry
immaterial. The vessel having totally perished, any act of
abandonment would be an idle ceremony. only two hundred sixty (260) passengers due
to the said deficiency and for lack of safety
Judgement is reversed and petitioner is hereby absolved of all the devices for 322 passengers (Exh. 2). A
complaints, without costs. headcount was made of the passengers on
board, resulting on the tallying of 168 adults
Avanceña, C.J., Abad Santos, Diaz, Laurel, Horrilleno, and Ozaeta,
and 20 minors, although the passengers
JJ., concur.
manifest only listed 106 passengers. It has
Republic of the Philippines been admitted, however, that the headcount is
SUPREME COURT not reliable inasmuch as it was only done by
Manila one man on board the vessel.
FIRST DIVISION When the vessel left Manila, its officers were
already aware of the typhoon Klaring building
G.R. No. L-42926 September 13, 1985
up somewhere in Mindanao. There being no
PEDRO VASQUEZ, SOLEDAD ORTEGA, CLETO B. BAGAIPO, typhoon signals on the route from Manila to
AGUSTINA VIRTUDES, ROMEO VASQUEZ and MAXIMINA Cebu, and the vessel having been cleared by
CAINAY, petitioners, the Customs authorities, the MV "Pioneer
vs. Cebu" left on its voyage to Cebu despite the
THE COURT OF APPEALS and FILIPINAS PIONEER LINES, typhoon. When it reached Romblon Island, it
INC., respondents. was decided not to seek shelter thereat,
inasmuch as the weather condition was still
Emilio D. Castellanes for petitioners. good. After passing Romblon and while near
Apolinario A. Abantao for private respondents. Jintotolo island, the barometer still indicated
the existence of good weather condition
continued until the vessel approached
MELENCIO-HERRERA, J.: Tanguingui island. Upon passing the latter
island, however, the weather suddenly
This litigation involves a claim for damages for the loss at sea of changed and heavy rains felt Fearing that due
petitioners' respective children after the shipwreck of MV Pioneer to zero visibility, the vessel might hit Chocolate
Cebu due to typhoon "Klaring" in May of 1966. island group, the captain ordered a reversal of
The factual antecedents, as summarized by the trial Court and the course so that the vessel could 'weather
adopted by respondent Court, and which we find supported by out' the typhoon by facing the winds and the
the record, read as follows: waves in the open. Unfortunately, at about
noontime on May 16, 1966, the vessel struck a
When the inter-island vessel MV "Pioneer reef near Malapascua island, sustained leaks
Cebu" left the Port of Manila in the early and eventually sunk, bringing with her
morning of May 15, 1966 bound for Cebu, it Captain Floro Yap who was in command of the
had on board the spouses Alfonso Vasquez and vessel.
Filipinas Bagaipo and a four-year old boy,
Mario Marlon Vasquez, among her passengers. Due to the loss of their children, petitioners sued for damages
The MV "Pioneer Cebu" encountered typhoon before the Court of First Instance of Manila (Civil Case No.
"Klaring" and struck a reef on the southern 67139). Respondent defended on the plea of force majeure, and
part of Malapascua Island, located somewhere the extinction of its liability by the actual total loss of the vessel.
north of the island of Cebu and subsequently After proper proceedings, the trial Court awarded damages, thus:
sunk. The aforementioned passengers were
unheard from since then. WHEREFORE, judgment is hereby rendered
ordering the defendant to pay:
Plaintiffs Pedro Vasquez and Soledad Ortega
are the parents of Alfonso Vasquez; plaintiffs (a) Plaintiffs Pedro Vasquez and Soledad
Cleto Bagaipo and Agustina Virtudes are the Ortega the sums of P15,000.00 for the loss of
parents of Filipinas Bagaipo; and plaintiffs earning capacity of the deceased Alfonso
Romeo Vasquez and Maxima Cainay are the Vasquez, P2,100.00 for support, and
parents of the child, Mario Marlon Vasquez. P10,000.00 for moral damages;
They seek the recovery of damages due to the (b) Plaintiffs Cleto B. Bagaipo and Agustina
loss of Alfonso Vasquez, Filipinas Bagaipo and Virtudes the sum of P17,000.00 for loss of
Mario Marlon Vasquez during said voyage. earning capacity of deceased Filipinas
At the pre-trial, the defendant admitted its Bagaipo, and P10,000.00 for moral damages;
contract of carriage with Alfonso Vasquez, and
Filipinas Bagaipo and Mario Marlon Vasquez, (c) Plaintiffs Romeo Vasquez and Maximina
and the fact of the sinking of the MV "Pioneer Cainay the sum of P10,000.00 by way of moral
Cebu". The issues of the case were limited to damages by reason of the death of Mario
the defenses alleged by the defendant that the Marlon Vasquez.
sinking of the vessel was caused by force
majeure, and that the defendant's liability had On appeal, respondent Court reversed the aforementioned
been extinguished by the total loss of the judgment and absolved private respondent from any and all
vessel. liability.
The evidence on record as to the Hence, this Petition for Review on Certiorari, the basic issue being
circumstances of the last voyage of the MV the liability for damages of private respondent for the presumptive
"Pioneer Cebu" came mainly, if not exclusively, death of petitioners' children.
from the defendant. The MV "Pioneer Cebu" The trial Court found the defense of caso fortuito untenable due
was owned and operated by the defendant and to various decisive factors, thus:
used in the transportation of goods and
passengers in the inter-island shipping. ... It is an admitted fact that even before the
Scheduled to leave the Port of Manila at 9:00 vessel left on its last voyage, its officers and
p.m. on May 14, 1966, it actually left port at crew were already aware of the typhoon
5:00 a.m. the following day, May 15, 1966. It brewing somewhere in the same general
had a passenger capacity of three hundred direction to which the vessel was going. The
twenty-two (322) including the crew. It crew of the vessel took a calculated risk when
undertook the said voyage on a special permit it proceeded despite the typhoon advisory. This
issued by the Collector of Customs inasmuch is quite evident from the fact that the officers
as, upon inspection, it was found to be without
not taken into account the legal responsibility of a common
carrier towards the safety of the passengers involved.
of the vessel had to conduct conferences
amongst themselves to decide whether or not With respect to private respondent's submission that the total
to proceed. The crew assumed a greater risk loss of the vessel extinguished its liability pursuant to Article 587
when, instead of seeking shelter in Romblon of the Code of Commerce 12 as construed in Yangco vs. Laserna,
and other islands the vessel passed en route, 73 Phil. 330 [1941], suffice it to state that even in the cited case,
they decided to take a change on the expected it was held that the liability of a shipowner is limited to the value
continuation of the good weather the vessel of the vessel or to the insurance thereon. Despite the total loss of
was encountering, and the possibility that the the vessel therefore, its insurance answers for the damages that
typhoon would veer to some other directions. a shipowner or agent may be held liable for by reason of the death
The eagerness of the crew of the vessel to of its passengers.
proceed on its voyage and to arrive at its
destination is readily understandable. It is WHEREFORE, the appealed judgment is hereby REVERSED and
undeniably lamentable, however, that they did the judgment of the then Court of First Instance of Manila,
so at the risk of the lives of the passengers on Branch V, in Civil Case No. 67139, is hereby reinstated. No costs.
board. SO ORDERED.
Contrariwise, respondent Appellate Court believed that the Teehankee (Chairman), Plana, Relova, Gutierrez, Jr., De la Fuente
calamity was caused solely and proximately by fortuitous event and Patajo, JJ., concur.
which not even extraordinary diligence of the highest degree could
have guarded against; and that there was no negligence on the Republic of the Philippines
part of the common carrier in the discharge of its duties. SUPREME COURT
Manila
Upon the evidence and the applicable law, we sustain the trial
Court. "To constitute a caso fortuito that would exempt a person SECOND DIVISION
from responsibility, it is necessary that (1) the event must be G.R. No. 74811 September 30, 1988
independent of the human will; (2) the occurrence must render it
impossible for the debtor to fulfill the obligation in a normal CHUA YEK HONG, petitioner,
manner; and that (3) the obligor must be free of participation in, vs.
or aggravation of, the injury to the creditor." 1 In the language of INTERMEDIATE APPELLATE COURT, MARIANO GUNO, and
the law, the event must have been impossible to foresee, or if it DOMINADOR OLIT, respondents.
could be foreseen, must have been impossible to avoid. 2 There Francisco D. Estrada for petitioner.
must be an entire exclusion of human agency from the cause of
injury or loss. 3 Purita Hontanosas-Cortes for private respondents.

Turning to this case, before they sailed from the port of Manila,
the officers and crew were aware of typhoon "Klaring" that was MELENCIO-HERRERA, J.:
reported building up at 260 kms. east of Surigao. In fact, they
had lashed all the cargo in the hold before sailing in anticipation In this Petition for Review on certiorari petitioner seeks to set
of strong winds and rough waters. 4 They proceeded on their way, aside the Decision of respondent Appellate Court in AC G.R. No.
as did other vessels that day. Upon reaching Romblon, they 01375 entitled "Chua Yek Hong vs. Mariano Guno, et al.,"
received the weather report that the typhoon was 154 kms. east promulgated on 3 April 1986, reversing the Trial Court and
southeast of Tacloban and was moving west northwest. 5 Since relieving private respondents (defendants below) of any liability
they were still not within the radius of the typhoon and the for damages for loss of cargo.
weather was clear, they deliberated and decided to proceed with The basic facts are not disputed:
the course. At Jintotolo Island, the typhoon was already reported
to be reaching the mainland of Samar. 6 They still decided to Petitioner is a duly licensed copra dealer based at Puerta Galera,
proceed noting that the weather was still "good" although, Oriental Mindoro, while private respondents are the owners of the
according to the Chief Forecaster of the Weather Bureau, they vessel, "M/V Luzviminda I," a common carrier engaged in
were already within the typhoon zone. 7 At Tanguingui Island, coastwise trade from the different ports of Oriental Mindoro to the
about 2:00 A.M. of May 16, 1966, the typhoon was in an area Port of Manila.
quite close to Catbalogan, placing Tanguingui also within the
In October 1977, petitioner loaded 1,000 sacks of copra, valued
typhoon zone. Despite knowledge of that fact, they again decided
at P101,227.40, on board the vessel "M/V Luzviminda I" for
to proceed relying on the forecast that the typhoon would weaken
shipment from Puerta Galera, Oriental Mindoro, to Manila. Said
upon crossing the mainland of Samar. 8 After about half an hour
cargo, however, did not reach Manila because somewhere
of navigation towards Chocolate Island, there was a sudden fall
between Cape Santiago and Calatagan, Batangas, the vessel
of the barometer accompanied by heavy downpour, big waves,
capsized and sank with all its cargo.
and zero visibility. The Captain of the vessel decided to reverse
course and face the waves in the open sea but because the On 30 March 1979, petitioner instituted before the then Court of
visibility did not improve they were in total darkness and, as a First Instance of Oriental Mindoro, a Complaint for damages
consequence, the vessel ran aground a reef and sank on May 16, based on breach of contract of carriage against private
1966 around 12:45 P.M. near Malapascua Island somewhere respondents (Civil Case No. R-3205).
north of the island of Cebu.
In their Answer, private respondents averred that even assuming
Under the circumstances, while, indeed, the typhoon was an that the alleged cargo was truly loaded aboard their vessel, their
inevitable occurrence, yet, having been kept posted on the course liability had been extinguished by reason of the total loss of said
of the typhoon by weather bulletins at intervals of six hours, the vessel.
captain and crew were well aware of the risk they were taking as
On 17 May 1983, the Trial Court rendered its Decision, the
they hopped from island to island from Romblon up to
dispositive portion of which follows:
Tanguingui. They held frequent conferences, and oblivious of the
utmost diligence required of very cautious persons, 9 they decided WHEREFORE, in view of the foregoing
to take a calculated risk. In so doing, they failed to observe that considerations, the court believes and so holds
extraordinary diligence required of them explicitly by law for the that the preponderance of evidence militates in
safety of the passengers transported by them with due regard for favor of the plaintiff and against the
an circumstances 10 and unnecessarily exposed the vessel and defendants by ordering the latter, jointly and
passengers to the tragic mishap. They failed to overcome that severally, to pay the plaintiff the sum of
presumption of fault or negligence that arises in cases of death or P101,227.40 representing the value of the
injuries to passengers. 11 cargo belonging to the plaintiff which was lost
while in the custody of the defendants;
While the Board of Marine Inquiry, which investigated the
P65,550.00 representing miscellaneous
disaster, exonerated the captain from any negligence, it was
expenses of plaintiff on said lost cargo;
because it had considered the question of negligence as "moot
attorney's fees in the amount of P5,000.00,
and academic," the captain having "lived up to the true tradition
and to pay the costs of suit. (p. 30, Rollo).
of the profession." While we are bound by the Board's factual
findings, we disagree with its conclusion since it obviously had
against these adverse conditions and to
encourage ship building and maritime
On appeal, respondent Appellate Court ruled to the contrary
when it applied Article 587 of the Code of Commerce and the commerce, it was deemed necessary to confine
doctrine in Yangco vs. Lasema (73 Phil. 330 [1941]) and held that the liability of the owner or agent arising from
the operation of a ship to the vessel,
private respondents' liability, as ship owners, for the loss of the
equipment, and freight, or insurance, if any, so
cargo is merely co-extensive with their interest in the vessel such
that a total loss thereof results in its extinction. The decretal that if the ship owner or agent abandoned the
portion of that Decision 1 reads: ship, equipment, and freight, his liability was
extinguished. (Abueg vs. San Diego, 77 Phil.
IN VIEW OF THE FOREGOING 730 [1946])
CONSIDERATIONS, the decision appealed
—0—
from is hereby REVERSED, and another one
entered dismissing the complaint against Without the principle of limited liability, a ship
defendants-appellants and absolving them owner and investor in maritime commerce
from any and all liabilities arising from the loss would run the risk of being ruined by the bad
of 1,000 sacks of copra belonging to plaintiff- faith or negligence of his captain, and the
appellee. Costs against appellee. apprehension of this would be fatal to the
(p. 19, Rollo). interest of navigation." Yangco vs. Lasema,
supra).
Unsuccessful in his Motion for Reconsideration of the aforesaid
Decision, petitioner has availed of the present recourse. —0—
The basic issue for resolution is whether or not respondent As evidence of this real nature of the maritime
Appellate Court erred in applying the doctrine of limited liability law we have (1) the limitation of the liability of
under Article 587 of the Code of Commerce as expounded in the agents to the actual value of the vessel and
Yangco vs. Laserna, supra. the freight money, and (2) the right to retain
Article 587 of the Code of Commerce provides: the cargo and the embargo and detention of the
vessel even in cases where the ordinary civil
Art. 587. The ship agent shall also be civilly law would not allow more than a personal
liable for the indemnities in favor of third action against the debtor or person liable. It
persons which may arise from the conduct of will be observed that these rights are
the captain in the care of the goods which he correlative, and naturally so, because if the
loaded on the vessel; but he may exempt agent can exempt himself from liability by
himself therefrom by abandoning the vessel abandoning the vessel and freight money, thus
with all the equipments and the freight it may avoiding the possibility of risking his whole
have earned during the voyage. fortune in the business, it is also just that his
maritime creditor may for any reason attach
The term "ship agent" as used in the foregoing provision is broad
the vessel itself to secure his claim without
enough to include the ship owner (Standard Oil Co. vs. Lopez
waiting for a settlement of his rights by a final
Castelo, 42 Phil. 256 [1921]). Pursuant to said provision,
judgment, even to the prejudice of a third
therefore, both the ship owner and ship agent are civilly and
person. (Phil. Shipping Co. vs. Vergara, 6 Phil.
directly liable for the indemnities in favor of third persons, which
284 [1906]).
may arise from the conduct of the captain in the care of goods
transported, as well as for the safety of passengers transported The limited liability rule, however, is not without exceptions,
Yangco vs. Laserna, supra; Manila Steamship Co., Inc. vs. namely: (1) where the injury or death to a passenger is due either
Abdulhaman et al., 100 Phil. 32 [1956]). to the fault of the ship owner, or to the concurring negligence of
the ship owner and the captain (Manila Steamship Co., Inc. vs.
However, under the same Article, this direct liability is moderated
Abdulhaman supra); (2) where the vessel is insured; and (3) in
and limited by the ship agent's or ship owner's right of
workmen's compensation claims Abueg vs. San Diego, supra). In
abandonment of the vessel and earned freight. This expresses the
this case, there is nothing in the records to show that the loss of
universal principle of limited liability under maritime law. The
the cargo was due to the fault of the private respondent as
most fundamental effect of abandonment is the cessation of the
shipowners, or to their concurrent negligence with the captain of
responsibility of the ship agent/owner (Switzerland General
the vessel.
Insurance Co., Ltd. vs. Ramirez, L-48264, February 21, 1980, 96
SCRA 297). It has thus been held that by necessary implication, What about the provisions of the Civil Code on common carriers?
the ship agent's or ship owner's liability is confined to that which Considering the "real and hypothecary nature" of liability under
he is entitled as of right to abandon the vessel with all her maritime law, these provisions would not have any effect on the
equipment and the freight it may have earned during the voyage," principle of limited liability for ship owners or ship agents. As was
and "to the insurance thereof if any" (Yangco vs. Lasema, supra). expounded by this Court:
In other words, the ship owner's or agent's liability is merely co-
extensive with his interest in the vessel such that a total loss In arriving at this conclusion, the fact is not
ignored that the illfated, S.S. Negros, as a
thereof results in its extinction. "No vessel, no liability" expresses
vessel engaged in interisland trade, is a
in a nutshell the limited liability rule. The total destruction of the
common carrier, and that the relationship
vessel extinguishes maritime liens as there is no longer any res
to which it can attach (Govt. Insular Maritime Co. vs. The Insular between the petitioner and the passengers who
Maritime, 45 Phil. 805, 807 [1924]). died in the mishap rests on a contract of
carriage. But assuming that petitioner is liable
As this Court held: for a breach of contract of carriage, the
exclusively 'real and hypothecary nature of
If the ship owner or agent may in any way be
maritime law operates to limit such liability to
held civilly liable at all for injury to or death of
the value of the vessel, or to the insurance
passengers arising from the negligence of the
thereon, if any. In the instant case it does not
captain in cases of collisions or shipwrecks, his
appear that the vessel was insured. (Yangco vs.
liability is merely co-extensive with his interest
Laserila, et al., supra).
in the vessel such that a total loss thereof
results in its extinction. (Yangco vs. Laserna, Moreover, Article 1766 of the Civil Code provides:
et al., supra).
Art. 1766. In all matters not regulated by this
The rationale therefor has been explained as follows: Code, the rights and obligations of common
carriers shall be governed by the Code of
The real and hypothecary nature of the liability
Commerce and by special laws.
of the ship owner or agent embodied in the
provisions of the Maritime Law, Book III, Code In other words, the primary law is the Civil Code (Arts. 17321766)
of Commerce, had its origin in the prevailing and in default thereof, the Code of Commerce and other special
conditions of the maritime trade and sea laws are applied. Since the Civil Code contains no provisions
voyages during the medieval ages, attended by
innumerable hazards and perils. To offset
The rights and liabilities of owners of ships are in many respects
essentially the same as in the case of other owners of things. As
regulating liability of ship owners or agents in the event of total
loss or destruction of the vessel, it is the provisions of the Code a general rule, the owners of a vessel and the vessel itself are
of Commerce, more particularly Article 587, that govern in this liable for necessary repairs. Naturally the total destruction of the
case. vessel extinguishes a maritime lien, as there is no longer any res
to which it can attach. But the total destruction of the vessel does
In sum, it will have to be held that since the ship agent's or ship not affect the liability of the owners for repairs on the vessel
owner's liability is merely co-extensive with his interest in the completed before its loss.
vessel such that a total loss thereof results in its extinction
(Yangco vs. Laserna, supra), and none of the exceptions to the It is but fair to say that what has been stated in this decision
more accurately expresses the consensus of opinion in the court
rule on limited liability being present, the liability of private
than it does the views of the writer, who sees more in the
respondents for the loss of the cargo of copra must be deemed to
appellee's case than do his colleagues in the court.
have been extinguished. There is no showing that the vessel was
insured in this case. The trial court was accordingly right in its exposition of the fact
WHEREFORE, the judgment sought to be reviewed is hereby but not in its application of the law. Judgment must therefore be
AFFIRMED. No costs. as it is hereby reversed, and in lieu of the judgment appealed
from, another shall be entered here in favor of the plaintiff and
SO ORDERED. against the defendant for the sum of P30,437.91 with legal
interest from July 20, 1921, when the complaint was presented,
Paras, Padilla, Sarmiento and Regalado, JJ., concur.
until payment. Without special findings as to costs in either
Republic of the Philippines instance, it is so ordered.
SUPREME COURT
Araullo, C.J., Johnson, Street, Avanceña, Ostrand, Johns and
Manila
Romualdez, JJ., concur.
EN BANC
Republic of the Philippines
G.R. No. L-21495 March 18, 1924 SUPREME COURT
Manila
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-
appellant, FIRST DIVISION
vs.
G.R. No. L-58897 December 3, 1987
THE INSULAR MARITIME CO., defendant-appellee.
LUZON STEVEDORING CORPORATION, petitioner,
Attorney-General Villa-Real for appellant.
vs.
Antonio M. Opisso for appellee.
COURT OF APPEALS, HIJOS DE F. ESCANO, INC., and
MALCOLM, J.: DOMESTIC INSURANCE COMPANY OF THE PHILIPPINES,
respondents.
The Government of the Philippine Islands seeks by this action to
recover from The Insular Maritime Company the sum of
P30,437.91 for repairs made by the Bureau of Commerce and
GANCAYCO, J.:
Industry on the motor ship Insular.
On May 30, 1968 at past 6:00 in the morning a maritime collision
The Insular Maritime Company was organized with a capital of
occurred within the vicinity of the entrance to the North Harbor,
P150,000. It became the owner of one vessel only, the Insular,
Manila between the tanker LSCO "Cavite" owned by Luzon
valued at P150,000. On October 29, 1919, The Insular Maritime
Stevedoring Corporation and MV "Fernando Escano" a passenger
Company asked the Bureau of Commerce and Industry to
ship owned by Hijos de F. Escano, Inc. as a result of which said
perform certain repairs on the Insular. The Government
passenger ship sunk. An action in admiralty was filed by Hijos de
consented and terminated said repairs on November 29 of the
F. Escano, Inc. and Domestic Insurance Company of the
same year. Subsequent thereto, on April 15, 1920, the Insular
Philippines against the Luzon Stevedoring Company (LSC) in the
suffered a total loss by fire.
Court of First Instance of Cebu. In the course of the trial, the trial
The bill prepared by the chief accountant of the Bureau of court appointed two commissioners representing the plaintiffs
Commerce and Industry for work done on the motor ship Insular and defendant to determine the value of the LSCO "CAVITE." Said
in the amount of P30,437.91, was dated July 31, 1920. Collection commissioners found the value thereof to be P180,000.00.
of the claim was attempted pursuant to formal demand made by
After trial on the merits, a decision was rendered on January 24,
the Acting Insular Auditor of date April 30, 1921.
1974 finding that LSCO "Cavite" was solely to blame for the
It will thus be noted, as was emphasized by the defense and by collision, thus its dispositive portion reads as follows:
His Honor, the trial judge, that no steps were taken by the
WHEREFORE, based on all the foregoing
Government to secure payment for the repairs until after the loss
considerations, the Court renders judgment in
of the vessel Insular. The first error assigned by the Attorney-
favor of the plaintiffs and against the
General addressed to this finding of fact is accordingly without
defendant ordering the latter to pay to the
merit.
plaintiff Domestic Insurance Company of the
The trial judge further found in effect, as a legal conclusion, that Philippines the sum of P514,000.00, and to the
the loss of the vessel Insular extinguished the obligation. The plaintiff Hijos de F. Escano, Inc. the sum of
Attorney-General challenges the correctness of this view. P68,819.00, with interest on both sums at the
legal rate, from the date the complaint was
The decision of the trial judge was predicated on his
filed and the further sum of P252,346.70, with
understanding of the provisions of article 591 of the Code of
interest at the legal rate from August 7, 1972
Commerce in relation with other articles of the same Code, and
and the sum of P163,721.91, without interest
with the decision of this court in the case of Philippine Shipping
in trust for, and with direction that it pay the
Co. vs. Garcia Vergara ([1906], 6 Phil., 281). As to the applicability same to, the claimants concerned.
of article 591 of the Code of Commerce, there is nothing in the
language to denote that the liability of the owners of a vessel is With costs against the defendant. 1
wiped out by the loss of that vessel. As to the applicability of the
In the penultimate paragraph of the decision the trial court held:
decision in the case of Philippine Shipping Co. vs. Garcia Vergara,
supra, the facts are not the same. There, the owners and agents With respect to the defense that defendant's
of a vessel causing the loss of another vessel by collision were liability is limited to the value of the LSCO
held "not liable beyond the vessel itself causing the collision," but "Cavite" and freight earned, invoking Art. 837
were "not required to pay such indemnification for the reason that of the Code of Commerce, the Court believes
the obligation thus incurred has been extinguished on account of and so holds that the defense has not been
the loss of the thing bound for the payment thereof." Here; there established. Moreover, the evidence is such
is a contractual relation which remains unaffected by the loss of that in principle Art. 837 does not apply here.
the thing concerned in the contract and which is governed
principally by the provisions of the Civil Code.
parties having filed their briefs the case is now submitted for
decision.
The counterclaim of the defendant is likewise
ordered dismissed for lack of merit. 2 Articles 587, 590, and 837 of the Code of Commerce provide as
follows:
Not satisfied therewith the defendant interposed an appeal
therefrom to the Court of Appeals wherein in due course a ART. 587. The ship agent shall also be civilly
decision was rendered on June 30, 1981 affirming the decision of liable for the indemnities in favor of third
the court a quo in toto with costs against appellant. The motion persons which arise from the conduct of the
for reconsideration filed by the defendant of the decision was captain in the vigilance over the goods which
denied in a resolution of the Court of Appeals of November 7, the vessel carried; but he may exempt himself
1981. Hence said defendant filed a petition for certiorari in this therefrom by abandoning the vessel with all
Court based on the following grounds: her equipment and the freight he may have
earned during the voyage.
I
xxx xxx xxx
THE LOWER COURT ERRED IN FINDING
THAT THE LSCO "CAVITE" WAS THE VESSEL ART. 590. The co-owners of the vessel shall be
AT FAULT IN THE COLLISION. civilly liable in the proportion of their
II contribution to the common fund for the
results of the acts of the captain, referred to in
THE LOWER COURT ERRED IN NOT FINDING Article 587.
THAT THE COLLISION BETWEEN THE M/V
Each co-owner may exempt himself from this
"FERNANDO ESCANO" AND THE LSCO
liability by the abandonment, before a notary,
"CAVITE" WAS DUE SOLELY AND
of that part of the vessel belonging to him.
EXCLUSIVELY TO THE FAULT, NEGLIGENCE
AND LACK OF SKILL OF THE MASTER OF xxx xxx xxx
THE FORMER VESSEL.
ART. 837. The civil liability incurred by the
III shipowners in the cases prescribed in this
THE LOWER COURT ERRED IN NOT RULING section, shall be understood as limited to the
value of the vessel with all her appurtenances
THAT THE CIVIL LIABILITY OF THE
and freight earned during the voyage. 5
PETITIONER, IF ANY THERE BE, SHOULD BE
LIMITED TO THE VALUE OF THE LSCO In the case of Philippine Shipping Company vs. Garcia, 6 which is
"CAVITE" WITH ALL ITS APPURTENANCES an action for damages instituted by the Philippine Shipping
AND FREIGHT- AGE WHEN THE COLLISION Company for the loss of Steamship "Ntra. Sra. de Lourdes" as a
TOOK PLACE. 3 result of the collision with the Steamship "Navarra" of Garcia, it
was found that the "Navarra" was responsible for the collision.
In a resolution of February 26, 1982 this Court denied the
petition for lack of merit. The claim of the Philippine Shipping is that the defendant should
pay P18,000.00, the value of the "Navarro" at the time of its loss,
A motion for reconsideration of said resolution was filed by in accordance with the provision of Article 837 of the Code of
petitioner limiting the issue to the legal question of whether under Commerce, and that it was immaterial that the "Navarro" had
Art. 837 of the Code of Commerce abandonment of vessel at fault been entirely lost provided the value could be ascertained since
is necessary in order that the liability of owner of said vessel shall the extent of liability of the owner of the colliding vessel resulting
be limited only to the extent of the value thereof, its from the collision is to be determined by its value.
appurtenances and freightage earned in the voyage. After
This Court speaking through the then Chief Justice Arellano held:
respondents submitted their comment to the motion as required,
on September 29, 1982 this Court denied the motion for Article 837 of the Code of Commerce provides:
reconsideration for lack of merit. "The civil liability contracted by the shipowners
in the cases prescribed in this section shall be
With leave of court petitioner filed a second motion for
reconsideration of said resolution raising the following issues: understood as limited to the value of the vessel
with all her equipment and all the freight
1. Whether abandonment is required under money earned during the voyage "
Article 837 of the Code of Commerce. The
"This section is a necessary consequence of the
decisions of this Honorable Court cited by the
right to abandon the vessel given to the
parties in support of their respective positions
only imply the answer to the question, and the shipowner in article 587 of the code, and it is
implied answers are contradictory. one of the many superfluities contained in the
code." (Lorenzo Benito, "Lecciones," 352.)
2. If abandonment is required under Article
ART. 587. The agent shall also be civilly liable
837 of the Code of Commerce, when should it
for the indemnities in favor of third persons
be made? The Code of Commerce is silent on
the matter. The decision of this Honorable which arise from the conduct of the captain in
Court in Yangco v. Laserna, 13 Phil. 330, left the care of the goods which the vessel carried
but he may exempt himself therefrom by
the question open and no other decision, as far
abandoning the vessel with all her equipments
as petitioner can ascertain, has resolved the
question. and the freight he may have earned during the
trip.
3. Is the decision of this Honorable Court in
Manila Steamship Co., Inc. v. Abdulhama,n 100 ART. 590. The part owners of a vessel shall be
civilly liable, in the proportion of their
Phil. 32, wherein it was held that "(t)he
contribution to the common fund, for the
international rule to the effect that the right of
results of the acts of the captain referred to in
abandonment of vessels, as a legal station of a
Article 587. Each part owner may exempt
shipowner's own fault," invoked by private
himself from this liability by the abandonment,
respondents and apparently a major
before a notary, of the part of the vessel
consideration in the denial of the motion for
belonging to him.
reconsideration, applicable to petitioner under
the circumstances of the case at bar? 4 The "Exposicion de motivos" of the Code of
Commerce contains the following: "The present
The respondents were required to comment thereto and after said
code (1829) does not determine the juridical
comment was submitted petitioners submitted a reply thereto to
which the respondents filed a rejoinder. status of the agent where such agent is not
himself the owner of the vessel. This omission
On November 28, 1983, the Court gave due course to the petition is supplied by the proposed code, which
for review and considered the respondents' comment thereto as provides in accordance with the principles of
the Answer. The parties were required to file their briefs. Both
exempt himself from liability by abandoning the
vessel and freight money, thus avoiding the
maritime law that by agent it is to be
possibility of risking his whole fortune in the
understood the person intrusted with the
business, it is also just that his maritime
provisioning of the vessel, or the one who
creditor may for any reason attach the vessel
represents her in the port in which she
itself to secure his claim without waiting for a
happens to be. This person is the only one who
settlement of his rights by a final judgment,
represents the vessel that is to say, the only
even to the prejudice of a third person.
one who represents the interests of the owner
of the vessel. This provision has therefore This repeals the civil law to such an extent
cleared the doubt which existed as to the that, in certain cases, where the mortgaged
extent of the liability, both of the agent and of property is lost no personal action lies against
the owner of the vessel. Such liability is limited the owner or agent of the vessel. For instance,
by the proposed code to the value of the vessel where the' vessel is lost the sailors and
and other things appertaining thereto." members of the crew can not recover their
There is no doubt that if the Navarro had not wages; in case of collision, the liability of the
been entirely lost, the agent, having been held agent is limited as aforesaid, and in case of
liable for the negligence of the captain of the shipwreck, those who loan their money on the
vessel could have abandoned her with all her vessel and cargo lose all their rights and can
not claim reimbursement under the law.
equipment and the freight money earned during
the voyage, thus bringing himself within the There are two reasons why it is impossible to
provisions of article 837 in so far as the do away with these privileges, to wit: (1) The
subsidiary civil liability is concerned This risk to which the thing is exposed, and (2) the
abandonment which would have amounted to "real" nature of the maritime law, exclusively
an offer of the value of the vessel, of her "real," according to which the liability of the
equipment, and freight money earned could parties is limited to a thing which is at the
not have been refused, and the agent could not mercy of the waves. If the agent is only liable
have been personally compelled, under such with the vessel and freight money and both
circumstances, to pay the 18,000 pesos, the may be lost through the accidents of
estimated value of the vessel at the time of the navigation it is only just that the maritime
collision. creditor have some means of obviating this
precarious nature of his rights by detaining the
This is the difference which exists between the
ship, his only security, before it is lost.
lawful acts and lawful obligations of the
captain and the liability which he incurs on The liens tacit or legal, which may exist upon
account of any unlawful act committed by him. the vessel and which a purchaser of the same
In the first case, the lawful acts and obligations would be obliged to respect and recognize are
of the captain beneficial to the vessel may be — in addition to those existing in favor of the
enforced as against the agent for the reason State by virtue of the privileges which are
that such obligations arise from the contract of granted to it by all the laws — pilot, tonnage,
agency (provided, however, that the captain and port dues and other similar charges, the
does not exceed his authority), while as to any wages of the crew earned during the last
liability incurred by the captain through his voyage as provided in article 646 of the Code of
unlawful acts, the ship agent is simply Commerce, salvage dues under article 842, the
subsidiarily civilly liable. This liability of the indemnification due to the captain of the vessel
agent is limited to the vessel and it does not in case his contract is terminated on account
extend further. For this reason the Code of of the voluntary sale of the ship and the
Commerce makes the agent liable to the extent insolvency of the owner as provided in article
of the value of the vessel, as the codes of the 608, and all other liabilities arising from
principal maritime nations provide, with the collisions under Articles 837 and 838.'
vessel, and not individually. Such is also the (Madariaga pp. 60, 62, 63, 85.
spirit of our code.
We accordingly hold that the defendant is liable
The spirit of our code is accurately set forth in for the indemnification to which the plaintiff is
a treatise on maritime law, from which we entitled by reason of the collision but he is not
deem proper to quote the following as the basis required to pay such indemnification for the
of this decision: reason that the obligation thus incurred has
been extinguished on account of the loss of the
That which distinguishes the maritime from
thing bound for the payment thereof and in this
the civil law and even from the mercantile law
respect the judgment of the court below is
in general is the real and hypothecary nature
affirmed except in so far as it requires the
of the former, and the many securities of a real
nature that maritime customs from time plaintiff to pay the costs of this action, which
immemorial the laws, the codes, and the later is not exactly proper. No special order is made
as to costs of this appeal. After the expiration
jurisprudence, have provided for the protection
of twenty days let judgment be entered in
of the various and conflicting interests which
are ventured and risked in maritime accordance herewith and ten days thereafter
expeditions, such as the interests of the vessel the record be remanded to the Court of First
Instance for execution. So ordered. 7
and of the agent, those of the owners of the
cargo and consignees, those who salvage the From the foregoing the rule is that in the case of collision,
ship, those who make loans upon the cargo, abandonment of the vessel is necessary in order to limit the
those of the sailors and members of the crew liability of the shipowner or the agent to the value of the vessel,
as to their wages, and those of a constructor its appurtenances and freightage earned in the voyage in
as to repairs made to the vessel. accordance with Article 837 of the Code of Commerce. The only
As evidence of this "real" nature of the maritime instance where such abandonment is dispensed with is when the
law we have (1) the limitation of the liability of vessel was entirely lost. In such case, the obligation is thereby
the agents to the actual value of the vessel and extinguished.
the freight money, and (2) the right to retain the In the case of Government of the Philippines vs. Maritime this
cargo and the embargo and detention of the Court citing Philippine Shipping stated the exception thereto in
vessel even in cases where the ordinary civil that while "the total destruction of the vessel extinguishes a
law would not allow more than a personal maritime lien, as there is no longer any risk to which it can
action against the debtor or person liable. It will attach, but the total destruction of the vessel does not affect the
be observed that these rights are correlative,
and naturally so, because if the agent can
El proyecto, al aplicar estos principios, se
liability of the owner for repairs of the vessel completed before its inspira tambien en los intereses del comercio
loss, 8 interpreting the provision of Article 591 of the Code of maritimo que quedaran mas asegurados
Commerce in relation with the other Articles of the same Code. ofreciendo a todo el que contrata con el naviero
o Capitan del buque, la garantia real del
In Ohta Development Company vs. Steamship "Pompey" 9 it mismo, cualesquiera que sean las facultades o
appears that at the pier sunk and the merchandise was lost due atribuciones de que se hallen investidos;
to the fault of the steamship "Pompey" that was then docked at (Echavarri, Codigo de Comercio, Tomo 4, 2.
said pier. This Court ruled that the liability of the owner of ed., pags. 483- 484.)
"Pompey" may not be limited to its value under Article 587 of the
A cursory examination will disclose that the
Code of Commerce as there was no abandonment of the ship. We
principle of limited liability of a shipowner or
also held that Article 837 cannot apply as it refers to collisions
which is not the case here. 10 agent is provided for in but three articles of the
Code of Commerce — Article 587 aforequoted
In the case of Guison vs. Philippine Shipping Company 11 and articles 590 and 837. Article 590 merely
involving the collision at the mouth of the Pasig river between the reiterates the principle embodied in article 587,
motor launches Martha and Manila H in which the latter was where the vessel is owned by several person
found to be at fault, this Court, applying Article 837 of the Code Article 837 applies the same principle in cases
of Commerce limited the liability of the agent to its value. of collision and it has been observed that said
article is but 'a necessary consequence of the
In the case of Yangco vs. Laserna 12 which involved the steamers
right to abandon the vessel given to the
SS "Negros" belonging to Yangco which after two hours of sailing
shipowner in Article 587 to the Code, and it is
from Romblon to Manila encountered rough seas as a result of
one of the many superfluities contained in the
which it capsized such that many of its passengers died in the
Code. (Lorenzo Benito, Lecciones 352, quoted in
mishap, several actions for damages were filed against Yangco,
Philippine Shipping Co. vs. Garcia, 6 Phil. 281,
by a verified pleading, he sought to abandon the vessel to the
282.) In effect therefore, only Articles 587 and
plaintiffs in the three cases together with all the equipment
590 are the provisions contained in our Code
without prejudice to the right to appeal. This Court in resolving
of Commerce on the matter, and the framers of
the issue held as follows:
said code had intended those provisions to
Brushing aside the incidental issues, the embody the universal principle of limited
fundamental question here raised is: May the liability in all cases. ... . 13
shipowner or agent, notwithstanding the total
In the said case We invoked our ruling in Philippine Shipping and
loss of the vessel as a result of the negligence
concluded as follows:
of its captain, be properly held liable in
damages for the consequent death of its In the light of all the foregoing, we therefore
passengers? We are of the opinion and so hold hold that if the shipowner or agent may in any
that this question is controlled by the provision way be held civilly liable at all for injury to or
of article 587 of the Code of Commerce. Said death of passengers arising from the
article reads: negligence of the captain in cases of collisions
or shipwrecks, his liability is merely
The agent shall also be civilly liable for the
coextensive with his interest in the vessel such
indemnities in favor of third persons which
that a total loss thereof results in its
arise from the conduct of the captain in the.
extinction. In arriving at this conclusion, we
care of the goods which the vessel carried; but
have not been unmindful of the fact that the
he may exempt himself therefrom by
ill-fated steamship Negros, as a vessel engaged
abandoning the vessel with all her equipments
in interisland trade, is a common carrier (De
and the freight he may have earned during the
Villata v. Stanely 32 Phil. 541), and that the
voyage.
relationship between the petitioner and the
The provision accords a shipowner or agent the passengers who died in the mishap rests on a
right of abandonment; and by necessary contract of carriage. But assuming that
implication, his liability is confined to that which petitioner is liable for a breach of contract of
he is entitled as of right to -abandon — "the carriage, the exclusively "real and hypothecary
vessel with all her equipments and the freight it nature" of maritime law operates to limit such
may have earned during the voyage." It is true liability to the value of the vessel, or to the
that the article apears to deal only with the insurance thereon, if any. In the instant case
limited liability of shipowners or agents for it does not appear that the vessel was insured.
damages arising from the misconduct of the
Whether the abandonment of the vessel sought
captain in the care of the goods which the
by the petitioner in the instant case was in
vessel carries, but this is a mere deficiency of
accordance with law or not, is immaterial The
language and in no way indicates the true
vessel having totally perished any act of
extent of such liability. The consensus of
abandonment would be an Idle ceremony. 14
authorities is to the effect that notwithstanding
the language of the afore-quoted provision, the In the case of Abueg vs. San Diego,15 which involves a claim of
benefit of limited liability therein provided for, compensation under the Workmen's Compensation Act for the
applies in all cases wherein the shipowner or deceased members of the crew of the MS "San Diego II" and MS
agent may properly be held liable for the "Bartolome" which were caught by a typhoon in the vicinity of
negligent or illicit acts of the captain. Dr. Jose Mindoro Island and as a consequence of which they were sunk
Ma. Gonzalez de Echavarri y Vivanco and totally lost, this Court held as follows:
commenting on said article, said:
Counsel for the appellant cite article 7837 of
La letra del Codigo, en el articulo 587, presenta the Code of Commerce which provides that if
una gravisima cuestion. El derecho de the vessel together with all her tackle and
abandono, si se atiende a lo escrito, solo se freight money earned during the voyage are
refiere a las indemnizaciones a que diere lugar abandoned, the agent's liability to third
la conducta del Capitan en la custodia de los persons for tortious acts of the captain in the
efectos que cargo en el buque. care of the goods which the ship carried is
extinguished (Yangco vs. Laserna, 73 Phil.
Es ese el espiritu del legislador? No; habra
330) Article 937 of the same Code which
derecho de abandono en las responsabilidades
provides that in cases of collision, the
nacidas de obligaciones contraidas por el
shipowners' liability is limited to the value of
Capitan y de otros actos de este? Lo reputamos
the vessel with all her equipment and freight
evidente y, para fortalecer nuestra opinion,
earned during the voyage (Philippine Shipping
basta copiar el siguiente parrafo de la
Exposicion de motivos:
similar provisions of the Civil as well as the
mercantile law. If an accident is compensable
Company vs. Garcia, 6 Phil. 281); and Article
643 of the same Code which provides that if under the Workmen's Compensation Act, it
the vessel and freight are totally lost, the must be compensated even when the
workman's right is not recognized by or is in
agent's liability for wages of the crew is
conflict with other provisions of the Civil Code
extinguished. From these premises counsel
draw the conclusion that appellant's liability, or of the Code of Commerce. The reason behind
as owner of the two motor ships lost or sunk this principle is that the Workmen's
Compensation Act was enacted by the
as a result of the typhoon that lashed the
Legislature in abrogation of the other existing
island of Mindoro on October 1, 1941, was
extinguished. laws.' This quoted part of the decision is in
answer to the contention that it was not the
The real and hypothecary nature of the liability intention of the Legislature to repeal Articles
of the shipowner or agent embodied in the 643 and 837 of the Code of Commerce with the
provisions of the Maritime Law, Book III, Code enactment of the Workmen's Compensation
of Commerce, had its origin in the prevailing Act. 16
conditions of the maritime trade and sea
voyages during the medieval ages, attended by In said case the Court reiterated that the liability of the shipowner
innumerable hazards and perils. To offset or agent under the provision of Articles 587 and 837 of the Code
against these adverse conditions and to of Commerce is limited to the value of the vessel with all her
encourage shipbuilding and maritime equivalent and freight earned during the voyage if the shipowner
commerce, it was deemed necessary to confine or agent abandoned the ship with all the equipment and freight.
the liability of the owner or agent arising from However, it does not apply to the liability under the Workmen's
the operation of a ship to the vessel equipment, Compensation Act where even as in said case the vessel was lost
and freight, or insurance, if any, so that if the the liability thereunder is still enforceable against the employer
shipowner or agent abandoned the ship, or shipowner.
equipment, and freight, his liability was The case of Manila Steamship Company, Inc. vs. Insa Abdulhaman
extinguished and Lim Hong To 17 is a case of collision of the ML "Consuelo V"
But the provisions of the Code of Commerce and MS "Bowline Knot" as a result of which the ML "Consuelo V"
invoked by appellant have no room in the capsized and was lost where nine (9) passengers died or were
application of the Workmen's Compensation Act missing and all its cargoes were lost. In the action for damages
which seeks to improve, and aims at the arising from the collision, applying Article 837 of the Code of
amelioration of, the condition of laborers and Commerce, this Court held that in such case where the collision
employees. It is not the liability for the damage was imputable to both of them, each vessel shall suffer her own
or loss of the cargo or injury to, or death of, a damages and both shall be solidarily liable for the damages
occasioned to their cargoes.18 Thus, We held:
passenger by or through the misconduct of the
captain or master of the ship; nor the liability In fact, it is a general principle, well
for the loss of the ship as a result of collision; established maritime law and custom, that
nor the responsibility for wages of the crew, shipowners and ship agents are civilly liable
but a liability created by a statute to for the acts of the captain (Code of Commerce,
compensate employees and laborers in cases Article 586) and for the indemnities due the
of injury received by or inflicted upon them, third persons (Article 587); so that injured
while engaged in the performance of their work parties may immediately look for
or employment, or the heirs and dependents of reimbursement to the owner of the ship, it
such laborers and employees in the event of being universally recognized that the ship
death caused by their employment. Such master or captain is primarily the
compensation has nothing to do with the representative of the owner (Standard Oil Co.
provisions of the Code of Commerce regarding vs. Lopez Castelo, 42 Phil. 256, 260). This
maritime commerce. It is an item in the cost of direct liability, moderated and limited by the
production which must be included in the owner's right of abandonment of the vessel and
budget of any well managed industry. earned freight (Article 587) has been declared to
exist not only in case of breached contracts, but
Appellant's assertion that in the case of Enciso
also in cases of tortious negligence (Yu Biao
vs. Dy-Liaco (57 Phil. 446), and Murillo vs.
Sontua vs. Osorio, 43 Phil. 511; 515):
Mendoza (66 Phil. 689), the question of the
extinction of the shipowner's liability due to xxx xxx xxx
abandonment of the ship by him was not fully
discussed, as in the case of Yangco vs. It is easy to see that to admit the defense of due
Laserna, supra, is not entirely correct. In the diligence of a bonus paterfamilias (in the
last mentioned case, the limitation of the selection and vigilance of the officers and crew)
shipowner's liability to the value of the ship, as exempting the shipowner from any liability
equipment, freight, and insurance, if any, was for their faults, would render nugatory the
the lis mota In the case of Enciso vs. Dy-Liaco, solidary liability established by Article 827 of
supra, the application of the Workmen's the Code of Commerce for the greater
Compensation Act to a master or patron who protection of injured parties. Shipowners
perished as a result of the sinking of the would be able to escape liability in practically
motorboat of which he was the master, was the every case, considering that the qualifications
controversy submitted to the court for and licensing of ship masters and officers are
decision. This Court held in that case that .It determined by the State, and that vigilance is
has been repeatedly stated that the Workmen's practically impossible to exercise over officers
Compensation Act was enacted to abrogate the and crew of vessels at sea. To compel the
common law and our Civil Code upon culpable parties prejudiced to look to the crew for
acts and omissions, and that the employer need indemnity and redress would be an illusory
not be guilty of neglect or fault in order that remedy for almost always its members. are,
responsibility may attach to him' (pp. 449-450); from captains down, mere wage earners.
and that the shipowner was liable to pay We, therefore, find no reversible error in the
compensation provided for in the Workmen's refusal of the Court of Appeals to consider the
Compensation Act, notwithstanding the fact defense of the Manila Steamship Co., that it is
that the motorboat was totally lost. In the case exempt from liability for the collision with the
of Murillo vs. Mendoza, supra, this Court held M L "Consuelo V " due to the absence of
that 'The rights and responsibilities defined in negligence on its part in the selection and
said Act must be governed by its own peculiar
provisions in complete disregard of other
Teehankee, C.J., Narvasa, Cruz and Paras, JJ., concur.
supervision of the officers and crew of the M/S Republic of the Philippines
"Bowline Knot. 19 SUPREME COURT
Manila
However, insofar as respondent Lim Hong To, owner of M L
"Consuelo V" who admittedly employed an unlicensed master and FIRST DIVISION
engineer and who in his application for permission to operate
expressly assumed full risk and responsibility thereby (Exh. 2) G.R. No. L-58897 December 3, 1987
this Court held that the liability of Lim Hong To cannot be limited LUZON STEVEDORING CORPORATION, petitioner,
to the value of his motor launch by abandonment of the vessel as vs.
invoked in Article 587 of the Code of Commerce, We said: COURT OF APPEALS, HIJOS DE F. ESCANO, INC., and
The international rule is to the effect that the DOMESTIC INSURANCE COMPANY OF THE PHILIPPINES,
right of abandonment of vessels, as a legal respondents.
limitation of a shipowner's liability, does not
apply to cases where the injury or the average
is due to shipowner's own fault. Farina GANCAYCO, J.:
(Derecho Commercial Maritima Vol. 1, pp. 122- On May 30, 1968 at past 6:00 in the morning a maritime collision
123), on the authority of judicial precedents occurred within the vicinity of the entrance to the North Harbor,
from various nations, sets the rule to be as Manila between the tanker LSCO "Cavite" owned by Luzon
follows: Stevedoring Corporation and MV "Fernando Escano" a passenger
xxx xxx xxx 20 ship owned by Hijos de F. Escano, Inc. as a result of which said
passenger ship sunk. An action in admiralty was filed by Hijos de
From the foregoing, it is clear that in case of collision of vessels, F. Escano, Inc. and Domestic Insurance Company of the
in order to avail of the benefits of Article 837 of the Code of Philippines against the Luzon Stevedoring Company (LSC) in the
Commerce the shipowner or agent must abandon the vessel. In Court of First Instance of Cebu. In the course of the trial, the trial
such case the civil liability shall be limited to the value of the court appointed two commissioners representing the plaintiffs
vessel with all the appurtenances and freight earned during the and defendant to determine the value of the LSCO "CAVITE." Said
voyage. However, where the injury or average is due to the ship- commissioners found the value thereof to be P180,000.00.
owner's fault as in said case, the shipowner may not avail of his
right to limited liability by abandoning the vessel. After trial on the merits, a decision was rendered on January 24,
1974 finding that LSCO "Cavite" was solely to blame for the
We reiterate what We said in previous decisions that the real and collision, thus its dispositive portion reads as follows:
hypothecary nature of the liability of the shipowner or agent is
embodied in the provisions of the Maritime Law, Book III, Code of WHEREFORE, based on all the foregoing
Commerce. 21 Articles 587, 590 and 837 of the same code are considerations, the Court renders judgment in
precisely intended to limit the liability of the shipowner or agent favor of the plaintiffs and against the
to the value of the vessel, its appurtenances and freightage earned defendant ordering the latter to pay to the
in the voyage, provided that owner or agent abandons the vessel. plaintiff Domestic Insurance Company of the
Although it is not specifically provided for in Article 837 of the Philippines the sum of P514,000.00, and to the
same code that in case of collision there should be such plaintiff Hijos de F. Escano, Inc. the sum of
abandonment to enjoy such limited liability, said article on P68,819.00, with interest on both sums at the
collision of vessels is a mere amplification of the provisions of legal rate, from the date the complaint was
Articles 587 and 590 of same code where abandonment of the filed and the further sum of P252,346.70, with
vessel is a pre-condition. Even without said article, the parties interest at the legal rate from August 7, 1972
may avail of the provisions of Articles 587 and 590 of same code and the sum of P163,721.91, without interest
in case of collision. This is the reason why Article 837 of the same in trust for, and with direction that it pay the
code is considered a superfluity. 22 same to, the claimants concerned.

Hence the rule is that in case of collision there should be With costs against the defendant. 1
abandonment of the vessel by the shipowner or agent in order to In the penultimate paragraph of the decision the trial court held:
enjoy the limited liability provided for under said Article 837.
With respect to the defense that defendant's
The exception to this rule is when the vessel is totally lost in liability is limited to the value of the LSCO
which case there is no vessel to abandon so abandonment is not "Cavite" and freight earned, invoking Art. 837
required. Because of such total loss the liability of the shipowner of the Code of Commerce, the Court believes
or agent for damages is extinguished. Nevertheless, the and so holds that the defense has not been
shipowner or agent is personally liable for claims under the established. Moreover, the evidence is such
Workmen's Compensation Act and for repairs of the vessel before that in principle Art. 837 does not apply here.
its loss. 23 The counterclaim of the defendant is likewise
In case of illegal or tortious acts of the captain the liability of the ordered dismissed for lack of merit. 2
shipowner and agent is subsidiary. In such instance the Not satisfied therewith the defendant interposed an appeal
shipowner or agent may avail of the provisions of Article 837 of therefrom to the Court of Appeals wherein in due course a
the Code by abandoning the vessel. 24 decision was rendered on June 30, 1981 affirming the decision of
However, if the injury or damage is caused by the shipowner's the court a quo in toto with costs against appellant. The motion
fault as where he engages the services of an inexperienced and for reconsideration filed by the defendant of the decision was
unlicensed captain or engineer, he cannot avail of the provisions denied in a resolution of the Court of Appeals of November 7,
of Article 837 of the Code by abandoning the vessel. 25 He is 1981. Hence said defendant filed a petition for certiorari in this
personally liable for the damages arising thereby. Court based on the following grounds:

In the case now before the Court there is no question that the I
action arose from a collision and the fault is laid at the doorstep THE LOWER COURT ERRED IN FINDING
of LSCO "Cavite" of petitioner. Undeniably petitioner has not THAT THE LSCO "CAVITE" WAS THE VESSEL
abandoned the vessel. Hence petitioner can not invoke the benefit AT FAULT IN THE COLLISION.
of the provisions of Article 837 of the Code of Commerce to limit
its liability to the value of the vessel, all the appurtenances and II
freightage earned during the voyage. THE LOWER COURT ERRED IN NOT FINDING
In the light of the foregoing conclusion, the issue as to when THAT THE COLLISION BETWEEN THE M/V
abandonment should be made need not be resolved. "FERNANDO ESCANO" AND THE LSCO
"CAVITE" WAS DUE SOLELY AND
WHEREFORE, the petition is DENIED with costs against EXCLUSIVELY TO THE FAULT, NEGLIGENCE
petitioner.
SO ORDERED.
Each co-owner may exempt himself from this
liability by the abandonment, before a notary,
AND LACK OF SKILL OF THE MASTER OF
THE FORMER VESSEL. of that part of the vessel belonging to him.
xxx xxx xxx
III
ART. 837. The civil liability incurred by the
THE LOWER COURT ERRED IN NOT RULING
THAT THE CIVIL LIABILITY OF THE shipowners in the cases prescribed in this
section, shall be understood as limited to the
PETITIONER, IF ANY THERE BE, SHOULD BE
value of the vessel with all her appurtenances
LIMITED TO THE VALUE OF THE LSCO
and freight earned during the voyage. 5
"CAVITE" WITH ALL ITS APPURTENANCES
AND FREIGHT- AGE WHEN THE COLLISION In the case of Philippine Shipping Company vs. Garcia, 6 which is
TOOK PLACE. 3 an action for damages instituted by the Philippine Shipping
In a resolution of February 26, 1982 this Court denied the Company for the loss of Steamship "Ntra. Sra. de Lourdes" as a
petition for lack of merit. result of the collision with the Steamship "Navarra" of Garcia, it
was found that the "Navarra" was responsible for the collision.
A motion for reconsideration of said resolution was filed by The claim of the Philippine Shipping is that the defendant should
petitioner limiting the issue to the legal question of whether under pay P18,000.00, the value of the "Navarro" at the time of its loss,
Art. 837 of the Code of Commerce abandonment of vessel at fault in accordance with the provision of Article 837 of the Code of
is necessary in order that the liability of owner of said vessel shall Commerce, and that it was immaterial that the "Navarro" had
be limited only to the extent of the value thereof, its been entirely lost provided the value could be ascertained since
appurtenances and freightage earned in the voyage. After the extent of liability of the owner of the colliding vessel resulting
respondents submitted their comment to the motion as required, from the collision is to be determined by its value.
on September 29, 1982 this Court denied the motion for
This Court speaking through the then Chief Justice Arellano held:
reconsideration for lack of merit.
Article 837 of the Code of Commerce provides:
With leave of court petitioner filed a second motion for
reconsideration of said resolution raising the following issues: "The civil liability contracted by the shipowners
in the cases prescribed in this section shall be
1. Whether abandonment is required under understood as limited to the value of the vessel
Article 837 of the Code of Commerce. The with all her equipment and all the freight
decisions of this Honorable Court cited by the money earned during the voyage "
parties in support of their respective positions
only imply the answer to the question, and the "This section is a necessary consequence of the
implied answers are contradictory. right to abandon the vessel given to the
shipowner in article 587 of the code, and it is
2. If abandonment is required under Article one of the many superfluities contained in the
837 of the Code of Commerce, when should it code." (Lorenzo Benito, "Lecciones," 352.)
be made? The Code of Commerce is silent on
ART. 587. The agent shall also be civilly liable
the matter. The decision of this Honorable
Court in Yangco v. Laserna, 13 Phil. 330, left for the indemnities in favor of third persons
the question open and no other decision, as far which arise from the conduct of the captain in
the care of the goods which the vessel carried
as petitioner can ascertain, has resolved the
question. but he may exempt himself therefrom by
abandoning the vessel with all her equipments
3. Is the decision of this Honorable Court in and the freight he may have earned during the
Manila Steamship Co., Inc. v. Abdulhama,n 100 trip.
Phil. 32, wherein it was held that "(t)he
ART. 590. The part owners of a vessel shall be
international rule to the effect that the right of
civilly liable, in the proportion of their
abandonment of vessels, as a legal station of a
contribution to the common fund, for the
shipowner's own fault," invoked by private
respondents and apparently a major results of the acts of the captain referred to in
Article 587. Each part owner may exempt
consideration in the denial of the motion for
himself from this liability by the abandonment,
reconsideration, applicable to petitioner under
the circumstances of the case at bar? 4 before a notary, of the part of the vessel
belonging to him.
The respondents were required to comment thereto and after said
comment was submitted petitioners submitted a reply thereto to The "Exposicion de motivos" of the Code of
which the respondents filed a rejoinder. Commerce contains the following: "The present
code (1829) does not determine the juridical
On November 28, 1983, the Court gave due course to the petition status of the agent where such agent is not
for review and considered the respondents' comment thereto as himself the owner of the vessel. This omission
the Answer. The parties were required to file their briefs. Both is supplied by the proposed code, which
parties having filed their briefs the case is now submitted for provides in accordance with the principles of
decision. maritime law that by agent it is to be
understood the person intrusted with the
Articles 587, 590, and 837 of the Code of Commerce provide as
provisioning of the vessel, or the one who
follows:
represents her in the port in which she
ART. 587. The ship agent shall also be civilly happens to be. This person is the only one who
liable for the indemnities in favor of third represents the vessel that is to say, the only
persons which arise from the conduct of the one who represents the interests of the owner
captain in the vigilance over the goods which of the vessel. This provision has therefore
the vessel carried; but he may exempt himself cleared the doubt which existed as to the
therefrom by abandoning the vessel with all extent of the liability, both of the agent and of
her equipment and the freight he may have the owner of the vessel. Such liability is limited
earned during the voyage. by the proposed code to the value of the vessel
and other things appertaining thereto."
xxx xxx xxx
There is no doubt that if the Navarro had not
ART. 590. The co-owners of the vessel shall be
been entirely lost, the agent, having been held
civilly liable in the proportion of their liable for the negligence of the captain of the
contribution to the common fund for the vessel could have abandoned her with all her
results of the acts of the captain, referred to in equipment and the freight money earned during
Article 587.
the voyage, thus bringing himself within the
provisions of article 837 in so far as the
There are two reasons why it is impossible to
subsidiary civil liability is concerned This do away with these privileges, to wit: (1) The
abandonment which would have amounted to risk to which the thing is exposed, and (2) the
an offer of the value of the vessel, of her "real" nature of the maritime law, exclusively
"real," according to which the liability of the
equipment, and freight money earned could
parties is limited to a thing which is at the
not have been refused, and the agent could not
have been personally compelled, under such mercy of the waves. If the agent is only liable
circumstances, to pay the 18,000 pesos, the with the vessel and freight money and both
may be lost through the accidents of
estimated value of the vessel at the time of the
collision. navigation it is only just that the maritime
creditor have some means of obviating this
This is the difference which exists between the precarious nature of his rights by detaining the
lawful acts and lawful obligations of the ship, his only security, before it is lost.
captain and the liability which he incurs on
The liens tacit or legal, which may exist upon
account of any unlawful act committed by him.
the vessel and which a purchaser of the same
In the first case, the lawful acts and obligations
would be obliged to respect and recognize are
of the captain beneficial to the vessel may be
enforced as against the agent for the reason — in addition to those existing in favor of the
State by virtue of the privileges which are
that such obligations arise from the contract of
granted to it by all the laws — pilot, tonnage,
agency (provided, however, that the captain
does not exceed his authority), while as to any and port dues and other similar charges, the
liability incurred by the captain through his wages of the crew earned during the last
voyage as provided in article 646 of the Code of
unlawful acts, the ship agent is simply
Commerce, salvage dues under article 842, the
subsidiarily civilly liable. This liability of the
agent is limited to the vessel and it does not indemnification due to the captain of the vessel
extend further. For this reason the Code of in case his contract is terminated on account
of the voluntary sale of the ship and the
Commerce makes the agent liable to the extent
insolvency of the owner as provided in article
of the value of the vessel, as the codes of the
principal maritime nations provide, with the 608, and all other liabilities arising from
collisions under Articles 837 and 838.'
vessel, and not individually. Such is also the
(Madariaga pp. 60, 62, 63, 85.
spirit of our code.
We accordingly hold that the defendant is liable
The spirit of our code is accurately set forth in
for the indemnification to which the plaintiff is
a treatise on maritime law, from which we
entitled by reason of the collision but he is not
deem proper to quote the following as the basis
of this decision: required to pay such indemnification for the
reason that the obligation thus incurred has
That which distinguishes the maritime from been extinguished on account of the loss of the
the civil law and even from the mercantile law thing bound for the payment thereof and in this
in general is the real and hypothecary nature respect the judgment of the court below is
of the former, and the many securities of a real affirmed except in so far as it requires the
nature that maritime customs from time plaintiff to pay the costs of this action, which
immemorial the laws, the codes, and the later is not exactly proper. No special order is made
jurisprudence, have provided for the protection as to costs of this appeal. After the expiration
of the various and conflicting interests which of twenty days let judgment be entered in
are ventured and risked in maritime accordance herewith and ten days thereafter
expeditions, such as the interests of the vessel the record be remanded to the Court of First
and of the agent, those of the owners of the Instance for execution. So ordered. 7
cargo and consignees, those who salvage the
ship, those who make loans upon the cargo, From the foregoing the rule is that in the case of collision,
abandonment of the vessel is necessary in order to limit the
those of the sailors and members of the crew
liability of the shipowner or the agent to the value of the vessel,
as to their wages, and those of a constructor
as to repairs made to the vessel. its appurtenances and freightage earned in the voyage in
accordance with Article 837 of the Code of Commerce. The only
As evidence of this "real" nature of the maritime instance where such abandonment is dispensed with is when the
law we have (1) the limitation of the liability of vessel was entirely lost. In such case, the obligation is thereby
the agents to the actual value of the vessel and extinguished.
the freight money, and (2) the right to retain the
cargo and the embargo and detention of the In the case of Government of the Philippines vs. Maritime this
vessel even in cases where the ordinary civil Court citing Philippine Shipping stated the exception thereto in
law would not allow more than a personal that while "the total destruction of the vessel extinguishes a
action against the debtor or person liable. It will maritime lien, as there is no longer any risk to which it can
be observed that these rights are correlative, attach, but the total destruction of the vessel does not affect the
and naturally so, because if the agent can liability of the owner for repairs of the vessel completed before its
loss, 8 interpreting the provision of Article 591 of the Code of
exempt himself from liability by abandoning the
vessel and freight money, thus avoiding the Commerce in relation with the other Articles of the same Code.
possibility of risking his whole fortune in the In Ohta Development Company vs. Steamship "Pompey" 9 it
business, it is also just that his maritime appears that at the pier sunk and the merchandise was lost due
creditor may for any reason attach the vessel to the fault of the steamship "Pompey" that was then docked at
itself to secure his claim without waiting for a said pier. This Court ruled that the liability of the owner of
settlement of his rights by a final judgment, "Pompey" may not be limited to its value under Article 587 of the
even to the prejudice of a third person. Code of Commerce as there was no abandonment of the ship. We
This repeals the civil law to such an extent also held that Article 837 cannot apply as it refers to collisions
which is not the case here. 10
that, in certain cases, where the mortgaged
property is lost no personal action lies against In the case of Guison vs. Philippine Shipping Company 11
the owner or agent of the vessel. For instance, involving the collision at the mouth of the Pasig river between the
where the' vessel is lost the sailors and motor launches Martha and Manila H in which the latter was
members of the crew can not recover their found to be at fault, this Court, applying Article 837 of the Code
wages; in case of collision, the liability of the of Commerce limited the liability of the agent to its value.
agent is limited as aforesaid, and in case of
shipwreck, those who loan their money on the In the case of Yangco vs. Laserna 12 which involved the steamers
vessel and cargo lose all their rights and can SS "Negros" belonging to Yangco which after two hours of sailing
not claim reimbursement under the law. from Romblon to Manila encountered rough seas as a result of
shipowner in Article 587 to the Code, and it is
one of the many superfluities contained in the
which it capsized such that many of its passengers died in the
Code. (Lorenzo Benito, Lecciones 352, quoted in
mishap, several actions for damages were filed against Yangco,
Philippine Shipping Co. vs. Garcia, 6 Phil. 281,
by a verified pleading, he sought to abandon the vessel to the
282.) In effect therefore, only Articles 587 and
plaintiffs in the three cases together with all the equipment
590 are the provisions contained in our Code
without prejudice to the right to appeal. This Court in resolving
the issue held as follows: of Commerce on the matter, and the framers of
said code had intended those provisions to
Brushing aside the incidental issues, the embody the universal principle of limited
fundamental question here raised is: May the liability in all cases. ... . 13
shipowner or agent, notwithstanding the total
In the said case We invoked our ruling in Philippine Shipping and
loss of the vessel as a result of the negligence
concluded as follows:
of its captain, be properly held liable in
damages for the consequent death of its In the light of all the foregoing, we therefore
passengers? We are of the opinion and so hold hold that if the shipowner or agent may in any
that this question is controlled by the provision way be held civilly liable at all for injury to or
of article 587 of the Code of Commerce. Said death of passengers arising from the
article reads: negligence of the captain in cases of collisions
The agent shall also be civilly liable for the or shipwrecks, his liability is merely
coextensive with his interest in the vessel such
indemnities in favor of third persons which
that a total loss thereof results in its
arise from the conduct of the captain in the.
care of the goods which the vessel carried; but extinction. In arriving at this conclusion, we
he may exempt himself therefrom by have not been unmindful of the fact that the
ill-fated steamship Negros, as a vessel engaged
abandoning the vessel with all her equipments
in interisland trade, is a common carrier (De
and the freight he may have earned during the
voyage. Villata v. Stanely 32 Phil. 541), and that the
relationship between the petitioner and the
The provision accords a shipowner or agent the passengers who died in the mishap rests on a
right of abandonment; and by necessary contract of carriage. But assuming that
implication, his liability is confined to that which petitioner is liable for a breach of contract of
he is entitled as of right to -abandon — "the carriage, the exclusively "real and hypothecary
vessel with all her equipments and the freight it nature" of maritime law operates to limit such
may have earned during the voyage." It is true liability to the value of the vessel, or to the
that the article apears to deal only with the insurance thereon, if any. In the instant case
limited liability of shipowners or agents for it does not appear that the vessel was insured.
damages arising from the misconduct of the
Whether the abandonment of the vessel sought
captain in the care of the goods which the
by the petitioner in the instant case was in
vessel carries, but this is a mere deficiency of
accordance with law or not, is immaterial The
language and in no way indicates the true
vessel having totally perished any act of
extent of such liability. The consensus of
abandonment would be an Idle ceremony. 14
authorities is to the effect that notwithstanding
the language of the afore-quoted provision, the In the case of Abueg vs. San Diego,15 which involves a claim of
benefit of limited liability therein provided for, compensation under the Workmen's Compensation Act for the
applies in all cases wherein the shipowner or deceased members of the crew of the MS "San Diego II" and MS
agent may properly be held liable for the "Bartolome" which were caught by a typhoon in the vicinity of
negligent or illicit acts of the captain. Dr. Jose Mindoro Island and as a consequence of which they were sunk
Ma. Gonzalez de Echavarri y Vivanco and totally lost, this Court held as follows:
commenting on said article, said:
Counsel for the appellant cite article 7837 of
La letra del Codigo, en el articulo 587, presenta the Code of Commerce which provides that if
una gravisima cuestion. El derecho de the vessel together with all her tackle and
abandono, si se atiende a lo escrito, solo se freight money earned during the voyage are
refiere a las indemnizaciones a que diere lugar abandoned, the agent's liability to third
la conducta del Capitan en la custodia de los persons for tortious acts of the captain in the
efectos que cargo en el buque. care of the goods which the ship carried is
Es ese el espiritu del legislador? No; habra extinguished (Yangco vs. Laserna, 73 Phil.
330) Article 937 of the same Code which
derecho de abandono en las responsabilidades
provides that in cases of collision, the
nacidas de obligaciones contraidas por el
Capitan y de otros actos de este? Lo reputamos shipowners' liability is limited to the value of
evidente y, para fortalecer nuestra opinion, the vessel with all her equipment and freight
earned during the voyage (Philippine Shipping
basta copiar el siguiente parrafo de la
Exposicion de motivos: Company vs. Garcia, 6 Phil. 281); and Article
643 of the same Code which provides that if
El proyecto, al aplicar estos principios, se the vessel and freight are totally lost, the
inspira tambien en los intereses del comercio agent's liability for wages of the crew is
maritimo que quedaran mas asegurados extinguished. From these premises counsel
ofreciendo a todo el que contrata con el naviero draw the conclusion that appellant's liability,
o Capitan del buque, la garantia real del as owner of the two motor ships lost or sunk
mismo, cualesquiera que sean las facultades o as a result of the typhoon that lashed the
atribuciones de que se hallen investidos; island of Mindoro on October 1, 1941, was
(Echavarri, Codigo de Comercio, Tomo 4, 2. extinguished.
ed., pags. 483- 484.)
The real and hypothecary nature of the liability
A cursory examination will disclose that the of the shipowner or agent embodied in the
principle of limited liability of a shipowner or provisions of the Maritime Law, Book III, Code
agent is provided for in but three articles of the of Commerce, had its origin in the prevailing
Code of Commerce — Article 587 aforequoted conditions of the maritime trade and sea
and articles 590 and 837. Article 590 merely voyages during the medieval ages, attended by
reiterates the principle embodied in article 587, innumerable hazards and perils. To offset
where the vessel is owned by several person against these adverse conditions and to
Article 837 applies the same principle in cases encourage shipbuilding and maritime
of collision and it has been observed that said commerce, it was deemed necessary to confine
article is but 'a necessary consequence of the
right to abandon the vessel given to the
or agent abandoned the ship with all the equipment and freight.
the liability of the owner or agent arising from However, it does not apply to the liability under the Workmen's
the operation of a ship to the vessel equipment, Compensation Act where even as in said case the vessel was lost
and freight, or insurance, if any, so that if the the liability thereunder is still enforceable against the employer
or shipowner.
shipowner or agent abandoned the ship,
equipment, and freight, his liability was The case of Manila Steamship Company, Inc. vs. Insa Abdulhaman
extinguished and Lim Hong To 17 is a case of collision of the ML "Consuelo V"
But the provisions of the Code of Commerce and MS "Bowline Knot" as a result of which the ML "Consuelo V"
invoked by appellant have no room in the capsized and was lost where nine (9) passengers died or were
application of the Workmen's Compensation Act missing and all its cargoes were lost. In the action for damages
which seeks to improve, and aims at the arising from the collision, applying Article 837 of the Code of
amelioration of, the condition of laborers and Commerce, this Court held that in such case where the collision
employees. It is not the liability for the damage was imputable to both of them, each vessel shall suffer her own
damages and both shall be solidarily liable for the damages
or loss of the cargo or injury to, or death of, a
occasioned to their cargoes.18 Thus, We held:
passenger by or through the misconduct of the
captain or master of the ship; nor the liability In fact, it is a general principle, well
for the loss of the ship as a result of collision; established maritime law and custom, that
nor the responsibility for wages of the crew, shipowners and ship agents are civilly liable
but a liability created by a statute to for the acts of the captain (Code of Commerce,
compensate employees and laborers in cases Article 586) and for the indemnities due the
of injury received by or inflicted upon them, third persons (Article 587); so that injured
while engaged in the performance of their work parties may immediately look for
or employment, or the heirs and dependents of reimbursement to the owner of the ship, it
such laborers and employees in the event of being universally recognized that the ship
death caused by their employment. Such master or captain is primarily the
compensation has nothing to do with the representative of the owner (Standard Oil Co.
provisions of the Code of Commerce regarding vs. Lopez Castelo, 42 Phil. 256, 260). This
maritime commerce. It is an item in the cost of direct liability, moderated and limited by the
production which must be included in the owner's right of abandonment of the vessel and
budget of any well managed industry. earned freight (Article 587) has been declared to
exist not only in case of breached contracts, but
Appellant's assertion that in the case of Enciso
also in cases of tortious negligence (Yu Biao
vs. Dy-Liaco (57 Phil. 446), and Murillo vs.
Sontua vs. Osorio, 43 Phil. 511; 515):
Mendoza (66 Phil. 689), the question of the
extinction of the shipowner's liability due to xxx xxx xxx
abandonment of the ship by him was not fully
discussed, as in the case of Yangco vs. It is easy to see that to admit the defense of due
Laserna, supra, is not entirely correct. In the diligence of a bonus paterfamilias (in the
last mentioned case, the limitation of the selection and vigilance of the officers and crew)
shipowner's liability to the value of the ship, as exempting the shipowner from any liability
equipment, freight, and insurance, if any, was for their faults, would render nugatory the
the lis mota In the case of Enciso vs. Dy-Liaco, solidary liability established by Article 827 of
supra, the application of the Workmen's the Code of Commerce for the greater
Compensation Act to a master or patron who protection of injured parties. Shipowners
perished as a result of the sinking of the would be able to escape liability in practically
motorboat of which he was the master, was the every case, considering that the qualifications
controversy submitted to the court for and licensing of ship masters and officers are
decision. This Court held in that case that .It determined by the State, and that vigilance is
has been repeatedly stated that the Workmen's practically impossible to exercise over officers
Compensation Act was enacted to abrogate the and crew of vessels at sea. To compel the
common law and our Civil Code upon culpable parties prejudiced to look to the crew for
acts and omissions, and that the employer need indemnity and redress would be an illusory
not be guilty of neglect or fault in order that remedy for almost always its members. are,
responsibility may attach to him' (pp. 449-450); from captains down, mere wage earners.
and that the shipowner was liable to pay We, therefore, find no reversible error in the
compensation provided for in the Workmen's refusal of the Court of Appeals to consider the
Compensation Act, notwithstanding the fact defense of the Manila Steamship Co., that it is
that the motorboat was totally lost. In the case exempt from liability for the collision with the
of Murillo vs. Mendoza, supra, this Court held M L "Consuelo V " due to the absence of
that 'The rights and responsibilities defined in negligence on its part in the selection and
said Act must be governed by its own peculiar supervision of the officers and crew of the M/S
provisions in complete disregard of other "Bowline Knot. 19
similar provisions of the Civil as well as the
mercantile law. If an accident is compensable However, insofar as respondent Lim Hong To, owner of M L
under the Workmen's Compensation Act, it "Consuelo V" who admittedly employed an unlicensed master and
must be compensated even when the engineer and who in his application for permission to operate
workman's right is not recognized by or is in expressly assumed full risk and responsibility thereby (Exh. 2)
conflict with other provisions of the Civil Code this Court held that the liability of Lim Hong To cannot be limited
or of the Code of Commerce. The reason behind to the value of his motor launch by abandonment of the vessel as
this principle is that the Workmen's invoked in Article 587 of the Code of Commerce, We said:
Compensation Act was enacted by the The international rule is to the effect that the
Legislature in abrogation of the other existing right of abandonment of vessels, as a legal
laws.' This quoted part of the decision is in limitation of a shipowner's liability, does not
answer to the contention that it was not the apply to cases where the injury or the average
intention of the Legislature to repeal Articles is due to shipowner's own fault. Farina
643 and 837 of the Code of Commerce with the (Derecho Commercial Maritima Vol. 1, pp. 122-
enactment of the Workmen's Compensation 123), on the authority of judicial precedents
Act. 16 from various nations, sets the rule to be as
In said case the Court reiterated that the liability of the shipowner follows:
or agent under the provision of Articles 587 and 837 of the Code xxx xxx xxx 20
of Commerce is limited to the value of the vessel with all her
equivalent and freight earned during the voyage if the shipowner
MELENCIO-HERRERA, J.:
From the foregoing, it is clear that in case of collision of vessels, This litigation involves a claim for damages for the loss at sea of
in order to avail of the benefits of Article 837 of the Code of petitioners' respective children after the shipwreck of MV Pioneer
Commerce the shipowner or agent must abandon the vessel. In Cebu due to typhoon "Klaring" in May of 1966.
such case the civil liability shall be limited to the value of the
vessel with all the appurtenances and freight earned during the The factual antecedents, as summarized by the trial Court and
voyage. However, where the injury or average is due to the ship- adopted by respondent Court, and which we find supported by
owner's fault as in said case, the shipowner may not avail of his the record, read as follows:
right to limited liability by abandoning the vessel. When the inter-island vessel MV "Pioneer
We reiterate what We said in previous decisions that the real and Cebu" left the Port of Manila in the early
hypothecary nature of the liability of the shipowner or agent is morning of May 15, 1966 bound for Cebu, it
embodied in the provisions of the Maritime Law, Book III, Code of had on board the spouses Alfonso Vasquez and
Commerce. 21 Articles 587, 590 and 837 of the same code are Filipinas Bagaipo and a four-year old boy,
precisely intended to limit the liability of the shipowner or agent Mario Marlon Vasquez, among her passengers.
to the value of the vessel, its appurtenances and freightage earned The MV "Pioneer Cebu" encountered typhoon
in the voyage, provided that owner or agent abandons the vessel. "Klaring" and struck a reef on the southern
Although it is not specifically provided for in Article 837 of the part of Malapascua Island, located somewhere
same code that in case of collision there should be such north of the island of Cebu and subsequently
abandonment to enjoy such limited liability, said article on sunk. The aforementioned passengers were
collision of vessels is a mere amplification of the provisions of unheard from since then.
Articles 587 and 590 of same code where abandonment of the Plaintiffs Pedro Vasquez and Soledad Ortega
vessel is a pre-condition. Even without said article, the parties are the parents of Alfonso Vasquez; plaintiffs
may avail of the provisions of Articles 587 and 590 of same code Cleto Bagaipo and Agustina Virtudes are the
in case of collision. This is the reason why Article 837 of the same parents of Filipinas Bagaipo; and plaintiffs
code is considered a superfluity. 22 Romeo Vasquez and Maxima Cainay are the
Hence the rule is that in case of collision there should be parents of the child, Mario Marlon Vasquez.
abandonment of the vessel by the shipowner or agent in order to They seek the recovery of damages due to the
enjoy the limited liability provided for under said Article 837. loss of Alfonso Vasquez, Filipinas Bagaipo and
Mario Marlon Vasquez during said voyage.
The exception to this rule is when the vessel is totally lost in
which case there is no vessel to abandon so abandonment is not At the pre-trial, the defendant admitted its
required. Because of such total loss the liability of the shipowner contract of carriage with Alfonso Vasquez,
or agent for damages is extinguished. Nevertheless, the Filipinas Bagaipo and Mario Marlon Vasquez,
shipowner or agent is personally liable for claims under the and the fact of the sinking of the MV "Pioneer
Workmen's Compensation Act and for repairs of the vessel before Cebu". The issues of the case were limited to
its loss. 23 the defenses alleged by the defendant that the
sinking of the vessel was caused by force
In case of illegal or tortious acts of the captain the liability of the majeure, and that the defendant's liability had
shipowner and agent is subsidiary. In such instance the been extinguished by the total loss of the
shipowner or agent may avail of the provisions of Article 837 of vessel.
the Code by abandoning the vessel. 24
The evidence on record as to the
However, if the injury or damage is caused by the shipowner's circumstances of the last voyage of the MV
fault as where he engages the services of an inexperienced and "Pioneer Cebu" came mainly, if not exclusively,
unlicensed captain or engineer, he cannot avail of the provisions from the defendant. The MV "Pioneer Cebu"
of Article 837 of the Code by abandoning the vessel. 25 He is was owned and operated by the defendant and
personally liable for the damages arising thereby. used in the transportation of goods and
passengers in the inter-island shipping.
In the case now before the Court there is no question that the
Scheduled to leave the Port of Manila at 9:00
action arose from a collision and the fault is laid at the doorstep
of LSCO "Cavite" of petitioner. Undeniably petitioner has not p.m. on May 14, 1966, it actually left port at
5:00 a.m. the following day, May 15, 1966. It
abandoned the vessel. Hence petitioner can not invoke the benefit
had a passenger capacity of three hundred
of the provisions of Article 837 of the Code of Commerce to limit
its liability to the value of the vessel, all the appurtenances and twenty-two (322) including the crew. It
freightage earned during the voyage. undertook the said voyage on a special permit
issued by the Collector of Customs inasmuch
In the light of the foregoing conclusion, the issue as to when as, upon inspection, it was found to be without
abandonment should be made need not be resolved. an emergency electrical power system. The
special permit authorized the vessel to carry
WHEREFORE, the petition is DENIED with costs against
only two hundred sixty (260) passengers due
petitioner.
to the said deficiency and for lack of safety
SO ORDERED. devices for 322 passengers (Exh. 2). A
headcount was made of the passengers on
Teehankee, C.J., Narvasa, Cruz and Paras, JJ., concur.
board, resulting on the tallying of 168 adults
and 20 minors, although the passengers
manifest only listed 106 passengers. It has
Republic of the Philippines been admitted, however, that the headcount is
SUPREME COURT not reliable inasmuch as it was only done by
Manila one man on board the vessel.
FIRST DIVISION When the vessel left Manila, its officers were
G.R. No. L-42926 September 13, 1985 already aware of the typhoon Klaring building
up somewhere in Mindanao. There being no
PEDRO VASQUEZ, SOLEDAD ORTEGA, CLETO B. BAGAIPO, typhoon signals on the route from Manila to
AGUSTINA VIRTUDES, ROMEO VASQUEZ and MAXIMINA Cebu, and the vessel having been cleared by
CAINAY, petitioners, the Customs authorities, the MV "Pioneer
vs. Cebu" left on its voyage to Cebu despite the
THE COURT OF APPEALS and FILIPINAS PIONEER LINES, typhoon. When it reached Romblon Island, it
INC., respondents. was decided not to seek shelter thereat,
Emilio D. Castellanes for petitioners. inasmuch as the weather condition was still
good. After passing Romblon and while near
Apolinario A. Abantao for private respondents. Jintotolo island, the barometer still indicated
the existence of good weather condition
impossible for the debtor to fulfill the obligation in a normal
manner; and that (3) the obligor must be free of participation in,
continued until the vessel approached
Tanguingui island. Upon passing the latter or aggravation of, the injury to the creditor." 1 In the language of
island, however, the weather suddenly the law, the event must have been impossible to foresee, or if it
could be foreseen, must have been impossible to avoid. 2 There
changed and heavy rains felt Fearing that due
must be an entire exclusion of human agency from the cause of
to zero visibility, the vessel might hit Chocolate
injury or loss. 3
island group, the captain ordered a reversal of
the course so that the vessel could 'weather Turning to this case, before they sailed from the port of Manila,
out' the typhoon by facing the winds and the the officers and crew were aware of typhoon "Klaring" that was
waves in the open. Unfortunately, at about reported building up at 260 kms. east of Surigao. In fact, they
noontime on May 16, 1966, the vessel struck a had lashed all the cargo in the hold before sailing in anticipation
reef near Malapascua island, sustained leaks of strong winds and rough waters. 4 They proceeded on their way,
and eventually sunk, bringing with her as did other vessels that day. Upon reaching Romblon, they
Captain Floro Yap who was in command of the received the weather report that the typhoon was 154 kms. east
vessel. southeast of Tacloban and was moving west northwest. 5 Since
they were still not within the radius of the typhoon and the
Due to the loss of their children, petitioners sued for damages
before the Court of First Instance of Manila (Civil Case No. weather was clear, they deliberated and decided to proceed with
67139). Respondent defended on the plea of force majeure, and the course. At Jintotolo Island, the typhoon was already reported
the extinction of its liability by the actual total loss of the vessel. to be reaching the mainland of Samar. 6 They still decided to
proceed noting that the weather was still "good" although,
After proper proceedings, the trial Court awarded damages, thus: according to the Chief Forecaster of the Weather Bureau, they
were already within the typhoon zone. 7 At Tanguingui Island,
WHEREFORE, judgment is hereby rendered
about 2:00 A.M. of May 16, 1966, the typhoon was in an area
ordering the defendant to pay:
quite close to Catbalogan, placing Tanguingui also within the
(a) Plaintiffs Pedro Vasquez and Soledad typhoon zone. Despite knowledge of that fact, they again decided
Ortega the sums of P15,000.00 for the loss of to proceed relying on the forecast that the typhoon would weaken
earning capacity of the deceased Alfonso upon crossing the mainland of Samar. 8 After about half an hour
Vasquez, P2,100.00 for support, and of navigation towards Chocolate Island, there was a sudden fall
P10,000.00 for moral damages; of the barometer accompanied by heavy downpour, big waves,
and zero visibility. The Captain of the vessel decided to reverse
(b) Plaintiffs Cleto B. Bagaipo and Agustina
course and face the waves in the open sea but because the
Virtudes the sum of P17,000.00 for loss of
visibility did not improve they were in total darkness and, as a
earning capacity of deceased Filipinas
consequence, the vessel ran aground a reef and sank on May 16,
Bagaipo, and P10,000.00 for moral damages;
1966 around 12:45 P.M. near Malapascua Island somewhere
and
north of the island of Cebu.
(c) Plaintiffs Romeo Vasquez and Maximina
Under the circumstances, while, indeed, the typhoon was an
Cainay the sum of P10,000.00 by way of moral
inevitable occurrence, yet, having been kept posted on the course
damages by reason of the death of Mario
of the typhoon by weather bulletins at intervals of six hours, the
Marlon Vasquez.
captain and crew were well aware of the risk they were taking as
On appeal, respondent Court reversed the aforementioned they hopped from island to island from Romblon up to
judgment and absolved private respondent from any and all Tanguingui. They held frequent conferences, and oblivious of the
liability. utmost diligence required of very cautious persons, 9 they decided
to take a calculated risk. In so doing, they failed to observe that
Hence, this Petition for Review on Certiorari, the basic issue being extraordinary diligence required of them explicitly by law for the
the liability for damages of private respondent for the presumptive safety of the passengers transported by them with due regard for
death of petitioners' children. an circumstances 10 and unnecessarily exposed the vessel and
The trial Court found the defense of caso fortuito untenable due passengers to the tragic mishap. They failed to overcome that
to various decisive factors, thus: presumption of fault or negligence that arises in cases of death or
injuries to passengers. 11
... It is an admitted fact that even before the
vessel left on its last voyage, its officers and While the Board of Marine Inquiry, which investigated the
crew were already aware of the typhoon disaster, exonerated the captain from any negligence, it was
brewing somewhere in the same general because it had considered the question of negligence as "moot
direction to which the vessel was going. The and academic," the captain having "lived up to the true tradition
crew of the vessel took a calculated risk when of the profession." While we are bound by the Board's factual
it proceeded despite the typhoon advisory. This findings, we disagree with its conclusion since it obviously had
is quite evident from the fact that the officers not taken into account the legal responsibility of a common
of the vessel had to conduct conferences carrier towards the safety of the passengers involved.
amongst themselves to decide whether or not With respect to private respondent's submission that the total
to proceed. The crew assumed a greater risk loss of the vessel extinguished its liability pursuant to Article 587
when, instead of seeking shelter in Romblon of the Code of Commerce 12 as construed in Yangco vs. Laserna,
and other islands the vessel passed en route, 73 Phil. 330 [1941], suffice it to state that even in the cited case,
they decided to take a change on the expected it was held that the liability of a shipowner is limited to the value
continuation of the good weather the vessel of the vessel or to the insurance thereon. Despite the total loss of
was encountering, and the possibility that the the vessel therefore, its insurance answers for the damages that
typhoon would veer to some other directions. a shipowner or agent may be held liable for by reason of the death
The eagerness of the crew of the vessel to of its passengers.
proceed on its voyage and to arrive at its
destination is readily understandable. It is WHEREFORE, the appealed judgment is hereby REVERSED and
undeniably lamentable, however, that they did the judgment of the then Court of First Instance of Manila,
so at the risk of the lives of the passengers on Branch V, in Civil Case No. 67139, is hereby reinstated. No costs.
board.
SO ORDERED.
Contrariwise, respondent Appellate Court believed that the
Teehankee (Chairman), Plana, Relova, Gutierrez, Jr., De la Fuente
calamity was caused solely and proximately by fortuitous event and Patajo, JJ., concur.
which not even extraordinary diligence of the highest degree could
have guarded against; and that there was no negligence on the
part of the common carrier in the discharge of its duties.
SECOND DIVISION
Upon the evidence and the applicable law, we sustain the trial
Court. "To constitute a caso fortuito that would exempt a person [G.R. No. 1600. June 1, 1906. ]
from responsibility, it is necessary that (1) the event must be
independent of the human will; (2) the occurrence must render it
THE PHILIPPINE SHIPPING COMPANY, ET AL., Plaintiffs- Article 837 of the Code Commerce provides: "The civil liability
Appellants, v. FRANCISCO GARCIA VERGARA, Defendant- contracted by the shipowners in the cases prescribed in this
Appellee. section shall be understood as limited to the value of the vessel
with all her equipment and all the freight money earned during
Del-Pan, Ortigas & Fisher, for Appellants. the voyage."cralaw virtua1aw library

Ledesma, Sumulong & Quintos, for Appellee. "This section is a necessary consequence of the right to abandon
the vessel given to the shipowner in article 587 of the code, and
SYLLABUS it is one of the many superfluities contained in the code. (Lorenzo
Benito, "Lecciones," 352.)
1. MARITIME LAW, "REAL" NATURE OF; LOSS OF VESSEL. —
"That which distinguishes the maritime from the civil law and "Art. 587. The agent shall also the civilly liable for the indemnities
even from the mercantile law in general is the ’real’ and in favor of third persons which arise from the conduct of the
hypothecary nature of the former, and the many securities of a captain in the care of the goods which the vessel carried, but he
’real’ nature that maritime customs from time immemorial, the may exempt himself therefrom by abandoning the vessel with all
laws, the codes, and the later jurisprudence, have provided for her equipments and the freight he may have earned during the
the protection of the various and conflicting interests which are trip.
ventured and risked in maritime expeditions. . . . This repeals the
civil law to such an extent that, in certain cases, where the "ART. 590. The part owners of a vessel shall be civilly liable, in
mortgaged property is lost no personal action lies against the the proportion of their contribution to the common fund, for the
owner or agent of the vessels." (Madariaga, pp. 60-62, 62, and results of the acts of the captain referred to in article 587. Each
85.) part owner may exempt himself from this liability by the
abandonment, before a notary, of the part of the vessel belonging
2. ID.; ID.; OWNERS AND AGENTS OF VESSELS, LIABILITY. — to him."cralaw virtua1aw library
The owners and agents of a vessel causing the loss of another
vessel by collision are not liable beyond the vessel itself causing The "Exposicion de motivos" of the Code of Commerce contains
the collision and other things appertaining thereto. the following: "The present code (1829) does not determine the
juridical status of the agent where such agent is not himself the
3. ID.; ID. — In the case at bar the vessel L., sailing in accordance owner of the vessel. This omission is supplied by the proposed
with the rules of navigation, collided with the vessel N., not so code, which provides in accordance with the principles of
sailing, and both vessels were lost. P., the owner of the vessel L., maritime law that by agent it is to be understood the person
sues for the value of the vessel N., the vessel causing the loss. intrusted with the provisioning of the vessel, or the one who
Held, That in view of the above stated principles, the defendant is represents her in the port in which she happens to be. This
liable for the indemnification to which the plaintiff is entitle by person is the only one who represents the vessel — that is to say,
reason of the collision, but he is not required to pay such the only one who represents the interest of the owner of the
indemnification for the reason that the obligation thus incurred vessel. This provision has therefore cleared the doubt which
has been extinguished on account of the loss of the thing bound existed as to the extent of the liability, both of the agent and for
for the payment thereof. the owner of the vessel. Such liability is limited by the proposed
code to the value of the vessel and other things appertaining
thereto."cralaw virtua1aw library
DECISION
There is no doubt that if the Navarra had not been entirely lost,
the agent, having held liable for the negligence of the captain of
ARELLANO, C.J. : the vessel, could have abandoned her with all her equipment and
the freight money earned during the voyage, thus bringing
himself within the provisions of the article 837 in so far as the
The Philippine Shipping Company, the owner of the steamship subsidiary civil liability is concerned. This abandonment which
Nuestra Sra. de Lourdes, claims an indemnification of 44,000 would have amounted to an offer of the value of the vessel, of her
pesos for the loss of the said ship as a result of a collision. equipment, and freight money earned could not have been
Ynchusti & Co. also claimed 24,705.64 pesos as an refused, and the agent could not have been personally compelled,
indemnification for the loss of the cargo of hemp and coprax under such circumstances, to pay the 18,000 pesos, the
carried by the said ship on her last trip. The defendant, Francisco estimated value of the vessel at the time of the collision.
Garcia Vergara, was the owner of the steamship Navarra, which
collided with the Lourdes. This is the difference which exist between the lawful acts and
lawful obligation of the captain and the liability which he incurs
From the judgment of the trial court the Philippine Shipping on account of any unlawful act committed by him. In the first
Company and the defendant Vergara appealed, but the latter has case, the lawful acts and obligations of the captain beneficial to
failed to prosecute his appeal by a bill of exceptions or otherwise. the vessel may be enforced as against the agent for the reason
The only appellant who has prosecuted this appeal now reduced that such obligations arise from the contract of agency (provided,
its claim to 18,000 pesos, the value of the colliding vessel. however, that the captain does not exceed his authority), while as
to any liability incurred by the captain through his unlawful acts,
The court below found as a matter of fact that the steamship the ship agent is simply subsidiarily civilly liable. This liability of
Lourdes was sailing in accordance with law, but that the Navarra the agent is limited to the vessel and it does not extend further.
was not, and was therefore responsible for the collision. (Bill of For this reason the Code of Commerce makes agent liable to the
exceptions, p. 7.) The court also found as a fact that "both ships extent of the value of the vessel, as to the codes of the principal
with their respective cargoes were entirely lost." Construing maritime nations provided, with the vessel, and not individually.
article 837 of the Code Commerce, the court below held "that the Such is also the spirit of our code.
defendant was not responsible to the plaintiff for the value of the
steamship Lourdes, with the costs against the latter." (Bill of The spirit of our code is accurately set forth in a treatise on
exceptions, p. 8.) maritime law, from which we deem proper to quote the following
as the basis of this decision:jgc:chanrobles.com.ph
But the appellant, the Philippine Shipping Company, contends
that the defendant should pay to 18,000 pesos, the value of the "That which distinguishes the maritime from the civil law and
Navarra at the time of its loss; that this is the sense in which the even from the mercantile law in general is the real and
provisions of article 837 of the Code of Commerce should be hypothecary nature of the former, and the many securities of a
understood; that said code has followed the principles of the real nature that maritime customs from time immemorial, the
English law and not those of the American law, and that it was laws, the codes, and the later jurisprudence, have provided for
immaterial whether the Navarra had been entirely lost, provided the protection of the various and conflicting interest which are
her value at the time she was lost could be ascertained, since the ventured and risked in maritime expeditions, such as the
extent of the liability of the owner of the colliding vessel for the interests of the vessel and of the agent, those of the owners of the
damages resulting from the collision is to be determined in
accordance with such value.
properties on board the M/L “Consuelo V” as a result of a
maritime collision between said vessel and the M/S “Bowline
cargo and consignees, those who salvage the ship, those who
make loans upon the cargo, those of the sailors and members of Knot” on May 4, 1948, a few kilometers distant from San Ramon
Beach, Zamboanga City.
the crew as to their wages, and those of a constructor as to repairs
made to the vessel. On appeal, the Court of Appeals found the following facts to have
been established:chanroblesvirtuallawlibrary
"As evidence of this "real" nature of the maritime law we have (1)
the limitation of the liability of the agents to the actual value of “From 7:chanroblesvirtuallawlibrary00 to
the vessel and the freight money, and (2) the right to retain the 8:chanroblesvirtuallawlibrary00 o’clock in the evening of May 4,
cargo and the embargo and detention of the vessel even cases 1948, the M/L “Consuelo V”, laden with cargoes and passengers
where the ordinary civil law would not allow more than a personal left the port of Zamboanga City bound for Siokon under the
action against the debtor or person liable. It will be observed that command of Faustino Macrohon. She was then towing a kumpit,
these rights are correlative, and naturally so, because if the agent named “Sta. Maria Bay”. The weather was good and fair. Among
can exempt himself from liability by abandoning the vessel and her passengers were the Plaintiff Insa Abdulhaman, his wife
freight money, thus avoiding the possibility of risking his whole Carimla Mora and their five children already mentioned. The
fortune in the business, it is also just that his maritime creditor Plaintiff and his wife paid their fare before the voyage started.
may for any reason attach the vessel itself to secure his claim On that same night the M/S “Bowline Knot” was navigating from
without waiting for a settlement of his rights by a final judgment, Maribojoc towards Zamboanga.
even to the prejudice of a third person.
Between 9:chanroblesvirtuallawlibrary30 to
"This repeals the civil law to such an extent that, in certain cases, 10:chanroblesvirtuallawlibrary00 in the evening the dark clouds
where the mortgaged property is lost no personal action lies bloated with rain began to fall and the gushing strong wind began
against the owner or agent of the vessel. For instance, where the to blow steadily harder, lashing the waves into a choppy and
vessel is lost the sailors and members of the crew can not recover roaring sea. Such weather lasted for about an hour and then it
their wages; in case of collision, the liability of the agent is limited became fair although it was showering and the visibility was good
as aforesaid, and in case of shipwrecks, those who loan their enough.
money on the vessel and cargo lose all their rights and can not When some of the passengers of the M/L “Consuelo V” were then
claim reimbursement under the law. sleeping and some were lying down awake, all of a sudden they
felt the shocking collision of the M/L “Consuelo V” and a big
"There are two reasons why it is impossible to do away with these motorship, which later on was identified as the M/V “Bowline
privileges, to wit: (1) The risk to which the thing is exposed, and Knot”.
(2) the ’real’ nature of maritime law, exclusively ’real,’ according
to which the liability of the parties is limited to a thing to which Because the M/L “Consuelo V” capsized, her crew and
is at mercy of the waves. If the agent is only liable with the vessel passengers, before realizing what had happened, found
and freight money and both may be lost through the accidents of themselves swimming and floating on the crest of the waves and
navigation it is only just that the maritime creditor have some as a result of which nine (9) passengers were dead and missing
means of obviating this precarious nature of his rights by and all the cargoes carried on said boat, including those of the
detaining the ship, his only security, before it is lost. Plaintiff as appear in the list, Exhibit “A”, were also lost.
Among the dead passengers found were Maria, Amlasa, Bidoaya
"The liens, tacit or legal, which may exist upon the vessel and and Bidalla, all surnamed Inasa, while the body of the child
which a purchaser of the same would be obliged to respect and Abdula Inasa of 6 years of age was never recovered. Before the
recognize — in addition to those existing in favor of the State by collision, none of the passengers were warned or informed of the
virtue of the privileges which are granted to it by all the laws — impending danger as the collision was so sudden and
pilot, tonnage, and port dues and other similar charges, the unexpected. All those rescued at sea were brought by the M/V
wages of the crew earned during the last voyage as provided in “Bowline Knot” to Zamboanga City.” (Decision of C. A., pp. 5-6).
article 646, of the Code of Commerce, salvage dues under article
842, the indemnification due to the captain of the vessel in case As the cause of the collision, the Court of Appeals affirmed the
his contract is terminated on account of the voluntary sale of the findings of the Board of Marine Inquiry, that the commanding
ship and the insolvency of the owner as provided in article 608, officer of the colliding vessels had both been negligent in
and other liabilities arising from collisions under article 837 and operating their respective vessels. Wherefore, the Court held the
838." (Madariaga, pp. 60-62, 63, 85.) owners of both vessels solidarily liable to Plaintiff for the damages
caused to him by the collision, under Article 827 of the Code of
We accordingly hold that the defendant is liable for the Commerce; chan roblesvirtualawlibrarybut exempted Defendant
indemnification to which the plaintiff is entitled by reason of the Lim Hong To from liability by reason of the sinking and total loss
collision, but he is not required to pay such indemnification of of his vessel, the M/L “Consuelo V”, while the other Defendant,
the reason that the obligation thus incurred has been the Manila Steamship Co., owner of the M/S “Bowline Knot”, was
extinguished on account of the loss of the thing bound for the ordered to pay all of Plaintiff’s damages in the amount of
payment thereof, and in this respect the judgment of the court P20,784.00 plus one-half of the costs. It is from this judgment
below is affirmed except in so far as it requires the plaintiff to pay that Defendant Manila Steamship Co. had appealed to this Court.
the costs of this action, which is not exactly proper. After the Petitioner Manila Steamship Co. pleads that it is exempt from any
expiration of twenty days let judgment be entered in accordance liability to Plaintiff under Article 1903 of the Civil Code because it
herewith and ten days thereafter the record be remanded to the had exercised the diligence of a good father of a family in the
Court of First Instance for execution. So ordered. selection of its employees, particularly Third Mate Simplicio
Ilagan, the officer in command of its vessels, the M/S “Bowline
Torres, Mapa, Johnson, and Carson, JJ., concur. Knot”, at the time of the collision. This defense is untenable.
While it is true that Plaintiff’s action against Petitioner is based on
a tort or quasi-delict, the tort in question is not a civil tort under
EN BANC the Civil Code but a maritime tort resulting in a collision at sea,
[G.R. No. L-9534. September 29, 1956.] governed by Articles 826-939 of the Code of Commerce. Under
Article 827 of the Code of Commerce, in case of collision between
MANILA STEAMSHIP CO., INC., Petitioner, vs. INSA two vessels imputable to both of them, each vessel shall suffer
ABDULHAMAN (MORO) and LIM HONG TO, Respondents. her own damage and both shall be solidarily liable for the
damages occasioned to their cargoes. The characteristic language
of the law in making the “vessels” solidarily liable for the damages
DECISION due to the maritime collision emphasizes the direct nature of the
REYES, J. B. L., J.: responsibilities on account of the collision incurred by the
shipowner under maritime law, as distinguished from the civil
This case was begun in the Court of First Instance of Zamboanga law and mercantile law in general. This direct responsibility is
(Civil Case No. 170) by Insa Abdulhaman against the Manila recognized in Article 618 of the Code of Commerce under which
Steamship Co., owner of the M/S “Bowline Knot”, and Lim Hong the captain shall be civilly liable to the ship agent, and the latter
To, owner of the M/L “Consuelo V”, to recover damages for the is the one liable to third persons, as pointed out in the collision
death of his (Plaintiff’s) five children and loss of personal
permission to operate, despite the lack of properly trained and
experienced, crew, Respondent Lim Hong To gave as a reason —
case of Yueng Sheng Exchange & Trading Co. vs. Urrutia & Co.,
12 Phil. 747, 753:chanroblesvirtuallawlibrary “that the income derived from the vessel is insufficient to pay
licensed officers who demand high salaries”,
“The responsibility involved in the present action is that derived
from the management of the vessel, which was defective on and expressly declared:chanroblesvirtuallawlibrary
account of lack of skill, negligence, or fault, either of the captain
or of the crew, for which the captain is responsible to the agent, “That in case of any accident, damage or loss, I shall assume full
who in his turn is responsible to the third party prejudiced or risk and responsibility for all the consequences thereof.” (Exhibit
damaged. (Article 618, Code of Commerce).” 2).

In fact, it is a general principle, well established maritime law and His permit to operate, in fact, stipulated —
custom, that shipowners and ship agents are civilly liable for the “that in case of any accident, damage or loss, the registered owner
acts of the captain (Code of Commerce, Article 586) and for the thereof shall assume full risk and responsibility for all the
indemnities due the third persons (Article 587); chan consequences thereof, and that said vessel shall be held
roblesvirtualawlibraryso that injured parties may immediately answerable for any negligence, disregard or violation of any of the
look for reimbursement to the owner of the ship, it being conditions herein imposed and for any consequence arising from
universally recognized that the ship master or captain is primarily such negligence, disregard or violations.” (Exhibit 3.)
the representative of the owner (Standard Oil Co. vs. Lopez
Castelo, 42 Phil. 256, 260). This direct liability, moderated and The Court of Appeals held that neither the letter (Exhibit 2) nor
limited by the owner’s right of abandonment of the vessel and the permit (Exhibit 3) contained any waiver of the right of
earned freight (Article 587), has been declared to exist, not only Respondent Lim Hong To to limit his liability to the value of his
in case of breached contracts, but also in cases of tortious motor launch and that he did not lose the statutory right to limit
negligence (Yu Biao Sontua vs. Osorio, 43 Phil. 511, his liability by abandonment of the vessel, as conferred by Article
515):chanroblesvirtuallawlibrary 587 of the Code of Commerce.

“In the second assignment of error, the Appellant contends that We find the ruling untenable. Disregarding the question whether
the Defendant ought not to be held liable for the negligence of his mere inability to meet the salary demands of duly licensed
agents and employees. masters and engineers constitutes non-availability thereof that
would excuse noncompliance with the law and authorize
It is proven that the agents and employees, through whose operation without licensed officers under Act 3553, the fact
negligence the explosion and fire in question occurred, were remains that by operating with an unlicensed master, Lim Hong
agents, employees and mandatories of the Defendant. Where the To deliberately increased the risk to which the passengers and
vessel is one of freight, a public concern or public utility, its owner shippers of cargo aboard the “Consuelo V” would be subjected. In
or agents is liable for the tortious acts of his agents (Articles 587, his desire to reap greater benefits in the maritime trade, Lim Hong
613, and 618 Code of Commerce; chan roblesvirtualawlibraryand To willfully augmented the dangers and hazards to his vessel’s
Article 1902, 1903, 1908, Civil Code). This principle has been unwarry passengers, who would normally assume that the
repeatedly upheld in various decisions of this court. launch officers possessed the necessary skill and experience to
The doctrines cited by the Appellant in support of his theory have evade the perils of the sea. Hence, the liability of said Respondent
reference to the relations between principal and agent in general, cannot be the identical to that of a shipowner who bears in mind
but not to the relations between ship agent and his agents and the safety of the passengers and cargo by employing duly licensed
employees; chan roblesvirtualawlibraryfor this reason they officers. To hold, as the Court of Appeals has done, that Lim Hong
cannot be applied in the present case.” To may limit his liability to the value of his vessels, is to erase all
difference between compliance with law and the deliberate
It is easy to see that to admit the defense of due diligence of a disregard thereof. To such proposition we cannot assent.
bonus paterfamilias (in the selection and vigilance of the officers
and crew) as exempting the shipowner from any liability for their The international rule is to the effect that the right of
faults, would render nugatory the solidary liability established by abandonment of vessels, as a legal limitation of a shipowner’s
Article 827 of the Code of Commerce for the greater protection of liability, does not apply to cases where the injury or the average
injured parties. Shipowners would be able to escape liability in is due to shipowner’s own fault. Fariña (Derecho Comercial
practically every case, considering that the qualifications and Maritimo, Vol. I, pp. 122-123), on the authority of judicial
licensing of ship masters and officers are determined by the State, precedents from various nations, sets the rule to be as
and that vigilance is practically impossible to exercise over follows:chanroblesvirtuallawlibrary
officers and crew of vessels at sea. To compel the parties “Esta generalmente admitido que el propietario del buque no
prejudiced to look to the crew for indemnity and redress would be tiene derecho a la limitacion legal de responsibilidad si los daños
an illusory remedy for almost always its members are, from o averias que dan origen a la limitacion provienen de sus propias
captains down, mere wage earners. culpas. El Convenio de Bruselas de 25 de agosto de 1924 tambien
We, therefore, find no reversible error in the refusal of the Court invalida la limitacion en el caso de culpa personal en los
of Appeals to consider the defense of the Manila Steamship Co., accidentes o averías sobrevenidos (Art. 2°).”
that it is exempt from liability for the collision with the M/L To the same effect, a noted French author
“Consuelo V” due to absence of negligence on its parts in the states:chanroblesvirtuallawlibrary
selection and supervision of the officers and crew of the M/S
“Bowline Knot”. “La limitacion de la responsabilidad maritima ha sido admitida
para proteger a los armadores contra los actos abusivos de sus
The case of Walter S. Smith & Co. vs. Cadwallader Gibson Lumber encargados y no dejar su patrimonio entero a la discrecion del
Co., 55 Phil. 517, invoked by Petitioner, is not the point. Said case personal de sus buques, porque este personal cumple sus
treated of a civil tort, in that the vessel of the Defendant, allegedly obligaciones en condiciones especiales; chan
negligently managed by its captain in the course of its maneuvers roblesvirtualawlibrarypero los armadores no tienen por sobre los
to moor at Plaintiff’s wharf, struck the same and partially demas derecho a ser amparados contra ellos mismos ni a ser
demolished it, causing damage to Plaintiff. Because the tort protegidos contra sus propios actos.”
allegedly committed was civil, the provisions of Article 1903 of the
Civil Code were correctly applied. The present case, on the other (Danjon, Derecho Maritimo, Vol. 2, p. 332). (Emphasis supplied.)
hand, involves tortious conduct resulting in a maritime collision; That Lim Hong To understood that he would incur greater liability
chan roblesvirtualawlibrarywherefore, the liability of the than that normally borne by shipowners, is clear from his
shipowner is, as already stated, governed by the provisions of the assumption of “ full” risk and responsibility for all the
Code of Commerce and not by the Civil Code. consequences” of the operation of the M/L “Consuelo V”; chan
We agree, however, with Petitioner-Appellant, that the Court of roblesvirtualawlibrarya responsibility expressly assumed in his
Appeals was in error in declaring the Respondent Lim Hong To, letter Exhibit 2, and imposed in his special permit, in addition to
owner of the M/L “Consuelo V”, exempt from liability to the the vessel itself being held answerable. This express assumption
original Plaintiff, Abdulhaman, in view of the total loss of his own of “full risk and responsibility” would be meaningless unless
vessel, that sank as a result of the collision. It is to be noted that intended to broaden the liability of Respondent Lim Hong To
both the master and the engineer of the motor launch “Consuelo beyond the value of his vessel.
V” were not duly licensed as such (Exh. 2). In applying for
event, FELMAN had abandoned all its rights, interests and
ownership over MV Asilda together with her freight and
In resume, we hold:chanroblesvirtuallawlibrary
appurtenances for the purpose of limiting and extinguishing its
(1) That the Manila Steamship Co., owner of the M/S “Bowline liability under Art. 587 of the Code of Commerce.iii[2]
Knot”, is directly and primarily responsible in tort for the injuries
caused to the Plaintiff by the collision of said vessel with the On 17 February 1986 the trial court dismissed the complaint of
PHILAMGEN. On appeal the Court of Appeals set aside the
launch “Consuelo V”, through the negligence of the crews of both
dismissal and remanded the case to the lower court for trial on
vessels, and it may not escape liability on the ground that it
the merits. FELMAN filed a petition for certiorari with this Court
exercised due diligence in the selection and supervision of the
officers and crew of the “Bowline Knot”; but it was subsequently denied on 13 February 1989.

(2) That Lim Hong To, as owner of the motor launch “Consuelo On 28 February 1992 the trial court rendered judgment in favor
of FELMAN.iii[3] It ruled that MV Asilda was seaworthy when it
V”, having caused the same to sail without licensed officers, is
left the port of Zamboanga as confirmed by certificates issued by
liable for the injuries caused by the collision over and beyond the
value of said launch; the Philippine Coast Guard and the shipowners surveyor
attesting to its seaworthiness. Thus the loss of the vessel and its
(3) That both vessels being at fault, the liability of Lim Hong To entire shipment could only be attributed to either a fortuitous
and Manila Steamship Co. to the Plaintiff herein is in solidum, as event, in which case, no liability should attach unless there was
prescribed by Article 827 of the Code of Commerce. a stipulation to the contrary, or to the negligence of the captain
and his crew, in which case, Art. 587 of the Code of Commerce
In view of the foregoing, the decision of the Court of Appeals is
should apply.
modified, and that of the Court of First Instance affirmed, in the
sense of declaring both original Defendants solidarily liable to The lower court further ruled that assuming MV Asilda was
Plaintiff Insa Abdulhaman in the sum of P20,784.00 and the cost unseaworthy, still PHILAMGEN could not recover from FELMAN
of the litigation, without prejudice to the right of the one who since the assured (Coca-Cola Bottlers Philippines, Inc.) had
should pay the judgment in full to demand contribution from his breached its implied warranty on the vessels seaworthiness.
co-Defendant. Resultantly, the payment made by PHILAMGEN to the assured
was an undue, wrong and mistaken payment. Since it was not
Paras, C.J., Padilla, Montemayor, Bautista Angelo, Labrador,
legally owing, it did not give PHILAMGEN the right of subrogation
Concepcion, Endencia and Felix, JJ., concur.
so as to permit it to bring an action in court as a subrogee.
On 18 March 1992 PHILAMGEN appealed the decision to the
FIRST DIVISION Court of Appeals. On 29 August 1994 respondent appellate court
rendered judgment finding MV Asilda unseaworthy for being top-
[G.R. No. 116940. June 11, 1997]
heavy as 2,500 cases of Coca-Cola softdrink bottles were
THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, improperly stowed on deck. In other words, while the vessel
INC., petitioner, vs. COURT OF APPEALS and FELMAN SHIPPING possessed the necessary Coast Guard certification indicating its
LINES, respondents. seaworthiness with respect to the structure of the ship itself, it
was not seaworthy with respect to the cargo. Nonetheless, the
DECISION appellate court denied the claim of PHILAMGEN on the ground
BELLOSILLO, J.: that the assureds implied warranty of seaworthiness was not
complied with. Perfunctorily, PHILAMGEN was not properly
This case deals with the liability, if any, of a shipowner for loss of subrogated to the rights and interests of the shipper.
cargo due to its failure to observe the extraordinary diligence Furthermore, respondent court held that the filing of notice of
required by Art. 1733 of the Civil Code as well as the right of the abandonment had absolved the shipowner/agent from liability
insurer to be subrogated to the rights of the insured upon under the limited liability rule.
payment of the insurance claim.
The issues for resolution in this petition are: (a) whether MV
On 6 July 1983 Coca-Cola Bottlers Philippines, Inc., loaded on Asilda was seaworthy when it left the port of Zamboanga; (b)
board MV Asilda, a vessel owned and operated by respondent whether the limited liability under Art. 587 of the Code of
Felman Shipping Lines (FELMAN for brevity), 7,500 cases of 1- Commerce should apply; and, (c) whether PHILAMGEN was
liter Coca-Cola softdrink bottles to be transported from properly subrogated to the rights and legal actions which the
Zamboanga City to Cebu City for consignee Coca-Cola Bottlers shipper had against FELMAN, the shipowner.
Philippines, Inc., Cebu.iii[1] The shipment was insured with
petitioner Philippine American General Insurance Co., Inc. MV Asilda was unseaworthy when it left the port of Zamboanga.
(PHILAMGEN for brevity), under Marine Open Policy No. 100367- In a joint statement, the captain as well as the chief mate of the
PAG. vessel confirmed that the weather was fine when they left the port
of Zamboanga. According to them, the vessel was carrying 7,500
MV Asilda left the port of Zamboanga in fine weather at eight cases of 1-liter Coca-Cola softdrink bottles, 300 sacks of
oclock in the evening of the same day. At around eight forty-five seaweeds, 200 empty CO2 cylinders and an undetermined
the following morning, 7 July 1983, the vessel sank in the waters quantity of empty boxes for fresh eggs. They loaded the empty
of Zamboanga del Norte bringing down her entire cargo with her boxes for eggs and about 500 cases of Coca-Cola bottles on
including the subject 7,500 cases of 1-liter Coca-Cola softdrink deck.iii[4] The ship captain stated that around four oclock in the
bottles. morning of 7 July 1983 he was awakened by the officer on duty
On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, to inform him that the vessel had hit a floating log. At that time
Inc., Cebu plant, filed a claim with respondent FELMAN for he noticed that the weather had deteriorated with strong
recovery of damages it sustained as a result of the loss of its southeast winds inducing big waves. After thirty minutes he
softdrink bottles that sank with MV Asilda. Respondent denied observed that the vessel was listing slightly to starboard and
the claim thus prompting the consignee to file an insurance claim would not correct itself despite the heavy rolling and pitching. He
with PHILAMGEN which paid its claim of P755,250.00. then ordered his crew to shift the cargo from starboard to portside
until the vessel was balanced. At about seven oclock in the
Claiming its right of subrogation PHILAMGEN sought recourse morning, the master of the vessel stopped the engine because the
against respondent FELMAN which disclaimed any liability for vessel was listing dangerously to portside. He ordered his crew to
the loss. Consequently, on 29 November 1983 PHILAMGEN sued shift the cargo back to starboard. The shifting of cargo took about
the shipowner for sum of money and damages. an hour afterwhich he rang the engine room to resume full speed.
In its complaint PHILAMGEN alleged that the sinking and total At around eight forty-five, the vessel suddenly listed to portside
loss of MV Asilda and its cargo were due to the vessels and before the captain could decide on his next move, some of the
unseaworthiness as she was put to sea in an unstable condition. cargo on deck were thrown overboard and seawater entered the
It further alleged that the vessel was improperly manned and that engine room and cargo holds of the vessel. At that instance, the
its officers were grossly negligent in failing to take appropriate master of the vessel ordered his crew to abandon ship. Shortly
measures to proceed to a nearby port or beach after the vessel thereafter, MV Asilda capsized and sank. He ascribed the sinking
started to list. to the entry of seawater through a hole in the hull caused by the
On 15 February 1985 FELMAN filed a motion to dismiss based vessels collision with a partially submerged log.iii[5]
on the affirmative defense that no right of subrogation in favor of
PHILAMGEN was transmitted by the shipper, and that, in any
It was already established at the outset that the sinking of MV
Asilda was due to its unseaworthiness even at the time of its
The Elite Adjusters, Inc., submitted a report regarding the sinking
of MV Asilda. The report, which was adopted by the Court of departure from the port of Zamboanga. It was top-heavy as an
Appeals, reads - excessive amount of cargo was loaded on deck. Closer supervision
on the part of the shipowner could have prevented this fatal
We found in the course of our investigation that a reasonable miscalculation. As such, FELMAN was equally negligent. It
explanation for the series of lists experienced by the vessel that cannot therefore escape liability through the expedient of filing a
eventually led to her capsizing and sinking, was that the vessel notice of abandonment of the vessel by virtue of Art. 587 of the
was top-heavy which is to say that while the vessel may not have Code of Commerce.
been overloaded, yet the distribution or stowage of the cargo on
Under Art 1733 of the Civil Code, (c)ommon carriers, from the
board was done in such a manner that the vessel was in top-
nature of their business and for reasons of public policy, are
heavy condition at the time of her departure and which condition
rendered her unstable and unseaworthy for that particular bound to observe extraordinary diligence in the vigilance over the
voyage. goods and for the safety of the passengers transported by them,
according to all the circumstances of each case x x x x" In the
In this connection, we wish to call attention to the fact that this event of loss of goods, common carriers are presumed to have
vessel was designed as a fishing vessel x x x x and it was not acted negligently. FELMAN, the shipowner, was not able to rebut
designed to carry a substantial amount or quantity of cargo on this presumption.
deck. Therefore, we believe strongly that had her cargo been
confined to those that could have been accommodated under In relation to the question of subrogation, respondent appellate
court found MV Asilda unseaworthy with reference to the cargo
deck, her stability would not have been affected and the vessel
and therefore ruled that there was breach of warranty of
would not have been in any danger of capsizing, even given the
prevailing weather conditions at that time of sinking. seaworthiness that rendered the assured not entitled to the
payment of is claim under the policy. Hence, when PHILAMGEN
But from the moment that the vessel was utilized to load heavy paid the claim of the bottling firm there was in effect a voluntary
cargo on its deck, the vessel was rendered unseaworthy for the payment and no right of subrogation accrued in its favor. In other
purpose of carrying the type of cargo because the weight of the words, when PHILAMGEN paid it did so at its own risk.
deck cargo so decreased the vessels metacentric height as to
cause it to become unstable. It is generally held that in every marine insurance policy the
assured impliedly warrants to the assurer that the vessel is
Finally, with regard to the allegation that the vessel encountered seaworthy and such warranty is as much a term of the contract
big waves, it must be pointed out that ships are precisely as if expressly written on the face of the policy.iii[12] Thus Sec.
designed to be able to navigate safely even during heavy weather 113 of the Insurance Code provides that (i)n every marine
and frequently we hear of ships safely and successfully insurance upon a ship or freight, or freightage, or upon anything
weathering encounters with typhoons and although they may which is the subject of marine insurance, a warranty is implied
sustain some amount of damage, the sinking of ship during heavy that the ship is seaworthy. Under Sec. 114, a ship is seaworthy
weather is not a frequent occurrence and is not likely to occur when reasonably fit to perform the service, and to encounter the
unless they are inherently unstable and unseaworthy x x x x ordinary perils of the voyage, contemplated by the parties to the
policy. Thus it becomes the obligation of the cargo owner to look
We believe, therefore, and so hold that the proximate cause of the
for a reliable common carrier which keeps its vessels in seaworthy
sinking of the M/V Asilda was her condition of unseaworthiness
condition. He may have no control over the vessel but he has full
arising from her having been top-heavy when she departed from
control in the selection of the common carrier that will transport
the Port of Zamboanga. Her having capsized and eventually sunk
his goods. He also has full discretion in the choice of assurer that
was bound to happen and was therefore in the category of an
will underwrite a particular venture.
inevitable occurrence (underscoring supplied).iii[6]
We need not belabor the alleged breach of warranty of
We subscribe to the findings of the Elite Adjusters, Inc., and the
seaworthiness by the assured as painstakingly pointed out by
Court of Appeals that the proximate cause of the sinking of MV
FELMAN to stress that subrogation will not work in this case. In
Asilda was its being top-heavy. Contrary to the ship captains
policies where the law will generally imply a warranty of
allegations, evidence shows that approximately 2,500 cases of
seaworthiness, it can only be excluded by terms in writing in the
softdrink bottles were stowed on deck. Several days after MV
policy in the clearest language.iii[13] And where the policy
Asilda sank, an estimated 2,500 empty Coca-Cola plastic cases
stipulates that the seaworthiness of the vessel as between the
were recovered near the vicinity of the sinking. Considering that
assured and the assurer is admitted, the question of
the ships hatches were properly secured, the empty Coca-Cola
seaworthiness cannot be raised by the assurer without showing
cases recovered could have come only from the vessels deck
concealment or misrepresentation by the assured.iii[14]
cargo. It is settled that carrying a deck cargo raises the
presumption of unseaworthiness unless it can be shown that the The marine policy issued by PHILAMGEN to the Coca-Cola
deck cargo will not interfere with the proper management of the bottling firm in at least two (2) instances has dispensed with the
ship. However, in this case it was established that MV Asilda was usual warranty of worthiness. Paragraph 15 of the Marine Open
not designed to carry substantial amount of cargo on deck. The Policy No. 100367-PAG reads (t)he liberties as per Contract of
inordinate loading of cargo deck resulted in the decrease of the Affreightment the presence of the Negligence Clause and/or
vessels metacentric heightiii[7] thus making it unstable. The Latent Defect Clause in the Bill of Lading and/or Charter Party
strong winds and waves encountered by the vessel are but the and/or Contract of Affreightment as between the Assured and the
ordinary vicissitudes of a sea voyage and as such merely Company shall not prejudice the insurance. The seaworthiness of
contributed to its already unstable and unseaworthy condition. the vessel as between the Assured and the Assurers is hereby
admitted.iii[15]
On the second issue, Art. 587 of the Code of Commerce is not
applicable to the case at bar.iii[8] Simply put, the ship agent is The same clause is present in par. 8 of the Institute Cargo
liable for the negligent acts of the captain in the care of goods Clauses (F.P.A.) of the policy which states (t)he seaworthiness of
loaded on the vessel. This liability however can be limited through the vessel as between the Assured and Underwriters in hereby
abandonment of the vessel, its equipment and freightage as admitted x x x x"iii[16]
provided in Art. 587. Nonetheless, there are exceptional
The result of the admission of seaworthiness by the assurer
circumstances wherein the ship agent could still be held
PHILAMGEN may mean one or two things: (a) that the warranty
answerable despite the abandonment, as where the loss or injury
of the seaworthiness is to be taken as fulfilled; or, (b) that the risk
was due to the fault of the shipowner and the captain.iii[9] The
of unseaworthiness is assumed by the insurance company.iii[17]
international rule is to the effect that the right of abandonment
The insertion of such waiver clauses in cargo policies is in
of vessels, as a legal limitation of a shipowners liability, does not
recognition of the realistic fact that cargo owners cannot control
apply to cases where the injury or average was occasioned by the
the state of the vessel. Thus it can be said that with such
shipowners own fault.iii[10] It must be stressed at this point that
categorical waiver, PHILAMGEN has accepted the risk of
Art. 587 speaks only of situations where the fault or negligence is
unseaworthiness so that if the ship should sink by
committed solely by the captain. Where the shipowner is likewise
unseaworthiness, as what occurred in this case, PHILAMGEN is
to be blamed, Art. 587 will not apply, and such situation will be
liable.
covered by the provisions of the Civil Code on common
carrier.iii[11]
the ticket numbers were listed in the passenger manifest; and
that the Don Juan left Pier 2, North Harbor, Manila on April 22,
Having disposed of this matter, we move on to the legal basis for
subrogation. PHILAMGENs action against FELMAN is squarely 1980 and sank that night after being rammed by the oil tanker
sanctioned by Art. 2207 of the Civil Code which provides: M/T Tacloban City, and that, as a result of the collision, some of
the passengers of the M/V Don Juan died. Petitioner, however,
Art. 2207. If the plaintiffs property has been insured, and he has denied that the four relatives of private respondents actually
received indemnity from the insurance company for the injury or boarded the vessel as shown by the fact that their bodies were
loss arising out of the wrong or breach of contract complained of, never recovered. Petitioner further averred that the Don Juan was
the insurance company shall be subrogated to the rights of the seaworthy and manned by a full and competent crew, and that
insured against the wrongdoer or the person who has violated the the collision was entirely due to the fault of the crew of the M/T
contract. If the amount paid by the insurance company does not Tacloban City.
fully cover the injury or loss, the aggrieved party shall be entitled
to recover the deficiency from the person causing the loss or On January 20, 1986, the PNOC and petitioner Negros Navigation
injury. Co., Inc. entered into a compromise agreement whereby petitioner
assumed full responsibility for the payment and satisfaction of all
In Pan Malayan Insurance Corporation v. Court of Appeals,iii[18] claims arising out of or in connection with the collision and
we said that payment by the assurer to the assured operates as releasing the PNOC and the PNOC/STC from any liability to it.
an equitable assignment to the assurer of all the remedies which The agreement was subsequently held by the trial court to be
the assured may have against the third party whose negligence binding upon petitioner, PNOC and PNOC/STC. Private
or wrongful act caused the loss. The right of subrogation is not respondents did not join in the agreement.
dependent upon, nor does it grow out of any privity of contract or
upon payment by the insurance company of the insurance claim. After trial, the court rendered judgment on February 21, 1991,
the dispositive portion of which reads as follows:
It accrues simply upon payment by the insurance company of the
insurance claim. WHEREFORE, in view of the foregoing, judgment is hereby
The doctrine of subrogation has its roots in equity. It is designed rendered in favor of the plaintiffs, ordering all the defendants to
pay jointly and severally to the plaintiffs damages as follows:
to promote and to accomplish justice and is the mode which
equity adopts to compel the ultimate payment of a debt by one To Ramon Miranda:
who in justice, equity and good conscience ought to pay.iii[19]
Therefore, the payment made by PHILAMGEN to Coca-Cola P42,025.00 for actual damages;
Bottlers Philippines, Inc., gave the former the right to bring an P152,654.55 as compensatory damages for loss of
action as subrogee against FELMAN. Having failed to rebut the earning capacity of his wife;
presumption of fault, the liability of FELMAN for the loss of the
7,500 cases of 1-liter Coca-Cola softdrink bottles is inevitable. P90,000.00 as compensatory damages for
wrongful death of three (3) victims;
WHEREFORE, the petition is GRANTED. Respondent FELMAN
SHIPPING LINES is ordered to pay petitioner PHILIPPINE P300,000.00 as moral damages;
AMERICAN GENERAL INSURANCE CO., INC., Seven Hundred P50,000.00 as exemplary damages, all in the total
Fifty-five Thousand Two Hundred and Fifty Pesos (P755,250.00) amount of P634,679.55; and
plus legal interest thereon counted from 29 November 1983, the
date of judicial demand, pursuant to Arts. 2212 and 2213 of the P40,000.00 as attorneys fees.
Civil Code.iii[20] To Spouses Ricardo and Virginia de la Victoria:
SO ORDERED. P12,000.00 for actual damages;
SECOND DIVISION P158,899.00 as compensatory damages for loss of
[G.R. No. 110398. November 7, 1997] earning capacity;

NEGROS NAVIGATION CO., INC., petitioner, vs. THE COURT OF P30,000.00 as compensatory damages for wrongful death;
APPEALS, RAMON MIRANDA, SPS. RICARDO and VIRGINIA DE P100,000.00 as moral damages;
LA VICTORIA, respondents.
P20,000.00 as exemplary damages, all in the total
DECISION amount of P320,899.00; and
MENDOZA, J.: P15,000.00 as attorneys fees.
This is a petition for review on certiorari of the decision of the On appeal, the Court of Appealsiii[1] affirmed the decision of the
Court of Appeals affirming with modification the Regional Trial Regional Trial Court with modification
Courts award of damages to private respondents for the death of
relatives as a result of the sinking of petitioners vessel. 1. Ordering and sentencing defendants-appellants, jointly and
severally, to pay plaintiff-appellee Ramon Miranda the amount of
In April of 1980, private respondent Ramon Miranda purchased P23,075.00 as actual damages instead of P42,025.00;
from the Negros Navigation Co., Inc. four special cabin tickets
(#74411, 74412, 74413 and 74414) for his wife, daughter, son 2. Ordering and sentencing defendants-appellants, jointly and
and niece who were going to Bacolod City to attend a family severally, to pay plaintiff-appellee Ramon Miranda the amount of
reunion. The tickets were for Voyage No. 457-A of the M/V Don P150,000.00, instead of P90,000.00, as compensatory damages
Juan, leaving Manila at 1:00 p.m. on April 22, 1980. for the death of his wife and two children;
The ship sailed from the port of Manila on schedule. 3. Ordering and sentencing defendants-appellants, jointly and
severally, to pay plaintiffs-appellees Dela Victoria spouses the
At about 10:30 in the evening of April 22, 1980, the Don Juan amount of P50,000.00, instead of P30,000.00, as compensatory
collided off the Tablas Strait in Mindoro, with the M/T Tacloban damages for the death of their daughter Elfreda Dela Victoria;
City, an oil tanker owned by the Philippine National Oil Company
(PNOC) and the PNOC Shipping and Transport Corporation Hence this petition, raising the following issues:
(PNOC/STC). As a result, the M/V Don Juan sank. Several of her (1) whether the members of private respondents families were
passengers perished in the sea tragedy. The bodies of some of the actually passengers of the Don Juan;
victims were found and brought to shore, but the four members
of private respondents families were never found. (2) whether the ruling in Mecenas v. Court of Appeals,iii[2] finding
the crew members of petitioner to be grossly negligent in the
Private respondents filed a complaint on July 16, 1980 in the performance of their duties, is binding in this case;
Regional Trial Court of Manila, Branch 34, against the Negros
Navigation, the Philippine National Oil Company (PNOC), and the (3) whether the total loss of the M/V Don Juan extinguished
PNOC Shipping and Transport Corporation (PNOC/STC), seeking petitioners liability; and
damages for the death of Ardita de la Victoria Miranda, 48, (4) whether the damages awarded by the appellate court are
Rosario V. Miranda, 19, Ramon V. Miranda, Jr., 16, and Elfreda excessive, unreasonable and unwarranted.
de la Victoria, 26.
In its answer, petitioner admitted that private respondents
purchased ticket numbers 74411, 74412, 74413 and 74414; that
delay the sinking of the ship and supervise the abandoning of the
ship.
First. The trial court held that the fact that the victims were
passengers of the M/V Don Juan was sufficiently proven by Petitioner Negros Navigation was found equally negligent in
private respondent Ramon Miranda, who testified that he tolerating the playing of mahjong by the ship captain and other
purchased tickets numbered 74411, 74412, 74413, and 74414 crew members while on board the ship and failing to keep the
at P131.30 each from the Makati office of petitioner for Voyage M/V Don Juan seaworthy so much so that the ship sank within
No. 47-A of the M/V Don Juan, which was leaving Manila on April 10 to 15 minutes of its impact with the M/T Tacloban City.
22, 1980. This was corroborated by the passenger manifest (Exh.
E) on which the numbers of the tickets and the names of Ardita In addition, the Court found that the Don Juan was overloaded.
Miranda and her children and Elfreda de la Victoria appear. The Certificate of Inspection, dated August 27, 1979, issued by
the Philippine Coast Guard Commander at Iloilo City stated that
Petitioner contends that the purchase of the tickets does not the total number of persons allowed on the ship was 864, of whom
necessarily mean that the alleged victims actually took the trip. 810 are passengers, but there were actually 1,004 on board the
Petitioner asserts that it is common knowledge that passengers vessel when it sank, 140 persons more than the maximum
purchase tickets in advance but do not actually use them. Hence, number that could be safely carried by it.
private respondent should also prove the presence of the victims
on the ship. The witnesses who affirmed that the victims were on Taking these circumstances together, and the fact that the M/V
the ship were biased and unreliable. Don Juan, as the faster and better-equipped vessel, could have
avoided a collision with the PNOC tanker, this Court held that
This contention is without merit. Private respondent Ramon even if the Tacloban City had been at fault for failing to observe
Miranda testified that he personally took his family and his niece an internationally-recognized rule of navigation, the Don Juan
to the vessel on the day of the voyage and stayed with them on was guilty of contributory negligence. Through Justice Feliciano,
the ship until it was time for it to leave. There is no reason he this Court held:
should claim members of his family to have perished in the
accident just to maintain an action. People do not normally lie The grossness of the negligence of the Don Juan is underscored
about so grave a matter as the loss of dear ones. It would be more when one considers the foregoing circumstances in the context of
difficult for private respondents to keep the existence of their the following facts: Firstly, the Don Juan was more than twice as
relatives if indeed they are alive than it is for petitioner to show fast as the Tacloban City. The Don Juans top speed was 17 knots;
the contrary. Petitioners only proof is that the bodies of the while that of the Tacloban City was 6.3. knots. Secondly, the Don
supposed victims were not among those recovered from the site Juan carried the full complement of officers and crew members
of the mishap. But so were the bodies of the other passengers specified for a passenger vessel of her class. Thirdly, the Don
reported missing not recovered, as this Court noted in the Juan was equipped with radar which was functioning that night.
Mecenasiii[3] case. Fourthly, the Don Juans officer on-watch had sighted the
Tacloban City on his radar screen while the latter was still four
Private respondent Mirandas testimony was corroborated by (4) nautical miles away. Visual confirmation of radar contact was
Edgardo Ramirez. Ramirez was a seminarian and one of the established by the Don Juan while the Tacloban City was still 2.7
survivors of the collision. He testified that he saw Mrs. Miranda miles away. In the total set of circumstances which existed in the
and Elfreda de la Victoria on the ship and that he talked with instant case, the Don Juan, had it taken seriously its duty of
them. He knew Mrs. Miranda who was his teacher in the grade extraordinary diligence, could have easily avoided the collision
school. He also knew Elfreda who was his childhood friend and with the Tacloban City. Indeed, the Don Juan might well have
townmate. Ramirez said he was with Mrs. Miranda and her avoided the collision even if it had exercised ordinary diligence
children and niece from 7:00 p.m. until 10:00 p.m. when the merely.
collision happened and that he in fact had dinner with them.
Ramirez said he and Elfreda stayed on the deck after dinner and It is true that the Tacloban City failed to follow Rule 18 of the
it was there where they were jolted by the collision of the two International Rules of the Road which requires two (2) power-
vessels. Recounting the moments after the collision, Ramirez driven vessels meeting end on or nearly end on each to alter her
testified that Elfreda ran to fetch Mrs. Miranda. He escorted her course to starboard (right) so that each vessel may pass on the
to the room and then tried to go back to the deck when the lights port side (left) of the other. The Tacloban City, when the two (2)
went out. He tried to return to the cabin but was not able to do vessels were only three-tenths (0.3) of a mile apart, turned (for
so because it was dark and there was a stampede of passengers the second time) 15o to port side while the Don Juan veered hard
from the deck. to starboard. . . . [But] route observance of the International Rules
of the Road will not relieve a vessel from responsibility if the
Petitioner casts doubt on Ramirez testimony, claiming that collision could have been avoided by proper care and skill on her
Ramirez could not have talked with the victims for about three part or even by a departure from the rules.
hours and not run out of stories to tell, unless Ramirez had a
storehouse of stories. But what is incredible about acquaintances In the petition at bar, the Don Juan having sighted the Tacloban
thrown together on a long journey staying together for hours on City when it was still a long way off was negligent in failing to take
end, in idle conversation precisely to while the hours away? early preventive action and in allowing the two (2) vessels to come
to such close quarters as to render the collision inevitable when
Petitioner also points out that it took Ramirez three (3) days there was no necessity for passing so near to the Tacloban City
before he finally contacted private respondent Ramon Miranda to as to create that hazard or inevitability, for the Don Juan could
tell him about the fate of his family. But it is not improbable that choose its own distance. It is noteworthy that the Tacloban City,
it took Ramirez three days before calling on private respondent upon turning hard to port shortly before the moment of collision,
Miranda to tell him about the last hours of Mrs. Miranda and her signalled its intention to do so by giving two (2) short blasts with
children and niece, in view of the confusion in the days following its horn. The Don Juan gave no answering horn blast to signal its
the collision as rescue teams and relatives searched for survivors. own intention and proceeded to turn hard to starboard.
Indeed, given the facts of this case, it is improper for petitioner to We conclude that Capt. Santisteban and Negros Navigation are
even suggest that private respondents relatives did not board the properly held liable for gross negligence in connection with the
ill-fated vessel and perish in the accident simply because their collision of the Don Juan and Tacloban City and the sinking of
bodies were not recovered. the Don Juan leading to the death of hundreds of passengers. . .
Second. In finding petitioner guilty of negligence and in failing to .iii[5]
exercise the extraordinary diligence required of it in the carriage Petitioner criticizes the lower courts reliance on the Mecenas case,
of passengers, both the trial court and the appellate court relied arguing that, although this case arose out of the same incident
on the findings of this Court in Mecenas v. Intermediate Appellate as that involved in Mecenas, the parties are different and trial was
Court,iii[4] which case was brought for the death of other conducted separately. Petitioner contends that the decision in
passengers. In that case it was found that although the proximate this case should be based on the allegations and defenses pleaded
cause of the mishap was the negligence of the crew of the M/T and evidence adduced in it or, in short, on the record of this case.
Tacloban City, the crew of the Don Juan was equally negligent as
it found that the latters master, Capt. Rogelio Santisteban, was The contention is without merit. What petitioner contends may
playing mahjong at the time of collision, and the officer on watch, be true with respect to the merits of the individual claims against
Senior Third Mate Rogelio De Vera, admitted that he failed to call petitioner but not as to the cause of the sinking of its ship on
the attention of Santisteban to the imminent danger facing them. April 22, 1980 and its liability for such accident, of which there
This Court found that Capt. Santisteban and the crew of the M/V can only be one truth. Otherwise, one would be subscribing to
Don Juan failed to take steps to prevent the collision or at least
Fourth. Petitioner contends that, assuming that the Mecenas case
applies, private respondents should be allowed to claim only
the sophistry: truth on one side of the Pyrenees, falsehood on the
other! P43,857.14 each as moral damages because in the Mecenas case,
the amount of P307,500.00 was awarded to the seven children of
Adherence to the Mecenas case is dictated by this Courts policy the Mecenas couple. Under petitioners formula, Ramon Miranda
of maintaining stability in jurisprudence in accordance with the should receive P43,857.14, while the De la Victoria spouses
legal maxim stare decisis et non quieta movere (Follow past should receive P97,714.28.
precedents and do not disturb what has been settled.) Where, as
in this case, the same questions relating to the same event have Here is where the principle of stare decisis does not apply in view
been put forward by parties similarly situated as in a previous of differences in the personal circumstances of the victims. For
that matter, differentiation would be justified even if private
case litigated and decided by a competent court, the rule of stare
respondents had joined the private respondents in the Mecenas
decisis is a bar to any attempt to relitigate the same issue.iii[6] In
Woulfe v. Associated Realties Corporation,iii[7] the Supreme Court case. The doctrine of stare decisis works as a bar only against
issues litigated in a previous case. Where the issue involved was
of New Jersey held that where substantially similar cases to the
not raised nor presented to the court and not passed upon by the
pending case were presented and applicable principles declared
court in the previous case, the decision in the previous case is
in prior decisions, the court was bound by the principle of stare
decisis. Similarly, in State ex rel. Tollinger v. Gill,iii[8] it was held not stare decisis of the question presently presented.iii[16] The
decision in the Mecenas case relates to damages for which
that under the doctrine of stare decisis a ruling is final even as to
petitioner was liable to the claimants in that case.
parties who are strangers to the original proceeding and not
bound by the judgment under the res judicata doctrine. The In the case at bar, the award of P300,000.00 for moral damages
Philadelphia court expressed itself in this wise: Stare decisis is reasonable considering the grief petitioner Ramon Miranda
simply declares that, for the sake of certainty, a conclusion suffered as a result of the loss of his entire family. As a matter of
reached in one case should be applied to those which follow, if fact, three months after the collision, he developed a heart
the facts are substantially the same, even though the parties may condition undoubtedly caused by the strain of the loss of his
be different.iii[9] Thus, in J. M. Tuason v. Mariano, supra, this family. The P100,000.00 given to Mr. and Mrs. de la Victoria is
Court relied on its rulings in other cases involving different likewise reasonable and should be affirmed.
parties in sustaining the validity of a land title on the principle of
stare decisis et non quieta movere. As for the amount of civil indemnity awarded to private
respondents, the appellate courts award of P50,000.00 per victim
Indeed, the evidence presented in this case was the same as those should be sustained. The amount of P30,000.00 formerly set in
presented in the Mecenas case, to wit: De Lima v. Laguna Tayabas Co.,iii[17] Heirs of Amparo delos
Santos v. Court of Appeals,iii[18] and Philippine Rabbit Bus Lines,
Document Mecenas
Inc. v. Intermediate Appellate Courtiii[19] as benchmark was
case This case
subsequently increased to P50,000.00 in the case of Sulpicio
Decision of Commandant Lines, Inc. v. Court of Appeals,iii[20] which involved the sinking of
Exh. 10iii[10] Exh. 11-B- another interisland ship on October 24, 1988.
NN/X
We now turn to the determination of the earning capacity of the
Phil. Coast Guard in BMI Case victims. With respect to Ardita Miranda, the trial court awarded
damages computed as follows:iii[21]
No. 415-80 dated 3/26/81
In the case of victim Ardita V. Miranda whose age at the time of
Decision of the Minister Exh. 11iii[11]
the accident was 48 years, her life expectancy was computed to
Exh. ZZ
be 21.33 years, and therefore, she could have lived up to almost
of National Defense dated 3/12/82 70 years old. Her gross earnings for 21.33 years based on
P10,224.00 per annum, would be P218,077.92. Deducting
Resolution on the motion Exh. 13iii[12]
therefrom 30% as her living expenses, her net earnings would be
Exh. AAA
P152,654.55, to which plaintiff Ramon Miranda is entitled to
for reconsideration of the compensatory damages for the loss of earning capacity of his wife.
(private respondents) In considering 30% as the living expenses of Ardita Miranda, the
Court takes into account the fact that plaintiff and his wife were
decision of the Minister of supporting their daughter and son who were both college
National Defense dated 7/24/84 students taking Medicine and Law respectively.
Certificate of inspection Exh. 1-Aiii[13] In accordance with the ruling in Villa-Rey Transit, Inc. v. Court of
Exh. 19-NN Appeals,iii[22] we think the life expectancy of Ardita Miranda was
correctly determined to be 21.33 years, or up to age 69. Petitioner
dated 8/27/79 contends, however, that Mrs. Miranda would have retired from
Certificate of Stability Exh. 6-Aiii[14] her job as a public school teacher at 65, hence her loss of earning
Exh. 19-D-NN capacity should be reckoned up to 17.33 years only.

dated 12/16/76 The accepted formula for determining life expectancy is 2/3
multiplied by (80 minus the age of the deceased). It may be that
Nor is it true that the trial court merely based its decision on the in the Philippines the age of retirement generally is 65 but, in
Mecenas case. The trial court made its own independent findings calculating the life expectancy of individuals for the purpose of
on the basis of the testimonies of witnesses, such as Senior Third determining loss of earning capacity under Art. 2206(1) of the
Mate Rogelio de Vera, who incidentally gave substantially the Civil Code, it is assumed that the deceased would have earned
same testimony on petitioners behalf before the Board of Marine income even after retirement from a particular job. In this case,
Inquiry. The trial court agreed with the conclusions of the then the trial court took into account the fact that Mrs. Miranda had
Minister of National Defense finding both vessels to be negligent. a masters degree and a good prospect of becoming principal of
Third. The next issue is whether petitioner is liable to pay the school in which she was teaching. There was reason to believe
damages notwithstanding the total loss of its ship. The issue is that her income would have increased through the years and she
not one of first impression. The rule is well-entrenched in our could still earn more after her retirement, e.g., by becoming a
jurisprudence that a shipowner may be held liable for injuries to consultant, had she not died. The gross earnings which Mrs.
passengers notwithstanding the exclusively real and hypothecary Miranda could reasonably be expected to earn were it not for her
nature of maritime law if fault can be attributed to the untimely death was, therefore, correctly computed by the trial
shipowner.iii[15] court to be P218,077.92 (given a gross annual income of
P10,224.00 and life expectancy of 21.33 years).
In Mecenas, this Court found petitioner guilty of negligence in (1)
allowing or tolerating the ship captain and crew members in Petitioner contends that from the amount of gross earnings, 60%
playing mahjong during the voyage, (2) in failing to maintain the should be deducted as necessary living expenses, not merely 30%
vessel seaworthy and (3) in allowing the ship to carry more as the trial court allowed. Petitioner contends that 30% is
passengers than it was allowed to carry. Petitioner is, therefore, unrealistic, considering that Mrs. Mirandas earnings would have
clearly liable for damages to the full extent. been subject to taxes, social security deductions and inflation.
Exemplary damages are designed by our civil law to permit the
We agree with this contention. In Villa-Rey Transit, Inc. v. Court of courts to reshape behaviour that is socially deleterious in its
Appeals,iii[23] the Court allowed a deduction of P1,184.00 for consequence by creating negative incentives or deterrents against
such behaviour. In requiring compliance with the standard of
living expenses from the P2,184.00 annual salary of the victim,
extraordinary diligence, a standard which is in fact that of the
which is roughly 54.2% thereof. The deceased was 29 years old
highest possible degree of diligence, from common carriers and in
and a training assistant in the Bacnotan Cement Industries. In
People v. Quilaton,iii[24] the deceased was a 26-year old laborer creating a presumption of negligence against them, the law seeks
to compel them to control their employees, to tame their reckless
earning a daily wage. The court allowed a deduction of
instincts and to force them to take adequate care of human beings
P120,000.00 which was 51.3% of his annual gross earnings of
P234,000.00. In People v. Teehankee,iii[25] the court allowed a and their property. The Court will take judicial notice of the
deduction of P19,800.00, roughly 42.4% thereof from the dreadful regularity with which grievous maritime disasters occur
in our waters with massive loss of life. The bulk of our population
deceaseds annual salary of P46,659.21. The deceased, Maureen
is too poor to afford domestic air transportation. So it is that
Hultman, was 17 years old and had just received her first
notwithstanding the frequent sinking of passenger vessels in our
paycheck as a secretary. In the case at bar, we hold that a
deduction of 50% from Mrs. Mirandas gross earnings waters, crowds of people continue to travel by sea. This Court is
prepared to use the instruments given to it by the law for securing
(P218,077.92) would be reasonable, so that her net earning
the ends of law and public policy. One of those instruments is the
capacity should be P109,038.96. There is no basis for supposing
institution of exemplary damages; one of those ends, of special
that her living expenses constituted a smaller percentage of her
gross income than the living expenses in the decided cases. To importance in an archipelagic state like the Philippines, is the
safe and reliable carriage of people and goods by sea.iii[28]
hold that she would have used only a small part of her income for
herself, a larger part going to the support of her children would WHEREFORE, the decision of the Court of Appeals is AFFIRMED
be conjectural and unreasonable. with modification and petitioner is ORDERED to pay private
respondents damages as follows:
As for Elfreda de la Victoria, the trial court found that, at the time
of her death, she was 26 years old, a teacher in a private school To private respondent Ramon Miranda:
in Malolos, Bulacan, earning P6,192.00 per annum. Although a
probationary employee, she had already been working in the P23,075.00 for actual damages;
school for two years at the time of her death and she had a general P109,038.96 as compensatory
efficiency rating of 92.85% and it can be presumed that, if not for damages for loss of earning
her untimely death, she would have become a regular teacher. capacity of his wife;
Hence, her loss of earning capacity is P111,456.00, computed as
follows: P150,000.00 as compensatory
damages for wrongful death
net earning capacity (x) = life expectancy x [ gross annual income of three (3) victims;
less reasonable & necessary living expenses (50%) ]
P300,000.00 as moral damages;
x = [ 2 (80-26) ] x [P6,192.00 - P3,096.00]
P300,000.00 as exemplary
3 damages, all in the total
= 36 x 3,096.00 amount of P882,113.96;
and
= P111,456.00
P40,000.00 as attorneys fees.
On the other hand, the award of actual damages in the amount
of P23,075.00 was determined by the Court of Appeals on the To private respondents Spouses Ricardo and Virginia de la
basis of receipts submitted by private respondents. This amount Victoria:
is reasonable considering the expenses incurred by private P12,000.00 for actual damages;
respondent Miranda in organizing three search teams to look for
his family, spending for transportation in going to places such as P111,456.00 as compensatory
Batangas City and Iloilo, where survivors and the bodies of other damages for loss of earning
victims were found, making long distance calls, erecting a capacity;
monument in honor of the four victims, spending for obituaries P50,000.00 as compensatory damages for
in the Bulletin Today and for food, masses and novenas. wrongful death;
Petitioners contention that the expenses for the erection of a P100,000.00 as moral damages;
monument and other expenses for memorial services for the
victims should be considered included in the indemnity for death P100,000.00 as exemplary
awarded to private respondents is without merit. Indemnity for damages, all in the total
death is given to compensate for violation of the rights of the amount of P373,456.00;
deceased, i.e., his right to life and physical integrity.iii[26] On the and
other hand, damages incidental to or arising out of such death P15,000.00 as attorneys fees.
are for pecuniary losses of the beneficiaries of the deceased.
Petitioners are further ordered to pay costs of suit.
As for the award of attorneys fees, we agree with the Court of
Appeals that the amount of P40,000.00 for private respondent In the event the Philippine National Oil Company and/or the
Ramon Miranda and P15,000.00 for the de la Victoria spouses is PNOC Shipping and Transport Corporation pay or are required to
justified. The appellate court correctly held: pay all or a portion of the amounts adjudged, petitioner Negros
Navigation Co., Inc. shall reimburse either of them such amount
The Mecenas case cannot be made the basis for determining the or amounts as either may have paid, and in the event of failure of
award for attorneys fees. The award would naturally vary or differ Negros Navigation Co., Inc., to make the necessary
in each case. While it is admitted that plaintiff-appellee Ramon reimbursement, PNOC and/or PNOC/STC shall be entitled to a
Miranda who is himself a lawyer, represented also plaintiffs- writ of execution without need of filing another action.
appellees Dela Victoria spouses, we note that separate
testimonial evidence were adduced by plaintiff-appellee Ramon SO ORDERED.
Miranda (TSN, February 26, 1982, p. 6) and plaintiffs-appellees Regalado, (Chairman), and Puno, JJ., concur.
spouses Dela Victoria (TSN, August 13, 1981, p. 43). Considering
the amount of work and effort put into the case as indicated by SECOND DIVISION
the voluminous transcripts of stenographic notes, we find no G.R. No. L-48264 February 21, 1980
reason to disturb the award of P40,000.00 for plaintiff-appellee
Ramon Miranda and P15,000.00 for plaintiffs-appellees Dela SWITZERLAND GENERAL INSURANCE COMPANY, LTD.,
Victoria spouses.iii[27] Petitioner, vs. HON. PEDRO A. RAMIREZ, Presiding Judge of
the Court of First Instance of Manila, Branch XXX, OYAMA
The award of exemplary damages should be increased to LINES, CITADEL LINES and MABUHAY BROKERAGE CO.,
P300,000.00 for Ramon Miranda and P100,000.00 for the de la INC., Respondents.
Victoria spouses in accordance with our ruling in the Mecenas
case:
claim before the insolvency court in Tokyo, Japan. Further, it
Manuel N. Camacho, for petitioner.chanrobles virtual law library imputed the loss or damage to the shipment to the shipper,
Sumitomo Shoji Kaisha, Ltd. for failing to provide seaworthy
Bito, Misa & Lozada for respondents Oyama Lines and Citadel packages for the goods, and/or the Mabuhay Brokerage for
Lines.chanrobles virtual law library failure to exercise utmost diligence after it took possession of the
cargo from the vessel S/S "St. Lourdes". Finally, it was averred
Gregorio Gonzales for respondent Company.
that plaintiff's reinsurer had already paid the plaintiff's claim and,
ANTONIO, J.: hence, said reinsurer is the real party to the action, and that
assumming defendant Oyama Shipping Co., Ltd. to be liable, its
Petition for review of the decision, dated February 24, 1978 of the
liability is limited to the amount of the loss in relation to the total
Court of First Instance of Manila in Civil Case No. 100704,
amount of the freight of the goods, which if computed, would be
entitled "Switzerland General Insurance Co., Ltd. v. Oyama Lines
a much lower amount. It was prayed that the complaint be
and Citadel Lines, and/or Mabuhay Brokerage Co., Inc."
dismissed as against this defendant.chanroblesvirtualawlibrary
On December 24, 1975, petitioner, a foreign insurance company chanrobles virtual law library
authorized to do business in the Philippines thru its agent, F. E.
After trial on the merits, respondent court rendered a decision,
Zuellig Inc., filed an admiralty case (Civil Case No. 100704)
dated February 23, 1978, in favor of petitioner as against therein
against private respondents Oyama Shipping Co., Ltd. (referred
defendant Oyama Shipping Co., Ltd., but absolving Citadel Lines,
to as Oyama Lines), a foreign firm doing business in the
Inc. and Mabuhay Brokerage Co., Inc. from liability. The decision
Philippines, and Citadel Lines, Inc. which is the local agent of reads, in part, as follows: chanrobles virtual law library
private, respondent Oyama Shipping Co., Inc. and/or Mabuhay
Brokerage Co., Inc.chanroblesvirtualawlibrary chanrobles virtual Since in the case at bar there is no question that the shipment in
law library question has suffered loss or damage while in the custody of the
carrier, the herein defendant Oyama Line, but it has not adduced
The complaint alleged that on December 21, 1974, 60,000 bags
evidence to prove that it was caused by any of those factors or
of Urea Nitrogen were shipped from Niihama Japan, on board the
reasons exempting it from liability, particularly that the bags
S/S St. Lourdes", claimed to be owned and operated by defendant
became torn or burst and the contents spilled because of the
Citadel Lines, Inc. The goods were consigned to Borden
character of the shipment or defects in the packing or in the
International Phils., Inc., and insured by petitioner for the sum
containers, or the nature or defect of the article itself. the
of P9,319,105.00 against all risks.chanroblesvirtualawlibrary
defendant Oyama Line, as carrier, cannot avoid liability to the
chanrobles virtual law library
consignee or its subrogee the plaintiff
The shipment was discharged from the vessel S/S "St. Lourdes" herein.chanroblesvirtualawlibrary chanrobles virtual law library
shipside into lighters owned by Mabuhay Brokerage Company,
The defendant Oyama Line pleads prescription of the plaintiff's
Inc., but when the same was subsequently delivered to and
cause of action under Article 366 of the Code of Commerce. The
received by the consignee, it was found to have sustained losses
defense is untenable. to begin with, the required claim that the
and/or damage amounting to P38.698.94. This amount was paid
owner of merchandise is supposed to make within 24 hours from
by petitioner insurance company to the consignee/assured, by
receipt is but in the nature of a limitation upon his right to
virtue of which payment it became subrogated to the rights of the
recovery and the burden of proof is accordingly on the carrier to
latter.chanroblesvirtualawlibrary chanrobles virtual law library
show that the limitation is reasonable and in proper form or
Petitioner made repeated demands against herein private without the time stated (Southern Lines, Inc. vs. Court of Appeals,
respondents for payment of the aforesaid losses or damaged but 4 SCRA 258, 261-262). And it is incumbent upon the said
no payment was made and, uncertain in whose custody the goods defendant to prove its defense, particularly that no such claim
were damaged, impleaded the private respondents as alternative was filed within the required period. Without such proof of a
defendants to determine their respective negative allegation, which it has failed to adduce, the pleader
liability.chanroblesvirtualawlibrary chanrobles virtual law library must suffer defeat under the rules of evidence (section 1, Rule
131, Revised Rules of Court). Be that as it may, the survey report
Defendant Citadel Lines, Inc. filed an Answer with Compulsory submitted in evidence by the plaintiff states that after completion
Counterclaim and Cross-claim, interposing special and of delivery the consignee signified its 'intention to file a claim for
affirmative defenses and alleging that defendant Citadel Lines the full value of the loss sustained by the shipment' (Exhibits 1,
was merely the civil agent in the Philippines for the Japanese firm 1-1 to 1-5), a fact that has not at all been refuted by the defendant
Oyama Shipping Co., Ltd., which was the charterer of the vessel Oyama Line.chanroblesvirtualawlibrary chanrobles virtual law
S/S "St. Lourdes", said vessel being owned by Companies library
Maritime de Brios, Sociedad Anonima a Panamanian corporation.
It was further alleged that the principal agency relationship The fact that the defendant Oyama Line has been declared
between the said Oyama Shipping Co., Ltd. and defendant Citadel insolvent by the Tokyo District Court of Japan since August 21,
Lines, Inc. was terminated on August 21, 1975 when the Tokyo 1975, is no defense at all. For such declaration of insolvency, even
District Court declared and decreed the insolvency of the said under Philippine Laws, does not bar recovery of damages based
Oyama Shipping Co., Ltd.chanroblesvirtualawlibrary chanrobles on contract. Neither can it successfully ward off liability on a
virtual law library claim that it is a mere charterer of the carrying vessel, having
represented on the face of the bill of lading as the carrier itself
It was argued that defendant Citadel Lines "has always acted as (Exhibit A; Exhibit 1-Oyama) And even if it is but a charterer of
an agent of a disclosed principal and, therefore, the herein the vessel that it claims it is, it cannot avoid its liability as a
defendant is without any liability at all" in connection with the carrier for loss and damage suffered by the goods it has
plaintiff's claim.chanroblesvirtualawlibrary chanrobles virtual transported.chanroblesvirtualawlibrary chanrobles virtual law
law library library
By way of cross-claim, defendant Citadel Lines alleged that the As a mere agent in the Philippines of the defendant Oyama Line,
loss/damaged to the cargo took place while the latter was being the defendant Citadel Line (see paragraph 1, complaint) cannot
delivered to the consignee thereof by the Mabuhay Brokerage, Inc. be held liable for the damages recoverable from its principal. But
and said corporation should be held liable therefor, as well as for for failure to substantiate it, its counterclaim against the plaintiff
all damages suffered and expenses incurred by defendant Citadel should be dismissed. So must its crossclaim against its co-
Lines as a result of the filing of the suit. Defendant likewise defendant brokerage company be dismissed since it has not at all
interposed a counterclaim for damages against plaintiff been held liable to the plaintiff.chanroblesvirtualawlibrary
Switzerland General Insurance Company, Ltd. (herein chanrobles virtual law library
petitioner).chanroblesvirtualawlibrary chanrobles virtual law
library Neither can the defendant Mabuhay Brokerage Company, Inc. be
held answerable for the loss and damage sustained by the cargo
Defendant Oyama Shipping Co. Ltd. likewise filed its Answer, in question while still in custody of the carrying vessel, for
denying the material averments of the complaint, alleging that it obvious reasons. Nor can it be made liable, jointly and severally,
ceased to be represented in the Philippines upon the declaration with the defendant Oyama Line for further loss and damage to
of its insolvency by the Tokyo Court; that it was a mere charterer the contents of the torn or burst bags turned over to its custody
of the S/S "St. Lourdes" which is owned by Companies Maritime in that condition in view of the required extraordinary diligence
de Brios, Sociedad Anonima a Panamanian corporation; that due that it has observed to prevent further loss or damage to them.
to the insolvency of Oyama Shipping Co. Ltd., the case as against
it should be dismissed, the remedy for the plaintiff being to file its
purpose of evidencing discharge of cargoes and the conditions
thereof from the vessel to the arrastre operators and/or unto
According to the defendant brokerage's witness, Virgilio de Jesus,
as soon as the bags in bad order were received from the lighters barges/lighters, and that claims against the vessel S/S "St.
they were tied and the torn parts sewed the falsity of which the Lourdes" for losses/damages sustained by shipments were in fact
filed and processed by respondent Citadel Lines, Inc. These facts
plaintiff has failed to prove.chanroblesvirtualawlibrary
chanrobles virtual law library point to the inevitable conclusion that private respondent is the
entity that represents the vessel in the port of Manila and hence
WHEREFORE, the Court hereby renders judgment in favor of the is a ship agent within the meaning and context of Article 586 of
plaintiff Switzerland General Insurance Company, Ltd. and the Code of Commerce.chanroblesvirtualawlibrary chanrobles
against the defendant Oyama Line, ordering the latter to pay the virtual law library
former the amount of P38,698.94, with interest thereon at the
The Code of Commerce provides, among others, that the ship
legal rate from the date of the filing of the complaint on December
agent shall also be liable for the indemnities in favor of third
24, 1975, until fully paid, P5,000.00 as attorney's fees and the
costs of the suit. The plaintiff's complaint against the defendants persons which arise from the conduct of the captain in the care
of the goods which the vessel carried; but he may exempt himself
Citadel Line and Mabuhay Brokerage Company, Inc. are
therefrom by abandoning the vessel with all her equipments and
dismissed. So is the defendant Citadel Lines' counterclaim
the freightage he may have earned during the voyage. (Article
against the plaintiff and crossclaim against its co-defendant
brokerage company dismissed. 587).chanroblesvirtualawlibrary chanrobles virtual law library

Petitioner filed a Motion for Reconsideration of the aforesaid In addition, Article 618 of the same Code states: chanrobles
virtual law library
decision insofar as it absolves respondents Citadel Lines, Inc. and
Mabuhay Brokerage Co., Inc. from liability, but said Motion for Art. 618. The captain shall be civilly liable to the ship agent and
Reconsideration was denied on April 21, 1979; hence, the instant the latter to the third persons who may have made contracts with
petition for review.chanroblesvirtualawlibrary chanrobles virtual the former - chanrobles virtual law library
law library
1. For all the damages sufferred by the vessel and its cargo by
The main issue raised in the instant petition is whether or not reason of want of skill or negligence on his part. If a misdemeanor
respondent Citadel Lines, Inc., the local agent of a foreign ocean or crime has been committed he shall be liable in accordance with
going vessel, the S/S "St. Lourdes", may be held primarily liable the Penal Code.chanroblesvirtualawlibrary chanrobles virtual law
for the loss/damage found to have been sustained by subject library
shipment while on board and/or still in the custody of the said
vessel.chanroblesvirtualawlibrary chanrobles virtual law library 2. For all the thefts and robberies committed by the crew,
reserving his right of action against the guilty
Petitioner contends that respondent Citadel Lines, Inc., being the parties.chanroblesvirtualawlibrary chanrobles virtual law library
ship agent for the vessel S/S "St. Lourdes", is liable under the
pertinent provisions of the Code of Commerce and applicable 3. For the losses, fines, and confiscations imposed on account of
jurisprudence.chanroblesvirtualawlibrary chanrobles virtual law violation. of the laws and regulations of customs, police, health,
library and navigation chanrobles virtual law library

Respondent Citadel Lines, Inc., in its Comment to the petition, 4. For the losses and damages caused by mutinies on board the
alleges that the lower court had made a finding that it is a mere vessel or by reason of faults committed by the crew in the service
agent of Oyama Shipping Co., Ltd., and not a ship agent, and and defense of the same, if he does not prove Chat, he made full
this, being a finding of fact, can no longer be questioned in the use of his authority to prevent or avoid
instant proceedings. Further, it argues that the provisions of the them.chanroblesvirtualawlibrary chanrobles virtual law library
Code of Commerce relied upon by petitioner are applicable to a 5. For those arising by reason of a misuse of powers and non-
ship agent, but not to a mere agent like private respondent, and fulfillment of the duties which pertain to him in accordance with
that granting that it is a ship agent, it contends that it should not Articles 610 and 612.chanroblesvirtualawlibrary chanrobles
be held liable because the principal, Oyama Shipping Co., Ltd. virtual law library
has been declared insolvent. it is claimed that petitioner, upon
being informed of the insolvency of the Oyama Shipping Co., Ltd., 6. For those arising by reason of his going out of his course or
should have filed its claim before the Trustee of the Oyama taking a course which, in the opinion of the officers of the vessel,
Shipping Co., Ltd. in Japan.chanroblesvirtualawlibrary at a meeting attended by the shippers or super cargoes who may
chanrobles virtual law library be on board, he should not have taken without sufficient
cause.chanroblesvirtualawlibrary chanrobles virtual law library
In fine, private respondents do not dispute that a ship agent is
liable to third persons under certain circumstances as provided No exception whatsoever shall exempt him from his
in the Code of Commerce, but insists that it is not a ship agent obligation.chanroblesvirtualawlibrary chanrobles virtual law
but a mere agent and hence, not library
liable.chanroblesvirtualawlibrary chanrobles virtual law library 7. For those arising by reason of his voluntarily entering a port
We find the instant petition meritorious the error of the lower other than his destination, with the exception of the cases or
court lies in its application of the general rule on agency to the without the formalities referred to in Article
case a quo, when the applicable law is contained in the pertinent 612.chanroblesvirtualawlibrary chanrobles virtual law library
provisions of the Code of Commerce as applied in relevant 8. For those arising by reason of the non-observance of the
decisions of this Court. Its finding. therefore, that respondent provisions contained in the regulations for lights and maneuvers
Citadel Lines, Inc. was a mere agent of Oyama Shipping Co., Ltd. for the purpose of preventing collisions.
was a result of its erroneous application of the law of agency to
the instant case. Considering the relationship of the parties, The foregoing provisions have been repeatedly applied by this
respondent Citadel Lines, Inc. cannot be considered as a "mere Court in various cases, among them: Pons y Compañia v. La
agent" under the civil law on agency as distinguished from a ship Compania Maritima; 2 Behn, Meyer & Co. v. McMicking, et al.: 3 Yu
agent, within the context of the Code of Commerce. In Yu Biao Biao Sontua & Co. v. Ossorio, 4 Wing Kee Compradoring Co. v. Bark
Sontua & Co. v. Ossorio, 1 for example, it was held that the "Monongahela" 5 and The American Insurance Co., Inc. v.
doctrines having reference to the relations Between principal and Macondray & Co., Inc. 6
agent cannot be applied in the case of ship agents and ship In Pons v. La Compania Maritima, supra, it was held that for
owners. For this reason, respondent cannot validly claim that the damages resulting to merchandize in transit due to negligence of
court a quo made a finding of fact which is conclusive upon this the officers of the ship, a cause of action arises against the owners
Court. A ship agent, according to Article 586 of the Code of or agents of the vessels which may be prosecuted by the shipper
Commerce, is the person entrusted with the provisioning of a or consignor the damaged goods.chanroblesvirtualawlibrary
vessel or who represents her in the port in which she happens to chanrobles virtual law library
be." (Emphasis supplied.) chanrobles virtual law library
At any rate, the liabilities of the ship agent are not disputed by
It is not disputed by the private respondent that it is the local private respondent. It appearing that the Citadel Lines is the ship
representative in the Philippines of the Oyama Shipping Co., Ltd. agent for the vessel S/S "St. Lourdes" at the port of Manila, it is,
and, as alleged by petitioner, upon arrival of the vessel S/S "St. therefore, liable to the petitioner, solidarily with its principal,
Lourdes" in Manila, it took charge of the unloading of the cargo
and issued cargo receipts (or tally sheets) in its own name, for the
COURT OF APPEALS, THE HON.
Oyama Shipping Co., Ltd., in an amount representing the value JUDGE REMEGIO E. ZARI, in his
of the goods lost and or damaged, amounting to P38,698.94,
which was likewise the amount paid by petitioner, as insurer, to capacity as Presiding Judge of the
the insured consignee As found by the court a quo, there has RTC, Branch 20; ASIA TRADERS
been no proof presented to show that the officers of the vessel, in
whose custody the goods were lost or damaged, are exempt from INSURANCE CORPORATION,
liability therefrom and that the damage was caused by factors and ALLIED GUARANTEE
and circumstances exempting them from
liability.chanroblesvirtualawlibrary chanrobles virtual law library INSURANCE CORPORATION,

The insolvency of Oyama Lines has no bearing on the instant case Respondents.
insofar as the liability of Citadel Lines, Inc. is concerned. The law
does does not make the liability of the ship agent dependent upon
the solvency or insolvency of the ship x-----------------------------------------x
owner.chanroblesvirtualawlibrary chanrobles virtual law library
WHEREFORE, the decision appealed from is modified, and
private respondent Citadel Lines, Inc. is hereby ordered to pay,
solidarily with its principal, Oyama Lines (Oyama Shipping Co.,
LTD.), the amount of P38,698.94, with interest thereon at the ABOITIZ SHIPPING CORPORATION, G.R. No. 137801
legal rate from the date of the filing of the complaint on December Petitioner,
24, 1975 until fully paid, P5,000.00 as attorney's fees and the
costs of suit. The rest of the decision is affirmed. No
pronouncement as to costs.chanroblesvirtualawlibrary
- versus -
chanrobles virtual law library
SO ORDERED.
EQUITABLE INSURANCE
Barredo (Chairman), and Concepcion Jr., JJ.,
Promulgated:
concur.chanroblesvirtualawlibrary chanrobles virtual law library
CORPORATION,
Justice Vicente Abad Santos is on
leave.chanroblesvirtualawlibrary chanrobles virtual law library Respondent.
October 17, 2008
Justice Pacifico P. de Castro, a Member of the First Division was
designated to sit in the Second Division.
chanrobles virtual law library
SECOND DIVISION x-----------------------------------------------------------------------------
--x

ABOITIZ SHIPPING CORPORATION, G.R. No. 121833


DECISION
Petitioner,

TINGA, J.:

- versus -
Present:
Before this Court are three consolidated Rule 45
petitions all involving the issue of whether the real and
hypothecary doctrine may be invoked by the shipowner in relation
to the loss of cargoes occasioned by the sinking of M/V P. Aboitiz
COURT OF APPEALS, MALAYAN QUISUMBING, J., on 31 October 1980. The petitions filed by Aboitiz Shipping
Corporation (Aboitiz) commonly seek the computation of its
INSURANCE COMPANY, INC., liability in accordance with the Courts pronouncement in Aboitiz
Chairperson,
Shipping Corporation v. General Accident Fire and Life Assurance
COMPAGNIE MARITIME DES CARPIO Corporation, Ltd.iii[1] (hereafter referred to as the 1993 GAFLAC
MORALES, case).
CHARGEURS REUNIS, and F.E. TINGA,
ZUELLIG (M), INC., The three petitions stemmed from some of the several
*LEONARDO
DE CASTRO, and suits filed against Aboitiz before different regional trial courts by
shippers or their successors-in-interest for the recovery of the
Respondents. monetary value of the cargoes lost, or by the insurers for the
BRION, JJ. reimbursement of whatever they paid. The trial courts awarded
to various claimants the amounts of P639,862.02, P646,926.30,
and P87,633.81 in G.R. Nos. 121833, 130752 and 137801,
x-----------------------------------------x respectively.

ABOITIZ SHIPPING CORPORATION, G.R. No. 130752


Petitioner, ANTECEDENTS

G.R. No. 121833

- versus -
Respondent Malayan Insurance Company, Inc.
(Malayan) filed five separate actions against several defendants
for the collection of the amounts of the cargoes allegedly paid by
Hundred Eighty-Nine Pesos and Fifty Centavos
(P52,689.50).
Malayan under various marine cargo policiesiii[2] issued to the
insurance claimants. The five civil cases, namely, Civil Cases No.
138761, No. 139083, No. 138762, No. R-81-526 and No. 138879,
were consolidated and heard before the Regional Trial Court All the aforesaid award shall bear
(RTC) of Manila, Branch 54. interest at the legal rate from the filing of the
respective complaints. Considering that there
is no clear showing that the cases fall under
Article 2208, Nos. 4 and 5, of the Civil Code,
The defendants in Civil Case No. 138761 and in Civil
and in consonance with the basic rule that
Case No. 139083 were Malayan International Shipping
Corporation, a foreign corporation based in Malaysia, its local there be no penalty (in terms of attorneys fees)
imposed on the right to litigate, no damages by
ship agent, Litonjua Merchant Shipping Agency (Litonjua), and
way of attorneys fees are awarded; however,
Aboitiz. The defendants in Civil Case No. 138762 were Compagnie
costs of the party/parties to whom judgment
Maritime des Chargeurs Reunis (CMCR), its local ship agent, F.E.
Zuellig (M), Inc. (Zuellig), and Aboitiz. Malayan also filed Civil awards are made shall be made by the party
ordered to pay the said judgment awards.
Case No. R-81-526 only against CMCR and Zuellig. Thus,
defendants CMCR and Zuellig filed a third-party complaint
against Aboitiz. In the fifth complaint docketed as Civil Case No.
138879, only Aboitiz was impleaded as defendant. SO ORDERED.iii[3]

The shipments were supported by their respective bills


of lading and insured separately by Malayan against the risk of Aboitiz, CMCR and Zuellig appealed the RTC decision to
loss or damage. In the five consolidated cases, Malayan sought the Court of Appeals. The appeal was docketed as CA-G.R. SP No.
the recovery of amounts totaling P639,862.02. 35975-CV. During the pendency of the appeal, the Court
promulgated the decision in the 1993 GAFLAC case.

Aboitiz raised the defenses of lack of jurisdiction, lack of


cause of action and prescription. It also claimed that M/V P. On 31 March 1995, the Court of Appeals (Ninth Division)
Aboitiz was seaworthy, that it exercised extraordinary diligence affirmed the RTC decision. It disregarded Aboitizs argument that
and that the loss was caused by a fortuitous event. the sinking of the vessel was caused by a force majeure, in view
of this Courts finding in a related case, Aboitiz Shipping
Corporation v. Court of Appeals, et al. (the 1990 GAFLAC
After trial on the merits, the RTC of Manila rendered a case).iii[4] In said case, this Court affirmed the Court of Appeals
Decision dated 27 November 1989, adjudging Aboitiz liable on the finding that the sinking of M/V P. Aboitiz was caused by the
money claims. The decretal portion reads: negligence of its officers and crew. It is one of the numerous
collection suits against Aboitiz, which eventually reached this
Court in connection with the sinking of M/V P. Aboitiz.

WHEREFORE, judgment is hereby


rendered as follows: As to the computation of Aboitizs liability, the Court of
Appeals again based its ruling on the 1990 GAFLAC case that
Aboitizs liability should be based on the declared value of the
shipment in consonance with the exceptional rule under Section
1. In Civil Case No. 138072 (R-81-
4(5)iii[5] of the Carriage of Goods by Sea Act.
526-CV), the defendants are adjudged liable
and ordered to pay to the plaintiffs jointly and
severally the amount of P128,896.79; the
third-party defendant Aboitiz is adjudged Aboitiz moved for reconsiderationiii[6] to no avail.
liable to reimburse and ordered to pay the Hence, it filed this petition for review on certiorari docketed as
defendants or whosoever of them paid the G.R. No. 121833.iii[7] The instant petition is based on the
following grounds:
plaintiff up to the said amount;

THE COURT OF APPEALS SHOULD


2. In Civil Case No. 138761, Aboitiz is
HAVE LIMITED THE RECOVERABLE
adjudged liable and ordered to pay plaintiff the
amount of One Hundred Sixty Three- AMOUNT FROM ASC TO THAT AMOUNT
STIPULATED IN THE BILL OF LADING.
Thousand Seven Hundred Thirteen Pesos and
Thirty-Eight Centavos (P163,713.38).
IN THE ALTERNATIVE, THE COURT
3. In Civil Case No. 138762, OF APPEALS SHOULD HAVE FOUND THAT
THE TOTAL LIABILITY OF ASC IS LIMITED TO
defendant Aboitiz is adjudged liable and
ordered to pay plaintiff the sum of Seventy THE VALUE OF THE VESSEL OR THE
INSURANCE PROCEEDS THEREOF.iii[8]
Three Thousand Five Hundred Sixty-Nine
Pesos and Ninety-Four Centavos (P73,569.94);
and Sixty-Four Thousand Seven Hundred Four
Pesos and Seventy-Seven Centavos
(P64,704.77); On 4 December 1995, the Court issued a Resolutioniii[9]
denying the petition. Aboitiz moved for reconsideration, arguing
that the limited liability doctrine enunciated in the 1993 GAFLAC
4. In Civil Case No. 139083, case should be applied in the computation of its liability. In the
defendant Aboitiz is adjudged liable and Resolutioniii[10] dated 6 March 1996, the Court granted the
ordered to pay plaintiff the amount of One motion and ordered the reinstatement of the petition and the
Hundred Fifty-Six Thousand Two Hundred filing of a comment.
Eighty-Seven Pesos and Sixty-Four Centavos
(P156,287.64);

In Civil Case No. 138879, defendant G.R. No. 130752


Aboitiz is adjudged liable and ordered to pay
plaintiff the amount of Fifty-Two Thousand Six
THE REAL AND HYPOTHECARY NATURE OF
MARITIME LAW IN THE PRESENT CASE.iii[21]
Respondents Asia Traders Insurance Corporation (Asia
Traders) and Allied Guarantee Insurance Corporation (Allied) filed
separate actions for damages against Aboitiz to recover by way of
subrogation the value of the cargoes insured by them and lost in
the sinking of the vessel M/V P. Aboitiz. The two actions were G.R. No. 137801
consolidated and heard before the RTC of Manila, Branch 20.

On 27 February 1981, Equitable Insurance Corporation


Aboitiz reiterated the defense of force majeure. The trial (Equitable) filed an action for damages against Aboitiz to recover
court rendered a decisioniii[11] on 25 April 1990 ordering Aboitiz by way of subrogation the value of the cargoes insured by
to pay damages in the amount of P646,926.30. Aboitiz sought Equitable that were lost in the sinking of M/V P. Aboitiz.iii[22] The
reconsideration, arguing that the trial court should have complaint, which was docketed as Civil Case No. 138395, was
considered the findings of the Board of Marine Inquiry that the later amended to implead Seatrain Pacific Services S.A. and
sinking of the M/V P. Aboitiz was caused by a typhoon and should Citadel Lines, Inc. as party defendants.iii[23] The complaint
have applied the real and hypothecary doctrine in limiting the against the latter defendants was subsequently dismissed upon
monetary award in favor of the claimants. The trial court denied motion in view of the amicable settlement reached by the parties.
Aboitizs motion for reconsideration.

On 7 September 1989, the RTC of Manila, Branch 7,


Aboitiz elevated the case to the Court of Appeals. While rendered judgmentiii[24] ordering Aboitiz to pay Equitable the
the appeal was pending, this Court promulgated the decision in amount of P87,633.81, plus legal interest and attorneys
the 1993 GAFLAC case. The Court of Appeals subsequently fees.iii[25] It found that Aboitiz was guilty of contributory
rendered a decision on 30 May 1994, affirming the RTC negligence and, therefore, liable for the loss.
decision.iii[12]

In its appeal, docketed as CA-G.R. CV No. 43458, Aboitiz


Aboitiz appealed the Court of Appeals decision to this invoked the doctrine of limited liability and claimed that the
Court.iii[13] In a Resolution dated 20 September 1995,iii[14] the typhoon was the proximate cause of the loss. On 27 November
Court denied the petition for raising factual issues and for failure 1998, the Court of Appeals rendered a decision, affirming the RTC
to show that the Court of Appeals committed any reversible error. decision.iii[26]
Aboitizs motion for reconsideration was also denied in a
Resolution dated 22 November 1995.iii[15]
The Court of Appeals (Fifteenth Division) ruled that the
loss of the cargoes and the sinking of the vessel were due to its
The 22 November 1995 Resolution became final and unseaworthiness and the failure of the crew to exercise
executory. On 26 February 1996, Asia Traders and Allied filed a extraordinary diligence. Said findings were anchored on the 1990
motion for execution before the RTC of Manila, Branch 20. Aboitiz GAFLAC case and on this Courts resolution dated November 13,
opposed the motion. On 16 August 1996, the trial court granted 1989 in G.R. No. 88159, dismissing Aboitizs petition and
the motion and issued a writ of execution. affirming the findings of the appellate court on the vessels
unseaworthiness and the crews negligence.

Alleging that it had no other speedy, just or adequate


remedy to prevent the execution of the judgment, Aboitiz filed Its motion for reconsiderationiii[27] having been
with the Court of Appeals a petition for certiorari and prohibition denied,iii[28] Aboitiz filed before this Court a petition for review
with an urgent prayer for preliminary injunction and/or on certiorari, docketed as G.R. No. 137801,iii[29] raising this sole
temporary restraining order docketed as CA-G.R. SP No. issue, to wit:
41696.iii[16] The petition was mainly anchored on this Courts
ruling in the 1993 GAFLAC case.
WHETHER OR NOT THE DOCTRINE
OF REAL AND HYPOTHECARY NATURE OF
On 8 August 1997, the Court of Appeals (Special MARITIME LAW (ALSO KNOWN AS THE
Seventeenth Division) rendered the assailed decision dismissing LIMITED LIABILITY RULE) APPLIES.iii[30]
the petition.iii[17] Based on the trial courts finding that Aboitiz
was actually negligent in ensuring the seaworthiness of M/V P.
Aboitiz, the appellate court held that the real and hypothecary ISSUES
doctrine enunciated in the 1993 GAFLAC case may not be applied
in the case.
The principal issue common to all three petitions is
whether Aboitiz can avail limited liability on the basis of the real
In view of the denial of its motion for and hypothecary doctrine of maritime law. Corollary to this issue
reconsideration,iii[18] Aboitiz filed before this Court the instant is the determination of actual negligence on the part of Aboitiz.
petition for review on certiorari docketed as G.R. No.
130752.iii[19] The petition attributes the following errors to the
Court of Appeals: These consolidated petitions similarly posit that Aboitizs
THE COURT OF APPEALS GRAVELY liability to respondents should be limited to the value of the
ERRED WHEN IT RULED THAT THE LOWER insurance proceeds of the lost vessel plus pending freightage and
COURT HAD MADE AN EXPRESS FINDING OF not correspond to the full insurable value of the cargoes paid by
THE ACTUAL NEGLIGENCE OF ABOITIZ IN respondents, based on the Courts ruling in the 1993 GAFLAC
THE SINKING OF THE M/V P. ABOITIZ case.
THEREBY DEPRIVING ABOITIZ OF THE
BENEFIT OF THE DOCTRINE OF THE REAL
AND HYPOTHECARY NATURE OF MARITIME Respondents in G.R. No. 121833 counter that the
LAW.iii[20] limited liability rule should not be applied because there was a
finding of negligence in the care of the goods on the part of Aboitiz
based on this Courts Resolution dated 4 December 1995 in G.R.
THE COURT OF APPEALS ERRED IN No. 121833, which affirmed the trial courts finding of negligence
NOT GIVING WEIGHT TO THE GAFLAC CASE on the part of the vessels captain. Likewise, respondent in G.R.
DECIDED BY THE HONORABLE COURT No. 137801 relies on the finding of the trial court, as affirmed by
WHICH SUPPORTS THE APPLICABILITY OF the appellate court, that Aboitiz was guilty of negligence.
The same is true of the decision of
this Court in G.R. No. 89757 affirming the
decision of the Court of Appeals in CA-G.R. CV
Respondents in G.R No. 130752 argue that this Court No. 10609 since both decisions did not make
had already affirmed in toto the appellate courts finding that the any new and additional finding of fact. Both
vessel was not seaworthy and that Aboitiz failed to exercise merely affirmed the factual findings of the trial
extraordinary diligence in the handling of the cargoes. This being court, adding that the cause of the sinking of
the law of the case, Aboitiz should not be entitled to the limited the vessel was because of unseaworthiness
liability rule as far as this petition is concerned, respondents due to the failure of the crew and the master to
contend. exercise extraordinary diligence. Indeed, there
appears to have been no evidence presented
sufficient to form a conclusion that petitioner
RULING of the COURT shipowner itself was negligent, and no
tribunal, including this Court, will add or
subtract to such evidence to justify a
These consolidated petitions are just among the many conclusion to the contrary.iii[33] (Citations
others elevated to this Court involving Aboitizs liability to entitled) (Emphasis supplied)
shippers and insurers as a result of the sinking of its vessel, M/V
P. Aboitiz, on 31 October 1980 in the South China Sea. One of
those petitions is the 1993 GAFLAC case, docketed as G.R. No. The ruling in the 1993 GAFLAC case cited the real and
100446.iii[31] hypothecary doctrine in maritime law that the shipowner or
agents liability is merely co-extensive with his interest in the
vessel such that a total loss thereof results in its extinction. No
The 1993 GAFLAC case was an offshoot of an earlier vessel, no liability expresses in a nutshell the limited liability
final and executory judgment in the 1990 GAFLAC case, where rule.iii[34]
the General Accident Fire and Life Assurance Corporation, Ltd.
(GAFLAC), as judgment obligee therein, sought the execution of
the monetary award against Aboitiz. The trial court granted In this jurisdiction, the limited liability rule is embodied
GAFLACs prayer for execution of the full judgment award. The in Articles 587, 590 and 837 under Book III of the Code of
appellate court dismissed Aboitizs petition to nullify the order of Commerce, thus:
execution, prompting Aboitiz to file a petition with this Court.

Art. 587. The ship agent shall also be


In the 1993 GAFLAC case, Aboitiz argued that the real civilly liable for the indemnities in favor of third
and hypothecary doctrine warranted the immediate stay of persons which may arise from the conduct of
execution of judgment to prevent the impairment of the other the captain in the care of the goods which he
creditors shares. Invoking the rule on the law of the case, private loaded on the vessel; but he may exempt
respondent therein countered that the 1990 GAFLAC case had himself therefrom by abandoning the vessel
already settled the extent of Aboitizs liability. with all her equipment and the freight it may
have earned during the voyage.

Following the doctrine of limited liability, however, the


Court declared in the 1993 GAFLAC case that claims against Art. 590. The co-owners of the vessel
Aboitiz arising from the sinking of M/V P. Aboitiz should be shall be civilly liable in the proportion of their
limited only to the extent of the value of the vessel. Thus, the interests in the common fund for the results of
Court held that the execution of judgments in cases already the acts of the captain referred to in Art. 587.
resolved with finality must be stayed pending the resolution of all
the other similar claims arising from the sinking of M/V P. Aboitiz.
Considering that the claims against Aboitiz had reached more Each co-owner may exempt himself
than 100, the Court found it necessary to collate all these claims from this liability by the abandonment, before
before their payment from the insurance proceeds of the vessel a notary, of the part of the vessel belonging to
and its pending freightage. As a result, the Court exhorted the him.
trial courts before whom similar cases remained pending to
proceed with trial and adjudicate these claims so that the pro-
rated share of each claim could be determined after all the cases Art. 837. The civil liability incurred by
shall have been decided.iii[32] shipowners in the case prescribed in this
section, shall be understood as limited to the
value of the vessel with all its appurtenances
In the 1993 GAFLAC case, the Court applied the limited and freightage served during the voyage.
liability rule in favor of Aboitiz based on the trial courts finding
therein that Aboitiz was not negligent. The Court explained, thus:

These articles precisely intend to limit the liability of the


x x x In the few instances when the matter was
shipowner or agent to the value of the vessel, its appurtenances
considered by this Court, we have been
and freightage earned in the voyage, provided that the owner or
consistent in this jurisdiction in holding that
the only time the Limited Liability Rule does agent abandons the vessel.iii[35] When the vessel is totally lost in
not apply is when there is an actual finding of which case there is no vessel to abandon, abandonment is not
required. Because of such total loss the liability of the shipowner
negligence on the part of the vessel owner or
or agent for damages is extinguished.iii[36] However, despite the
agent x x x. The pivotal question, thus, is
total loss of the vessel, its insurance answers for the damages for
whether there is finding of such negligence on
which a shipowner or agent may be held liable.iii[37]
the part of the owner in the instant case.

Nonetheless, there are exceptional circumstances


A careful reading of the decision
wherein the ship agent could still be held answerable despite the
rendered by the trial court in Civil Case No.
abandonment of the vessel, as where the loss or injury was due
144425 as well as the entirety of the records in
to the fault of the shipowner and the captain. The international
the instant case will show that there has been
rule is to the effect that the right of abandonment of vessels, as a
no actual finding of negligence on the part
legal limitation of a shipowners liability, does not apply to cases
of petitioner. x x x
where the injury or average was occasioned by the shipowners
own fault.iii[38] Likewise, the shipowner may be held liable for However, on 02 May 2006, the Court rendered a
injuries to passengers notwithstanding the exclusively real and decision in Aboitiz Shipping Corporation v. New India Assurance
hypothecary nature of maritime law if fault can be attributed to Company, Ltd.iii[44] (New India), reiterating the well-settled
the shipowner.iii[39] principle that the exception to the limited liability doctrine applies
when the damage is due to the fault of the shipowner or to the
concurrent negligence of the shipowner and the captain. Where
As can be gleaned from the foregoing disquisition in the the shipowner fails to overcome the presumption of negligence,
1993 GAFLAC case, the Court applied the doctrine of limited the doctrine of limited liability cannot be applied.iii[45] In New
liability in view of the absence of an express finding that Aboitizs India, the Court clarified that the earlier pronouncement in
negligence was the direct cause of the sinking of the vessel. The Monarch Insurance was not an abandonment of the doctrine of
circumstances in the 1993 GAFLAC case, however, are not limited liability and that the circumstances therein still made the
obtaining in the instant petitions. doctrine applicable.iii[46]

In New India, the Court declared that Aboitiz failed to


discharge its burden of showing that it exercised extraordinary
A perusal of the decisions of the courts below in all three
diligence in the transport of the goods it had on board in order to
petitions reveals that there is a categorical finding of negligence
invoke the limited liability doctrine. Thus, the Court rejected
on the part of Aboitiz. For instance, in G.R. No. 121833, the RTC
Aboitizs argument that the award of damages to respondent
therein expressly stated that the captain of M/V P. Aboitiz was
therein should be limited to its pro rata share in the insurance
negligent in failing to take a course of action that would prevent
proceeds from the sinking of M/V P. Aboitiz.
the vessel from sailing into the typhoon. In G.R. No. 130752, the
RTC concluded that Aboitiz failed to show that it had exercised
the required extraordinary diligence in steering the vessel before,
The instant petitions provide another occasion for the
during and after the storm. In G.R. No. 137801, the RTC
categorically stated that the sinking of M/V P. Aboitiz was Court to reiterate the well-settled doctrine of the real and
attributable to the negligence or fault of Aboitiz. In all instances, hypothecary nature of maritime law. As a general rule, a ship
owners liability is merely co-extensive with his interest in the
the Court of Appeals affirmed the factual findings of the trial
courts. vessel, except where actual fault is attributable to the shipowner.
Thus, as an exception to the limited

The finding of actual fault on the part of Aboitiz is liability doctrine, a shipowner or ship agent may be held liable for
central to the issue of its liability to the respondents. Aboitizs damages when the sinking of the vessel is attributable to the
contention, that with the sinking of M/V P. Aboitiz, its liability to actual fault or negligence of the shipowner or its failure to ensure
the cargo shippers and shippers should be limited only to the the seaworthiness of the vessel. The instant petitions cannot be
insurance proceeds of the vessel absent any finding of fault on spared from the application of the exception to the doctrine of
the part of Aboitiz, is not supported by the record. Thus, Aboitiz limited liability in view of the unanimous findings of the courts
is not entitled to the limited liability rule and is, therefore, liable below that both Aboitiz and the crew failed to ensure the
for the value of the lost cargoes as so duly alleged and proven seaworthiness of the M/V P. Aboitiz.
during trial.

WHEREFORE, the petitions in G.R. Nos. 121833,


130752 and 137801 are DENIED. The decisions of the Court of
Appeals in CA-G.R. SP No. 35975-CV, CA-G.R. SP No. 41696 and
Events have supervened during the pendency of the
CA-G.R. CV No. 43458 are hereby AFFIRMED. Costs against
instant petitions. On two other occasions, the Court ruled on
petitioner.
separate petitions involving monetary claims against Aboitiz as a
result of the 1980 sinking
SO ORDERED.
of the vessel M/V P. Aboitiz. One of them is the consolidated
petitions of Monarch Ins. Co., Inc v. Court of Appeals,iii[40] Allied
Guarantee Insurance Company v. Court of Appealsiii[41] and
Equitable Insurance Corporation v. Court of Appealsiii[42]
(hereafter collectively referred to as Monarch Insurance) D
promulgated on 08 June 2000. This time, the petitioners ANTE O. TINGA
consisted of claimants against Aboitiz because either the Associate Justice
execution of the judgment awarding full indemnification of their
claims was stayed or set aside or the lower courts awarded
damages only to the extent of the claimants proportionate share Republic of the Philippines
in the insurance proceeds of the vessel. SUPREME COURT
Manila
EN BANC
In Monarch Insurance, the Court deemed it fit to settle
once and for all this factual issue by declaring that the sinking of G.R. No. L-1600 June 1, 1906
M/V P. Aboitiz was caused by the concurrence of the THE PHILIPPINE SHIPPING COMPANY, ET AL., plaintiffs-
unseaworthiness of the vessel and the negligence of both Aboitiz appellants,
and the vessels crew and master and not because of force vs.
majeure. Notwithstanding this finding, the Court did not reverse FRANCISCO GARCIA VERGARA, defendant-appellee.
but reiterated instead the pronouncement in GAFLAC to the effect
that the claimants be treated as creditors in an insolvent Del-Pan, Ortigas and Fisher, for appellants.
corporation whose assets are not enough to satisfy the totality of Ledesma, Sumulong and Quintos, for appellee.
claims against it.iii[43] The Court explained that the peculiar ARELLANO, C.J.:
circumstances warranted that procedural rules of evidence be set
aside to prevent frustrating the just claims of shippers/insurers. The Philippine Shipping Company, the owner of the steamship
Thus, the Court in Monarch Insurance ordered Aboitiz to institute Nuestra Sra. de Lourdes, claims an indemnification of 44,000
the necessary limitation and distribution action before the proper pesos for the loss of the said ship as a result of a collision.
RTC and to deposit with the said court the insurance proceeds of Ynchusti & Co. also claimed 24,705.64 pesos as an
and the freightage earned by the ill-fated ship. indemnification for the loss of the cargo of hemp and coprax
carried by the said ship on her last trip. The defendant, Francisco
on account of any unlawful act committed by him. In the first
Garcia Vergara, was the owner of the steamship Navarra, which case, the lawful acts and obligations of the captain beneficial to
collided with the Lourdes. the vessel may be enforced as against the agent for the reason
that such obligations arise from the contract of agency (provided,
From the judgment of the trial court the Philippine Shipping however, that the captain does not exceed his authority), while as
Company and the defendant Vergara appealed, but the latter has to any liability incurred by the captain through his unlawful acts,
failed to prosecute his appeal by a bill of exceptions or otherwise. the ship agent is simply subsidiarily civilly liable. This liability of
The only appellant who has prosecuted this appeal now reduced the agent is limited to the vessel and it does not extend further.
its claim to 18,000 pesos, the value of the colliding vessel. For this reason the Code of Commerce makes agent liable to the
extent of the value of the vessel, as to the codes of the principal
The court below found as a matter of fact that the steamship
maritime nations provided, with the vessel, and not individually.
Lourdes was sailing in accordance with law, but that the Navarra
Such is also the spirit of our code.
was not, and was therefore responsible for the collision. (Bill of
exceptions, p. 7.) The court also found as a fact that "both ships The spirit of our code is accurately set forth in a treatise on
with their respective cargoes were entirely lost." Construing maritime law, from which we deem proper to quote the following
article 837 of the Code Commerce, the court below held "that the as the basis of this decision:
defendant was not responsible to the plaintiff for the value of the
steamship Lourdes, with the costs against the latter." (Bill of That which distinguishes the maritime from the civil law
and even from the mercantile law in general is the real
exceptions, p. 8.)
and hypothecary nature of the former, and the many
But the appellant, the Philippine Shipping Company, contends securities of a real nature that maritime customs from
that the defendant should pay to 18,000 pesos, the value of the time immemorial, the laws, the codes, and the later
Navarra at the time of its loss; that this is the sense in which the jurisprudence, have provided for the protection of the
provisions of article 837 of the Code of Commerce should be various and conflicting interest which are ventured and
understood; that said code has followed the principles of the risked in maritime expeditions, such as the interests of
English law and not those of the American law, and that it was the vessel and of the agent, those of the owners of the
immaterial whether the Navarra had been entirely lost, provided cargo and consignees, those who salvage the ship, those
her value at the time she was lost could be ascertained, since the who make loans upon the cargo, those of the sailors and
extent of the liability of the owner of the colliding vessel for the members of the crew as to their wages, and those of a
damages resulting from the collision is to be determined in constructor as to repairs made to the vessel.
accordance with such value.
As evidence of this "real" nature of the maritime law we
Article 837 of the Code Commerce provides: "The civil liability have (1) the limitation of the liability of the agents to the
contracted by the shipowners in the cases prescribed in this actual value of the vessel and the freight money, and (2)
section shall be understood as limited to the value of the vessel the right to retain the cargo and the embargo and
with all her equipment and all the freight money earned during detention of the vessel even cases where the ordinary
the voyage." civil law would not allow more than a personal action
against the debtor or person liable. It will be observed
This section is a necessary consequence of the right to
that these rights are correlative, and naturally so,
abandon the vessel given to the shipowner in article 587
because if the agent can exempt himself from liability by
of the code, and it is one of the many superfluities
abandoning the vessel and freight money, thus avoiding
contained in the code. (Lorenzo Benito, "Lecciones,"
the possibility of risking his whole fortune in the
352.)
business, it is also just that his maritime creditor may
Art. 587. The agent shall also the civilly liable for the for any reason attach the vessel itself to secure his claim
indemnities in favor of third persons which arise from without waiting for a settlement of his rights by a final
the conduct of the captain in the care of the goods which judgment, even to the prejudice of a third person.
the vessel carried, but he may exempt himself therefrom
This repeals the civil law to such an extent that, in
by abandoning the vessel with all her equipments and
certain cases, where the mortgaged property is lost no
the freight he may have earned during the trip.
personal action lies against the owner or agent of the
ART. 590. The part owners of a vessel shall be civilly vessel. For instance, where the vessel is lost the sailors
liable, in the proportion of their contribution to the and members of the crew can not recover their wages;
common fund, for the results of the acts of the captain in case of collision, the liability of the agent is limited as
referred to in article 587. Each part owner may exempt aforesaid, and in case of shipwrecks, those who loan
himself from this liability by the abandonment, before a their money on the vessel and cargo lose all their rights
notary, of the part of the vessel belonging to him. and can not claim reimbursement under the law.
The "Exposicion de motivos" of the Code of Commerce contains the There are two reasons why it is impossible to do away
following: "The present code (1829) does not determine the with these privileges, to wit: (1) The risk to which the
juridical status of the agent where such agent is not himself the thing is exposed, and ( 2 ) the "real" nature of maritime
owner of the vessel. This omission is supplied by the proposed law, exclusively "real," according to which the liability of
code, which provides in accordance with the principles of the parties is limited to a thing to which is at mercy of
maritime law that by agent it is to be understood the person the waves. If the agent is only liable with the vessel and
intrusted with the provisioning of the vessel, or the one who freight money and both may be lost through the
represents her in the port in which she happens to be. This accidents of navigation it is only just that the maritime
person is the only who represents the interest of the owner of the creditor have some means of obviating this precarious
vessel. This provision has therefore cleared the doubt which nature of his rights by detaining the ship, his only
existed as to the extent of the liability, both of the agent and for security, before it is lost.
the owner of the vessel. Such liability is limited by the proposed
The liens, tacit or legal, which may exist upon the vessel
code to the value of the vessel and other things appertaining
and which a purchaser of the same would be obliged to
thereto."
respect and recognize — in addition to those existing in
There is no doubt that if the Navarra had not been entirely lost, favor of the State by virtue of the privileges which are
the agent, having held liable for the negligence of the captain of granted to it by all the laws — pilot, tonnage, and port
the vessel, could have abandoned her with all her equipment and dues and other similar charges, the wages of the crew
the freight money earned during the voyage, thus bringing earned during the last voyage as provided in article 646,
himself within the provisions of the article 837 in so far as the of the Code of Commerce, salvage dues under article
subsidiary civil liability is concerned. This abandonment which 842, the indemnification due to the captain of the vessel
would have amounted to an offer of the value of the vessel, of her in case his contract is terminated on account of the
equipment, and freight money earned could not have been voluntary sale of the ship and the insolvency of the
refused, and the agent could not have been personally compelled, owner as provided in article 608, and other liabilities
under such circumstances, to pay the 18,000 pesos, the arising from collisions under article 837 and 838.
estimated value of the vessel at the time of the collision. (Madariaga, pp. 60-62, 63, 85.)
This is the difference which exist between the lawful acts and
lawful obligation of the captain and the liability which he incurs
general average." The reason for this rule is found in the fact that
deck cargo is in an extra-hazardous position and, if on a sailing
We accordingly hold that the defendant is liable for the
indemnification to which the plaintiff is entitled by reason of the vessel, its presence is likely to obstruct the free action of the crew
collision, but he is not required to pay such indemnification of in managing the ship. Moreover, especially in the case of small
vessels, it renders the boat top-heavy and thus may have to be
the reason that the obligation thus incurred has been
extinguished on account of the loss of the thing bound for the cast overboard sooner than would be necessary if it were in the
payment thereof, and in this respect the judgment of the court hold; and naturally it is always the first cargo to go over in case
below is affirmed except in so far as it requires the plaintiff to pay of emergency. Indeed, in subsection 1 of article 815 of the Code
of Commerce, it is expressly declared that deck cargo shall be cast
the costs of this action, which is not exactly proper. After the
overboard before cargo stowed in the hold.
expiration of twenty days let judgment be entered in accordance
herewith and ten days thereafter the record be remanded to the But this rule, denying deck cargo the right to contribution by way
Court of First Instance for execution. So ordered. of general average in case of jettison, was first mad in the days of
Torres, Mapa, Johnson and Carson, JJ., concur. sailing vessels; and with the advent of the steamship as the
principal conveyer of cargo by sea, it has been felt that the reason
The Lawphil Project - Arellano Law Foundation for the rule has become less weighty, especially with reference to
coastwise trade; and it is now generally held that jettisoned goods
carried on deck, according to the custom of trade, by steam
Republic of the Philippines vessels navigating coastwise and inland waters, are entitled to
SUPREME COURT contribution as a general average loss (24 R. C. L., 1419).
Manila
Recognition is given to this idea in two different articles in the
EN BANC Spanish Code of Commerce. In the first it is in effect declared
that, if the marine ordinances allow cargo to the laden on deck in
G.R. No. L-13695 October 18, 1921
coastwise navigation, the damages suffered by such merchandise
STANDARD OIL COMPANY OF NEW YORK, plaintiff-appellee, shall not be dealt with as particular average (art. 809 [3], Comm.
vs. Code); and in the other it is stated that merchandise laden on the
MANUEL LOPEZ CASTELO, defendant-appellant. upper deck of the vessel shall contribute in the general average if
it should be saved; but that there shall be no right to indemnity
Gabriel La O for appellant. if it should be lost by reason of being jettisoned for the general
Lawrence and Ross for appellee. safety, except when the marine ordinances allow its shipment in
this manner in coastwise navigation (art. 855, Comm. Code).
STREET, J.: The Marine Regulations now in force in these Islands contain
provisions recognizing the right of vessels engaged in the
By contract of character dated February 8, 1915, Manuel Lopez interisland trade to carry deck cargo; and express provision is
Castelo, as owner, let the small interisland steamer Batangueño made as to the manner in which it shall be bestowed and
for the term of one year to Jose Lim Chumbuque for use in the protected from the elements (Phil. Mar. Reg. [1913], par 23).
conveying of cargo between certain ports of the Philippine Islands. Indeed, there is one commodity, namely, gasoline, which from its
In this contract it was stipulated that the officers and crew of the inflammable nature is not permitted to be carried in the hold of
Batangueño should be supplied by the owner, and that the any passenger vessel, though it may be carried on the deck if
charterer should have no other control over the captain, pilot, and certain precautions are taken. There is no express provision
engineers than to specify the voyages that they should make and declaring that petroleum shall be carried on deck in any case; but
to require the owner to discipline or relieve them as soon as having regard to its inflammable nature and the known practices
possible in case they should fail to perform the duties respectively of the interisland boats, it cannot be denied that this commodity
assigned to them. also, as well as gasoline, may be lawfully carried on deck in our
While the boat was being thus used by the charterer in the coatwise trade.
interisland trade, the standard Oil Company delivered to the The reason for adopting a more liberal rule with respect to deck
agent of the boat in Manila a quantity of petroleum to be conveyed cargo on vessels used in the coastwise trade than upon those
to the port of Casiguran, in the Province of Sorsogon. For this used for ordinary ocean borne traffic is to be found of course in
consignment a bill of lading of the usual form was delivered, with the circumstance that in the coastwise trade the boats are small
the stipulation that freight should be paid at the destination. Said and voyages are short, with the result that the coasting vessel can
bill of lading contained no provision with respect to the storage of use more circumspection about the condition of the weather at
the petroleum, but it was in fact placed upon the deck of the ship the time of departure; and if threatening weather arises, she can
and not in the hold. often reach a port of safety before disaster overtakes her. Another
While the boat was on her way to the port mentioned, and off the consideration is that the coastwise trade must as a matter of
western coast of Sorsogon, a violent typhoon passed over that public policy be encouraged, and domestic traffic must be
region, and while the storm was at its height the captain was permitted under such conditions as are practically possible, even
compelled for the safety of all to jettison the entire consignment if not altogether ideal.
of petroleum consisting of two hundred cases. When the storm From what has been said it is evident that the loss of this
abated the ship made port, and thirteen cases of the petroleum petroleum is a general and not a special average, with the result
were recovered, but the remainder was wholly lost. that the plaintiff is entitled to recover in some way and from
To recover the value of the petroleum thus jettisoned but not somebody an amount bearing such proportion to its total loss as
recovered, the present action was instituted by the Standard Oil the value of both the ship and the saved cargo bears to the value
Company against the owner of the ship in the Court of First of the ship and entire cargo before the jettison was effected. Who
Instance of Manila, where judgment was rendered in favor of the is the person, or persons, who are liable to make good this loss,
plaintiff. From this judgment the defendant appealed. and what are the conditions under which the action can be
maintained?
No question is made upon the point that the captain exercised
proper discretion in casting this petroleum overboard, as a step That the owner of the ship is a person to whom the plaintiff in
necessary to the salvation of the ship; and in fact it appears that this case may immediately look for reimbursement to the extent
even after the vessel was thus eased, she was with difficulty above stated is deducible not only from the general doctrines of
prevented from capsizing, so great was the intensity of the storm. admiralty jurisprudence but from the provisions of the Code of
Commerce applicable to the case. It is universally recognized that
The first question for discussion is whether the loss of this the captain is primarily the representative of the owner; and
petroleum was a general average loss or a particular less to be article 586 of the Code of Commerce expressly declares that both
borne solely by the owner of the cargo. Upon this point it will be the owner of the vessel and the naviero, or charterer, shall be civil
observed that the cargo was carried upon deck; and it is a general liable for the acts of the master. In this connection, it may be
rule, both under the Spanish Commercial Code and under the noted that there is a discrepancy between the meaning of naviero,
doctrines prevailing in the courts of admiralty of England in articles 586 of the Code of Commerce, where the word is used
America, as well as in other countries, that ordinarily the loss of in contradistinction to the term "owner of the vessel" ( propietario),
cargo carried on deck shall not be considered a general average and in article 587 where it is used alone, and apparently in a
loss. This is clearly expressed in Rule I of the York-Antwerp Rules,
as follows: "No jettison of deck cargo shall be made good as
It results that the plaintiff is entitled to recover in this action; and
the only additional point to be inquired into is the amount that
sense broad enough to include the owner. Fundamentally the
word "naviero" must be understood to refer to the person should be awarded. In this connection it appears that the total
undertaking the voyage, who in one case may be the owner and value of the jettisoned cargo, belonging partly to the plaintiff to
another shipper, was P880.35, of which P719.95 represented the
in another the charterer. But this is not vital to the present
value of the plaintiff's petroleum. Upon the apportionment of this
discussion. The real point to which we direct attention is that, by
the express provision of the Code, the owner of the vessel is civilly total loss among the different interests involved, to wit, value of
liable for the acts of the captain; and he can only escape from this ship, value of cargo, and the earned but lost freight, it appears
that the amount of the loss apportionable to the plaintiff is
civil liability by abandoning his property in the ship and any
P11.28. Deducting this from the value of the petroleum, we have
freight that he may have earned on the voyage (arts. 587, 588,
Code of Comm.). as a result, the amount of P708.67, which is the amount for which
judgment should be given.
Now, by article 852 of the Code of Commerce the captain is
required to initiate the proceedings for the adjustment, Accordingly, modifying the judgment appealed from to this extent,
we affirm the same, with costs. So ordered.
liquidation, and distribution of any gross average to which the
circumstances of the voyage may have given origin; and it is Johnson and Villamor, JJ., concur.
therefore his duty to take the proper steps to protect any shipper Mapa, C.J., concurs in the result.
whose goods may have been jettisoned for the general safety. In
ordinary practice this, we supposed, would be primarily Republic of the Philippines
accomplished by requiring the consignees of other cargo, as a SUPREME COURT
condition precedent to the delivery of their goods to them, to give Manila
a sufficient bond to respond for their proportion of the general EN BANC
average. But it is not necessary here to inquire into details. It is
sufficient to say that the captain is required to take the necessary G.R. No. L-47447-47449 October 29, 1941
steps to effect the adjustment, liquidation, and distribution of the TEODORO R. YANGCO, ETC., petitioner,
general average. In the case before us the captain of the vessel vs.
did not take those steps; and we are of the opinion that the failure MANUEL LASERNA, ET AL., respondents.
of the captain to take those steps gave rise to a liability for which
the owner of the ship must answer. Claro M. Recto for petitioner.
Powell & Vega for respondents.
But it is said — and the entire defense seems to be planted upon
this proposition — that the liquidation of the general average is,
under article 852 and related provisions, a condition precedent MORAN, J.:
to the liability of the defendant, and that at any rate the
defendant, as owner of the ship, should only be held liable for his At about one o'clock in the afternoon of May 26, 1927, the
proportion of the general average. It is also suggested that if the steamer S.S. Negros, belonging to petitioner here, Teodoro R.
plaintiff has any right of action at all upon the state of facts here Yangco, left the port of Romblon on its retun trip to Manila.
presented, it is against the captain, who has been delinquent in Typhoon signal No. 2 was then up, of which fact the captain was
performing the duty which the law imposes on him. duly advised and his attention thereto called by the passengers
themselves before the vessel set sail. The boat was overloaded as
This argument involves, we think, a misconception of the true indicated by the loadline which was 6 to 7 inches below the
import of the provisions relating to the adjustment and surface of the water. Baggage, trunks and other equipments were
liquidation of general average. Clearly, for one thing, those heaped on the upper deck, the hold being packed to capacity. In
provisions are intended to supply the shipowner, acting of cause addition, the vessel carried thirty sacks of crushed marble and
in the person of the captain, with a means whereby he may escape about one hundred sacks of copra and some lumber. The
bearing the entire burden of the loss and may distribute it among passengers, numbering about 180, were overcrowded, the
all the persons who ought to participate in sharing it; but the vessel's capacity being limited to only 123 passengers. After two
making of the liquidation is not a condition precedent to the hours of sailing, the boat encountered strong winds and rough
liability of the shipowner of the shipper whose property has been seas between the islands of Banton and Simara, and as the waves
jettisoned. splashed the ladies' dresses, the awnings were lowered. As the
It is true that if the captain does not comply with the article sea became increasingly violent, the captain ordered the vessel to
relating to the adjustment, liquidation, and distribution of the turn left, evidently to return to port, but in the manuever, the
general average, the next article (852) gives to those concerned — vessel was caught sidewise by a big wave which caused it to
whether shipowner (naviero) or shipper — the right to maintain capsize and sink. Many of the passengers died in the mishap,
an action against the captain for indemnification for the loss; but among them being Antolin Aldaña and his son Victorioso,
the recognition of this right of action does not by any means husband and son, respectively, of Emilia Bienvenida who,
involve the suppression of the right of action which is elsewhere together with her other children and a brother-in-law, are
recognized in the shipper against the ship's owner. The shipper respondents in G.R. No. 47447; Casiana Laserna, the daughter
may in our opinion go at once upon the owner and the latter, if of respondents Manuel Laserna and P.A. de Laserna in G.R.
so minded, may have his recourse for indemnization against his 47448; and Genaro Basaña, son of Filomeno Basaña, respondent
captain. in G.R. No. 47449. These respondents instituted in the Court of
First Instance of Capiz separate civil actions against petitioner
In considering the question now before us it is important to here to recover damages for the death of the passengers
remember that the owner of the ship ordinarily has vastly more aforementioned. The court awarded the heirs of Antolin and
capital embarked upon a voyage than has any individual shipper Victorioso Aldana the sum of P2,000; the heirs of Casiana
of cargo. Moreover, the owner of the ship, in the person of the Laserna, P590; and those of Genaro Basana, also P590. After the
captain, has complete and exclusive control of the crew and of the rendition of the judgment to this effcet, petitioner, by a verified
navigation of the ship, as well as of the disposition of the cargo at pleading, sought to abandon th evessel to the plainitffs in the
the end of the voyage. It is therefore proper that any person whose three cases, together with all its equipments, without prejudice
property may have been cast overboard by order of the captain to his right to appeal. The abandonment having been denied, an
should have a right of action directly against the ship's owner for appeal was taken to the Court of Appeals, wherein all the
the breach of any duty which the law may have imposed on the judgmnets were affirmed except that which sums was increased
captain with respect to such cargo. To adopt the interpretation of to P4,000. Petitioner, now deceased, appealed and is here
the law for which the appellant contends would place the represented by his legal representative.
shipowner in a position to escape all responsibility for a general
average of this character by means of the delinquency of his own Brushing aside the incidental issues, the fundamental question
captain. This cannot be permitted. The evident intention of the here raised is: May the shipowner or agent, notwithstanding the
Code, taken in all of its provisions, is to place the primary liability total loss of the vessel as a result of the negligence of its captain,
upon the person who has actual control over the conduct of the be properly held liable in damages for the consequent death of its
voyage and who has most capital embarked in the venture, passengers? We are of the opinion and so hold that this question
namely, the owner of the ship, leaving him to obtain recourse, as is controlled by the provisions of article 587 of the Code of
it is very easy to do, from other individuals who have been drawn Commerce. Said article reads:
into the venture as shippers.
This is the difference which exists between the lawful
acts and lawful obligations of the captain and the
The agent shall also be civilly liable for the indemnities
in favor of third persons which arise from the conduct liability which he incurs on account of any unlawful act
of the captain in the care of the goods which the vessel committed by him. In the first case, the lawful acts and
obligations of the captain beneficial to the vessel may be
carried; but he may exempt himself therefrom by
enforced as against the agent for the reason that such
abandoning the vessel with all her equipments and the
freight he may have earned during the voyage. obligations arise from te the contract of agency
(provided, however, that the captain does not exceed his
The provisions accords a shipowner or agent the right of authority), while as to any liability incurred by the
abandonment; and by necessary implication, his liability is captain through his unlawful acts, the ship agent is
confined to that which he is entitled as of right to abandon — "the simply subsidiarily civilly liable. This liability of the
vessel with all her equipments and the freight it may have earned agent is limited to the vessel and it does not extend
during the voyage." It is true that the article appears to deal only further. For this reason the Code of Commerce makes
with the limited liability of shipowners or agents for damages the agent liable to the extent of the value of the vessel,
arising from the misconduct of the captain in the care of the goods as the codes of the principal maritime nations provide
which the vessel carries, but this is a mere deficiency of language with the vessel, and not individually. Such is also the
and in no way indicates the true extent of such liability. The spirit of our Code.
consensus of authorities is to the effect that notwithstanding the
The spirit of our code s accurately set forth in a treatise
language of the aforequoted provision, the benefit of limited
on maritime law, from which we deem proper to quote
liability therein provided for, applies in all cases wherein the
the following as the basis of this decision:lawphil.net
shipowner or agent may properly be held liable for the negligent
or illicit acts of the captain. Dr. Jose Ma. Gonzalez de Echavarri "That which distinguishes the maritime from
y Vivanco, commenting on said article, said: the civil law and even from the mercantile law
in general is the real and hypothecary nature
La letra del Codigo, en el articulo 587, presenta una
of the former, and the many securities of a real
gravisima cuestion. El derecho de abandono, si se
atiende a lo escrito, solo se refiere a las indemnizaciones nature that maritime customs from time
a que dierQe lugar la conducta del Capitan en la custodia immemorial, the laws, the codes, and the later
de los efectos que cargo en el buque. jurisprudence, have provided for the protection
of the various and conflicting interests which
¿Es ese el espiritu del legislador? No; ¿habra derecho de are ventured and risked in maritime
abandono en las responsabilidades nacidas de expeditions, such as the interests of the vessel
obligaciones contraidas por el Capitan y de otros actos and of the agent, those of the owners of the
de este? Lo reputamos evidente y, para fortalecer cargo and consignees, those who salvage the
nuestra opinion, basta copiar el siguiente parrafo de la ship, those who make loans upon the cargo,
Exposicion de motivos: those of the sailors and members of the crew
as to their wages, and those of a constructor
"El proyecto, al aplicar estos principios, se
as to repairs made to the vessel.
inspira tambien en los intereses del comercio
maritimo, que quedaran mas asegurados "As evidence of this real nature of the maritime
ofreciendo a todo el que contrata con el naviero law we have (1) the limitation of the liability of
o Capitan del buque, la garantia real del the agents to the actual value of the vessel and
mismo, cualesquiera que sean las facultades o the freight money, and (2) the right to retain
atribuciones de que se hallen investidos." the cargo and the embargo and detention of the
(Echavarri, Codigo de Comercio, Tomo 4, 2. a vessel even in cases where the ordinary civil
ed., pags. 483-484.) law would not allow more than a personal
action against the debtor or person liable. It
A cursory examination will disclose that the principle of liomited
will be observed that these rights are
liability of a shipowner or agent is provided for in but three
correlative, and naturally so, because if the
articles of the Code of Commerce — article 587 aforequoted and
agent can exempt himself from liability by
article 590 and 837. Article 590 merely reiterates the principle
abandoning the vessel and freight money, thus
embodied in article 587, applies the same principle in cases of
avoiding the possibility of risking his whole
collision, and it has been observed that said article is but "a
fortune in the business, it is also just that his
necessary consequences of the right to abandon the vessel given
maritime creditor may for any reason attach
to the shipowner in article 587 of the Code, and it is one of the
the vessel itself to secure his claim without
many superfluities contained in the Code." (Lorenzo Benito,
waiting for a settlement of his rights by a final
Lecciones 352, quoted in Philippine Shipping Co. vs. Garcia, 6
judgment, even to the prejudice of a third
Phil. 281, 282.) In effect, therefore, only articles 587 and 590 are
person.
the provisions conatined in our Code of Commerce on the matter,
and the framers of said code had intended those provisions to "This repeals the civil law to such an extent
embody the universal principle of limited liability in all cases. that, in certain cases, where the mortgaged
Thus, in the "Exposicon de Motivos" of the Code of Commerce, we property is lost no personal action lies against
read: the owner or agent of the vessel. For instance,
where the vessel is lost the sailors and
The present code (1829) does not determine the juridical
members of the crew cannot recover their
status of the agent where such agent is not himself the
wages; in case of collision, the liability of the
owner of the vessel. This omission is supplied by the
agent is limited as aforesaid, and in case of
proposed code, which provides in accordance with the
shipwreck, those who loan their money on the
principles of maritime law that by agent it is to be
vessel and cargo lose all their rights and
understood the person intrusted with the provisioning
cannot claim reimbursement under the law.
of the vessel, or the one who represents her in the port
in which she happens to be. This person is the only one "There are two reasons why it is impossible to
who represents the vessel — that is to say, the only one do away with these privileges, to wit: (1) The
who represents the interests of the owner of the vessel. risk to which the thing is exposed, and (2) the
This provision has therefore cleared the doubt which real nature of the maritime law, exclusively
existed as to the extent of the liability, both of the agent real, according to which the liability of the
and of the owner of the vessel. Such liability is limited parties is limited to a thing which is at the
by the proposed code to the value of the vessel and other mercy of the waves. If the agent is only liable
things appertaining thereto. with the vessel and freight money and both
may be lost through the accidents of
In Philippine Shipping Co. vs. Garcia (6 Phil., 281, 284-286), we
navigation it is only just that the maritime
have expressed ourselves in such a comprehensive manner as to
creditor have some means to obviating this
leave no room for doubt on the applicability of our ratio decidendi
precarious nature of his rights by detaining the
not only to cases of collision but also to those of shipwrecks, etc.
ship, his only security, before it is lost.
We said:
tierra y fortuna de mar o flotante; y se admitio la teoria
de que esta era la que respondia solo de las deudas
"The liens, tacit or legal, which may exist upon
the vessel and which a purchaser of the same provinientes de los actos del capitan o de la tripulacion,
would be obliged to respect and recognize are es decir, que el conjunto del patrimonio del naviero
escaparia a estas cargas desde el momento en que
— in addition to those existing in favor of the
abandonara la nave y los fletes a los acreedores. . . .
State by virtue of the privileges which are
granted to it by all the laws — pilot, tonnate, Escriche in his Diccionario de la Legislacion y Jurisprudencia, Vol.
and port dues and other similar charges, the 1, p. 38, observes:
wages of the crew earned during the last
voyage as provided in article 646 of the Code of La responsabilidad del naviero, en el caso expuesto, se
Commerce, salvage dues under article 842, the funda en el principio de derecho comun de ser
indemnification due to the captain of the vessel responsable todo el que pone al frente de un
in case his contract is terminated on account establecimiento a una persona, de los daños o perjuicios
of the voluntary sale of the ship and the que ocasionare esta desempeñando su cometido, y en
insolvency of the owner as provided in article que estando facultado el naviero para la eleccion de
608, and all other liabilities arising from capitan de la nave, viene a tener indirectamente culpa
collisions under articles 837 and 838." en la negligencia o actos de este que o casionaron daños
o perjuicios, puesto que no se aseguro de su pericia o
We are shared in this conclusion by the eminent commentators buena fe. Limitase, sin embargo, la responsabilidad del
on the subject. Agustin Vicente y Gella, asserting, in his naviero a la perdida de la nave, sus aparejos, y fletes
"Introduccion al Derecho Mercantil Comparado" 1929 (pages 374- devengados durante el viaje; porque no pudiendo vigilar
375), the like principle of limited liability of shipowners or agent de un modo directo e inmediato la conducta del capitan,
in cases of accidents, collisions, shipwrecks, etc., said: hubiera sido duro hacerla extensiva a todos sus bienes
que podria comprometer el capitan con sus faltas o
De las responsabilities que pueden resultar como
delitos.
consequencia del comercio maritimo, y no solo por
hechos propios sino tambien por las que se ocasionen The views of these learned commentators, including those of
por los del capitan y la tripulacion, responde frente a Estasen (Derecho Mercantil, Vol. 4, 259) and Supino (Derecho
tercero el naviero que representa el buque; pero el Mercantil, pp. 463-464), leave nothing to be desired and nothing
derecho maritimo es sobre todo tradicional y siguiendo to be doubted on the principle. It only remains to be noted that
un viejo principio de la Edad Media la responsabilidad the rule of limited liability provided for in our Code of Commerce
del naviero se organiza de un modo especifico y reflects merely, or is but a restatement, imperfect though it is, of
particularisimo que no encuentra similar en el derecho the almost universal principle on the subject. While previously
general de las obligaciones. under the civil or common law, the owner of a vessel was liable to
the full amount for damages caused by the misconduct of the
Una forma corrientisima de verificarse el comercio
master, by the general maritime law of modern Europe, the
maritimo durante la epoca medieval, era prestar un
propietario su navio para que cargase en el mercancias liability of the shipowner was subsequently limited to his interest
in the vessel. (Norwich & N. Y. Trans. Co. v. Wright, 80 U. S. 104,
determinada persona, y se hiciese a la mar, yendo al
20 Law. ed. 585.) A similar limitation was placed by the British
frente de la expedicion un patron del buque, que llegado
al puerto de destino se encargaba de venderlas y Parliament upon the liability of Englosh shipowners through a
retornaba al de salida despues de adquirir en aquel series of statutes beginning in 1734 with the Act of 7 George II,
chapter 15. The legislatures of Massachusetts and Maine followed
otros efectos que igualmente revendia a su regreso,
suit in 1818 and 1821, and finally, Congress enacted the Limited
verificado lo cual los beneficios de la expedicion se
repartian entre el dueño del buque, el cargador y el Liability Act of March 3, 1851, embodying most of the provisions
capitan y tripulantes en la proporcion estipulada. El contained in the British Statutes (see 24 R. C. L. pp. 1387-1389).
Section 4283 of the Revised Statutes (sec. 183, Tit. 46, Code of
derecho maritimo empezo a considerar la asociacion asi
Laws of U. S. A.) reads:
formada como una verdadera sociedad mercantil, de
responsabilidad limitada, y de acuerdo con los LIABILITY OF OWNER NOT TO EXCEED INTEREST. —
principios que gobiernan aquella en los casos de The liability of the owner of any vessel, for any
accidentes, abordajes, naufragios, etc., se resolvia que embezzlement, loss, or destruction, by any person, of
el dueño del buque perdia la nave, el cargador las any property, goods, or merchandise, shipped or put on
mercancias embarcadas y el capitan y la tripulacion su board of such vessel, or for any loss, damage, or injury
trabajo, sin que en ningun caso el tercer acreedor by collision, or for any act, matter or thing, loss,
pudiese reclamar mayor cantidad de ninguno de ellos, damage, or forfeiture, done, occasioned, or incurred
porque su responsabilidad quedaba limitada a lo que without the privity, or knowledge of such owner or
cada uno aporto a la sociedad. Recogidas estas ideas en owners, shall in no case exceed the amount or value of
el derecho comercial de tiempos posteriores, la the interest of such owner in such vessel, and her freight
responsabilidad del naviero se edifico sobre aquellos then pending.
principios, y derogando la norma general civil de que del
cumplimiento de sus obligaciones responde el deudor The policy which the rule is designed to promote is the
con todos sus bienes presentes y futuros, la encouragement of shipbuilding and investment in maritime
responsabilidad maritima se considero siempre limitada commerce. (Vide: Norwich & N. Y. Trans. Co. v. Wright, supra;
ipso jure al patrimonio de mar. Y este es el origen de la The Main v. Williams, 152 U. S. 122; 58 C. J. 634.) And it is in
regla trascendental de derecho maritimo segun la cual that spirit that the American courts construed the Limited
el naviero se libera de toda responsabilidad Liability Act of Congress whereby the immunities of the Act were
abandonando el buque y el flete a favor de los applied to claims not only for lost goods but also for injuries and
acreedores. "loss of life of passengers, whether arising under the general law
of admiralty, or under Federal or State statutes." (The City of
From the Enciclopedia Juridica Española, Vol. 23, p. 347, we read: Columbus, 22 Fed. 460; The Longfellow, 104 Fed. 360; Butler v.
Boston & Savannah Steamship Co., 32 Law. ed. 1017; Craig v.
Ahora bien: ¿hasta donde se extiende esta
responsabilidad del naviero? ¿sobre que bienes pueden Continental Insurance Co., 35 Law. ed. 836.) The Supreme Court
los acreedores resarcirse? Esta es otra especialidad del of the United States in Norwich & N. Y. Trans. Co. v. Wright, 80
U. S. 104, 20 Law. ed. 585, 589-590, accounting for the history
Derecho maritimo; en el Derecho comun la
responsabilidad es limitada; tambien lo era en el antiguo of the principle, clinches our exposition of the supporting
Derecho maritimo romano; es daba la actio exercitoria authorities:
contra el exercitor navis sin ninguna restriccion, pero en The history of the limitation of liability of shipowners is
la Edad Media una idea nueva se introdujo en los usos matter of common knowledge. The learned opinion of
maritimos. Las cargas resultantes de las expediciones Judge Ware in the case of The Rebecca, 1 Ware, 187-
maritimas se consideraron limitadas por los 194, leaves little to be desired on the subject. He shows
propietarios de las naves a los valores comprometidos that it originated in the maritime law of modern Europe;
por ellos en cada expedicion; se separo ficticiamente el that whilst the civil, as well as the common law, made
patrimonio de los navieros en dos partes que todavia se
designan de una manera bastante exacta; fortuna de
Republic of the Philippines
SUPREME COURT
the owner responsible to the whole extent of damage
Manila
caused by the wrongful act or negligence of the matter
or crew, the maritime law only made then liable (if EN BANC
personally free from blame) to the amount of their
interest in the ship. So that, if they surrendered the G.R. No. L-21495 March 18, 1924
ship, they were discharged. THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-
Grotius, in his law of War and Peace, says that men appellant,
would be deterred from investing in ships if they thereby vs.
incurred the apprehension of being rendered liable to an THE INSULAR MARITIME CO., defendant-appellee.
indefinite amount by the acts of the master and, Attorney-General Villa-Real for appellant.
therefore, in Holland, they had never observed the Antonio M. Opisso for appellee.
Roman Law on that subject, but had a regulation that
the ship owners should be bound no farther than the MALCOLM, J.:
value of their ship and freight. His words are: Navis et The Government of the Philippine Islands seeks by this action to
eorum quae in navi sunt," "the ship and goods therein." recover from The Insular Maritime Company the sum of
But he is speaking of the owner's interest; and this, as P30,437.91 for repairs made by the Bureau of Commerce and
to the cargo, is the freight thereon, and in that sense he Industry on the motor ship Insular.
is understood by the commentators. Boulay Paty, Droit
Maritime, tit. 3, sec. 1, p. 276; Book II, c. XI, sec. XIII. The Insular Maritime Company was organized with a capital of
The maritime law, as codified in the celebrated French P150,000. It became the owner of one vessel only, the Insular,
Ordonance de la Marine, in 1681, expressed the rule valued at P150,000. On October 29, 1919, The Insular Maritime
thus: 'The proprietors of vessels shall be responsible for Company asked the Bureau of Commerce and Industry to
the acts of the master, but they shall be discharged by perform certain repairs on the Insular. The Government
abandoning the ship and freight.' Valin, in his consented and terminated said repairs on November 29 of the
commentary on this passage, lib. 2, tit. 8, art. 2, after same year. Subsequent thereto, on April 15, 1920, the Insular
specifying certain engagements of the master which are suffered a total loss by fire.
binding on the owners, without any limit of The bill prepared by the chief accountant of the Bureau of
responsibility, such as contracts for the benefit of the Commerce and Industry for work done on the motor ship Insular
vessel, made during the voyage (except contracts of in the amount of P30,437.91, was dated July 31, 1920. Collection
bottomry) says: "With these exceptions it is just that the of the claim was attempted pursuant to formal demand made by
owner should not be bound for the acts of the master, the Acting Insular Auditor of date April 30, 1921.
except to the amount of the ship and freight. Otherwise
he would run the risk of being ruined by the bad faith It will thus be noted, as was emphasized by the defense and by
or negligence of his captain, and the apprehension of His Honor, the trial judge, that no steps were taken by the
this would be fatal to the interests of navigation. It is Government to secure payment for the repairs until after the loss
quite sufficient that he be exposed to the loss of his ship of the vessel Insular. The first error assigned by the Attorney-
and of the freight, to make it his interest, independently General addressed to this finding of fact is accordingly without
of any goods he may have on board to select a reliable merit.
captain." Pardessus says: 'The owner is bound civilly for The trial judge further found in effect, as a legal conclusion, that
all delinquencies committed by the captain within the the loss of the vessel Insular extinguished the obligation. The
scope of his authority, but he may discharge himself Attorney-General challenges the correctness of this view.
therefrom by abandoning the ship and freight; and, if
they are lost, it suffices for his discharge, to surrender The decision of the trial judge was predicated on his
all claims in respect of the ship and its freight," such as understanding of the provisions of article 591 of the Code of
insurance, etc. Droit Commercial, part 3, tit. 2, c. 3, sec. Commerce in relation with other articles of the same Code, and
2. with the decision of this court in the case of Philippine Shipping
Co. vs. Garcia Vergara ([1906], 6 Phil., 281). As to the applicability
The same general doctrine is laid down by many other of article 591 of the Code of Commerce, there is nothing in the
writers on maritime law. So that it is evident that, by language to denote that the liability of the owners of a vessel is
this law, the owner's liability was coextensive with his wiped out by the loss of that vessel. As to the applicability of the
interest in the vessel and its freight, and ceased by his decision in the case of Philippine Shipping Co. vs. Garcia Vergara,
abandonment and surrender of these to the parties supra, the facts are not the same. There, the owners and agents
sustaining loss. of a vessel causing the loss of another vessel by collision were
In the light of all the foregoing, we therefore hold that if the held "not liable beyond the vessel itself causing the collision," but
shipowner or agent may in any way be held civilly liable at all for were "not required to pay such indemnification for the reason that
injury to or death of passengers arising from the negligence of the the obligation thus incurred has been extinguished on account of
captain in cases of collisions or shipwrecks, his liability is merely the loss of the thing bound for the payment thereof." Here; there
co-extensive with his interest in the vessel such that a total loss is a contractual relation which remains unaffected by the loss of
thereof results in its extinction. In arriving at this conclusion, we the thing concerned in the contract and which is governed
have not been unmindful of the fact that the ill-fated steamship principally by the provisions of the Civil Code.
Negros, as a vessel engaged in interisland trade, is a common The rights and liabilities of owners of ships are in many respects
carrier (De Villata v. Stanely, 32 Phil., 541), and that the as a essentially the same as in the case of other owners of things. As
vessel engaged in interisland trade, is a common carrier (De a general rule, the owners of a vessel and the vessel itself are
Villata v. Stanely, 32 Phil., 541), and that the relationship liable for necessary repairs. Naturally the total destruction of the
between the petitioner and the passengers who died in the vessel extinguishes a maritime lien, as there is no longer any res
mishap rests on a contract of carriage. But assuming that to which it can attach. But the total destruction of the vessel does
petitioner is liable for a breach of contract of carriage, the not affect the liability of the owners for repairs on the vessel
exclusively "real and hypothecary nature" of maritime law completed before its loss.
operates to limit such liability to the value of the vessel, or to the
insurance thereon, if any. In the instant case it does not appear It is but fair to say that what has been stated in this decision
that the vessel was insured. more accurately expresses the consensus of opinion in the court
than it does the views of the writer, who sees more in the
Whether the abandonment of the vessel sought by the petitioner appellee's case than do his colleagues in the court.
in the instant case was in accordance with law of not, is
immaterial. The vessel having totally perished, any act of The trial court was accordingly right in its exposition of the fact
abandonment would be an idle ceremony. but not in its application of the law. Judgment must therefore be
as it is hereby reversed, and in lieu of the judgment appealed
Judgement is reversed and petitioner is hereby absolved of all the from, another shall be entered here in favor of the plaintiff and
complaints, without costs. against the defendant for the sum of P30,437.91 with legal
Avanceña, C.J., Abad Santos, Diaz, Laurel, Horrilleno, and Ozaeta, interest from July 20, 1921, when the complaint was presented,
JJ., concur.
This is an appeal from a judgment rendered by the Court of First
Instance of Manila in the above-entitled cases awarding plaintiffs
until payment. Without special findings as to costs in either
instance, it is so ordered. the compensation provided for in the Workmen’s Compensation
Act.
Araullo, C.J., Johnson, Street, Avanceña, Ostrand, Johns and
Romualdez, JJ., concur. The record of the cases was forwarded the Court of Appeals for
review, but as there was no question of fact involved in the appeal,
EN BANC
said court forwarded the record to this Court. The appeal was
pending when the Pacific War broke out, and continued pending
[CA-No. 773. December 17, 1946.]
until after liberation, because the record of the cases was
destroyed as a result of the battle waged by the forces of liberation
DIONISIA ABUEG, ET AL., Plaintiffs-Appellees, v.
against the enemy. As provided by law, the record was
BARTOLOME SAN DIEGO, Defendant-Appellant.
reconstituted and we now proceed to dispose of the appeal.
[CA-No. 774. December 17, 1946.]
Appellant, who was the owner of the motor ships San Diego II and
Bartolome S, states in his brief the following:chanrob1es virtual
MARCIANA DE SALVACION, ET AL., Plaintiffs-Appellees, v.
1aw library
BARTOLOME SAN DIEGO, Defendant-Appellant.
There is no dispute as to the facts involved in these cases and
[CA-No. 775. December 17, 1946.]
they may be gathered from the pleadings and the decision of the
trial Court. In case CA-G. R. No. 773, Dionisia Abueg is the widow
ROSARIO OCHING, ET AL., Plaintiffs-Appellees, v.
of the deceased, Amado Nuñez; who was a machinist on board
BARTOLOME SAN DIEGO, Defendant-Appellant.
the M/S San Diego II belonging to the defendant-appellant. In
case CA-G. R. NO. 774, plaintiff-appellee, Marciana S. dc
Lichauco, Picazo & Mejia, for Appellant.
Salvacion, is the widow of the deceased, Victoriano Salvacion,
who was a machinist on board the M/S Bartolome S also
Cecilio I. Lim and Roberto P. Ancog, for Appellees.
belonging to the defendant-appellant. In case CA-G. R. NO. 775,
the plaintiff-appellee, Rosario R. Oching is the widow of Francisco
SYLLABUS
Oching who was captain or patron of the defendant-appellant’s
1. MARITIME LAW; SHIPOWNER OR AGENT, ORIGIN OF REAL M/S Bartolome S.
AND HYPOTHECARY NATURE OF LIABILITY OF. — The real and
hypothecary nature of the liability of the shipowner or agent The M/S San Diego II and the M/S Bartolome, while engaged in
embodied in provisions of the Maritime Law, Book III, Code of fishing operations around Mindoro Island on Oct. 1, 1941 were
Commerce, had its origin in the prevailing conditions of the caught by a typhoon as a consequence of which they were sunk
maritime trade and sea voyages during the medieval ages, and totally lost. Amado Nuñez, Victoriano Salvacion and
attended by innumerable hazards and perils. To offset against Francisco Oching while acting in their capacities perished in the
these adverse conditions and to encourage shipbuilding and shipwreck(Appendix A, p. IV).
maritime commerce, it was deemed necessary to confine the
liability of the owner or agent arising from the operation of a ship It is also undisputed that the above-named vessels were not
to the vessel, equipment, and freight, or insurance, if any, so that covered by any insurance. (Appendix A, p. IV.)
if the shipowner or agent abandoned the ship, equipment, and
freight, his liability was extinguished. Counsel for the appellant cite article 587 of the Code of Commerce
which provides that if the vessel together with all her tackle and
2. WORKMEN’S COMPENSATION ACT; PROVISIONS OF CODE freight money earned during the voyage are abandoned, the
OF COMMERCE REGARDING MARITIME COMMERCE agent’s liability to third persons for tortuous acts of the captain
WITHOUT EFFECT IN APPLICATION OF. — The provisions of the in the care of the goods which the ship carried is extinguished
Code of Commerce regarding maritime commerce have no room (Yangco v. Laserna, 73 Phil., 330); article 837 of the same Code
in the application of the Workmen’s Compensation Act which which provides that in cases of collision, the shipowners’ liability
seeks to improve, and aims at the amelioration of, the condition is limited to the value of the vessel with all her equipment and
of laborers and employees. Said Act creates a liability to freight during the voyage (Philippines Shipping Company v.
compensate employees and laborers in cases of injury received by Garcia, 6 Phil., 281); and article 643 of the same Code which
or inflicted upon them, while engaged in the performance of their provides that if the vessels and freight are totally lost, the agent’s
work or employment, or the heirs and dependents of such liability for wages of the crew is extinguished. From these
laborers and employees in the event of death caused by their premises counsel draw the conclusion that appellant’s liability,
employment. as owner of the two motor ships lost or sunk as a result of the
typhoon that lashed the island of Mindoro on October 1, 1941,
3. ID.; INDUSTRIAL EMPLOYEES; OFFICERS OF MOTOR SHIPS was extinguished.
ENGAGED IN FISHING EXCEPTIONS. — The officers of motor
ships engaged in fishing are industrial employees within the The real and hypothecary nature of the liability of the shipower
purview of section 39, paragraph (d), as amended, for industrial or agent embodied in the provisions of the Maritime Law, Book
employment "includes all employment or work at a trade, III, Code of Commerce, had its origin in the prevailing conditions
occupation or profession exercised by an employer for the of the maritime trade and sea voyages during the medieval ages,
purpose of gain." The only exceptions recognized by the attended by innumerable hazards and perils. to offset against
Workmen’s Compensation Act are agriculture, charitable these adverse conditions and to encourage shipbuilding and
institutions and domestic service. Even employees engaged in maritime commerce it was deemed necessary to confine the
agriculture for the operation of mechanical implements, are liability of the owner or agent arising from the operation of a ship
entitled to the benefits of the Workmen’s Compensation Act. to the vessel, equipment, and freight, or insurance, if any, so that
if the shipowner or agent abandoned the ship, equipment, and
4. ID.; COASTWISE AND INTERISLAND TRADE, MEANING OF; freight, his liability was extinguished.
FISHING, WHEN A TRADE . — The term "coastwise and
interisland trade" does not have such a narrow meaning as to But the provisions of the Code of Commerce invoked by appellant
confine it to the carriage for hire of passengers and/or have no room in the application of the Workmen’s Compensation
merchandise on vessels between ports and places in the Act which seeks to improve, and aims at the amelioration of, the
Philippines because while fishing is an industry, if the catch is condition of laborers and employees. It is not the liability for the
brought to a port for sale, it is at the same time a trade. damage or loss of the cargo or injury to, or death of, a passenger
by or through the misconduct of the captain or master of the ship;
nor the liability for the loss of the ship as a result of collision; nor
DECISION the responsibility for w ages of the crew, but a liability created by
a statute to compensate employees and laborers in cases of injury
received by or inflicted upon them, while engaged in the
PADILLA, J.: performance of their work or employment, or the heirs and
Finding no merit in the appeal filed in these cases, we affirm the
judgment of the lower court, with costs against the Appellant.
dependents of such laborers and employees in the event of death
caused by their employment Such Compensation has nothing to
Moran, C.J., Feria, Pablo, Perfecto, Hilado Bengzon, Briones and
do with the provisions of the Code of Commerce regarding
Tuazon, JJ., concur.
maritime commerce. It is an item in the costs of production which
must be included in the budget of any well-managed industry.

Appellant’s assertion that in the case of Francisco v. Dy Liaco (57 FIRST DIVISION
Phil., 446), and Murillo v. Mendoza (66 Phil., 689), the question
of the extinction of the shipowner’s liability due to abandonment [G.R. No. L-11407. October 30, 1917. ]
of the ship by him was not fully discussed, as in the case of
Yangco v. Laserna, supra, is not entirely correct. In the last FAUSTO FUBISO and BONIFACIO GELITO, Plaintiffs-
mentioned case, the limitation of the shipowner’s liability to the Appellees, v. FLORENTINO E. RIVERA, Defendant-Appellant.
value of the ship, equipment, freight, and insurance, if any, was
the lis mota. In the case of Francisco v. Dy-Liacco, supra, the Francisco Sevilla for Appellant.
application of the Workmen’s Compensation Act to a master or
patron who perished as a result of the sinking of the motorboat Salvador Q. Araullo for Appellees.
of which he was the master, was the controversy submitted to the
court for decision. This Court held in that case that "It has been SYLLABUS
repeatedly stated that the Workmen’s Compensation Act was 1. SHIPPING; REGISTRATION OF THE PURCHASE OF A
enacted to abrogate the common law and our Civil Code upon VESSES. — The requisite of registration in the registry of the
culpable acts and omissions, and that the employer need not be purchase of a vessel is necessary and indispensable in orderer
guilty of neglect or fault, in order that responsibility may attach that the purchaser’s rights may be maintained against a claim
to him" (pp. 449-450); and that the shipowner was liable to pay filed by a third person; pursuant to article 573 of the Code of
compensation provided for in the Workmen’s Compensation Act, Commerce in connection with section 2 of Act No. 1900, which
notwithstanding the fact that the motorboat was totally lost. In Act, amending said article, provides that such registration,
the case of Murillo v. Mendoza, supra, this Court held that "The instead of being made in the commercial registry, shall be entered
rights and responsibilities defined in said Act must be governed in the registry of the Insular Collector of Customs, who, since May
by its own peculiar provisions in complete disregard of other 18 1909, has been performing the duties of commercial register.
similar provisions of the civil as well as the mercantile law. If an
accident is compensable under the Workmen’s Compensation 2. ID.; ID. — The legal rule set down in the Code of Commerce,
Act, it must be compensated even when the workman’s right is subsist, inasmuch as the amendment solely refers to the official
not recognized by or is in conflict with other provisions of the Civil who shall make the entry.
Code or of the Code of Commerce. The reason behind this
principle is that the Workmen’s Compensation Act was enacted 3. ID.; ID. — Ships or vessels, whether moved by steam or by sail,
by the Legislature in abrogation of the other existing laws." This partake to a certain extent, of the nature and conditions of real
quoted part of the decision is in answer to the contention that it property, on account of their value and importance in the world
was not the intention of the Legislature to repeal articles 643 and commerce; and for this reason the provisions of article 573 of the
837 of the Code of Commerce with the enactment of the Code of Commerce are nearly identical with those of article 1473
Workmen’s Compensation Act. of the Civil Code.

In the memorandum filed by counsel for the appellant, a new


point not relied upon in the court below is raised. They contend DECISION
that the motorboats engaged in fishing could not be deemed to be
in the coastwise and interisland trade, as contemplated in section
38 of the Workmen’s Compensation Act (No. 3428), as amended TORRES, J. :
by Act No. 3812, in as much as, according to counsel, a craft
engaged in the coastwise and interisland trade is one that carries
passengers and/or merchandise for hire between ports and This appeal by bill of exceptions was filed by counsel for
places in the Philippine Islands. Florentino E. Rivera against the judgment of September 6, 1915,
in which the defendant and appellant was ordered to place at the
This new point raised by counsel for the appellant is inconsistent disposal of the plaintiff Fausto Rubiso the pilot boat in litigation.
with the first, for, if the motor ships in question while engaged in No special finding was made for costs.
fishing, were to be considered as not engaged in interisland and
coastwise trade, the provisions or the Code of Commerce invoked On April 10, 1915, counsel for plaintiffs brought suit in the Court
by them regarding limitation of the shipowner’s liability or of First Instance of this city and alleged in the complaint that his
extinction thereof when the shipowner abandons the ship, cannot clients were the owners of the pilot boat named Valentina, which
be applied Lopez v. Duruelo, 52 Phil., 229). Granting however, had been in bad condition since the year 1914 and, on the date
that the motor ships run and operated by the appellant were not of the complaint, was stranded in the place called Tingloy, of the
engaged in the coastwise and interisland trade, as contemplated municipality of Bauan, Batangas; that the defendant Florentino
in section 38 of the Workmen’s compensation Act, as amended, E. Rivera took charge or possession of said vessel without the
still the deceased officers of the motor ships in question were knowledge or consent of the plaintiffs and refused to deliver it to
industrial employees within the purview of section 39, paragraph them, under claim that he was the owner thereof; and that such
(d), as amended, for industrial employment "includes all procedure on the defendant’s part cause the plaintiffs to suffer
employment or work at a trade, occupation or profession damages, not only because they could not proceed to repair the
exercised by an employer for the purpose of gain." The only vessel, but also because they were unable to derive profit from
exceptions recognized by the Act are agriculture, charitable the voyages for which said pilot boat was customarily used; and
institutions and domestic service. Even employees engaged in that the net amount of such uncollected profit was P1,750. The
agriculture for the operation of mechanical implements, are complaint terminated with a petition that judgment be rendered
entitled to the benefits of the Workmen’s Compensation Act by ordering the defendant to deliver said pilot boat to the plaintiffs
Francisco v. Consing, 63 Phil., 354). In Murillo v. Mendoza, and indemnify them in the amount aforementioned or in such
supra, this Court held that "our Legislature has deemed it amount as should be proven at trial, and to pay the costs.
advisable to include in the Workmen’s Compensation Act all
accidents that may occur to workmen or employees in factories, Counsel for the defendant entered a general and specific denial of
shops and other industrial and agricultural workplaces as well as all the facts set forth in the complaint, with the exception of those
in the interisland seas of the Archipelago." But we do not believe admitted in the special defense and consisting in that said pilot
that the term "coastwise and interisland trade" has such a narrow boat belonged to the concern named "Gelito & Co.," Bonifacio
meaning as to confine it to the carriage for hire of passengers Gilito being a copartner thereof to the extent of two-thirds, and
and/or merchandise, on vessels between Ports and Places in the the Chinaman Sy Qui, to that of one-third, of the value of said
Philippines, because while fishing is an industry, if the catch is vessel; that subsequently Bonifacio Gelito sold his share to his
brought to a port for sale, it is at the same time a trade. copartner Sy Qui, as attested by the instrument Exhibit A,
"The documenting, registering, enrolling, and licensing of vessels
in accordance with the Customs Administrative Act and customs
registered in the office of the Collector of Customs and made a
part of his answer; that later said Chinaman, the absolutely rules and regulations shall be deemed to be a 900, on May 18,
owner of the vessel, sold it in turn to the defendant Rivera, 1909, said article of the Code of Commerce was amended, as
appears by section 2 of that Act, herebelow transcribed.
according to the public instrument, also attached to his answer
as Exhibit B; and that, for this reason, Rivera took possession of
the said pilot boat Valentina, as its sole owner. He therefore "The documenting, registering, enrolling, and licensing of vessels
petitioned that the defendant be absolve from the complaint, with in accordance with the Customs Administrative Act and customs
rules and regulations shall be deemed to be a registry of vessels
the costs against the plaintiffs.
within the meaning of title two of the Code of Commerce, unless
After the hearing of the case and the introduction of documentary otherwise provided in said Customs Administrative Act or in said
evidence, the judgment of September 6, 1915, was rendered, from customs rules and regulations, and the Insular Collector of
Customs shall perform the duties of commercial register
which counsel for the defendant appealed and moved for a new
concerning the registering of vessels, as defined in title two of the
trial. This motion was denied and appellant excepted.
Code of Commerce."cralaw virtua1aw library
The record shows it to have been fully proven that Bonifacio Gelito
The requisite of registration on the registry, of the purchase of a
sold his share in the pilot boat Valentina, consisting of a two-
vessel, is necessary and indispensable in order that the
thirds interest therein, to the Chinaman Sy Qui, the co-owner of
the other one-third interest in said vessel; wherefore this vendor purchaser’s rights may be maintained against a claim filed by a
is no longer entitled to exercise any action whatever in respect to third person. Such registration is required both by the Code of
Commerce and by Act No. 1900. The amendment solely consisted
the boat in question. Gelito was one of the partnership owners of
in charging the Insular Collector of Customs, as at present, with
the Valentina, as in fact his name appears in the certificate of
protection issued by the Bureau of Customs, and the rights he the fulfillment of the duties of the commercial register concerning
the registering of vessels; so that the registration of a bill of sale
held are evidenced by the articles of partnership; but, the whole
of a vessel shall be made in the office of the Insular Collector of
ownership in the vessel having been consolidated in behalf of the
Customs, who, since May 18, 1909, has been performing the
Chinaman Sy Qui, this latter, in the use of his right as the sole
owner of the Valentina, sold this boat to Florentino E. Rivera for duties of the commercial register in place of this latter official.
P2d, 500, on January 4, 1915, which facts are set forth in a deed
In view of said legal provisions, it is undeniable that the defendant
ratified on the same date before a notary. This document was
Florentino E. Rivera’s rights cannot prevail over those acquired
registered in the Bureau of Customs on March 17th of the same
year. by Fausto Rubiso in the ownership of the pilot boat Valentina,
inasmuch as, though the latter’s acquisition of the vessel at
public auction, on January 23, 1915, was subsequent to its
On the 23d of that year, that is, after the sale of the boat to the
purchase by the defendant Rivera, nevertheless said sale at
defendant Rivera, suit having been brought in the justice of the
peace court against the Chinaman Sy Qui to enforce payment of public auction was antecedently record in the office of the
Collector of Customs, on January 27, and entered in the
a certain sum of money, the latter’s creditor Fausto Rubiso, the
commercial registry. — An unnecessary proceeding-on March
herein plaintiff, acquired said vessel at a public auction sale and
4th; while the private and voluntary purchase made by Rivera on
for the sum of P55.45. The certificate of sale and adjudication of
the boat in question was issued by the sheriff on behalf of Fausto a prior date was not recorded in the office of the Collector of
Customs until many days afterwards, that is, not until March 17,
Rubiso, in the office of the Collector of Customs, on January 27
1915.
of the same year and was also entered in the commercial registry
on the 14th of March, following:chanrob1es virtual 1aw library
The legal rule set down in the Mercantile Code subsists,
inasmuch as the amendment solely refers to the official who shall
So that the pilot boat Valentina was twice said: first privately by
make the entry; but, with respect to the rights of the two
its owner Sy Qui to the defendant to the defendant Florentino E.
purchases, whichever of them first registered his acquisition of
Rivera, on January 4, 1915, and afterwards by the sheriff at
public auction in conformity with the order contained in the the vessel in the one entitled to enjoy the protection of the law,
which considers him the absolute owner of the purchased boat,
judgment rendered by the justice of the peace court, on January
an this latter to be free of all encumbrance and all claims by
23 of the same year, against the Chinaman Sy Qui and in behalf
of the plaintiff, Fausto Rubiso. strangers for, pursuant to article 582 of the said code, after the
bill of the judicial sale at auction has been executed and recorded
in the commercial registry, all the other liabilities of the vessel in
It is undeniable that the defendant Rivera acquired by purchase
favor of the creditors shall be considered canceled.
the pilot boat Valentina on behalf of the plaintiff Rubiso; but it is
no less true that the sale of the vessel by Sy Qui to Florentino E.
Rivera, on January 4, 1915, was entered in the customs registry The purchaser at public auction, Fausto Rubiso, who was careful
to record his acquisition, opportunely and on prior date, has,
only on March 17, 1915, while its sale is public auction to Fausto
according to the law, a better right than the defendant Rivera who
Rubiso on the 23d of January of the same year, 1915, was
recorded in the office of the Collector of Customs on the 27th of subsequently recorded his purchase. The latter is a third person,
the same month, and in the commercial registry on the 4th of who was directly affected by the registration which the plaintiff
made of the acquisition.
March, following; that is, the sale on behalf of the defendant
Rivera was prior to that made at public auction to Rubiso, but
the registration of this latter sale was prior by may days to the Ships or vessels, whether moved by steam or by sail, partake, to
sale made to the defendant. a certain extent, of the nature and conditions of real property, on
account of their value and importance in the world commerce;
and for this reason the provisions of article 573 of the Code of
Article 573 of the Code of Commerce provides, in its first
paragraph:jgc:chanrobles.com.ph Commerce are nearly identical with article 1473 of the Civil Code.

With respect to the indemnity for losses and damages, requested


"Merchant vessels constitute property which may be acquired an
by the plaintiff, aside from the fact, ad shown by the evidence,
transferred by any of the means recognized by law. The
acquisition of a vessel must be included in a written instrument, that, subsequent to the date when the judgment appealed from
was rendered, the vessel in question emerged unharmed from the
which shall not produce any effect with regard to third persons if
place where it was stranded, and was, at the time of the trial,
not recorded in the commercial registry."cralaw virtua1aw library
anchored in the port of Maricaban, the record certainly does not
So that, pursuant to the above-quoted article, inscription in the furnish any positive evidence of the losses and damages alleged
to have been occasioned. On the other hand, it cannot be affirmed
commercial registry was indispensable , in order that said
that the defendant acted in bad faith specifically because he
acquisition might affect, and produce consequences with respect
acquired the vessel on a date prior to that of its acquisition at
to third persons.
public auction by the plaintiff Rubiso, who, for the reasons
aforestated, is true and sole owner of said pilot boat.
However, since the enactment of Act No. 1900, on May 18, 1909,
said article of the Code of Commerce was amended, as appears
For the foregoing considerations, whereby the errors assigned to
by section 2 of that Act, herebelow transcribed.
the judgment appealed from are deemed to have been refuted, it
is our opinion that said judgment should be, as it is hereby,
affirmed, with the costs against the appellant. So ordered.

Arrellano, C.J., Johnson, Carson, Street, and Malcolm, JJ.,


concur.

Araullo, J., did not take part.