Transportation
Law Case Digests | Atty. Norianne Tan | 2016
SET 7: CODE OF COMMERCE: ARTS. 349-379, 573-651-
OVERLAND TRANSPORTATION; VESSELS; REAL &
HYPOTHECARY NATURE OF MARITIME LAW
CODE OF COMMERCE
ABELARDO LIM and ESMADITO GUNNABAN v. CA and DONATO
H. GONZALES
G.R. No. 125817, 16 January 2002
Overland Transportation
Code of Commerce also applies to transpo by land
CASE:
Gonzales (buyer) purchased an Isuzu passenger jeepney from
Vallarta (seller), holder of a CPC for the operation of PUVs. Gonzales
did not register the vehicle under his name, nor did he apply for CPC.
Still, he used the jeepney for public transportation.
The jeepney figured in an accident. The driver of the 10-
wheeler truck (Gunnaban) admitted to being responsible, saying that
the truck lost its brakes. Lim, owner of the truck, compensated
everyone who got wounded in the accident and even the heirs of the
deceased passenger. Lim offered Php20,000.00 to Gonzales for the
repair of his jeepney, but this was refused by the latter. Gonzales said
that Lim should pay Php236,000.00 because this is the actual amount
needed for the repair of his jeepney. Lim countered with Php40,000.00.
Gonzales refused again and instead filed a complaint for damages.
Lim sets due diligence in the selection and supervision of his
employees as a defense. He also said that Gonzales is not the real
party in interest, because the jeepney is still registered in the name of
Vallarta.
The issue is whether or not Gonzales may sue for damages
when he and Vallarta allegedly engaged in kabit system.
The Court held that Gonzales may sue for damages. The kabit
system is an arrangement whereby a person who has been granted a
CPC allows other persons who own motor vehicles to operate them
under his license. The kabit system is void for being against public
policy. One of the primary factors in the granting of CPC is the financial
capacity of the holder of the license, so that liabilities from accidents
may be duly compensated. The kabit system renders this policy
nugatory.
Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira
In this case, the evil sought to be prevented is inexistent.
Gonzales nor Vallarta is being sued for damages. The riding public was
not inconvenienced by the void arrangement. In fact, it was the owner
of the jeepney who was suing for damages (kabit parties are not the
ones being sued).
Petitioners are liable to Gonzales with the amount of
Php236,000.00 with the legal interest computed from the time the lower
court rendered its judgment until the finality of the decision.
FACTS:
• In 1982, private respondent Donato Gonzales (“Gonzales”)
purchased an Isuzu passenger jeepney from Gomercino
Vallarta (“Vallarta”), holder of a certificate of public
convenience (“CPC”) for the operation of public utility vehicles
with a Monumento – Bulacan route.
• Gonzales did not have the registration of the vehicle be
transferred to his name, nor did he secure a CPC for himself.
Despite this, he used the jeepney for public transport.
• On 22 July 1990, while the jeepney was going along the North
Diversion Road in Bulacan, it collided with a 10-wheeler truck
owned by petitioner Abelardo Lim (“Lim”) and driven by his co-
petitioner, Esmadito Gunnaban (“Gunnaban”).
• Gunnaban admitted to being responsible for the accident,
explaining that the truck suddenly lost its brakes. The jeepney
at that time was driven by one Virgilio Gonzales.
• The accident resulted in the death of one passenger and left
others wounded.
• Lim shouldered the costs for the hospitalization of those
wounded and even compensated the heirs of the deceased
passenger. He also offered to have the jeepney repaired, but
Gonzales refused. Instead, he demanded a brand new jeepney
or Php236,000.00. Lim countered by increasing his previous
offer of Php20,000.00 to Php40,000.00.
• Gonzales did not accept this, so instead, he filed a complaint
for damages against petitioners. Gonzales left the jeepney to
rust by the roadside (the scene of the accident), because,
according to him, he had no capability to tow the vehicle.
• Lim denied liability by saying that he exercised due diligence in
the selection and supervision of his employees. Furthermore,
Gonzales is not the real party in interest, considering the
jeepney is still registered to Vallarta.
• The trial court ruled in favor of Gonzales. The CA affirmed.
Transportation Law Case Digests | Atty. Norianne Tan | 2016
ISSUES:
When a passenger jeepney covered by a certificate of public
convenience is sold to another who continues to operate it under the
same certificate of public convenience under the so-called kabit
system, and in the course thereof the vehicle meets an accident
through the fault of another vehicle, may the new owner sue for
damages against the erring vehicle?
HELD & RATIO:
1. YES, the new owner may sue.
• The kabit system is an arrangement whereby a person who
has been granted a CPC allows other persons who own motor
vehicles to operate them under his license. Although the
parties are not penalized by law, the system is recognized as
being contrary to public policy and therefore void and inexistent
under Art. 1409 of the Civil Code.
• One of the primary factors in the granting of CPC is the
financial capacity of the holder of the license, so that liabilities
from accidents may be duly compensated. The kabit system
renders this policy nugatory. For the safety of passengers who
may have been wronged and fooled by the kabit system, the
registered owner of the vehicle cannot prove that another
person has become the owner in order to relieve himself of
responsibility.
• In the present case, the evil sought to be prevented is
inexistent.
o Neither of the parties (Gonzales or Vallarta) is being
sued for damages.
o The negligence of another person driving another
vehicle to whom no misrepresentation as to ownership
exists.
o The riding public was not bothered nor inconvenienced
by the illegal arrangement. On the contrary, it was the
owner of the jeepney was seeking for damages.
• Therefore, Gonzales is the real party in interest, and may sue
for damages.
• Petitioners are liable to pay Gonzales Php236,000.00 (amount
of repair). The legal interest is to be computed from the time
the judgment of the lower court is made until the finality of the
decision.
Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira
ABOITIZ SHIPPING CORPORATION v. GENERAL ACCIDENT FIRE
AND LIFE ASSURANCE CORPORATION, LTD
G.R. No. 100446; January 21, 1993
Limited Liability Rule
CASE:
M/V P. ABOITIZ sank on a voyage from Hongkong to the
Philippines. Said vessel was owned by Aboitiz Shipping Corporation.
The incident of said vessel's sinking gave rise to the filing of suits for
recovery of lost cargo either by the shippers, their successor-in-
interest, or the cargo insurers like GAFLAC as subrogees. BMI initially
investigated the vessel’s sinking and found out that such was due to
force majeure and that subject vessel, at the time of the sinking was
seaworthy. However, despite this administrative finding, Trial Court in a
Civil Case No. 144425 found against the carrier on the basis that the
loss subject matter therein did not occur as a result of force majeure. In
which case, an order for execution for the full amount of the judgment
award prayed by GAFLAC against Aboitiz was issued. Aboitiz, in this
case, seeks a pronouncement as to the applicability of the doctrine of
limited liability on the totality of the claims vis a vis the losses brought
about by the sinking of the vessel M/V P. ABOITIZ, as based on the
real and hypothecary nature of maritime law.
SC ruled in this case that the Limited Liability Rule arising out
of real and hypothecary nature of maritime law should be applied
in this case. The real and hypothecary nature of maritime law simply
means that the liability of the carrier in connection with losses related to
maritime contracts is confined to the vessel, which is hypothecated for
such obligations or which stands as the guaranty for their settlement.
According to our Code of Commerce, Limited Liability Rule in the
Philippines covers only liability for injuries to third parties (Art.
587), acts of the captain (Art. 590) and collisions (Art. 837).
The only time the Limited Liability Rule does not apply is when there is
an actual finding of negligence on the part of the vessel owner or
agent. A careful reading of the decision rendered by the trial court in
Civil Case No. 144425 as well as the entirety of the records in the
instant case will show that there has been no actual finding of
negligence on the part of petitioner. The rights of parties to claim
against an agent or owner of a vessel may be compared to those
of creditors against an insolvent corporation whose assets are not
enough to satisfy the totality of claims against it. Each individual
Transportation Law Case Digests | Atty. Norianne Tan | 2016
creditor may prove the actual amount of their respective claims but this
does not mean that they shall be allowed to recover fully. The
claimants or creditors are limited in their recovery to the remaining
value of accessible assets. No claimant can be given precedence over
the others by the simple expedience of having filed or completed its
action than the rest. Thus, execution of judgment must be stayed
pending completion of all cases occasioned by the subject
sinking.
FACTS:
• ABOITIZ SHIPPING CORPORATION is a corporation
organized and operating under Philippine laws and engaged in
the business of maritime trade as a carrier. As such, it owned
and operated the ill-fated "M/V P. ABOITIZ”.
• General Accident Fire and Life Assurance Corporation,
Ltd. (GAFLAC) is a foreign insurance company pursuing its
remedies as a subrogee of several cargo consignees whose
respective cargo sank with the said vessel and for which it has
priorly paid.
• "M/V P. ABOITIZ," sank on a voyage from Hongkong to the
Philippines on October 31, 1980.
• The incident of said vessel's sinking gave rise to the filing of
suits for recovery of lost cargo either by the shippers, their
successor-in-interest, or the cargo insurers like GAFLAC as
subrogees.
• The sinking was initially investigated by the Board of Marine
Inquiry which found that such sinking was due toforce
majeure and that subject vessel, at the time of the sinking was
seaworthy.
• This administrative finding notwithstanding, the trial court in a
Civil Case No. 144425 found against the carrier on the basis
that the loss subject matter therein did not occur as a result
of force majeure.
o Thus, in said case, plaintiff GAFLAC was allowed to
prove, and was later awarded, its claim. The
attempted execution of the full judgment award
prayed for by GAFLAC in said case in the amount
of P1,072,611.20 plus legal interest has given rise
to the instant petition.
• On the other hand, other cases have resulted in findings
upholding the conclusion of the BMI that the vessel was
seaworthy at the time of the sinking, and that such sinking was
Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira
due to force majeure. One such ruling was likewise elevated to
this Court in Country Bankers Insurance Corporation v. Court
of Appeals, et al., and was sustained.
• Aboitiz, in this petition, seeks a pronouncement as to the
applicability of the doctrine of limited liability on the
totality of the claims vis a vis the losses brought about by
the sinking of the vessel M/V P. ABOITIZ, as based on the
real and hypothecary nature of maritime law.
ISSUE:
1. w/not execution of judgments which have become final and
executory may be stayed. à YES
2. w/not the Limited Liability Rule arising out of the real and
hypothecary nature of maritime law should apply in this case.
àYES!
HELD+RATIO:
1. The rule that once a decision becomes final and executory, it is
the ministerial duty of the court to order its execution, admits of
certain exceptions as in cases of special and exceptional
nature:
a. where it becomes the imperative in the higher interest
of justice to direct the suspension of its execution;
b. whenever it is necessary to accomplish the aims of
justice; or
c. when certain facts and circumstances transpired after
the judgment became final which would render the
execution of the judgment unjust.
2. The Limited Liability Rule arising our of real and
Hypothecary nature of maritime law should apply in this
case.
In deciding the instant case below, the CA took refuge in this Court's
decision in Country Bankers Insurance Corporation v. Court of
Appeals, et al which upheld GAFLAC 's claims, which the CA took to
mean that this Court has "considered, passed upon and resolved
Aboitiz's contention that all claims for the losses should first be
determined before GAFLAC's judgment may be satisfied," and that
such ruling "in effect necessarily negated the application of the limited
liability principle".
• Such conclusion is not accurate. The decision in said case
considered only the circumstances peculiar to that particular
Transportation Law Case Digests | Atty. Norianne Tan | 2016
case, and was not meant to traverse the larger picture herein
brought to fore, the circumstances of which heretofore were not
relevant. As discussed earlier, the "limited liability" in issue
before the trial courts referred to the package limitation clauses
in the bills of lading and not the limited liability doctrine arising
from the real and hypothecary nature of maritime trade. The
latter rule was never made a matter of defense in any of the
cases a quo, as properly it could not have been made so since
it was not relevant in said cases. The only time it could come
into play is when any of the cases involving the mishap were to
be executed, as in this case.
The real and hypothecary nature of maritime law simply means
that the liability of the carrier in connection with losses related to
maritime contracts is confined to the vessel, which is
hypothecated for such obligations or which stands as the
guaranty for their settlement.
• It was designed to offset such adverse conditions and to
encourage people and entities to venture into maritime
commerce despite the risks and the prohibitive cost of
shipbuilding. Thus, the liability of the vessel owner and agent
arising from the operation of such vessel were confined to the
vessel itself, its equipment, freight, and insurance, if any, which
limitation served to induce capitalists into effectively wagering
their resources against the consideration of the large profits
attainable in the trade.
The Limited Liability Rule in the Philippines is taken up in Book III of the
Code of Commerce. Limited Liability Rule in the Philippines cover
only liability for injuries to third parties (Art. 587), acts of the
captain (Art. 590) and collisions (Art. 837).
Art. 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which may arise from the
conduct of the captain in the care of the goods which he loaded
on the vessel; but he may exempt himself therefrom by
abandoning the vessel with all her equipment and the freight it
may have earned during the voyage.
Art. 590. The co-owners of a vessel shall be civilly liable in the
proportion of their interests in the common fund for the results
of the acts of the captain referred to in Art. 587.
Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira
Each co-owner may exempt himself from this liability by the
abandonment, before a notary, of the part of the vessel
belonging to him.
Art. 837. The civil liability incurred by shipowners in the case
prescribed in this section (on collisions), shall be understood
as limited to the value of the vessel with all its appurtenances
and freightage served during the voyage. (Emphasis supplied)
The only time the Limited Liability Rule does not apply is when
there is an actual finding of negligence on the part of the vessel
owner or agent.
• A careful reading of the decision rendered by the trial court in
Civil Case No. 144425 as well as the entirety of the records in
the instant case will show that there has been no actual
finding of negligence on the part of petitioner.
• In the other civil case related to this case, (Country Bankers
Insurance Corporation v. Court of Appeals, et al), it merely
affirmed the factual findings of the trial court, adding that the
cause of the sinking of the vessel was because of
unseaworthiness due to the failure of the crew and the master
to exercise extraordinary diligence. Indeed, there appears to
have been no evidence presented sufficient to form a
conclusion that petitioner shipowner itself was negligent,
and no tribunal, including this Court will add or subtract to
such evidence to justify a conclusion to the contrary.
• The qualified nature of the meaning of "unseaworthiness,"
under the peculiar circumstances of this case is underscored
by the fact that in the Country Banker's case, supra, arising
from the same sinking, the Court sustained the decision that
the sinking of the M/V P. Aboitiz was due to force majeure.
• On this point, it should be stressed that
unseaworthiness is not a fault that can be laid
squarely on petitioner's lap, absent a factual basis for
such a conclusion.
o While the conclusion therein exonerating the
captain and crew of the vessel was not sustained
for lack of basis, the finding therein contained to
the effect that the vessel was seaworthy
deserves merit. Despite appearances, it is not
totally incompatible with the findings of the trial
court and the CA, whose finding of
"unseaworthiness" clearly did not pertain to
Transportation Law Case Digests | Atty. Norianne Tan | 2016
the structural condition of the vessel which is
the basis of the BMI's findings, but to the
condition it was in at the time of the sinking,
which condition was a result of the acts of the
captain and the crew.
The rights of a vessel owner or agent under the Limited Liability
Rule are akin to those of the rights of shareholders to limited
liability under our corporation law.
• Both are privileges granted by statute, and while not absolute,
must be swept aside only in the established existence of the
most compelling of reasons. In the absence of such reasons,
this Court chooses to exercise prudence and shall not sweep
such rights aside on mere whim or surmise, for even in the
existence of cause to do so, such incursion is definitely punitive
in nature and must never be taken lightly.
The rights of parties to claim against an agent or owner of a
vessel may be compared to those of creditors against an insolvent
corporation whose assets are not enough to satisfy the totality of
claims as against it.
• While each individual creditor may, and in fact shall, be allowed
to prove the actual amounts of their respective claims, this
does not mean that they shall all be allowed to recover fully
thus favoring those who filed and proved their claims sooner to
the prejudice of those who come later.
• In both insolvency of a corporation and the sinking of a
vessel, the claimants or creditors are limited in their
recovery to the remaining value of accessible assets.
o In the case of an insolvent corporation, these are the
residual assets of the corporation left over from its
operations.
o In the case of a lost vessel, these are the insurance
proceeds and pending freightage for the particular
voyage.
In the instant case, there is, therefore, a need to collate all claims
preparatory to their satisfaction from the insurance proceeds on the
vessel M/V P. Aboitiz and its pending freightage at the time of its loss.
No claimant can be given precedence over the others by the
simple expedience of having filed or completed its action earlier
than the rest. Thus, execution of judgment in earlier completed
Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira
cases, even those already final and executory, must be stayed
pending completion of all cases occasioned by the subject
sinking. Then and only then can all such claims be simultaneously
settled, either completely or pro-rata should the insurance proceeds
and freightage be not enough to satisfy all claims.
• Finally, the Court notes that petitioner has provided this Court
with a list of all pending cases, together with the corresponding
claims and the pro-rated share of each. We likewise note that
some of these cases are still with the Court of Appeals, and
some still with the trial courts and which probably are still
undergoing trial. We, therefore, rule that the pro-rated share of
each claim can only be found after all the cases shall have
been decided.
• In fairness to the claimants, and as a matter of equity, the
total proceeds of the insurance and pending freightage
should now be deposited in trust.
ABOITIZ SHIPPING CORPORATION v. NEW INDIA ASSURANCE
COMPANY, LTD.
G.R. No. 15697, May 2, 2006
CASE:
Societe Francaise loaded a cargo of textiles and auxiliary
chemicals from France on board a vessel owned by Franco-Belgian.
The cargo was consigned to General Textile, Inc., in Manila and
insured by respondent New India Assurance Company, Ltd. While in
Hongkong, the cargo was transferred to M/V P. Aboitiz for
transshipment to Manila. While at sea, the vessel received a report of a
typhoon moving within its general path. It changed its route to avoid the
typhoon but its hull leaked causing it to sank. Upon paying General
Textile, New India Assurance was subrogated to its rights and the latter
filed a complaint against Aboitiz to recover damages. Meanwhile, after
conducting its own investigation, the Board of Marine Inquiry
exonerated the captain and crew of any administrative liability.
Aboitiz argues that the claim for damages should only be
against the insurance proceeds and limited to its pro-rata share in view
of the doctrine of limited liability. New India countered saying that the
doctrine of real and hypothecary nature of maritime law is not
applicable in the present case because petitioner was found to have
been negligent. Hence, according to respondent, petitioner should be
held liable for the total value of the lost cargo.
Transportation Law Case Digests | Atty. Norianne Tan | 2016
SC held that Aboitiz is liable for the total value of the lost cargo.
Where the shipowner fails to overcome the presumption of
negligence, the doctrine of limited liability cannot be applied. In
this case, petitioner failed to discharge this burden. Both the trial and
the appellate courts, in this case, found that the sinking was not due to
the typhoon but to its unseaworthiness. Evidence on record showed
that the weather was moderate when the vessel sank. In contrast, the
findings of the BMI are not deemed always binding on the courts.
Besides, exoneration of the vessel’s officers and crew by the BMI
merely concerns their respective administrative liabilities. It does not in
any way operate to absolve the common carrier from its civil liabilities
arising from its failure to exercise extraordinary diligence.
FACTS:
• SocieteFrancaise Des Colloides loaded a cargo of textiles and
auxiliary chemicals from France on board a vessel owned by
Franco-Belgian Services, Inc. The cargo was consigned to
General Textile, Inc., in Manila and insured by respondent New
India Assurance Company, Ltd. While in Hongkong, the cargo
was transferred to M/V P. Aboitiz for transshipment to Manila.
• Before departing, the vessel was advised by the Japanese
Meteorological Center that it was safe to travel to its
destination. But while at sea, the vessel received a report of a
typhoon moving within its general path. To avoid the typhoon,
the vessel changed its course. However, it was still at the fringe
of the typhoon when its hull leaked. On October 31, 1980, the
vessel sank, but the captain and his crew were saved.
• General Textile lodged a claim with respondent New India
(insurance company) for the amount of its loss. Respondent
paid General Textile and was subrogated to the rights of the
latter.
• Respondent New India hired a surveyor, Perfect, Lambert and
Company, to investigate the cause of the sinking. In its report,
the surveyor concluded that the cause was the flooding of the
holds brought about by the vessel’s questionable
seaworthiness. Consequently, respondent filed a complaint for
damages against petitioner Aboitiz, Franco-Belgian Services
and the latter’s local agent, F.E. Zuellig, Inc. (Zuellig).
• Respondent New India alleged that the proximate cause of the
loss of the shipment was the fault or negligence of the master
and crew of the vessel, its unseaworthiness, and the failure of
Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira
defendants therein to exercise extraordinary diligence in the
transport of the goods.
• Petitioner Aboitiz raised the defense that the ship was
seaworthy. It alleged that the sinking of M/V P. Aboitiz was due
to an unforeseen event and without fault or negligence on its
part. It also alleged that in accordance with the real and
hypothecary nature of maritime law, the sinking of M/V P.
Aboitiz extinguished its liability on the loss of the cargoes.
• Meanwhile, the Board of Marine Inquiry (BMI) conducted its
own investigation to determine whether the captain and crew
were administratively liable. The BMI exonerated the captain
and crew of any administrative liability; and declared the vessel
seaworthy and concluded that the sinking was due to the
vessel’s exposure to the approaching typhoon.
• RTC ruled in favor of New India; affirmed in toto by the CA.
ISSUE:
Whether the limited liability doctrine, which limits respondent’s award of
damages to its pro-rata share in the insurance proceeds, applies in this
case.
Aboitiz’s argument: respondent’s claim for damages should only be
against the insurance proceeds and limited to its pro-rata share in view
of the doctrine of limited liability.
New India’s argument: the doctrine of real and hypothecary nature of
maritime law is not applicable in the present case because petitioner
was found to have been negligent. Hence, according to respondent,
petitioner should be held liable for the total value of the lost cargo.
HELD + RATIO:
Where the shipowner fails to overcome the presumption of
negligence, the doctrine of limited liability cannot be applied.
An exception to the limited liability doctrine is when the damage is due
to the fault of the shipowner or to the concurrent negligence of the
shipowner and the captain. In which case, the shipowner shall be liable
to the full-extent of the damage.
Where the vessel is found unseaworthy, the shipowner is also
presumed to be negligent since it is tasked with the maintenance of its
Transportation Law Case Digests | Atty. Norianne Tan | 2016
vessel. Though this duty can be delegated, still, the shipowner must
exercise close supervision over its men.
• In the present case, petitioner has the burden of showing that it
exercised extraordinary diligence in the transport of the goods
it had on board in order to invoke the limited liability doctrine.
Differently put, to limit its liability to the amount of the insurance
proceeds, petitioner has the burden of proving that the
unseaworthiness of its vessel was not due to its fault or
negligence. Considering the evidence presented and the
circumstances obtaining in this case, we find that petitioner
failed to discharge this burden.
• Both the trial and the appellate courts, in this case, found that
the sinking was not due to the typhoon but to its
unseaworthiness. Evidence on record showed that the weather
was moderate when the vessel sank. These factual findings of
the CA, affirming those of the trial court are not to be disturbed
on appeal, but must be accorded great weight. These findings
are conclusive not only on the parties but on this Court as well.
• In contrast, the findings of the BMI are not deemed always
binding on the courts. Besides, exoneration of the vessel’s
officers and crew by the BMI merely concerns their respective
administrative liabilities. It does not in any way operate to
absolve the common carrier from its civil liabilities arising from
its failure to exercise extraordinary diligence, the determination
of which properly belongs to the courts
• Petitioner is liable for the total value of the lost cargo.
Aboitiz Shipping Corporation vs. CA
GR No. 121833, October 17, 2008
Case:
On October 31, 1980, M/V P. Aboitiz sank in South China Sea,
Various defendants composed of insurance companies filed claims
against Aboitiz for collection of lost cargo (in separate cases). Aboitiz
tried to excuse itself from liability by invoking force majeure but the TCs
all ruled in favor of the respondents awarding them the amounts of
P639,862.02, P646,926.30, and P87,633.81. These were affirmed by
the CA.
In this current petition, Aboitiz asked that its liability be limited
to the value of the insurance proceeds of the lost vessel plus pending
Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira
freightage and not correspond to the full insurable value of the cargoes
paid by respondents, based on the Courts ruling in the 1993 GAFLAC
case. While respondents counter that the 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; that the vessel was not seaworthy and that
it failed to exercise extraordinary diligence in the handling of the
cargoes.
UNDER THE REAL AND HYPOTHECARY DOCTRINE IN
MARINETIME LAW/LIMITED LIABILITY RULE- As a general rule, a
ship owner’s liability is merely co-extensive with his interest in the
vessel, except where actual fault is attributable to the shipowner. Thus,
as an exception to the limited liability doctrine, a shipowner or ship
agent may be held liable for damages when the sinking of the vessel is
attributable to the actual fault or negligence of the shipowner or its
failure to ensure the seaworthiness of the vessel.
Applying the rule in this case Aboitiz was found negligent,
proved by the fact that: it failed to take a course of action that would
prevent the vessel from sailing into the typhoon; It failed to show that it
had exercised the required extraordinary diligence in steering the
vessel before, during and after the storm. Hence, Aboitiz is not entitled
to the limited liability rule and is, therefore, liable for the full value of the
lost cargoes.
Facts:
• This case is composed of three consolidated cases involving
the sinking of M/V P. Aboitiz on October 31, 1980. 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, respectively.
GR No. 121833
• Respondent Malayan Insurance Company (Malayan) filed five
separate actions against several defendants for the collection
of the amount of cargoes paid by them to various marine cargo
policy holders, Aboitiz was defendant in four out of the five
cases and was a third-party (defendant) in the fifth one.
• The shipments were supported by their respective bills of
lading and insured separately by Malayan against the risk of
loss or damage. In the five consolidated cases, Malayan
sought the recovery of amounts totaling P639,862.02.
• Aboitiz raised the defenses of lack of jurisdiction, lack of cause
of action and prescription. It also claimed that M/V P. Aboitiz
Transportation Law Case Digests | Atty. Norianne Tan | 2016
was seaworthy, that it exercised extraordinary diligence and
that the loss was caused by a fortuitous event.
• The Trial Court adjudged Aboitiz liable on the money claims,
The CA affirmed the RTC decision. It disregarded Aboitizs
argument that the sinking of the vessel was caused by a force
majeure,
• As to the computation of Aboitizs liability, the CA 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 4(5) of the Carriage of
Goods by Sea Act.
• Aboitiz appealed the case on a Rule 45, alleging that the
limited liability doctrine enunciated in the 1993 GAFLAC case
should be applied in the computation of its liability.
GR No. 130752
• 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.
• Aboitiz reiterated the defense of force majeure but the trial
court rendered a decision ordering Aboitiz to pay damages n
the amount of P646,926.30.
• Aboitiz sought reconsideration, arguing that the trial court
should have considered the findings of the Board of Marine
Inquiry that the sinking of the M/V P. Aboitiz was caused by a
typhoon and should have applied the real and hypothecary
doctrine in limiting the monetary award in favor of the
claimants. The trial court denied the MR. This was affirmed by
the CA and subsequently by the SC which became final and
executory.
• Asia Traders and Allied filed a motion for execution, which was
granted by the trial court. This was questioned by Aboitiz via
Rule 65 w/ urgent prayer for preliminary injunction and/or TRO
in the CA. The CA denied the petition ruling that Aboitiz was
actually negligent in ensuring the seaworthiness of M/V P.
Aboitiz, the appellate court held that the real and hypothecary
doctrine enunciated in the 1993 GAFLAC case cannot be
applied in the case. Hence Aboitiz elevated the matter in this
case.
Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira
GR No. 137801
• Equitable Insurance Corporation (Equitable) filed an action for
damages against Aboitiz to recover by way of subrogation the
value of the cargoes insured by Equitable that were lost in the
sinking of M/V P. Aboitiz.
• The TC rendered judgment ordering Aboitiz to pay P87,633.81,
plus legal interest and attorneys fees.
• On appeal, Aboitiz invoked the doctrine of limited liability and
claimed that the typhoon was the proximate cause of the loss.
But the CA affirmed the TC’s decision.
Notes:
• In all of these cases, Aboitiz wishes that its liability be limited to
the value of the insurance proceeds of the lost vessel plus
pending freightage and not correspond to the full insurable
value of the cargoes paid by respondents, based on the Courts
ruling in the 1993 GAFLAC case.
• The 1993 GAFLAC case was an offshoot of an earlier final and
executory judgment in the 1990 GAFLAC case, where the
General Accident Fire and Life Assurance Corporation, Ltd.
(GAFLAC), as judgment obligee therein, sought the execution
of the monetary award against Aboitiz. In this case, the SC
ruled that that claims against Aboitiz arising from the sinking of
M/V P. Aboitiz should be limited only to the extent of the value
of the vessel, finding no negligence on their part.
• In addition, since there were still several pending claims
against Aboitiz (more than 100) in relation to the sinking of MV
P. Aboitiz, the court ruled that the execution of judgments in
cases already resolved with finality must be stayed pending the
resolution of all the other similar claims arising from the sinking
of M/V P. Aboitiz. It reasoned that it is necessary to collate all
these claims before their payment from the insurance proceeds
of the vessel and its pending freightage.
ISSUE: Whether Aboitiz can avail limited liability on the basis of
the real and hypothecary doctrine of maritime law?
RULING: affirmed lower court and ca
REAL AND HYPOTHECARY DOCTRINE IN MARINETIME
LAW/LIMITED LIABILITY RULE is embodied in Articles 587, 590 and
837 under Book III of the Code of Commerce, thus:
Transportation Law Case Digests | Atty. Norianne Tan | 2016
• Art. 587. The ship agent shall also be civilly liable for
the indemnities in favor of third persons which may
arise from the conduct of the captain in the care of the
goods which he loaded on the vessel; but he may
exempt himself therefrom by abandoning the vessel
with all her equipment and the freight it may have
earned during the voyage.
• Art. 590. The co-owners of the vessel shall be civilly
liable in the proportion of their interests in the
common fund for the results of the acts of the captain
referred to in Art. 587.
Each co-owner may exempt himself from this liability
by the abandonment, before a notary, of the part of the
vessel belonging to him.
• Art. 837. The civil liability incurred by shipowners in
the case prescribed in this section, shall be
understood as limited to the value of the vessel with all
its appurtenances and freightage served during the
voyage.
• These articles intend to limit the liability of the shipowner or
agent to the value of the vessel, its appurtenances and
freightage earned in the voyage, provided that the owner
or agent abandons the vessel. When the vessel is totally lost
in which case there is no vessel to abandon, abandonment is
not required. Because of such total loss the liability of the
shipowner or agent for damages is extinguished. However,
despite the total loss of the vessel, its insurance answers for
the damages for which a shipowner or agent may be held
liable.
• Nonetheless, there are exceptional circumstances wherein
the ship agent could still be held answerable despite the
abandonment of the vessel, as where the loss or injury was
due to the fault of the shipowner and the captain. The
international rule is to the effect that the right of abandonment
of vessels, as a legal limitation of a shipowners liability, does
not apply to cases where the injury or average was occasioned
by the shipowners own fault. Likewise, the shipowner may be
Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira
held liable for injuries to passengers notwithstanding the
exclusively real and hypothecary nature of maritime law if fault
can be attributed to the shipowner.
• The doctrine of limited liability can only be applied if Aboitiz is
found NOT negligent and is NOT the direct cause of the sinking
of the vessel.
• In the case at bar, however, Aboitiz was found negligent,
proved by the fact that:
o It was negligent in failing to take a course of action that
would prevent the vessel from sailing into the typhoon.
o It failed to show that it had exercised the required
extraordinary diligence in steering the vessel before,
during and after the storm.
• Hence, Aboitiz is not entitled to the limited liability rule and is,
therefore, liable for the value of the lost cargoes as ruled by the
TCs.
SUPERVENING EVENTS BETWEEN GAFLAC CASE AND THIS
CASE
• MONARCH INSURANCE CASE- ruled that Aboitiz was
negligent but ruled that the amount of damages to the
claimants be limited only to the portionate share in the
insurance proceeds of the vessel in accordance with the
GAFLAC case.
• NEW INDIA- found Aboitiz negligent but this time ruled that it
cannot invoked the limited liability doctrine hence rejected
Aboitiz’s argument that the award of damages to respondent
therein should be limited to its pro rata share in the insurance
proceeds from the sinking of M/V P. Aboitiz.
NOTE:
REAL AND HYPOTHECARY DOCTRINE IN MARINETIME
LAW/LIMITED LIABILITY RULE
• As a general rule, a ship owners liability is merely co-extensive
with his interest in the vessel, except where actual fault is
attributable to the shipowner. Thus, as an exception to the
limited liability doctrine, a shipowner or ship agent may be held
liable for damages when the sinking of the vessel is attributable
to the actual fault or negligence of the shipowner or its failure to
ensure the seaworthiness of the vessel.
Transportation Law Case Digests | Atty. Norianne Tan | 2016
MONARCH INSURANCE CO., INC., TABACALERA INSURANCE
CO., INC and Hon. Judge AMANTE PURISIMA,vs.
COURT OF APPEALS and ABOITIZ SHIPPING CORPORATION
G.R. No. 92735, June 8, 2000
CASE:
This case is a consolidation of three petitions against Aboitiz. All cases
arose from the loss of cargoes of various shippers when the M/V P.
Aboitiz, a common carrier owned and operated by Aboitiz, sank on her
voyage from Hong Kong to Manila. Seeking indemnification for the loss
of their cargoes, the shippers, their successors-in-interest, and the
cargo insurers such as the instant petitioners filed separate suits
against Aboitiz before the Regional Trial Courts. The claims numbered
one hundred and ten (110) for the total amount of P41,230,115.00
which is almost thrice the amount of the insurance proceeds of
P14,500,000.00 plus earned freight of 500,000.00 according to
Aboitiz.Petitioners contend that the vessel M/V P. Aboitiz did not sink
by reason offorce majeure but because of its unseaworthiness and the
concurrent fault and/or negligence of Aboitiz, the captain and its crew,
thereby barring Aboitiz from availing of the benefit of the limited liability
rule.
WoN CA erred in finding that Aboitiz is entitled to the benefit of the
limited liability rule. YES
The provision 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 vessel with all her equipments and
the freight it may have earned during the voyage.""No vessel, no
liability," expresses in a nutshell the limited liability rule. The
shipowner's or agent's liability is merely co-extensive with his interest in
the vessel such that a total loss thereof results in its extinction. The
total destruction of the vessel extinguishes maritime liens because
there is no longer any res to which it can attach. This doctrine is based
on the real and hypothecary nature of maritime law which has its origin
in the prevailing conditions of the maritime trade and sea voyages
during the medieval ages, attended by innumerable hazards and perils.
To offset against these adverse conditions and to encourage
shipbuilding and maritime commerce, it was deemed necessary to
confine the liability of the owner or agent arising from the operation of a
ship to the vessel, equipment, and freight, or insurance, if any.
A finding that a fortuitous event was the sole cause of the loss of the
M/V P. Aboitiz would absolve Aboitiz from any and all liability pursuant
Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira
to Article 1734(1) of the Civil Code which provides in part that common
carriers are responsible for the loss, destruction, or deterioration of the
goods they carry, unless the same is due to flood, storm, earthquake,
lightning, or other natural disaster or calamity. On the other hand, a
finding that the M/V P. Aboitiz sank by reason of fault and/or
negligence of Aboitiz, the ship captain and crew of the M/V P. Aboitiz
would render inapplicable the rule on limited liability.
In this case, the Court found that the sinking of the ship is NOT force
majeure and Aboitiz, the captain and the crew are concurrently
negligent. Thus, the rule on limited liability is NOT applicable.
FACTS:
• Three consolidated petitions.
• All cases arose from the loss of cargoes of various shippers when
the M/V P. Aboitiz, a common carrier owned and operated by
Aboitiz, sank on her voyage from Hong Kong to Manila. Seeking
indemnification for the loss of their cargoes, the shippers, their
successors-in-interest, and the cargo insurers such as the instant
petitioners filed separate suits against Aboitiz before the Regional
Trial Courts. The claims numbered one hundred and ten (110) for
the total amount of P41,230,115.00 which is almost thrice the
amount of the insurance proceeds of P14,500,000.00 plus earned
freight of 500,000.00 according to Aboitiz.
G.R. No. 92735.
• Monarch and Tabacalera are insurance carriers of lost cargoes.
They indemnified the shippers and were consequently subrogated
to their rights, interests and actions against Aboitiz, the cargo
carrier.
• Aboitiz rejected responsibility for the claims on the ground that the
sinking of its cargo vessel was due to force majeure or an act of
God.
• Aboitiz had repeatedly failed to appear in court, the trial court
denied the said motion and allowed Monarch and Tabacalera to
present evidence ex-parte.
• Monarch and Tabacalera proffered in evidence the survey of
Perfect Lambert, a surveyor commissioned to investigate the
possible cause of the sinking of the cargo vessel. The survey
established that on her voyage to Manila from Hong Kong, the
vessel did not encounter weather so inclement that Aboitiz would
be exculpated from liability for losses. In his note of protest, the
master of M/V P. Aboitiz described the wind force encountered by
the vessel as from ten (10) to fifteen (15) knots, a weather
condition classified as typical and moderate in the South China Sea
Transportation Law Case Digests | Atty. Norianne Tan | 2016
at that particular time of the year. The survey added that the
seaworthiness of the vessel was in question especially because the
breaches of the hull and the serious flooding of two (2) cargo holds
occurred simultaneously in "seasonal weather."
• Trial Court rendered judgment AGAINST Aboitiz. CA dismissed the
appeal for failure to file appellant’s brief. SC (Pet for Review)
denied for being filed out of time. Entry of judgment was made.
• Monarch and Tabaclera moved for execution of judgment. The trial
court granted the motion on April 4, 1989 and issued separate writs
of execution. A public auction was made where Monarch and
Tabaclera were the highest bidders for several equipment.
• Aboitiz filed a Pet for Certiorari in the CA where such court granted,
annulling the writs of execution and the auction sale.
G.R. NOS. 94867 & 95578
• Allied as insurer-subrogee of consignee Peak Plastic and Metal
Products Limited, filed a complaint against Aboitiz for the recovery
of P278,536.50 representing the value of 676 bags of PVC
compound and 10 bags of ABS plastic lost on board the M/V P.
Aboitiz.
• Equitable, as insurer-subrogee of consignee-assured Axel
Manufacturing Corporation, filed an amended complaint against
Franco Belgian Services, F.E. Zuellig, Inc. and Aboitiz for the
recovery of P194,794.85 representing the value of 76 drums of
synthetic organic tanning substances and 1,000 kilograms of
optical bleaching agents.
• Aboitiz presented the testimonies of Capt. Gerry N. Racines,
master mariner of the M/V P. Aboitiz, and Justo C. Iglesias, a
meteorologist of the Philippine Atmospheric Geophysical and
Astronomical Services Administration (PAGASA).
• According to the master of the ship
o M/V P. Aboitiz left Hong Kong for Manila at about 7:30 in the
evening of October 29, 1980 after securing a departure
clearance from the Hong Kong Port Authority. The departure
was delayed for two hours because he (Capt. Racines) was
observing the direction of the storm that crossed the Bicol
Region. He proceeded with the voyage only after being
informed that the storm had abated.
o After more than twelve (12) hours of navigation, the vessel
suddenly encountered rough seas with waves about fifteen to
twenty-five feet high. He ordered his chief engineer to check
the cargo holds. The latter found that sea water had entered
Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira
cargo hold Nos. 1 and 2.He immediately directed that water be
pumped out by means of the vessel's bilge pump, a device
capable of ejecting 180 gallons of water per minute.
o At 6:00 a.m. of October 31, 1980, however, Capt. Racines
received a report from his chief engineer that the water level in
the cargo holds was rapidly rising. He altered the vessel's
course and veered towards the northern tip of Luzon to prevent
the vessel from being continuously pummeled by the waves.
o The ship sank and the master and crew were rescued.
• Justo Iglesias, meteorologist of PAGASA, testified:
o A stormy weather condition prevailed within the Philippine area
of responsibility, particularly along the sea route from Hong
Kong to Manila, because of tropical depression "Yoning."
• ALLIED and EQUITABLE refuted Aboitiz’s defense of force
majeure relying mainly on the marine protest filed by Capt. Racines
as well as on the Beaufort Scale of Wind. In his marine protest
under oath, Capt. Racines affirmed that the wind force an October
29-30, 1980 was only ten (10) to fifteen (15) knots. Under the
Beaufort Scale of Wind, said wind velocity falls under scale No. 4
that describes the sea condition as "moderate breeze," and "small
waves becoming longer, fairly frequent white horses."
• Both trial courts rendered judgment AGAINST Aboitiz. Both CA
affirmed. Similarly to the first petition, Aboitiz filed a Pet for Review
with the CA, but again, denied and the judgments became final and
executory. Allied prayed for writ of execution. To stay the
execution, Aboitiz filed a Pet. For Certiorari. CA ruled in favor of
Aboitiz, the execution was stayed.
• Hence, these petitions.
ISSUES: (Relevant only)
1) WoN Court of Appeals erred in finding that Aboitiz is entitled to the
benefit of the limited liability rule.
2) WoN force mejeure had indeed caused the M/V P. Aboitiz to sink.
3) WoN it was the concurrent fault and/or negligence of Aboitiz and
the captain and crew of the ill-fated vessel that had caused it to go
under water.
HELD & RATIO:
1) YES.
• Petitioners contend that the vessel M/V P. Aboitiz did not sink by
reason offorce majeure but because of its unseaworthiness and the
concurrent fault and/or negligence of Aboitiz, the captain and its
Transportation Law Case Digests | Atty. Norianne Tan | 2016
crew, thereby barring Aboitiz from availing of the benefit of the
limited liability rule.
• Applicable Rules: (Code of Commerce)
o Art. 587. The shipagent shall also be civilly liable for the
indemnities in favor of third persons which may arise from the
conduct of the captain in the care of goods which he loaded on
the vessel; but he may exempt himself therefrom by
abandoning the vessel with all the equipments and the freight it
may have earned during the voyage.
o Art. 590. The co-owners of a vessel shall be civilly liable in the
proportion of their interests in the common fund for the results
of the acts of the captain referred to in Art. 587.
Each co-owner may exempt himself from his liability by the
abandonment, before a notary, of the part of the vessel
belonging to him.
o Art. 837. The civil liability incurred by shipowners in the case
prescribed in this section, shall be understood as limited to the
value of the vessel with all its appurtenances and the
freightage served during the voyage.
• Art. 837 appeals the principle of limited liability in cases of collision
hence, Arts. 587 and 590 embody the universal principle of limited
liability in all cases.
• The provision 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 vessel with
all her equipments and the freight it may have earned during the
voyage."
• "No vessel, no liability," expresses in a nutshell the limited liability
rule. The shipowner's or agent's liability is merely co-extensive with
his interest in the vessel such that a total loss thereof results in its
extinction. The total destruction of the vessel extinguishes maritime
liens because there is no longer any res to which it can attach. This
doctrine is based on the real and hypothecary nature of maritime
law which has its origin in the prevailing conditions of the maritime
trade and sea voyages during the medieval ages, attended by
innumerable hazards and perils. To offset against these adverse
conditions and to encourage shipbuilding and maritime commerce,
it was deemed necessary to confine the liability of the owner or
Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira
agent arising from the operation of a ship to the vessel, equipment,
and freight, or insurance, if any.
• Contrary to the petitioners' theory that the limited liability rule has
been rendered obsolete by the advances in modern technology
which considerably lessen the risks involved in maritime trade, this
Court continues to apply the said rule in appropriate cases. This is
not to say, however, that the limited liability rule is without
exceptions, namely: (1) where the injury or death to a passenger
is due either to the fault of the shipowner, or to the concurring
negligence of the shipowner and the captain; (2) where the vessel
is insured; and (3) in workmen's compensation claims.
• We have categorically stated that Article 587 speaks only of
situations where the fault or negligence is committed solely by the
captain. In cases where the ship owner is likewise to be blamed,
Article 587 does not apply. Such a situation will be covered by the
provisions of the Civil Code on common carriers.
• A finding that a fortuitous event was the sole cause of the loss of
the M/V P. Aboitiz would absolve Aboitiz from any and all liability
pursuant to Article 1734(1) of the Civil Code which provides in part
that common carriers are responsible for the loss, destruction, or
deterioration of the goods they carry, unless the same is due to
flood, storm, earthquake, lightning, or other natural disaster or
calamity. On the other hand, a finding that the M/V P. Aboitiz sank
by reason of fault and/or negligence of Aboitiz, the ship captain and
crew of the M/V P. Aboitiz would render inapplicable the rule on
limited liability.
2) NO. The M/V P. Aboitiz did not go under water because of the
storm "Yoning."
• It is true that as testified by Justo Iglesias, meteorologist of Pag-
Asa, during the inclusive dates of October 28-31, 1980, a stormy
weather condition prevailed within the Philippine area of
responsibility, particularly along the sea route from Hong Kong to
Manila, because of tropical depression "Yoning". But even Aboitiz'
own evidence in the form of the marine protest filed by Captain
Racines affirmed that the wind force when the M/V P. Aboitiz
foundered on October 31, 1980 was only ten (10) to fifteen (15)
knots which, under the Beaufort Scale or Wind, falls within scale
No. 4 that describes the wind velocity as "moderate breeze," and
characterizes the waves as "small . . . becoming longer, fairly
frequent white horses." Captain Racines also testified in open court
Transportation Law Case Digests | Atty. Norianne Tan | 2016
that the ill-fated M/V P. Aboitiz was two hundred (200) miles away
from storm "Yoning" when it sank.
3) YES.
• The unseaworthiness of the M/V P. Aboitiz had caused it to
founder. We, however, take exception to the pronouncement that
said unseaworthiness could not be attributed to the ship owner but
only to the negligent acts of the captain and crew of the M/V P.
Aboitiz. On the matter of Aboitiz' negligence, we adhere to our
ruling in Aboitiz Shipping Corporation v. Court of Appeals, that
found Aboitiz, and the captain and crew of the M/V P. Aboitiz to
have been concurrently negligent.
• Monarch and Tabacalera presented a survey from Perfect Lambert,
a surveyor based in Hong Kong that conducted an investigation on
the possible cause of the sinking of the vessel. The said survey
established that the cause of the sinking of the vessel was the
leakage of water into the M/V P. Aboitiz which probably started in
the forward part of the No. 1 hull, although no explanation was
proffered as to why the No. 2 hull was likewise flooded. Perfect
Lambert surmised that the flooding was due to a leakage in the
shell plating or a defect in the water tight bulk head between the
Nos. 1 and 2 holds which allowed the water entering hull No. 1 to
pass through hull No. 2. The surveyor concluded that whatever the
cause of the leakage of water into these hulls, the seaworthiness of
the vessel was definitely in question because the breaches of the
hulls and serious flooding of the two cargo holds occurred
simultaneously in seasonal weather.
• Aboitiz had failed to prove that it observed the extraordinary
diligence required of it as a common carrier.
• The failure of Aboitiz to present sufficient evidence to exculpate
itself from fault and/or negligence in the sinking of its vessel in the
face of the foregoing expert testimony constrains us to hold that
Aboitiz was concurrently at fault and/or negligent with the ship
captain and crew of the M/V P. Aboitiz. This is in accordance with
the rule that in cases involving the limited liability of shipowners,
the initial burden of proof of negligence or unseaworthiness rests
on the claimants. However, once the vessel owner or any party
asserts the right to limit its liability, the burden of proof as to lack of
privity or knowledge on its part with respect to the matter of
negligence or unseaworthiness is shifted to it. This burden, Aboitiz
had unfortunately failed to discharge.
Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira
OTHERS:
For its contumacious act of defying the order of this Court to file the
appropriate action to consolidate all claims for settlement, Aboitiz must
be held liable for moral damages which may be awarded in appropriate
cases under the Chapter on human relations of the Civil Code.
On account of Aboitiz' refusal to satisfy petitioners' claims in
accordance with the directive of the Court in Aboitiz Shipping
Corporation v. General Accident Fire and Life Assurance Corporation,
Ltd., it acted in gross and evident bad faith. Accordingly, pursuant to
Article 2208 of the Civil Code, petitioners should be granted attorney's
fees.
PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC.,
v. CA and FELMAN SHIPPING LINES
G.R. No. 116940. June 11, 1997
CASE:
Coke Ph loaded on board MV Asilda (owned by FELMAN) soft
drink bottles bound for Coke Cebu from Zamboanga City. The
shipment was insured with PHILAMGEN. MV Asilda sank in
Zamboanga del Norte bringing down her entire cargo including the
subject Coke bottles. PHILAMGEN, as insurer, paid Coke Cebu. By
virtue of subrogation, PHILAMGEN sought recourse against FELMAN
which disclaimed any liability for the loss. CA held that MV Asilda was
unseaworthy for being top- heavy. Nonetheless, CA denied the
PHILAMGEN’s claim on the ground that PHILAMGEN was not properly
subrogated to the rights and interests of the shipper. Furthermore, CA
held that the filing of notice of abandonment had absolved the
shipowner/agent from liability under the limited liability
rule.(Please see ratio for discussion on the other two issues.)
W/N the limited liability under Art. 587 of the Code of
Commerce should apply.-NO.
While the ship agent is liable for the negligent acts of the
captain in the care of goods loaded on the vessel, this liability however
can be limited through abandonment of the vessel, its equipment and
freightage as provided in Art. 587 of the Code of Commerce.
Nonetheless, there are exceptional circumstances wherein the ship
agent could still be held answerable despite the abandonment, as
where the loss or injury was due to the fault of the shipowner and the
captain. It must be stressed that Art. 587 speaks only of situations
Transportation Law Case Digests | Atty. Norianne Tan | 2016
where the fault or negligence is committed solely by the
captain. Where the shipowner is likewise to be blamed, Art. 587
will not apply, and such situation will be covered by the
provisions of the Civil Code on common carrier.
In this case, the sinking was due to its unseaworthiness even
at the time of its departure from Zamboanga port. It was top-heavy as
an excessive amount of cargo was loaded on deck. Closer
supervision on the part of the shipowner could have prevented this fatal
miscalculation. As such, FELMAN was equally negligent. It cannot
escape liability through the expedient of filing a notice of abandonment
of the vessel by virtue of Art. 587 of the Code of Commerce.
FACTS:
• On 6 July 1983 Coca-Cola Bottlers Philippines, Inc. loaded on
board MV Asilda, a vessel owned by FELMAN, 7,500 cases of
1-liter soft drink bottles to be
transported from Zamboanga toCebu for consignee Coca-
Cola Cebu (Coke Cebu). The shipment was insured with
Philippine American General Insurance Co., Inc.
(PHILAMGEN) under Marine Open Policy.
• MV Asilda left Zamboanga port in fine weather, but the next
day the vessel sank in Zamboanga del Norte bringing down her
entire cargo including the subject 7,500 cases of Coke bottles.
• Coke Cebu filed a claim with FELMAN for recovery of
damages. FELMAN denied the claim, thus, the Coke Cebu filed
an insurance claim with PHILAMGEN which paid P755,250.
• By virtue of subrogation, PHILAMGEN sought recourse against
FELMAN which disclaimed any liability for the
loss. Consequently, PHILAMGEN sued the shipowner for sum
of money and damages.
• PHILAMGEN alleged that the sinking and total loss of MV
Asilda and its cargo were due to the vessels’ unseaworthiness
as she was put to sea in an unstable
condition;that the vessel was improperly manned; and that its
officers were grossly negligent in failing to take appropriate
measures to proceed to a nearby port or beach after the vessel
started to list.
• FELMAN filed MTD on the ground that no right of subrogation
in favor of PHILAMGEN was transmitted by the shipper, and
that, in any event, FELMAN had abandoned all its rights,
interests and ownership over MV Asilda together with her
Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira
freight and appurtenances for the purpose of limiting and
extinguishing its liability under Art. 587 of the Code of
Commerce.
• TC ruled in favor of FELMAN&held that MV Asilda was
seaworthy when it left the port as confirmed by the Philippine
Coast Guard certificates and the shipowner’s surveyor attesting
to its seaworthiness. Thus the loss of the vessel and its entire
shipment could only be attributed to either a fortuitous event, in
which case, no liability should attach unless there was 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
should apply.
• CA held that MV Asilda was unseaworthy for being top- heavy
as 2,500 cases of Coke softdrink bottles were improperly
stowed on deck. While the vessel had the necessary PCG
certification indicating its seaworthiness with respect to the
structure of the ship itself, it was not seaworthy with respect to
the cargo. Nonetheless, CA denied the claim of PHILAMGEN
on the ground that the assured’ implied warranty of
seaworthiness was not complied with. Thus, PHILAMGEN was
not properly subrogated. Further, CA held that the filing of
notice of abandonment had absolved the shipowner/agent from
liability under the limited liability rule.
ISSUE:
3. W/N MV Asilda was seaworthy when it left the port of
Zamboanga
4. W/N the limited liability under Art. 587 of the Code of
Commerce should apply.
5. W/N PHILAMGEN was properly subrogated to the rights and
legal actions which the shipper had against FELMAN
HELD & RATIO:
1. MV Asilda was unseaworthy when it left the port of
Zamboanga.
• SC subscribed to the findings of the Elite Adjusters,
Inc., and the CA that the proximate cause of the
sinking was its being top-heavy.
• Evidence shows that approximately 2,500 cases of
softdrink bottles were stowed on deck.
• It is settled that carrying a deck cargo raises the
presumption of unseaworthiness unless it can be
shown that the deck cargo will not interfere with the
Transportation Law Case Digests | Atty. Norianne Tan | 2016
proper management of the ship. However, in this case
it was established that MV Asilda was not designed to
carry substantial amount of cargo on deck. The
inordinate loading of cargo deck resulted in the
decrease of the vessel’s metacentric height thus
making it unstable. The strong winds and waves
encountered by the vessel are but the ordinary
vicissitudes of a sea voyage and as such merely
contributed to its already unstable and unseaworthy
condition.
2. Art. 587 of the Code of Commerce is not applicable to the
case at bar.
• The ship agent is liable for the negligent acts of the
captain in the care of goods loaded on the vessel. This
liability however can be limited through abandonment
of the vessel, its equipment and freightage as provided
in Art. 587.
• Nonetheless, there are exceptional circumstances
wherein the ship agent could still be held
answerable despite the abandonment, as where the
loss or injury was due to the fault of the shipowner and
the captain.
o The international rule is to the effect that
the right of abandonment of vessels, as a
legal limitation of a shipowner’s liability,
does not apply to cases where the injury or
average was occasioned by the
shipowner’s own fault.
• Art. 587speaks only of situations where the fault or
negligence is committed solely by the captain. Where
the shipowner is likewise to be blamed, Art. 587 will not
apply, and such situation will be covered by the
provisions of the Civil Code on common carrier.
• The sinking was due to its unseaworthiness even at
the time of its departure. It was top-heavy as an
excessive amount of cargo was loaded on deck. Closer
supervision on the part of the shipowner could have
prevented this fatal miscalculation. As such, FELMAN
was equally negligent. It cannot escape liability through
the expedient of filing a notice of abandonment of the
vessel by virtue of Art. 587 of the Code of Commerce.
Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira
Under Art 1733 of the Civil Code, “Common carriers,
•
from the nature of their business and for reasons of
public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the
safety of the
passengers transported by them, according to all the
circumstances of each case x xxx." In the event of loss
of goods, common carriers are presumed to have
acted negligently. FELMAN was not able to rebut this
presumption.
3. Subrogation was proper.
• PHILAMGEN’s action against FELMAN is sanctioned
5
by Art. 2207 of the Civil Code.
• Payment by the assurer to the assured operates as an
equitable assignment to the assurer of all the remedies
which the assured may have against the third party
whose negligence or wrongful act caused the loss. The
right of subrogation is not dependent upon, nor does
it grow out of any privity of contract or
upon payment by the insurance company of the
insurance claim. It accrues simply upon payment by
the insurance company of the insurance claim.
• The doctrine of subrogation has its roots in equity. It is
designed to promote and to accomplish justice and is
the mode which equity adopts to compel the ultimate
payment of a debt by one who in justice, equity and
good conscience ought to pay. Therefore, the payment
of PHILAMGEN to Coke Ph gave the former the right
to bring an action as subrogee against
FELMAN. Having failed to rebut the presumption of
fault, the liability of FELMAN is inevitable.
5
Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured against
the wrongdoer or the person who has violated the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover
the deficiency from the person causing the loss or injury.
Transportation Law Case Digests | Atty. Norianne Tan | 2016
NEGROS NAVIGATION CO., INC. v. CA, RAMON MIRANDA, SPS.
RICARDO and VIRGINIA DE LA VICTORIA
G.R. No. 110398, 7 November 1997
Real & Hypothecary Nature of Maritime Law
CASE:
Ramon Miranda purchased from petitioner Negros Navigation
four tickets for his family who was going to Bacolod City. The vessel,
M/V Don Juan, collided with PNOC’s M/T Tacloban City and as a
result, it sank. Several passengers died, however, Ramon’s family was
never found.
He and others filed a complaint for damages. Negros
Navigation’s principal defense is that the mere fact the bodies were
never found indicates that Ramon’s family did not board the vessel.
The Court held that the family was actual passengers of the
ship. This was proven by the Passenger Manifest and testimonies of
Ramon and one survivor of the incident, who was able to talk to the
family.
The Court also said that the total loss of the vessel does not
extinguish petitioner’s liability. A shipowner may be held liable for
injuries to passengers notwithstanding the exclusively real and
hypothecary nature of maritime law if fault can be attributed to the
shipowner. Having found the crew liable in another case Mecenas v.
CA (master was playing mahjong and vessel was overloaded),
petitioner must also be held liable to the private respondents in the
present case.
FACTS:
• Private respondent Ramon Miranda (“Ramon”) purchased from
Negros Navigation (“NN”) four special cabin tickets for his wife,
daughter, son and niece who were going to Bacolod City to
attend a family reunion.
• M/V Don Juan left Manila on schedule. At about 10:30 pm, it
collided with M/T Tacloban City off the Tablas Strait in Mindoro.
M/T Tacloban City is an oil tanker owned by the Philippine
National Oil Company (“PNOC”). As a result, M/V Don Juan
sank.
• Several passengers died. All four members of Ramon’s family
were never found.
• Ramon and the other private respondents filed a complaint
against NN and PNOC for damages for the death of their
family.
Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira
• NN admitted to all facts, except they insisted that Ramon’s
family members never boarded the vessel on the ground that
their bodies were never found. NN also averred that the vessel
was seaworthy and manned by competent crew, and that the
incident was entirely due to the fault of M/T Tacloban City’s
crew.
• PNOC and NN entered into a compromise agreement whereby
the latter would pay all compensation and would release PNOC
from any liability. However, the private respondents did not join
the agreement.
• The trial court found NN liable and ordered it to pay private
respondents.
ISSUES:
1. whether the members of Ramon’s families were passengers of the
vessel
2. whether the ruling in Mecenas v. CA, finding the crew of NN to be
grossly negligent in the performance of their duties, is binding in this
case
3. RELEVANT: whether the total loss of the vessel extinguished NN’s
liability
4. whether the damages awarded are excessive, unreasonable and
unwarranted
HELD & RATIO:
1. YES, they are actual passengers of the vessel.
• This is corroborated by the following evidence:
o Passenger Manifest – on which the numbers of the
tickets and names of Ramon’s family members appear.
o Ramon testified that he personally took his family and
niece to the vessel and stayed with them until it was
time for the ship to leave.
o Edgardo Ramirez, a seminarian who was also one of
the survivors, testified that he saw the victims on the
ship and was able to talk to them. He knew them
because Ramon’s wife was his teacher in grade
school.
2. YES, the ruling in Mecenas v. CA is binding in this case by virtue of
stare decisis, except the ruling on damages is not.
Transportation Law Case Digests | Atty. Norianne Tan | 2016

• In that case, although it was found out that the negligence of

the crew of M/T Tacloban City is the proximate cause of the
incident, the crew of M/V Don Juan contributed to it.
o The master of M/V Don Juan was playing mahjong at
the time of collision, and the officer on watch admitted
that he failed to call the attention of the master to the
danger facing them.
o The vessel was also overloaded. The Certificate of
Inspection issued by the Philippine Coast Guard stated
that the total number of persons allowed on the ship
was 864, of whom 810 are passengers, but it was later
on found out that 1,004 passengers were on board
when it sank.

3. NO, the total loss does not extinguish NN’s liability.

• A shipowner may be held liable for injuries to passengers
notwithstanding the exclusively real and hypothecary nature of
maritime law if fault can be attributed to the shipowner.
• Since Mecenas is applicable in this case, and it was found that
NN is liable therein, NN is liable for damages to the full extent
and must pay private respondents accordingly.

4. YES, the award was excessive. Stare decisis does not apply in view
of differences in the personal circumstances of victims.
• The important differentiation made by the SC is with regard to
the determination of the earning capacity of the victims.
• The formula is 2/3 multiplied by (80 minus the age of the
deceased). Mrs. Miranda is a teacher. NN contends that, in
counting her life expectancy, her age should be pegged at 65,
the retirement age. However, the Court did not agree.
According to the Court, it is assumed that the deceased would
have earned income even after retirement from a particular job.
Mrs. Miranda had a master’s degree and a good prospect of
becoming principal of the school she was teaching. The trial
court correctly pegged it at 69.
• The amount of moral and exemplary damages was also
correct.

Lim, Aubbrey. Lim,Yvette. Miranda, Wayne. Rivera, Camille. Santos, Reeneth. Yogue, Akira