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CASE

NR

CASE TITLE

NAME
Guevarra,
Kim

15

International Harvester v. Aragon, G.R. No. L-2372 (26 August 1949)

16

Phil Shipping Co. v. Vergara, 6 Phil 281 (1906)

Lee

17

Chua Yek Hong v. IAC, 166 SCRA 183 (1988)

Lofranco

18

Guison v. Phil Shipping Co., 69 Phil 536 (1940)

Manalo

19

Yangco v. Laserna, 73 Phil 330 (1941)

Mateo

20

22

Ohta Devt Co. v. Steamship Pompey, 49 Phil 117 (1926)


Aboitiz Shipping Corp. v. General Accident Fire and Life Insurance Corp., Ltd., 217
SCRA 359 (1993)
Monarch Insurance Co., Inc. v. CA, 333 SCRA 71 (2000)

23

Manila Steamship v. Abdulhaman, 100 Phil 32 (1956)

Pagalilauan

24

Abueg v. San Diego, 77 Phil 730 (1946)

Palomique

25

PI v. Insular Maritime Co., 45 Phil 805 (1924)

Tolentino

26

Phil Am Gen Insurance Co, Inc. v. CA, 273 SCRA 260 (1997) (previously assigned)

Zerrudo

27

Loadstar Shipping, Co., Inc. v. CA, 315 SCRA 339 (1999) (previously assigned)

Alfafara

21

Mauricio
Meridores
Padua

INTERNATIONAL HARVESTER COMPANY OF THE PHILIPPINES,


vs. CRISANTO ARAGON, Judge of Municipal Court of Manila, and YARAS and COMPANY, FAR EAST
G.R. No. L-2372 | August 26, 1949
FACTS:
International Harvester Company of the Philippines is the agent in the Philippines of the vessel S/S Belle of the Sea
which took on board at Los Angeles, California, U. S. A., goods for shipment to Manila, and covered by Bill of Lading
No. 105; When the S/S Belle of the Seaarrived in Manila, the cargoes were discharged at the Government piers under the
supervision and custody of Manila Terminal Co., Inc.
Out of the goods covered by Bill of Lading No. 105, one carton of assorted samples with a stipulated value of P200 was
not delivered to Yaras and Company which was lost through the negligence either of the Manila Terminal Co., Inc., or of
the International Harvester Company of the Philippines. The complaint prayed for judgment either against the defendant
Manila Terminal Co., Inc., or the International Harvester Company of the Philippines, agent of the vessel Belle of the Sea
for the amount of P200, with legal interest from the date of the filing of the complaint.
*Before the trial in the Municipal Court of Manila could be proceeded with, the International Harvester of the Philippines
filed a motion to dismiss, on the ground that the Municipal Court of Manila had no jurisdiction to try case because the
action involves admiralty or maritime jurisdiction, which motion was overruled by the municipal court.
*The Court of First Instance of Manila rendered judgment favor of the International Harveter Company of the Philippines,
ordering the judge of the municipal court to desist from taking cognizance of civil case against the International Harvester
Company of the Philippines.
ISSUE:
WON the municipal court can take cognizance of civil case for recovery of the undelivered goods against the International
Harvester Company of the Philippines.
HELD:
In view of our conclusion that the cause of action of Yaras and Company against International Harvester Company of the
Philippines involves admiralty over which the courts of first instance have original jurisdiction and to which the
jurisdiction of the justice of the peace courts (including municipal courts) does not extend the respondent judge was
properly restrained from further proceeding with civil case No. IV-262.
The liability of the International Harvester Company of the Philippines is predicated on the contract of carriage by sea
between the International Harvester Company of the Philippines and Yaras and Company as evidenced by Bill of Lading
No. 105, independently of the liability of the Manila Terminal Co., Inc, as operator of an arrastre service.
Admiralty has jurisdiction over all maritime contracts, in whatever form, wherever they were executed or are to be
performed, but not over non-maritime contracts. Whether or not a contract is maritime does not depend upon the English
rule which conceded jurisdiction only to contracts made upon and the to be performed upon navigable water, making the
locality the test. It depends on the subject-matter of the contract, making the true criterion a maritime service or a
maritime transaction.
Specifically, admiralty has jurisdiction of a proceeding in rem or in personam for the breach of a contract of
affreightment, whether evidenced by a bill of lading or a charter party. And typical of a controversy over contracts of
affreightment is a suit of one party against the other for loss of or damage to the cargo.
DIPOSITIVE:
Wherefore, the judge of the municipal court is ordered to desist from taking cognizance of civil case against the
International Harvester Company of the Philippines.

Title: THE PHILIPPINE SHIPPING


COMPANY, ET AL., plaintiffs-appellants,
vs.
FRANCISCO GARCIA VERGARA, defendantappellee
G.R. No. L-1600
June 1, 1906
Topic: Real and Hypothecary

Quick Notes/Doctrine

Facts: The Philippine Shipping Company, the owner of the steamship Nuestra Sra. de Lourdes, claims an indemnification
of 44,000 pesos for the loss of the said ship as a result of a collision. Ynchusti & Co. also claimed 24,705.64 pesos as an
indemnification for the loss of the cargo of hemp and coprax carried by the said ship on her last trip. The defendant,
Francisco Garcia Vergara, was the owner of the steamship Navarra, which collided with the Lourdes.
The court below found as a matter of fact that the steamship Lourdes was sailing in accordance with law, but that the
Navarra was not, and was therefore responsible for the collision. The court also found as a fact that "both ships with their
respective cargoes were entirely lost." Construing article 837 of the Code Commerce, the court below held "that the
defendant was not responsible to the plaintiff for the value of the steamship Lourdes, with the costs against the latter."
But the appellant, the Philippine Shipping Company, contends that the defendant should pay to 18,000 pesos, the value of
the Navarra at the time of its loss; that this is the sense in which the provisions of article 837 of the Code of Commerce
should be understood; that said code has followed the principles of the English law and not those of the American law, and
that it was immaterial whether the Navarra had been entirely lost, provided her value at the time she was lost could be
ascertained, since the extent of the liability of the owner of the colliding vessel for the damages resulting from the collision
is to be determined in accordance with such value.
From the judgment of the trial court the Philippine Shipping Company and the defendant Vergara appealed, but the latter
has failed to prosecute his appeal by a bill of exceptions or otherwise. The only appellant who has prosecuted this appeal
now reduced its claim to 18,000 pesos, the value of the colliding vessel.
Issues: WON Philippine Shipping should be indemnify for 18,000
Held: No, the defendant is liable for the indemnification to which the plaintiff is entitled by reason of the collision, but he
is not required to pay such indemnification of the reason that the obligation thus incurred has been extinguished on account
of the loss of the thing bound for the payment thereof, and in this respect the judgment of the court below is affirmed
except in so far as it requires the plaintiff to pay the costs of this action, which is not exactly proper.
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 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 subsidiary civil liability is concerned. This
abandonment which would have amounted to an offer of the value of the vessel, of her equipment, and freight money
earned could not have been refused, and the agent could not have been personally compelled, under such circumstances, to
pay the 18,000 pesos, the estimated value of the vessel at the time of the collision.
Ratio : The spirit of our code is accurately set forth in a treatise on maritime law, from which we deem proper to quote the
following as the basis of this decision:
That which distinguishes the maritime from the civil law and even from the mercantile law in general is the real
and hypothecary nature of the former, and the many securities of a real nature that maritime customs from time
immemorial, the laws, the codes, and the later jurisprudence, have provided for the protection of the various and
conflicting interest which are ventured and risked in maritime expeditions, such as the interests of the vessel and of
the agent, those of the owners of the cargo and consignees, those who salvage the ship, those who make loans upon
the cargo, those of the sailors and members of the crew as to their wages, and those of a constructor as to repairs
made to the vessel.
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 the vessel and the freight money, and (2) the right to retain the cargo and the embargo and
detention of the vessel even cases where the ordinary civil law would not allow more than a personal action against
the debtor or person liable. It will be observed that these rights are correlative, and naturally so, because if the
agent can exempt himself from liability by abandoning the vessel and freight money, thus avoiding the possibility
of risking his whole fortune in the business, it is also just that his maritime creditor may for any reason attach the
vessel itself to secure his claim without waiting for a settlement of his rights by a final judgment, even to the
prejudice of a third person.
This repeals the civil law to such an extent that, in certain cases, where the mortgaged property is lost no personal
action lies against the owner or agent of the vessel. For instance, where the vessel is lost the sailors and members
of the crew can not recover their wages; in case of collision, the liability of the agent is limited as aforesaid, and in
case of shipwrecks, those who loan their money on the vessel and cargo lose all their rights and can not claim
reimbursement under the law.
There are two reasons why it is impossible to do away with these privileges, to wit: (1) The risk to which the thing
is exposed, and ( 2 ) the "real" nature of maritime law, exclusively "real," according to which the liability of the
parties is limited to a thing to which is at mercy of the waves. If the agent is only liable with the vessel and freight
money and both may be lost through the accidents of navigation it is only just that the maritime creditor have some
means of obviating this precarious nature of his rights by detaining the ship, his only security, before it is lost.
The liens, tacit or legal, which may exist upon the vessel and which a purchaser of the same would be obliged to
respect and recognize in addition to those existing in favor of the State by virtue of the privileges which are
granted to it by all the laws pilot, tonnage, and port dues and other similar charges, the wages of the crew
earned during the last voyage as provided in article 646, of the Code of Commerce, salvage dues under article 842,
the indemnification due to the captain of the vessel in case his contract is terminated on account of the voluntary
sale of the ship and the insolvency of the owner as provided in article 608, and other liabilities arising from
collisions under article 837 and 838. (Madariaga, pp. 60-62, 63, 85.)
Dispositive Portion:
Relation/Pertinent Law :
Article 837 of the Code Commerce provides: "The civil liability contracted by the shipowners in the cases prescribed in
this section shall be understood as limited to the value of the vessel with all her equipment and all the freight money earned
during the voyage."
This section is a necessary consequence of the right to abandon the vessel given to the shipowner in article 587 of the code,
and it is one of the many superfluities contained in the code. (Lorenzo Benito, "Lecciones," 352.)
Art. 587. The agent shall also the civilly liable for the indemnities in favor of third persons which arise from the conduct 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 trip.
ART. 590. The part owners of a vessel shall be civilly liable, in the proportion of their contribution to the common fund,
for the results of the acts of the captain referred to in article 587. Each part owner may exempt himself from this liability
by the abandonment, before a notary, of the part of the vessel belonging to him.
The "Exposicion de motivos" of the Code of Commerce contains the following: "The present code (1829) does not
determine the juridical status of the agent where such agent is not himself the owner of the vessel. This omission is
supplied by the proposed code, which provides in accordance with the principles of maritime law that by agent it is to be
understood the person intrusted with the provisioning of the vessel, or the one who represents her in the port in which she
happens to be. This person is the only who represents the interest of the owner of the vessel. This provision has therefore
cleared the doubt which existed as to the extent of the liability, both of the agent and for the owner of the vessel. Such
liability is limited by the proposed code to the value of the vessel and other things appertaining thereto."

017 Chua Yek Hong v. Intermediate Appellate Court


Melencio-Herrera, J.
G.R. No. 74811 September 30, 1988
Nature: Petition for Review on Certiorari

Quick Notes / Doctrine:


The primary law is the Civil Code (Arts. 1732-1766)
and in default thereof, the Code of Commerce and
other special laws are applied.
Doctrine of Limited Liability: "NO VESSEL, NO
LIABILITY".

Facts:
Petitioner: Chua Yek Hong
Respondents: Intermediate Appellate Court, Mariano Guno, and Dominador Olit
Background:
Petitioner is a duly licensed copra dealer based at Puerta Galera, Oriental Mindoro, while private respondents are the
owners of the vessel, "M/V Luzviminda I," a common carrier engaged in coastwise trade from the different ports of
Oriental Mindoro to the Port of Manila.
Petitioner loaded 1,000 sacks of copra, valued at P101,227.40, on board the vessel "M/V Luzviminda I" for shipment
from Puerta Galera, Oriental Mindoro, to Manila. Said cargo, however, did not reach Manila because somewhere
between Cape Santiago and Calatagan, Batangas, the vessel capsized and sank with all its cargo.
Petitioner instituted before the then CFI of Oriental Mindoro, a Complaint for Damages based on breach of
contract of carriage against private respondents.
Private Respondents argued that even assuming that the alleged cargo was truly loaded aboard their vessel, their
liability had been extinguished by reason of the total loss of said vessel.
Trial Court:
The preponderance of evidence militates in favor of the plaintiff and against the defendants.
Ordered the defendants, jointly and severally, to pay the plaintiff:
o P101,227.40 representing the value of the cargo which was lost while in the custody of the defendants;
o P65,550.00 representing miscellaneous expenses of plaintiff on said lost cargo;
o Attorney's fees in the amount of P5,000.00
o Costs of suit.
Appellate Court:
REVERSED. Applied Article 587 of the Code of Commerce and the doctrine in Yangco vs. Lasema.
Private respondents' liability, as ship owners, for the loss of the cargo is merely co-extensive with their interest in the
vessel such that a total loss thereof results in its extinction.
Absolved defendants-appellants from any and all liabilities arising from the loss of 1,000 sacks of copra belonging to
plaintiff-appellee.
Issue:
WoN respondent Appellate Court erred in applying the doctrine of limited liability under Article 587 of the Code of
Commerce.
Held:
No. Article 1766 of the Civil Code provides:
Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be
governed by the Code of Commerce and by special laws.
In other words, the primary law is the Civil Code (Arts. 1732-1766) and in default thereof, the Code of Commerce
and other special laws are applied. Since the Civil Code contains no provisions 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 of Commerce,
more particularly Article 587, that govern in this case.
In sum, it will have to be held that since the ship agent's or ship owner's liability is merely co-extensive with his
interest in the vessel such that a total loss thereof results in its extinction (Yangco vs. Laserna, supra), and none of
the exceptions to the rule on limited liability being present, the liability of private respondents for the loss of the
cargo of copra must be deemed to have been extinguished. There is no showing that the vessel was insured in this
case.

WHEREFORE, the judgment sought to be reviewed is hereby AFFIRMED. No costs.


Ratio:
Art. 587 of the Code of Commerce.
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 the equipments and the freight it may have earned during the voyage.
The term ship agent under Article 587 includes ship owner; Both shipagent and shipowner are civilly and directly
liable.
The term "ship agent" as used in the foregoing provision (Article 587) is broad enough to include the ship owner
(Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256 [1921]). Pursuant to said provision, therefore, both the ship
owner and ship agent are civilly and directly liable for the indemnities in favor of third persons, which may
arise from the conduct of the captain in the care of goods transported, as well as for the safety of passengers
transported (Yangco vs. Laserna, supra; Manila Steamship Co., Inc. vs. Abdulhaman et al., 100 Phil. 32 [1956]).
Limited liability rule; Shipowners or agents liability merely cextensive with his interest in vessel; total loss results in
extinction of liability.
However, under the same Article, this direct liability is moderated and limited by the ship agent's or ship
owner's right of abandonment of the vessel and earned freight. This expresses the universal principle of limited
liability under maritime law. The most fundamental effect of abandonment is the cessation of the responsibility of
the ship agent/owner (Switzerland General Insurance Co., Ltd. vs. Ramirez, L-48264, February 21, 1980, 96 SCRA
297). It has thus been held that by necessary implication, the ship agent's or ship owner's liability is confined to that
which he is entitled as of right to abandon the vessel with all her equipment and the freight it may have earned
during the voyage," and "to the insurance thereof if any" (Yangco vs. Lasema, supra). 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 thereof
results in its extinction. "NO VESSEL, NO LIABILITY" expresses in a nutshell the limited liability rule. The
total destruction of the vessel extinguishes maritime liens as there is no longer any res to which it can attach (Govt.
Insular Maritime Co. vs. The Insular Maritime, 45 Phil. 805, 807 [1924]).
As this Court held:
If the ship owner or agent may in any way be held civilly liable at all for injury to or death of passengers arising
from the negligence of the captain in cases of collisions or shipwrecks, his liability is merely co-extensive with
his interest in the vessel such that a total loss thereof results in its extinction. (Yangco vs. Laserna, et al., supra).
Rationale:
To offset against hazards and perils of the sea and to encourage ship building.
The real and hypothecary nature of the liability of the ship owner or agent embodied in the provisions of the
Maritime Law, Book III, Code of Commerce, had 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 ship building 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, so that if the ship owner or agent ABANDONED the ship, equipment, and freight, HIS LIABILITY
WAS EXTINGUISHED. (Abueg vs. San Diego, 77 Phil. 730 [1946])
To protext the shipowner from the negligence of his captain.
Without the principle of limited liability, a ship owner and investor in maritime commerce would run the risk
of being ruined by the bad faith or negligence of his captain, and the apprehension of this would be fatal to the
interest of navigation." (Yangco vs. Lasema, supra).
To avoid the risk of losing his whole fortune.
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 the vessel and the freight money, and (2) the right to retain the cargo and the embargo and detention
of the vessel even in cases where the ordinary civil law would not allow more than a personal action against the
debtor or person liable. It will be observed that these rights are correlative, and naturally so, because if the agent can

exempt himself from liability by abandoning the vessel and freight money, thus avoiding the possibility of risking
his whole fortune in the business, it is also just that his maritime creditor may for any reason attach the vessel itself
to secure his claim without waiting for a settlement of his rights by a final judgment, even to the prejudice of a third
person. (Phil. Shipping Co. vs. Vergara, 6 Phil. 284 [1906]).
Exceptions to the limited liability rule.
The limited liability rule, however, is not without exceptions, namely:
1. where the injury or death to a passenger is due either to the fault of the ship owner, or to the concurring
negligence of the ship owner and the captain (Manila Steamship Co., Inc. vs. Abdulhaman supra);
2. where the vessel is insured; and
3. in workmen's compensation claims Abueg vs. San Diego, supra).
In this case, there is nothing in the records to show that the loss of the cargo was due to the fault of the private
respondent as shipowners, or to their concurrent negligence with the captain of the vessel.
The provisions of Civil Code on common carriers have no effect.
Considering the "real and hypothecary nature" of liability under maritime law, these provisions would not have any
effect on the principle of limited liability for ship owners or ship agents. As was expounded by this Court:
In arriving at this conclusion, the fact is not ignored that the ill-fated, S.S. Negros, as a vessel engaged in
interisland trade, is a common carrier, and that the relationship between the petitioner and the passengers who
died in the mishap rests on a contract of carriage. But assuming that petitioner is liable for a breach of contract of
carriage, the exclusively 'real and hypothecary nature of maritime law 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 that the vessel was insured.
(Yangco vs. Laserila, et al., supra).
Pertinent Laws:
[Civil Code] Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be
governed by the Code of Commerce and by special laws.
[Code of Commerce] 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 the equipments and the freight it may have earned during the
voyage.

018 Guison v Phil. Shipping Co


AUTHOR:
[G.R. No. 46846; February 3, 1940]
NOTE/S:
TOPIC: Maritime LAw
The original is in Spanish
PONENTE: Avancena, J.
FACTS:
1. Plaintiff, Guison, owns the steam launch "Martha" and the defendant Philippine Fish Company owns the
motorboat "Manila X", both in enrollment Port of Manila.
2. On the morning of March 4, 1936 both boats, being respectively maneuvering at the mouth of the Pasig River,
had a collision which resulted in the boat the "Martha" sank, causing the plaintiff damages in the amount of
P10,197.24.
3. Plaintiff presented this action against the defendant for the recovery of this amount of P10,197.24 that matter
the damage suffered by him, because of the collision.
4. Lower Court: having come to the conclusion that the collision was due to recklessness and negligence of the
employer of the boat "Manila X" without any contributory negligence by the pattern of "Marta" condemn the
defendant to pay the claimed amount.
5. The defendant asked for the reconsideration of this judgment for a declaration that responsibility, in
accordance with Article 837 of the Commercial Code, is limited to the value of your boat.
6. Appellate court: on January 22, 1937, agreeing to the request of the defendant, modified its decision in the
sense that they understand the limited liability of the defendant to the value of the boat "Manila X." The plaintiff
presented except against the resolution of the Court by amending the original decision in the sense described
ISSUE:
Whether the liability of the defendant in the circumstances of this case is limited to the value of the boat.
HELD:
Yes
RATIO:
1. Article 837 of the Commercial Code declares it so strictly. In this sense the Court applied this provision in the case
against Garcia Philippine Shipping Co., stating that the maritime law is only true character and limits the liability of the
shipowner to the value of the ship (6 Phil. Rep., 291).
2. For the rest, the boat "Manila X", which is a boat used to navigate freshwater or saltwater, for receiving and
transporting people or things, enters the general concept of the word vessel is used in Article 837 of the Commercial
Code. No mention is made in the decision appealed circumstance that precludes this concept to launch "Manila X."
3. It is said that this boat "Manila X" followed in the possession of the defendant for more than ten months after the
collision to he had one with another vessel, having unworthy of value as a result. This, however, would have been
avoided if the defendant had taken over the boat immediately after the collision, as collateral for your credit, whose real
character entitled him to it. the judgment appealed from with costs to the appellant was confirmed.

019 (MATEO)

020 OHTA DEVELOPMENT COMPANY, plaintiffappellee vs. STEAMSHIP POMPEY, ALFREDO


GALVEZ and NATIONAL COAL COMPANY,
defendants-appellants
[G.R. NUMBER L-24658; DATE: March 31, 1926]
TOPIC: Real and Hypothecary
PONENTE: Avancena, C. J.

AUTHOR: Drei Mauricio


NOTES:

FACTS: (chronological order)


1. Plaintiff, Ohta Development Company, is the owner of a pier in Talomo Bay, Davao. On the western side of the pier
were groups of posts (3 to a group) about 20 feet apart, 2 feet away from the pier which served as a protection to the pier
against the impact of the vessel.
2. One morning of June 23, at around 7:00 AM, the Steamship Pompey in command of Captain Alfredo Galvez,
possessing a certificate of public convenience issued by the Commissioner of Public Utility in the name of the National
Coal Company, carrying cargo of flour and rice for the plaintiff, docked along the side of the pier.
3. The Pompey docked with her bow (anchor) facing towards the land and fastened her ropes to the posts on the pier. She
did not stretch a rope to the tree to on the shore, neither did she drop her bow anchors.
Other ships docking at the pier has always observed that the bow facing towards the land and fastened a rope to
a tree situated faster west on the beach as a precaution taken to avoid the ship from getting too close to the pier.
4. After being docked, they proceeded to unload the flour and rice which as first deposited on the pier and later transported
to the plaintiffs warehouse on land where it was officially received.
The unloading of the cargo was done without any infererence of the part of the plaintiff and exclusively by
laborers and the crew of the ship.
5. The unloading was done in a hurry and their being 15 or 20 laborers engaged in the hauling of the same to the plaintiffs
warehouse, a large amount of cargo accumulated on the dock. Within 10 minutes past 11 on the same morning, the pier
sank with all of its merchandise.
6. COURT FINDINGS: The current forced the ship towards the pier. The impact caused the pier to sink.
When the pier sank, there was a current from west to east. The flour which floated after the sinking of the dock
drifted from west to east.
The pier when it sank, leaned towards the west, going beyond the western line formerly occupied by the pier.
The hull of the ship came to a stop at a point where the piles of defense formerly stood. Based on the
photograph taken after the incident admitted by the court as Exhibit B.
7. DEFENSE CONTENDS: the pier sank because of the weight of the cargo and the poor condition of the dock. Captain
Razon, the first mate of Pompey on that trip the sole witness presented by the defense, claims that the defense piles
fell without coming into contact with the ship.
COURT RULED: The pier underwent repairs in 1921 and 1922 wherein materials not in good condition were
replaced. The testimony of the Captain Razon is inconceivable because the piles were not attached to the pier
but were 2 feet away from it. The sinking of the dock should not affect the defense piles.
8. CONCLUSION OF THE COURT: dock on the account of the impact of the ship as a result of a strong current at the
time; that the ship was not fastened with the rope to a tree on shore and that bow anchors had not been dropped.
ISSUE(S): Whether the defendant National Coal Companys liability ceased when the merchandise was unload and placed on
the dock based on the bills of lading of the lost merchandise.
HELD: No.
RATIO: Under article 619 of the Code of Commerce, it is the delivery of the cargo at the port of discharge that determines the
cessation of the liability of the captain for the cargo. In the instant case, when the merchandise was lost by the sinking of the
pier, it had not yet been delivered, and therefore still under the responsibility of the captain. The defendant company, as agent, is
liable for the indemnities arising from the lack of skill or negligence of the captain.
On the liability of ship agents provision of the Article 587 of the Code of Commerce, limiting the liability of the agent to the
value of the ship, its appurtenances and freight, is not applicable when no abandonment of the vessel is made.
CASE LAW/ DOCTRINE:
DISSENTING/CONCURRING OPINION(S):

021 Aboitiz Shipping v. General Accident Fire and Life AUTHOR:


Assurance Corp. Ltd.
NOTES:
[G.R. No. 100446; January 21, 1993]
TOPIC: Real and Hypothecary
PONENTE: Melo
FACTS:
(parties)
! Aboitiz Shipping: common carrier; owner of M/V P. Aboitiz
! General Accident Fire and Life Assurance Corp: insurer of several cargoes carrier by Aboitiz; suborgee to insured.
(facts)
1. M/V P. Aboitiz owned by Aboitiz Shipping sank on its way to Hong Kong on Oct. 31, 1980.
2. The sinking prompted the shippers and suborgees (such as General Accident) to file suits for recovery.
2.1 to state the obvious, General Accident is a suborgee because it already indemnified the insured.
3. Board of Marine Inquiry (BMI) investigated the matter and found that:
3.1 the sinking was caused by force majeure
3.2 the vessel was seaworthy
4. Despite the findings by the BMI, the RTC nevertheless ruled that Aboitiz was liable.
4.1 Also, RTC granted the prayer of General Accident for execution for the full amount of the judgment award
4.2 The primary contention of Aboitiz, which was grounded on the real and hypothecary nature of its liability, was
swept aside.
5. This is elevated to the CA however the CA dismissed the petition for certiorari filed by Aboitiz.
6. Hence this petition.
ISSUE/s:
Whether or not the Doctrine of Limited Liability arising out of the real and hypothecary nature of maritime law is
applicable to the case?
HELD:
Yes. The ruling of the RTC and CA are set aside.
RATIO:
1. 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 has its origin by reason of the conditions and risks attending maritime
trade in its earliest years when such trade was replete with innumerable and unknown hazards since vessels had to
go through largely uncharted waters to ply their trade. 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.
2. The Limited Liability Rule in the Philippines is taken up in Book III of the Code of Commerce, particularly
in Articles 587, 590, and 837, hereunder quoted in toto:
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.
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)


3. In the few instances when the matter was considered by this Court, we have been consistent in this jurisdiction in
holding that 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.
3.1 Unfortunately for General Accident. A careful reading of the decision rendered by the trial court in Civil
Case No. 144425 (pp. 27-33, Rollo) 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.

22 MONARCH INSURANCE CO., INC.,


TABACALERA INSURANCE CO., INC and Hon.
Judge AMANTE PURISIMA, petitioners, vs. COURT
OF APPEALS and ABOITIZ SHIPPING
CORPORATION, respondents. [G.R. No. 92735. June
8, 2000]
ALLIED GUARANTEE INSURANCE COMPANY,
petitioner, vs. COURT OF APPEALS, Presiding Judge,
RTC Manila, Br. 24 and ABOITIZ SHIPPING
CORPORATION, respondents. [G.R. No. 94867. June
8, 2000]

AUTHOR:
NOTES: three consolidated cases. All cases arose from the
loss of cargoes of various shippers
when the M/V P. Aboitiz, a commoncarrier owned and
operated by Aboitiz, sank on her voyage from Hong Kong
to Manila on October 31, 1980
. 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.

EQUITABLE INSURANCE CORPORATION,


petitioner, vs. COURT OF APPEALS, Former First
Division Composed of Hon. Justices RODOLFO
NOCON, PEDRO RAMIREZ, and JESUS ELBINIAS
and ABOITIZ SHIPPING CORPORATION,
respondents. [G.R. No. 95578. June 8, 2000]
TOPIC: REAL AND HYPOTHECARY
PONENTE: De Leon, Jr., J.
FACTS:
1. The 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. The M/V P. Aboitiz sank at about 7:00 p.m. of
October 31, 1980.Justo Iglesias, meteorologist of PAGASA, testified in both cases that 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."
2. (Petitioners) Allied and Equitable refuted the allegation that the M/V P. Aboitiz and its cargo were lost due to
force majeure, relying mainly on the marine protest filed by Capt. Racines under scale No. 4 that describes the sea
condition as "moderate breeze," and "small waves becoming longer, fairly frequent white horses." 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.
3. Because Aboitiz refused to compensate Monarch, it filed two complaints against Aboitiz. In its answer with
counterclaim, 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, it then allowed Monarch
and Tabacalera to present evidence ex-parte
4. 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. 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." In due course, the trial court rendered judgment against
Aboitiz. It was appealed to CA. CA dismissed for failure to file appellant's brief.
5. Consequently, Monarch and Tabacalera moved for execution of judgment. TC granted the motion and issued
separate writs of execution. However, Aboitiz, invoking the real and hypothecary nature of liability in maritime
law, filed an urgent motion to quash the writs of execution.
6. According to Aboitiz, since its liability is limited to the value of the vessel which was insufficient to satisfy the
aggregate claims of all 110 claimants, to indemnify Monarch and Tabacalera ahead of the other claimants would
be prejudicial to the latter. Aboitiz filed with the CA a petition for certiorari and prohibition with prayer for
preliminary injunction and/or temporary restraining order, and was granted.
ISSUE(S): Whether or not the respondent Court of Appeals erred in finding, upon review, that Aboitiz is entitled to the
benefit of the limited liability rule

HELD: NO. we reiterate our findings in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance
Corporation, Ltd., that the unseaworthiness of the M/V P. Aboitiz had caused it to founder. We, however, take exception to
the pronouncement therein 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.
RATIO:
1) The principle of limited liability is enunciated in the following provisions of the Code of Commerce:
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.
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.
2) Each co-owner may exempt himself from his 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 the freightage served during the voyage.
Article 837 applies the principle of limited liability in cases of collision, hence, Arts. 587 and 590 embody the
universal principle of limited liability in all cases. In Yangco v. Laserna, this Court elucidated on the import of
Art. 587 as follows:
"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. It is true that the article appears to deal only with the limited liability of the
shipowners or agents for damages arising from the misconduct of the captain in the care of the goods which the
vessel carries, but this is a mere deficiency of language and in no way indicates the true extent of such liability.
The consensus of authorities is to the effect that notwithstanding the language of the aforequoted provision, the
benefit of limited liability therein provided for, applies in all cases wherein the shipowner or agent may properly
be held liable for the negligent or illicit acts of the captain."
"No vessel, no liability," expresses in a nutshell the limited liability rule. The shipowners or agents 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.
3) 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
workmens compensation claims.
4) 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.
5) 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. These issues are therefore ultimately questions of fact which
have been subject of conflicting determinations by the trial courts, the Court of Appeals and even this Court.
6) 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 of Wind,
falls within scale No. 4 that describes the wind velocity as "moderate breeze," and characterizes the waves as
"small x x x becoming longer, fairly frequent white horses."[68] Captain Racines also testified in open court that
the ill-fated M/V P. Aboitiz was two hundred (200) miles away from storm "Yoning" when it sank.[69]
7) It therefore becomes incumbent upon this Court to answer with finality the nagging question of whether or not 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.
Guided by our previous pronouncements and illuminated by the evidence now on record, we reiterate our
findings in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance Corporation, Ltd., that the
unseaworthiness of the M/V P. Aboitiz had caused it to founder. We, however, take exception to the
pronouncement therein 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.
8) We agree with the uniform finding of the lower courts that Aboitiz had failed to prove that it observed the
extraordinary diligence required of it as a common carrier. We therefore reiterate our pronouncement in
Aboitiz Corporation v. Court of Appeals[77] on the issue of Aboitiz liability in the sinking of its vessel, to wit:
"In accordance with Article 1732 of the Civil Code, the defendant common carrier from the nature of its business
and for reasons of public policy, is bound to observe extraordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by it according to all circumstances of the case. While the goods are in
the possession of the carrier, it is but fair that it exercise extraordinary diligence in protecting them from loss or
damage, and if loss occurs, the law presumes that it was due to the carriers fault or negligence; that is necessary to
protect the interest of the shipper which is at the mercy of the carrier x x x. In the case at bar, the defendant failed
to prove that the loss of the subject cargo was not due to its fault or negligence."
9) 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.[79] This burden, Aboitiz had unfortunately failed to discharge. That Aboitiz failed
to discharge the burden of proving that the unseaworthiness of its vessel was not due to its fault and/or negligence
should not however mean that the limited liability rule will not be applied to the present cases. The peculiar
circumstances here demand that there should be no strict adherence to procedural rules on evidence lest the just
claims of shippers/insurers be frustrated. The rule on limited liability should be applied in accordance with the
latest ruling in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance Corporation, Ltd.,[80]
promulgated on January 21, 1993, that claimants be treated as "creditors in an insolvent corporation whose assets
are not enough to satisfy the totality of claims against it."[81] To do so, the Court set out in that case the
procedural guidelines:
10) "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 completed its action
earlier than the rest. Thus, execution of judgment in earlier completed 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.
"x x x............x x x............x x x.
" 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. Moreover, petitioner should institute the necessary limitation
and distribution action before the proper admiralty court within 15 days from finality of this decision, and
thereafter deposit with it the proceeds from the insurance company and pending freightage in order to
safeguard the same pending final resolution of all incidents, for final pro-rating and settlement thereof."
11) There is no record that Aboitiz has instituted such action or that it has deposited in trust the insurance proceeds and
freightage earned. Aboitiz blatant disregard of the order of this Court in Aboitiz Shipping Corporation v. General
Accident Fire and Life Assurance Corporation, Ltd. cannot be anything but willful on its part. An act is considered
willful if it is done with knowledge of its injurious effect; it is not required that the act be done purposely to
produce the injury. Aboitiz is well aware that by not instituting the said suit, it caused the delay in the resolution of
all claims against it. Having willfully caused loss or injury to the petitioners in a manner that is contrary to morals,
good customs or public policy, Aboitiz is liable for damages to the latter.
12) Thus, 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 (Articles 19 to 36)
CASE LAW/ DOCTRINE:
DISSENTING/CONCURRING OPINION(S):

MANILA STEAMSHIP CO., INC. vs. INSA ABDULHAMAN (MORO) and LIM HONG TO
Facts: Respondent Abdulhaman filed a case against Manila Steamship Co Inc, owner of MS Bowline Knot, and Lim
Hong To, owner of M/LConsuelo V to recover damages for the death of his 5 children and loss of personal properties on
board the M/L Consuelo V as a result of a maritime collision between the 2 vessels. In 1948, the M/L Consuelo V left
the port of Zamboanga City for Siokon. On the same night, The M/S Bowline Knot was heading toZamboanga City. The
weather was good and fair. Abdulhaman, his wife and 5 children had paid their fare beforehand. It began raining and there
were strong winds for an hour. This weather lasted for an hour then it became fair although it was showering and the
visibility was good enough.
The two vessels collided while the passengers were sleeping. M/L Consuelo V capsized quickly (before the passengers
realized it, they were already floating and swimming) 9 died and the cargo was lost. Before the collision, none of the
passengers were warned or informed of the impending danger as the collision was so sudden and unexpected. All those
rescued at sea were brought by the M/V Bowline Knot to Zamboanga City.
The Board of Marine Inquiry found that the commanding officer of the colliding vessels had both been negligent in
operating their respective vessels. It held the owners of both vessels solidarily liable to Abdulhaman for the damages
caused to him by the collision, under Article 827of the Code of Commerce; but exempted Defendant Lim Hong To from
liability by reason of the sinking and total loss of his vessel, the M/L Consuelo V.CA affirmed.
Manila Steamship appealed because it was the one who was ordered to pay damages. It is exempt from any liability under
Article 1903 of the Civil Code because it had exercised the diligence of a good father of a family in the selection of its
employees, particularly Third Mate Simplicio Ilagan, the officer in command of its vessels, the M/SBowline Knot, at
the time of the collision. It shouldnt be liable for the actions of its agent (captain) and employees.
Issue: WON Manila Steamship is liable
Held: YES
Ratio: DUE DILIGENCE. The defense of due diligence is untenable. While it is true that Plaintiffs action is based on a
tort or quasi delict, the tort in question is not a civil tort under the Civil Code but a maritime tort resulting in a collision at
sea, governed by Articles 826-939 of the Code of Commerce
. Under Article 827 of the Code of Commerce, in case of collision between two vessels imputable to both of them, each
vessel shall suffer 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 due to the maritime collision
emphasizes the direct nature of the responsibilities on account of the collision incurred by the ship owner under maritime
law, as distinguished from the civil law and mercantile law in general. This direct responsibility is recognized in Article
618 of the Code of Commerce under which the captain shall be civilly liable to the ship agent, and the latter is the one
liable to third persons.
It is a general principle, well established maritime law and custom, that ship owners and ship agents are civilly liable for
the acts of the captain (Code of Commerce, Article 586) and for the indemnities due the third persons (Article 587); so
that injured parties may immediately look for reimbursement to the owner of the ship, it being universally recognized that
the ship master or captain is primarily the representative of the owner.
This direct liability, moderated and limited by the owners right of abandonment of the vessel and earned freight (Article
587),has been declared to exist, not only in case of breached contracts, but also in cases of tortious negligence
ACT OF AGENT
It is proven that the agents and employees, through whose negligence the explosion and fire in question occurred, were
agents, employees and mandatories of Manila Steamship. Where the vessel is one of freight, a public concern or public
utility, its owner or agents is liable for the tortious acts of his agents (Articles 587, 613, & 618 Code of Commerce; &
Article 1902, 1903, 1908, Civil Code). Manila Steamship cites cases which are about principals and agents in general
BUT this case is about the relations between ship agent and his agents and employees.

It is easy to see that to admit the defense of due diligence of a bonus paterfamilias (in the selection and vigilance of the
officers and crew) as exempting the ship owner from any liability for their faults, would render nugatory the solidary
liability established by Article 827 of the Code of Commerce for the greater protection of injured parties.
Ship owners would be able to escape liability in practically every case, considering that the qualifications and licensing of
ship masters and officers are determined by the State, and that vigilance is practically impossible to exercise over officers
and crew of vessels at sea.To compel the parties prejudiced to look to the crew for indemnity and redress would be an
illusory remedy for almost always its members are, from captains down, mere wage earners.
Liability of Lim Hong To- HE IS LIABLE
Both the master and the engineer of the motor launch Consuelo V were not duly licensed as such. In applying for
permission to operate, despite the lack of properly trained and experienced, crew, Lim Hong To gave as a reason that the
income derived from the vessel is insufficient to pay licensed officers who demand high salaries, and expressly
declaredThat in case of any accident, damage or loss, I shallassume full risk and responsibility for all the consequences
thereof
His permit to operate, in fact, stipulatedthat in case of any accident, damage or loss, the registered owner thereof shall
assume full risk and responsibility for all the consequences thereof, and that said vessel shall be held answerable for any
negligence, disregard or violation of any of the conditions herein imposed and for any consequence arising from such
negligence, disregard or violations.
CA held that his permit and letter didnt contain waivers of his right to limit his liability to the value of his motor launch
and that he did not lose the statutory right to limit his liability by abandonment of the vessel is a vague argument.
By operating with an unlicensed master, Lim Hong To deliberately increased the risk to which the passengers and
shippers of cargo aboard the Consuelo V would be subjected. In his desire to reap greater benefits in the maritime
trade, Lim Hong To willfully augmented the dangers and hazards to his vessels unwarry passengers, who would normally
assume that the launch officers possessed the necessary skill and experience to evade the perils of the sea. Hence, the his
liability cannot be the identical to that of a ship owner who bears in mind the safety of the passengers and cargo by
employing duly licensed officers.
The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a ship owners
liability, does not apply to cases where the injury or the average is due to ship owners own fault. Lim Hong To expressly
assumed the full risk and responsibility of such a collision

024 DIONISIA ABUEG, ET AL., plaintiffs-appellees, vs. BARTOLOME


AUTHOR: Ernest
SAN DIEGO, defendant appellant. [G.R. No. L-773
December 17,
NOTE/S:
1946]
CA-No. L-774
December 17, 1946
MARCIANA DE SALVACION, ET AL., plaintiffs-appellees, vs.
BARTOLOME SAN DIEGO, defendant-appellant.
CA-No. L-775
December 17, 1946
ROSARIO OCHING, ET AL., plaintiffs-appellees, vs. BARTOLOME SAN
DIEGO, defendant-appellant.
TOPIC: MARTIME LAW; Real and hypothecary ; Exceptions
PONENTE: PADILLA, J.
NATURE: This is appeal from a judgment rendered by the Court of First Instance of Manila in the above-entitled cases
awarding plaintiffs the compensation provided for in the Workmen's Compensation Act. (Records of the case were
reconstituted as they were destroyed during WWII)
FACTS:
1. Dionisia, Marciana, and Rosario are widows of the deceased, who were machinists on board the M/S San Diego II
and M/S Bartolome belonging to the defendant-appellant. The boats sank as they were caught by a typhoon while
engaged in fishing operations around Mindoro Island on Oct. 1, 1941 ( boats were not covered by insurance)
2. They filed against the owner, San Diego for compensation.
3. The Court of First Instance of Manila awarded plaintiffs the compensation provided for in the Workmen's
Compensation Act. San Diego appealed.
4. CA forwarded the case to the Supreme Court as there were no questions of fact.
San Diegos arguments:
1. Article 587 of the Code of Commerce which provides that if the vessel together with all her tackle and freight
money earned during the voyage are abandoned, the agent's liability to third persons for tortious acts of the captain
in the care of the goods which the ship carried is extinguished (Yangco vs. Laserna, 73 Phil., 330)
2. Article 837 of the same code which provides that in cases of collision, the ship owners' liability is limited to the
value of the vessel with all her equipment and freight earned during the voyage (Philippine Shipping company vs.
Garcia, 6 Phil., 281)
3. Article 643 of the same Code which provides that if the vessel and freight are totally lost, the agent's liability
for wages of the crew is extinguished.
ISSUE Whether or not San Diego, as owner of the ships which sank due to typhoon, is liable for compensation
YES. The provisions of the Code of Commerce invoked by appellant have no room in the application of the Workmen's
Compensation Act which seeks to improve, and aims at the amelioration of, the condition of laborers and employees.
It is not the liability for the 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 result of collision; nor the responsibility for
wages 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 performance of their work or employment, or the heirs
and dependents and laborers and employees in the event of death caused by their employment. Such compensation
has nothing to do with the provisions of the Code of Commerce regarding maritime commerce. It is an item in the cost of
production which must be included in the budget of any well-managed industry.
RATIO:
The real and hypothecary nature of the liability of the shipowner or agent embodied in the provisions of the Maritime
Law, Book III, Code of Commerce, had its origin in the prevailing continues of the maritime trade and sea voyages during
the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and 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, so that if the shipowner or agent
abandoned the ship, equipment, and freight, his liability was extinguished.
HOWEVER, as discussed, the provisions of the Code of Commerce do not apply in this case. The Workmen's
Compensation Act was enacted to abrogate the common law and our Civil Code upon culpable acts and omissions, and

that the employer need not be guilty of neglect or fault, in order that responsibility may attach to him and that
shipowner was liable to pay compensation provided for in the Workmen's Compensation Act, notwithstanding the
fact that the motorboat was totally lost.
If an accident is compensable under the Workmen's Compensation Act, it must be compensated even when the workman's
right is not recognized by or is in conflict with other provisions of the Civil Code or the Code of Commerce. The reason
behind this principle is that the Workmen's Compensation Act was enacted by the Legislature in abrogation of the other
existing laws."
OTHER ISSUES:
San Diego contends 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 by Act no. 3812,
inasmuch 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 places in the Philippine Islands.
SC: This new point raised by counsel for the appellant is inconsistent with the first, for, if the motor ships in question,
while engaged in fishing, were to be considered as not engaged in interisland and coastwise trade, the provisions of the
Code of Commerce invoked by them regarding limitation of the shipowner's liability or extinction thereof when the
shipowner abandons the ship, cannot be applied
Granting however, that the motor ships run and operated by the appellant were not engaged in the coastwise and interisland
trade, as contemplated in section 38 of the Workmen's Compensation Act, as amended, still the deceased officers of the
motor ships in question were industrial employees within the purview of section 39, paragraph (d), as amended, for
industrial employment "includes all employment or work at a trade, occupation or profession exercised by an employer for
the purpose of gain." The only exceptions recognized by the Act are agriculture, charitable institutions and domestic
service. Even employees engaged in agriculture for the operation of mechanical implements, are entitled to the benefits of
the Workmen's Compensation Act
DISPOSITIVE: Finding no merit in the appeal filed in these cases, we affirm the judgment of the lower court, with costs
against the appellant.

025
G.R. No. L-21495 March 18, 1924
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-appellant,
vs.THE INSULAR MARITIME CO., defendant-appellee.
MALCOLM, J.:
Facts:
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 Industry on the motor ship Insular.
The Insular Maritime Company became the owner of one vessel only, the Insular, valued at P150,000.
On October 29, 1919, The Insular Maritime Company asked the Bureau of Commerce and Industry to perform
certain repairs on the Insular.
The Government consented and terminated said repairs on November 29 of the same year.
Subsequent thereto, on April 15, 1920, the Insular suffered a total loss by fire.
The bill prepared by the chief accountant of the Bureau of Commerce and Industry for work done on the motor
ship Insular in the amount of P30,437.91, was dated July 31, 1920. Collection of the claim was attempted
pursuant to formal demand made by the Acting Insular Auditor of date April 30, 1921.
It will thus be noted, as was emphasized by the defense and by His Honor, the trial judge, that no steps were taken
by the Government to secure payment for the repairs until after the loss of the vessel Insular.
The trial judge further found in effect, as a legal conclusion, that the loss of the vessel Insular extinguished the
obligation. The Attorney-General challenges the correctness of this view.
Issue: WON the obligation of Insular Maritime Company to pay the Bureau of Commerce and Industry for the repairs
done has extinguished.
Held: No. The obligation to pay on the part of Insular Maritime Company still exists.
Ratio:
The decision of the trial judge was predicated on his understanding of the provisions of article 591 of the Code of
Commerce in relation with other articles of the same Code, and with the decision of this court in the case of
Philippine Shipping Co. vs. Garcia Vergara ([1906], 6 Phil., 281).
As to the applicability 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 wiped out by the loss of that vessel.
As to the applicability of the decision in the case of Philippine Shipping Co. vs. Garcia Vergara, supra, the facts
are not the same. There, the owners and agents of a vessel causing the loss of another vessel by collision were
held "not liable beyond the vessel itself causing the collision," but were "not required to pay such indemnification
for the reason that the obligation thus incurred has been extinguished on account of the loss of the thing bound for
the payment thereof." Here; there is a contractual relation which remains unaffected by the loss of the thing
concerned in the contract and which is governed principally by the provisions of the Civil Code.
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 a general rule, the owners of a vessel and the vessel itself are liable for necessary repairs.
Naturally the total destruction of the 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 not affect the liability of the owners for
repairs on the vessel completed before its loss.
The trial court was accordingly right in its exposition of the fact but not in its application of the law.
Judgment must therefore be as it is hereby reversed, and in lieu of the judgment appealed from, another shall be
entered here in favor of the plaintiff and against the defendant for the sum of P30,437.91 with legal interest from
July 20, 1921, when the complaint was presented, until payment. Without special findings as to costs in either
instance, it is so ordered.

026 THE PHILIPPINE AMERICAN GENERAL


INSURANCE COMPANY, INC., petitioner, vs.
COURT OF APPEALS and FELMAN
SHIPPING LINES, respondents.
[G.R. No. 116940. June 11, 1997]
Topic: Maritime Law Real and Hypothecary;
Exceptions

Doctrine:
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.

Facts:
1. 6 July 1983 - Coca-Cola Bottlers Philippines, Inc., loaded on board MV Asilda, a vessel owned and
operated by respondent Felman Shipping Lines (FELMAN), 7,500 cases of 1-liter Coca-Cola softdrink
bottles
to
be
transported from Zamboanga City to
Cebu City for consignee CocaCola Bottlers Philippines, Inc., Cebu.
The shipment was insured with petitioner Philippine American General Insurance Co., Inc.
(PHILAMGEN).
2. MV Asilda left the port of Zamboanga in fine weather at eight oclock in the evening of the same day.
3. 7 July 1983 - The vessel sank in the waters of Zamboanga del Norte together with its cargo, which includes
the 7,500 cases of Coca-Cola softdrink bottles.
4. 15 July 1983 - The consignee Coca-Cola Bottlers Philippines, Inc., Cebu plant, filed a claim with respondent
FELMAN for recovery of damages due to the loss of its softdrink bottles.
5. Respondent denied the claim so Coca-Cola filed an insurance claim with PHILAMGEN which paid its claim
of P755,250.00.
6. Claiming its right of subrogation PHILAMGEN now seeks recourse againt respondent FELMAN.
Consequently, on 29 November 1983, PHILAMGEN sued the shipowner for sum of money and damages.
7. PHILAMGENs contentions:
The sinking and total loss of MV Asilda and its cargo were due to the vessels unseaworthiness
since it was put to sea in an unstable condition; and
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.
8. FELMANs contentions:
No right of subrogation in favor of PHILAMGEN was transmitted by the shipper; and
FELMAN had abandoned all its rights, interests and ownership over MV Asilda together
with her freight and appurtenances for the purpose of limiting and extinguishing its liability
under Art. 587 of the Code of Commerce.
9. RTC Ruled in favor of FELMAN
It found that MV Asilda was seaworthy when it left the port of Zamboanga (as confirmed by
certificates issued by the Philippine Coast Guard and the shipowners 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.
10. CA Ruled in favor of FELMAN
MV Asilda was found to be unseaworthy for being top-heavy as 2,500 cases of Coca-Cola
softdrink bottles were improperly stowed on deck. In other words, while the vessel possessed the
necessary Coast Guard certification indicating its seaworthiness with respect to the structure of the
ship itself, it was not seaworthy with respect to the cargo. Nonetheless, the appellate court denied the
claim of PHILAMGEN on the ground that the assureds implied warranty of seaworthiness was not
complied with.
Issue: Whether the limited liability under Art. 587 of the Code of Commerce should apply

Held: No
Ratio:
1. Art. 587 of the Code of Commerce is not applicable to the case at bar. Simply put, 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.
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. It must be stressed at this point that Art. 587 speaks 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.
2. It was already established at the outset that the sinking of MV Asilda was due to its unseaworthiness even
at the time of its departure from the port of Zamboanga. 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 therefore escape liability through the
expedient of filing a notice of abandonment of the vessel by virtue of Art. 587 of the Code of Commerce.
3. Under Art 1733 of the Civil Code, (c)ommon 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" In the
event of loss of goods, common carriers are presumed to have acted negligently. FELMAN, the shipowner,
was not able to rebut this presumption.

027 Loadstar Shipping, Co., Inc. v. CA

AUTHOR: RC

[G.R. No. 131621; September 28, 1999]

NOTES:

TOPIC: Exceptions

Pet. for review on certiorari under Rule 45 which seek to set


aside the CA decision that affirmed the RTC, making
Loadstar liable to pay Manila Insurance Co. (Private resp.)

PONENTE: Davide, JR, C.J.


FACTS:

1. On 19 November 1984, LOADSTAR received on board its M/V Cherokee the following goods for shipment: (a) 705
bales of lawanit hardwood; (b) 27 boxes and crates of tilewood assemblies; and (c) 49 bundles of mouldings R & W (3)
Apitong Bolidenized.
2. The goods (w/c amounted to P 6,067,178) were insured for the same amount with Manila Insurance Co. (MIC) against
various risks including TOTAL LOSS BY TOTAL LOSS OF THE VESSEL.
3. The vessel was insured by Prudential Guarantee & Assurance, Inc. (PGAI) for P 4 million.
4. On 20 November 1984, on its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo,
sank off Limasawa Island.
5. As a result of the total loss of its shipment, the consignee made a claim with LOADSTAR. (LOADSTAR ignored.)
6. As the insurer, MIC paid to the insured in full settlement of the claim. MIC then executed a subrogation receipt.
7. On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI. (Alleged that the sinking of the vessel was
due to the fault and negligence of LOADSTAR and its employees; That PGAI be ordered to pay the insurance proceeds
from the loss of the vessel directly to MIC, said amount to be deducted from MICs claim from LOADSTAR.)
8. In its answer, LOADSTAR denied any liability for the loss and claimed that the sinking was due to force majeure.
9. PGAI averred that MIC had no cause of action against it, LOADSTAR being the party insured. (In any event, PGAI was
later dropped as a party defendant after it paid the insurance proceeds to LOADSTAR.)
10. RTC: In favor of MIC. (Loadstar liable.)
11. CA: Affirmed RTC. [CA Ratio: (1) LOADSTAR is not a private carrier LOADSTAR retained control over its crew;
(2) As a common carrier, it is the Code of Commerce, not the Civil Code, which should be applied in determining the
rights and liabilities of the parties; (3) The vessel was not seaworthy because it was undermanned. It could have withstood
the natural and inevitable action of the sea when the condition of the sea was moderate there was negligence; (4)
Between MIC and LOADSTAR, the provisions of the Bill of Lading do not apply because it binds only the
shipper/consignee and the carrier. When MIC paid, it was subrogated to the latters rights as against LOADSTAR; (5)
There was breach of the contract of carriage when the shippers goods never reached their destination; and (6) Art. 361,
Code of Commerce: When goods are delivered on board a ship in good order and condition, and the shipowner delivers
them to the shipper in bad order and condition, it then devolves upon the shipowner to both allege and prove that the goods
were damaged by reason of some fact which legally exempts him from liability. Transportation of the merchandise at the
risk and venture of the shipper means that the latter bears the risk of loss or deterioration of his goods arising from
fortuitous events, force majeure, or the inherent nature and defects of the goods, but not those caused by the presumed
negligence or fault of the carrier, unless otherwise proved.]
12. Pet.s allegation/s: (1) The vessel was a private carrier because it was not issued a certificate of public convenience, it
did not have a regular trip or schedule nor a fixed route, and there was only one shipper, one consignee for a special
cargo.; (2) The vessel was seaworthy; (3) Before the sail, the vessel was dry docked at Keppel Philippines Shipyard and

was duly inspected by the maritime safety engineers of the Philippine Coast Guard, who certified that the ship was fit to
undertake a voyage. Its crew was experienced, licensed and competent. With all these precautions, LOADSTAR
exercised the diligence of a good father of a family in ensuring the vessels seaworthiness; (4) The loss was due to force
majeure. When the vessel left, the weather was fine until the next day when the vessel sank due to strong waves; (5) Being
a private carrier, any agreement limiting its liability is valid. Since the cargo was being shipped at owners risk,
LOADSTAR was not liable for any loss or damage; and (6) MICs claim had prescribed, the case having been instituted
beyond the period stated in the bills of lading which shall be within 60 days from the accrual of the right of action. The
vessel sank on 20 November 1984; yet, the case for recovery was filed only on 4 February 1985.]
13. Resp.s contention/s: (1) the issue as to the classification of the M/V Cherokee was not timely raised barred by
estoppel; (2) Assuming it was due to force majeure, LOADSTAR was guilty of contributory negligence; (3) Did not raise
the issue of prescription deemed waived; and (4) the limited liability theory is not applicable because LOADSTAR
was at fault or negligent failed to maintain a seaworthy vessel.
ISSUE/s:
(1) Whether Loadstar is a private or common carrier.
(2) Whether or not it had exercised due and/or ordinary diligence in the case.
>> WON Loadstar is liable. YES (CA Affirmed.)
HELD:
(1) Common Carrier, the singular fact that the vessel was carrying a particular type of cargo for one shipper is not
sufficient to convert the vessel into a private carrier.
(2) Loadstar was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its vessel to sail despite
knowledge of an approaching typhoon.
RATIO:
1. LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certificate of public convenience and
this is not altered by the fact that the carriage of the goods in question was periodic, occasional, episodic, or unscheduled.
2. The records do not disclose that the M/V Cherokee, on the date in question, undertook to carry a special cargo or was
chartered to a special person only. There was no charter party. The bills of lading failed to show any special arrangement,
but only a general provision to the effect that the M/V Cherokee was a general cargo carrier. Further, the bare fact that
the vessel was carrying a particular type of cargo (wood products) for one shipper, which appears to be purely coincidental,
is not reason enough to convert the vessel from a common to a private carrier, especially where, as in this case, it was
shown that the vessel was also carrying passengers.
3. Under the facts & circumstances in the case, LOADSTAR fits the definition of a common carrier under Art. 1732, CC.
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public.
4. De Guzman v. CA:
The above article makes no distinction between one whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary activity. Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between
a carrier offering its services to the general public, i.e., the general community or population, and one who offers

services or solicits business only from a narrow segment of the general population.
5. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code governing
common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether
or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing
regulations and has been granted a certificate of public convenience or other franchise. To exempt private respondent from
the liabilities of a common carrier because he has not secured the certificate of public convenience, would be offensive to
sound public policy; that would be to reward private resp. for failing to comply with applicable statutory requirements.
6. The business of a common carrier impinges directly intimately upon the safety and well being and property of those
members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon
common carriers for the safety and protection of those who utilize their services. The law cannot allow a common carrier
to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations.
7. M/V Cherokee was not seaworthy when it embarked on its voyage. The vessel was not even sufficiently manned at
the time. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient
number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition its vessel
involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.
8. The doctrine of limited liability does not apply where there was negligence on the part of the vessel owner or
agent. LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its vessel to sail
despite knowledge of an approaching typhoon. In any event, it did not sink because of any storm that may be deemed as
force majeure, the wind condition in the area where it sank was determined to be moderate. Since it was remiss in the
performance of its duties, LOADSTAR cannot hide behind the limited liability doctrine to escape responsibility.
9. The stipulation in the case at bar which effectively reduces the common carriers liability for the loss or
destruction of the goods to a degree less than extraordinary (Articles 1744 and 1745), that is, the carrier is not liable
for any loss or damage to shipments made at owners risk. Such stipulation is obviously null and void for being
contrary to public policy.
10. Three kinds of stipulations often made in a bill of lading:
(1) Exempting the carrier from any and all liability for loss or damage occasioned by its own negligence (Invalid);
(2) Providing for an unqualified limitation of such liability to an agreed valuation (Invalid); and
(3) Limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays a
higher rate of freight. (Valid)
11. Since the stipulation is null and void, it follows that when MIC paid the shipper, it was subrogated to all the rights
which the latter has against LOADSTAR.
12. Re: Prescription: MICs cause of action had not yet prescribed. Inasmuch as neither the Civil Code nor the Code of
Commerce states a specific prescriptive period, the Carriage of Goods by Sea Act (COGSA) provides for a 1-year period
of limitation on claims for loss of, or damage to, cargoes sustained during transit may be applied suppletorily to the case.
Moreover, a stipulation reducing the 1-year period is null and void. It must be struck down.