ABOITIZ SHIPPING CORPORATION VS.

COURT OF APPEALS
GR. No. 89757, August 8, 1990
FACTS:

On October 28, 1980, M/V P/ Aboitiz took on board in Hong Kong for shipment to Manila one twentyfooter container holding 281 rolls of goods and one twenty-footer container holding 447 rolls, 10
bulk and 95 carbons of goods for apparel covered by bill of lading No. 575-M.
Both shipment were consigned to the Philippines Apparel, Inc an insured with the general Accident
Fire and Life Assurance Corporation, Ltd (GAFLAC).
The vessel is owned aned operated to manila, the vessel sank and it was declared lost with all its
cargoes.
GAFLAC was subrogated to all the rights, interests of action of the consignee against Aboitiz, it filed
an action for damages against Aboitiz in the RTC of Manila alleging that the loss was due to the
fault or negligence of Aboitiz and the master and crew of its vessel in that they did not observe
extraordinary diligence required by law as regards to common carrier.

ISSUE: WON the loss was due to fortuitous event.

RULING: NO!
Sinking of M/V P.Aboitiz was not due to waves caused by tropical storm Yooning but due to the fault
and negligence of petitioner, its master and crew.

ABOITIZ SHIPPING CORPORATION

CORPORATION, LTD.

V.

GENERAL

ACCIDENT

FIRE

AND

LIFE

ASSURANCE

G.R. No. 89757, August 6, 1990

FACTS:
Aboitiz Corporation operated M/V P. Aboitiz, a common carrier which sank on a voyage from Hong
Kong to the Philippines on 31 October 1980.
General Accident Fire and Life Assurance Corporation, Ltd. Is a foreign insurance company pursuing
its remedies as subrogee of several cargo consignees whose cargo sank with the said vessel.
The sinking gave rise to several suits against Aboitiz.
The sinking was initially investigated by the Board of Marine Inquiry which found that the sinking
was due to force majeure and that the vessel was sea worthy.
Notwithstanding such finding, the trial court found against the carrier on the basis that the loss was
not due to force majeure.
The attempted execution of the judgment award in said case gave rise to this case.
Aboitiz contends that the Limited Liability Rule warrants immediate stay of execution of judgment
to prevent impairment of other creditors shares.

ISSUE: WON the Limited Liability Rule arising out of the real and hypothecary nature of maritime law
should apply in this case
RULING: YES!
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 guaranty for their settlement.
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.
The Limited Liability Rule in the Philippines cover only liability for injuries to third parties, acts of the
captain and collisions.
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.
In this case, there has been no actual finding of negligence on the part of Aboitiz.
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 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.

CASE:
ABOITIZ
SHIPPING
CORPORATION
VS.
COURT
OF
APPEALS,
MALAYAN
INSURANCECOMPANY, INC., COMPAGNIE MARITIME DES CHARGEURS REUNIS, AND F.E. ZUELLIG
(M),INC

FACTS:
3 consolidated petitions involving the issue of whether the real and hypothecary doctrine may be
invoked by the shipowner in relation to the loss of cargoes occasioned by the sinking of M/V P.
Aboitiz.
Malayan Insurance Company, Inc. filed 5 separate actions against several defendants for the
collection of the amounts of the cargoes allegedly paid by Malayan under various marine cargo
policies issuedto the insurance claimants. In the five consolidated cases, Malayan sought the
recovery of amounts totalingP639,862.02. Aboitiz raised the defenses that M/V P. Aboitiz was
seaworthy, that it exercised extraordinary diligence and that the loss was caused by a fortuitous
event.
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.
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.
Aboitiz reiterated the defense of force majeure. It 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 Aboitizs motion for
reconsideration.

ISSUE: WON the real and hypothecary doctrine may be invoked by the ship owner to limit its liability.

RULING: NO!
Aboitiz is not entitled to the limited liability rule and is, therefore, liable for the value of the lost
cargoes as so duly alleged and proven during trial.
Unanimous findings of the courts that both Aboitiz and the crew failed to ensure the seaworthiness
of the M/V P. Aboitiz
There is a categorical finding of negligence on the part of Aboitiz.
Captain of M/V P. Aboitiz was negligent in failing to take a course of action that would
prevent the vessel from sailing into the typhoon.
Aboitiz failed to show that it had exercised the required extraordinary diligence in steering
the vessel before, during and after the storm.
GENERAL RULE (LIMITED LIABILITY DOCTRINE): ship owner's liability is merely co-extensive with
his interest in the vessel, except where actual fault is attributable to the ship owner.
EXCEPTION: Ship owner 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 ship owner or its failure to ensure the
seaworthiness of the vessel.
NOTE: In 1993 GAFLAC case, the Court applied the limited liability rule in favor of Aboitiz based on
the trialcourt's finding therein that Aboitiz was not negligent.

 The Court explained, thus: x x x 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.
There has been no actual finding of negligence on the part of petitioner
The real and hypothecary doctrine in maritime law that the ship owner 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.