Concept of Admiralty: Jurisdiction over admiralty cases IV-262 as against the International Harvester Company of the Philippines.

ational Harvester Company of the Philippines. From this judgment

the respondents have appealed.
G.R. No. L-2372 August 26, 1949
From the facts alleged in the complaint filed in the municipal court, it is clear that the
INTERNATIONAL HARVESTER COMPANY OF THE PHILIPPINES, petitioner-appellee, International Harvester Company of the Philippines, as agent in the Philippines of the
vs. vessel S/S Belle of the Sea, is alternatively being held liable for the loss of the cargo in question
CRISANTO ARAGON, Judge of Municipal Court of Manila, and YARAS and COMPANY, FAR through its negligence. Inasmuch as it is expressly that the cargo of the S/S Belle of the Sea was
EAST,respondents-appellants. discharged on December 23, 1946, at the Government piers under the supervision and custody
of the Manila Terminal Company, Inc., the International Havester Company of the Philippines
Roxas, Picazo and Mejia for appellants. may be held liable only on the assumption that the goods had been lost in transit or before
Ross, Selph, Carascoso and Janda for appellee. being discharged at the pier. In other words the liability of the International Harvester
Company of the Philippines is predicated on the contract of carriage by sea between the
PARAS, J.: 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
On July 9, 1947, the respondent-appellant, Yaras and Company, Far East, filed a complaint in of an arrastre service.
the Municipal Court of Manila (civil case No. IV-262) against the Manila Terminal Co., Inc., and
International Harvester Company of the Philippines. The complaint alleges that the defendant Admiralty has jurisdiction over all maritime contracts, in whatever form, wherever they were
Manila Terminal Co., Inc., is in charge of the custody and delivery to the respective owners of executed or are to be performed, but not over non-maritime contracts, (2 Corpus Juris
cargoes discharged at the Government piers in the City of Manila; that the defendant Secundum, p. 84.) Whether or not a contract is maritime depends not on the place where the
International Harvester Company of the Philippines is the agent in the Philippines of the contract is made and is to be executed, making the locality the test, but on the subject-matter
vessel Belle of the Sea; that on September 27, 1946, the S/S Belle of the Sea took on board at of the contract, making the true criterion a maritime service or a maritime transaction. (Id., p.
Los Angeles, California, U. S. A., goods for shipment to Manila, Philippines, and covered by Bill 85.) Specifically, admiralty has jurisdiction of a proceeding in rem or in personam for the
of Lading No. 105; that the S/S Belle of the Sea arrived in Manila on December 23, 1946, and breach of a contract of affreightment, whether evidenced by a bill of lading or a charter party.
discharged her cargo at the Government piers under the supervision and custody of the (Id., pp. 90-91.) And typical of a controversy over contracts of affreightment is a suit of one
defendant Manila Terminal Co., Inc.; that out of the goods covered by Bill of Lading No. 105, party against the other for loss of or damage to the cargo. (1 American Jurisprudence, p. 567.)
one carton of assorted samples with a stipulated value of P200 was not delivered to Yaras and This is the very case now before us, because the respondent Yaras and Company seeks to
Company; and said merchandise was lost through the negligence either of the Manila Terminal recover from the petitioner International Harvester Company of the Philippines the value of a
Co., Inc., or of the International Harvester Company of the Philippines. The complaint prayed certain lost cargo.
for judgment either against the defendant Manila Terminal Co., Inc., or the International
Harvester Company of the Philippines for the amount of P200, with legal interest from the date The contention of the respondent Yaras and Company that admirally jurisdiction is not
of the filing of the complaint. involved herein because the contract in question was made upon land and to be terminated
upon land, merely reflects the English rule which had long been rejected in the United States. It
Before the trial could be proceeded with, the International Harvester of the Philippines filed a is now settled in the latter country that "the jurisdiction of admiralty in matters of contract
motion to dismiss, on the ground that the Municipal Court of Manila had no jurisdiction to try depends upon the subject-matter, i.e., the nature and character of the contract, and that the
case because the action involves admiralty or maritime jurisdiction, which motion was English rule which conceded jurisdiction (with few exceptions) only to contracts made upon
overruled by the municipal court on December 16, 1947. In due time, the International and the to be performed upon navigable waters, is inadmissable, the true criterion being that
Harvester Company of the Philippines filed in the Court of First Instance of Manila a petition for the contract has reference to maritime service or maritime transaction." (Benedict on
prohibition (civil case No. 4328) against the Hon. Crisanto Aragon, Judge of the Municipal Court Admiralty, 6th Ed., Vol. 1, p. 127.) We choose to adopt the sound American rule. Even in
of Manila, and Yaras and Company Far East, for the purpose of restraining said respondent England the English rule was not without protest. Lord Kenyon, in Menetone vs. Gibbons, 3
judge from proceeding with civil case No. IV-262 in so far as the International Harvester Term, 269, had expressed the following criticism: "if the admiralty has jurisdiction over the
Company of the Philippines was concerned, on the ground that admiralty or maritime subject-matter, to say that it is necessary for the parties to go upon the sea to execute the
jurisdiction is involved. After trial, the Court of First Instance of Manila rendered judgment instrument borders upon absurdity."
favor of the petitioners, International Harveter Company of the Philippines, ordering the
respondent judge of the municipal court to desist from taking cognizance of civil case No.
The respondent Yaras and Company cannot invoke the rule against multiplicity of suits, for the
simple reason that said rule has to be subservient to the superior requirement that the court
must have jurisdiction. In view of our conclusion that the cause of action of said respondent
against International Harvester Company of the Philippines involves admiralty over which the
courts of first instance have original jurisdiction (Par. 4, Sec. 56, Act No. 136 of the Philippine
Commission, as reproduced in sec. 43 [d] of Republic Act No. 296), and to which the jurisdiction
of the justice of the peace courts (including municipal courts) does not extend (sec. 68, Act No.
136 of the Philippine Commission, as amended by Commonwealth Act No. 4090, reproduced in
par, 2, sec. 88, Republic Act No. 296), the respondent judge was properly restrained from
further proceeding with civil case No. IV-262.

We hold also that prohibition is the proper remedy, since the respondent judge was taking
cognizance of the case over which he had no jurisdiction and his order overruling the motion to
dismiss filed by the petitioner-appellee is interlocutory and therefore not appealable. (Sec. 2 of
Rule 67, Rules of Court 2.) At any rate, the remedy of appeal available when the case shall have
been decided on the merits, is inadequate.

The appealed judgment is therefore affirmed, with costs against the appellant Yaras and
Company. So ordered.
Vessels: Meaning As a general ground of demurrer it is assigned by the defendants that the complaint does not
show a right of action, and in the course of the argument submitted with the demurrer
G.R. No. L-29166 October 22, 1928 attention is directed to the fact that the complaint does not allege that a protest had been
presented by the plaintiff, within twenty-four hours after the occurrence, to the competent
AUGUSTO LOPEZ, plaintiff-appellant, authority at the port where the accident occured. It is accordingly insisted that, under article
vs. 835 of the Code of Commerce, the plaintiff has shown no cause of action.
JUAN DURUELO, ET AL., defendants.
ALBINO JISON, appellee. Assuming that the article of the Code of Commerce relied upon states a condition precedent to
the maintenance of an action in case where protest is required and that the making of protest
STREET, J.: must be alleged in the complaint in order to show a good cause of action — an assumption
that is possibly without basis, for the reason that lack of protest in a case where protest is
This action was instituted in the Court of First Instance of Occidental Negros by Augusto Lopez, necessary would seem to supply matter of defense proper to be set up in the answer, — we
for the purpose of recovering damages for personal injuries inflicted upon him by reason of the nevertheless are of the opinion that protest was not necessary in the case now before us. The
negligence of the defendants, Juan Duruelo and Albino Jison. The defendants demurred to the article in question (835, Code of Com.) is found in the section dealing with collisions, and the
complaint, and the demurrer having been sustained, the plaintiff elected to stand upon his context shows the collisions intended are collisions of sea-going vessels. Said article cannot be
complaint, which was accordingly dismissed; and the plaintiff appealed. applied to small boats engaged in river and bay traffic. The Third Book of the Code of
Commerce, dealing with Maritime Commerce, of which the section of Collisions forms a part,
The facts necessary to an understanding of the case as set out in the complaint are briefly was evidently intended to define the law relative to mechant vessels and marine shipping; and,
these: On February 10, 1927, the plaintiff, who is a resident of the municipality of Silay, as appears from said Code, the vessels intended in that Book are such as are run by masters
Occidental Negros, was desirous of embarking upon the interisland steamer San Jacinto in having special training, with the elaborate apparatus of crew and equipment indicated in the
order to go to Iloilo. This boat was at the time in the anchoring-ground of the port of Silay, Code. The word "vessel" (Spanish "buque," "nave"), used in the section referred to was not
some half a mile distant from the port. The plaintiff therefore embarked at the landing in the intended to include all ships, craft or floating structures of every kind without limitation, and
motor boat Jison, which was then engaged in conveying passengers and luggage back and forth the provisions of that section should not be held to include minor craft engaged only in river
from the landing to boats at anchor, and which was owned and operated by the defendant and bay traffic. Vessels which are licensed to engage in maritime commerce, or commerce by
Albino Jison, with Juan Duruelo as patron. The engineer (maquinista) aboard on this trip was sea, whether in foreign or coastwise trade, are no doubt regulated by Book III of the Code of
one Rodolin Duruelo, a boy of only 16 years of age. He is alleged to have been a mere novice Commerce. Other vessels of a minor nature not engaged in maritime commerce, such as river
without experience in the running of motor boats; and the day of the occurrence now in boats and those carrying passengers from ship to shore, must be governed, as to their liability
contemplation is said to have been the third day of his apprenticeship in this capacity. It is to passengers, by the provisions of the Civil Code or other appropriate special provisions of
alleged that the Jison, upon this trip, was grossly overladen, having aboard fourteen law.
passengers, while its capacity was only for eight or nine. As the motor boat approached the San
Jacinto in a perfectly quiet sea, it came too near to the stern of the ship, and as the propeller of This conclusion is substantiated by the writer Estasen who makes comment upon the word
the ship had not yet ceased to turn, the blades of the propeller struck the motor boat and sank "vessel" to the following effect:
it at once. It is alleged in the complaint that the approach of the Jison to this dangerous
proximity with the propeller of the San Jacinto was due to the fault, negligence and lack of skill When the mercantile codes speak of vessels, they refer solely and exclusively to merchant
of the defendant Juan Duruelo, as patron of the Jison. As the Jison sank, the plaintiff was ships, as they do not include war ships furthermore, they almost always refer to craft which are
thrown into the water against the propeller, and the revolving blades inflicted various injuries not accessory to another as is the case of launches, lifeboats, etc. Moreover, the mercantile
upon him, consisting of a bruise in the breast, two serious fractures of the bones of the left leg, laws, in making use of the words ship, vessels, boat, embarkation, etc., refer exclusively to
and a compound fracture of the left femur. As a consequence of these injuries the plaintiff was those which are engaged in the transportation of passengers and freight from one port to
kept in bed in a hospital in the City of Manila from the 28th of February until October 19 of the another or from one place to another; in a word, they refer to merchant vessels and in no way
year 1927, or approximately eight months. In the conclusion of his complaint the plaintiff sets can they or should they be understood as referring to pleasure craft, yachts, pontoons, health
out the various items of damage which he suffered, amounting in all to something more than service and harbor police vessels, floating storehouses, warships or patrol vessels, coast guard
P120,000. These damages he seeks to recover of the defendants in this action. vessels, fishing vessels, towboats, and other craft destined to other uses, such as for instance
coast and geodetic survey, those engaged in scientific research and exploration, craft engaged
in the loading and discharge of vessels from same to shore or docks, or in transhipment and
those small craft which in harbors, along shore, bays, inlets, coves and anchorages are engaged Yet notwithstanding these principles from which it would seem that any
in transporting passengers and baggage. (Estasen, Der. Mer., vol IV, p. 195.)
floating apparatus which serves directly for the transportation of things or persons or which
In Yu Con vs. Ipil (41 Phil., 770), this court held that a small vessel used for the transportation inderectly is related to this industry, ought to be subjected to the principles of the Code with
of merchandise by sea and for the making of voyages from one port to another of these Islands, reference to ownership, transfer, rights, registration, etc., we agre with Benito (obra cit.) and it
equipped and victualed for this purpose by its owner, is a vessel, within the purview of the so happens in practice that they are not aplicable to small which are subject to administrative
Code of Commerce, for the determination of the character and effect of the relations created (customs) regulations in the matter of port service and in the fishing industry.1awph!l.net
between the owners of the merchandise laden on it and its owner. In the case before us the
Jison, as we are informed in the complaint, was propelled by a second-hand motor, originally We may add that the word "nave" in Spanish, which is used interchangeably with "buque" in
used for a tractor plow; and it had a capacity for only eight persons. The use to which it was the Code of Commerce, means, according to the Spanish-English Dictionary complied by
being put was the carrying of passengers and luggage between the landing at Silay and ships in Edward R. Bensley and published at Paris in the year 1896, "Ship, a vessel with decks and sails."
the harbor. This was not such a boat as is contemplated in article 835 of the Code of Particularly significant in this definition is the use of the word "decks" since a deck is not a
Commerce, requiring protest in case of collision. feature of the smallest types of water craft.

In Yu Con vs. Ipil, supra, the author of the opinion quotes a passage from the treaties on In this connection a most instructive case from a Federal Court in the United States is that of
Mercantile Law by Blanco. We now have before us the latest edition of Blanco, and we the Mamie (5 Fed., 813), wherein it was held that only vessels engaged in what is ordinarily
reproduced here, in both Spanish and English, not only the passage thus quoted but also the known as maritime commerce are within the provisions of law conferring limited liability on
sentence immediately following said passage; and this latter part of the quotation is quite the owner in case maritime disaster. In the course of the opinion in that case the author cites
pertinent to the point now under consideration. the analogous provisions in the laws of foreign maritime, nations, especially the provisions of
the Commercial Code of France; and it is observed that the word "vessel" in these codes is
Says Blanco: limited to ships and other sea-going vessels. "Its provisions are not applicable," said the court,
"to vessels in inland navigation, which are especially designated by the name of boats."
Las palabras "nave" y "buque", en su sentido gramatical se aplican para designar cualquier Quoting from the French author Dufour (1 Droit Mer., 121), the writer of the opinion in the
clase de embarcaciones, grandes o pequenas, mercantes o de guerra, significacion que no case cited further says: "Thus, as a general rule, it appears to me clearly, both by the letter and
difiere esencialmente de la juridica, con arreglo a la cual se consideran buques para los efectos spirit of the law, that the provisions of the Second Book of the Commercial Code [French]
del Codigo y del Reglamento para la organizacion del Registro mencantile, no solo las relate exclusively to maritime and not to fluvial navigation; and that consequently the word
embarcaciones destinadas a la navegacion de cabo taje o altura, sino tambien los diques 'ship' when it is found in these provisions, ought to be understand in the sense of a vessel
flotantes, pontones, dragas, ganguiles y cualquier otro aparato flotante destinado a servicios serving the purpose of maritime navigation of seagoing vessel, and not in the sense of a vessel
de la industria o del comercio maritimo. "Aun cuando, corforme a este concepto legal, parece devoted to the navigation of rivers."
que todo aparato flotante que sirve directamente para el trasporte de cosas o personas, o que
inderectamente se relacionen con esta industria, han de sujertarse a los preceptos del Codigo It is therefore clear that a passenger on a boat like the Jison, in the case before us, is not
sobre propiedad, transmision, derechos, inscripciones, etc., entendemos con el Sr. Benito (obra required to make protest as a condition precedent to his right of action for the injury suffered
cit.) y asi ocurre en la practica, que no son aplicables a las pequeñas embarcaciones, que solo by him in the collision described in the complaint. In other words, article 835 of the Code of
estan sujetas a los de la administracion de marina para el servicio de los puertos o ejercicio de Commerce does not apply. But even if said provision had been considered applicable to the
la industria de la pesca. (Blanco, Der. Mer., vol. II, pag. 22.) case in hand, a fair interpretation of the allegations of the complaint indicates, we think, that
the injuries suffered by the plaintiff in this case were of such a nature as to excuse protest; for,
The words "ship" (nave) and "vessel" (buque), in their grammatical sense, are applied to under article 836, it is provided that want to protest cannot prejudice a person not in a
designate every kind of craft, large or small, merchant vessels or war vessels, a signification condition to make known his wishes. An individual who has suffered a compound fracture of
which does not differ essentially from its juridical meaning, according to which vessels for the the femur and received other physical injuries sufficient to keep him in a hospital for may
purposes of the Code and Regulations for the organization of the Mercantile Registry, are months, cannot be supposed to have in a condition to make protest within twenty-four hours
considered not only those engaged in navigation, whether coastwise or on the high seas, but of such occurrence. It follows that the demurrer in this case was not well taken and should
also floating docks, pantoons, dredges, scows and any other floating apparatus destined for the have been overruled.
service of the industry or maritime commerce.
In their brief in this court the attorneys for the defendant have criticised the complaint for a
general lack of certainty and precision in more than one respect. However, we have read the
document attentively and, in our opinion, it states a good cause of action upon a civil liability
arising from tort under articles 1902 and 1903 of the Civil Code, and our attention has not been
drawn to any provision of law which would constitute an obstacle to the maintenance of the
action.

We have repeatedly called the attention of trial courts to the general rule that a case should
not be dismissed on demurrer when, under any reasonable interpretation of the complaint, a
cause of action can be made out; and the fact that a complaint is inartificially drawn or in a
certain degree lacking in precision constitutes no sufficient reason for dismissing it. In passing
upon a demurrer, every reasonable intendment is to be taken in favor of the pleader. In this
connection it should be borne in mind that if a complaint does not show a good cause of action,
the action can be dismissed at a later stage of the proceedings; and even where no objection
has been previously made, the point can be raised in the Supreme Court under section 93 of
the Code of Civil Procedure (Abiera vs. Orin, 8 Phil., 193). Little or no appreciable prejudice to
the defendant will therefore ordinarily result from overruling a demurrer, and no harm is done
to anyone by requiring the defendant to answer. On the contrary, grave prejudice may result
to a plaintiff from the erroneous sustaining of a demurrer, because of the delay and even
expense necessary to set the matter right upon appeal.

The judgment appealed from is reversed, the demurrer overruled, and the defendant is
required to answer the complaint within five days after notification of the return of this
decision to the court of origin. So ordered, with costs against the appellee.
Vessel:Significance of registration of transaction of affecting vessels. But the lorchas China and Cuylim do not, by the mere fact of being mortgaged, cease to
pertain to the Lim Ponzo Navigation Co., as evidence by certificates of ownership Exhibits A
G.R. No. L-31865 February 28, 1930 and B; and being property appertaining to the Lim Ponzo Navigation Co., they were validly
attached, as shown by Exhibits E, F, G and , levied upon by virtue of the writ of execution
MARIANO B. ARROYO, provincial Sheriff of Iloilo, plaintiff-appellee, Exhibit I, issued December 6, 1928, upon petition of plaintiff Maria Corazon Yu de Sane filed in
vs. Civil case No. 7688, Exhibit C. It was on December 6, 1928, that by virtue of said writ of
MARIA CORAZON YU DE SANE, JOSE, M. PO PAUCO, and PO SUY execution the sheriff levied upon the lochas China and Cuylim, which, according to Exhibit F,
LIONG, defendants-appellants. had been attached on December 4, 1928; it being understood that both attachment and
PHILIPPINE NATIONAL BANK, defendant-appellee. execution were subject to all liens existing upon said lorchas on the date of the attachment,
which liens were the mortgages in favor of J. M. Po Pauco transferred by the same to the
Philippine National Bank, according to Exhibits 1 and 2.
Luis G. Hofileña for appellant Corazon Yu de Sane.
Tomas Villa-Real, Teofilo del Rosario and Tiburcio Lutero for appellants Po Pauco and Po Suy
Liong. The aforementioned writ of execution Exhibit I was not carried out by the sheriff because the
Plaintiff-appellee in his own behalf. Philippine National Bank filed a third-party claim, Exhibit 12, and according to Exhibit 14, Maria
Roman J. Lacson for defendant-appellee National Bank. Corazon Yu de Sane, the judgment creditor, failed to give indemnity bond as required by the
sheriff.

MALCOLM, J.:
But the court also holds that the provincial sheriff of Iloilo did not act legally when, after giving
notice, Exhibit 15, on December 28, or 29, 1928, he dissolved the attachment levied upon
In the Court of First Instance of Iloilo, the sheriff of that province instituted an action to compel
the lorchas China and Cuylim, and delivered them to J. M. Po Pauco, as was proved at the trial
the various persons and entities with claims to the lorchas China and Cuylim to interplead with
of this case, for on December 28, 1928, those lorchas were under the control of this court in
one another to determine their conflicting rights. As a result, Po Suy Liong, Ti, Liong & Co., J. M.
the instant case, wherein, on December 17, 1928, the complaint of interpleading filed by the
Po Pauco, Maria Corazon Yu de Sane, and the Philippine National Bank presented their
sheriff was entered in the docket, and, without authority of the court in the instant case, said
respective answers and complaints. Thereafter, it is probable that a hearing was had and
sheriff should not have assumed to dispose of the lorchas China and Cuylim as he did. The
evidence taken, although no such evidence has been transcribed and elevated to this court,
complaint of interpleading filed on December 17, 1928, was presented by the provincial sheriff
which means that we must perforce accept the findings of fact made by the trial judge. His
of Iloilo, according to paragraph 11 thereof, for the purpose of protecting himself from any
decision conclude with the following pronouncements:
claim that might arise from the sale only the person of the sheriff, but also the lorchas in his
possession which were the object of contradictory claims filed by several persons. But the
In view of these proven facts, the court holds that the mortgage of the lorchas sheriff, by his own authority, and without the knowledge and authority of this court, disposed
China and Cuylim executed in favor of J. M. Po Pauco through notarial deed Exhibit 2, and the of said lorchas, as stated in Exhibit 15, and in so acting he assumed full responsibility for all his
transfer of said mortgage by J. M. Po Pouco, the mortgagee, to the Philippine National Bank acts.
through notarial deed Exhibit 1, duly recorded in the registry of deeds of the Province of Iloilo
on November 29, 1919, are valid and legal.
The court holds that the now defendants Maria Corazon Yy de Sane may, if she so desires, ask
for another order of execution in civil case No. 7688, and may by virtue thereof attached
The fact that this mortgage was not registered in the Bureau of Customs of the port of Iloilo the lorchas China and Cuylim, and order their sale by public auction subject to the mortgage
until March 5th of this year does not invalidate it; since it was proved at the trial of this case executed thereon by the owner, the Lim Ponzo Navigation Co., in favor of the Philippine
that such deferred registration was due to certain doubts entertained by the collector of National Bank, which is hereby declared valid.
customs of the port of Iloilo touching the applicability of Act No. 3324, amending section 1176
of the Administrative Code; and that said collector only decided to admit and register said
The court holds that the damages at the rate of P100 a day claimed by defendants Po Suy Liong,
mortgage upon lochas China and Cuylim in March of this year after receipt of advice from
Ti Liong & Co., and J. M. Po Pauco through the counterclaim contained in their answer filed on
Manila regarding the applicability of Act No. 3324, which was approved on December 4, 1926,
December 18, 1928, have not been proved.
to a mortgage executed on November 6, 1918, in favor of a Chinese subject — a prohibition
not found in the original section 1176 of the Administrative Code, but which went into effect
when the aforementioned Act No. 3324, approved on December 4, 1926, took effect. As to the cross-complaint filed by the Philippine National Bank against J. M. Po Pauco, Maria
Corazon Yu de Sane, Po Suy Liong, and Ti Liong & Co., the court finds that the basic facts
thereof have been established, as heretofore stated in paragraphs numbered 2, 3, 4, 5, and 6, Maria Corazon Yu de Sane secured a judgment against the Lim Ponzo Navigation Co. for
holding J. M. Po Pauco in debt to the Philippine National Bank for the sum of P131,994.95, P7,179.65. In due course, a writ of attachment and an execution were secured, the date of the
including interest up to March 31, 1928, and the interest mentioned in Exhibit 10, from April 1, latter being December 6, 1928. The notice of seizure was recorded by the collector of customs
1928, until payment, to which is added the stipulated 10 per cent of the sum total by way of of Iloilo on December 4, 1928, on which date the records of that office disclosed the vessels as
attorney's fees, which the court hereby reduced to 5 per cent of the whole. free from encumbrances.

This debt of J. M. Po Pauco is secured by a mortgage of the property described in Exhibits 1 and The registration of vessels is now governed by the Administrative Code. Section 1171 thereof
3, already due and demandable when the cross-complaint was filed by the Philippine National provides:
Bank.
Record of documents affecting title. — In the record of transfers and incumbrances of vessels,
Let judgment be entered for the Philippine National Bank, ordering J. M. Po Pauco to pay to it to be kept at each principal port of entry, shall be recorded at length all transfers, bills of sale,
the sum of P131,994.95, plus the interest mentioned in Exhibit 10, from April 1, 1928, until mortgages, liens, or other document which evidence ownership or directly or indirectly affect
payment, plus 5 per cent of the debt as attorney's fees and costs of collection. the title of registered vessels, and therein shall be recorded all receipts, certificates, or
acknowledgments canceling or satisfying, whole or in part, any such obligation. No other
If said J. M. Po Pauco fails to pay the amount of this judgment within three months from the record of any such document or paper shall be required than such as is affected hereunder.
date hereof, the court will decree the sale of the mortgaged property, as prayed for by the
Philippine National Bank in its cross-complaint; and should be the proceeds of the sale thereof It is clear that section 1171 of the Administrative Code has modified the provisions of the
fall short of the amount of this judgment, a writ of execution shall issue against whatsoever Chattel Mortgage Law, Act No. 1508, particularly section 4 thereof. It is now not necessary for
unexempted property said J. M. Po Pauco olds, until the whole balance remaining is satisfied. a chattel mortgage of a vessel to be noted in the registry of the register of deeds. On the other
hand, it is essential that a record of documents affecting the title of a vessel be entered in the
Maria Corazon de Sane, and Po Suy Liong & Co. are hereby absolved from the cross-complaint office of the collector of customs, at a port of entry (Rubiso and Gelito vs. Rivera [1917], 37
interposed by the Philippine National Bank against them. Phil., 72; 2 Araneta, Administrative Code, note to section 1171). The law as now existing is
designed to protect persons who deal with a vessel on the strength of the record title.
The Philippine National Bank, J. M. Po Pauco, Po Suy Liong, and Ti Liong & Co., are hereby Mortgages on vessels, although not recorded, are good as between the parties. But as against
absolved from the cross-complaint interposed against them by Maria Corazon Yu de Sane. creditors of the mortgagor, an unrecorded mortgage is invalid (37 Cyc., 54).

From the aforementioned decision and judgment, two appeals have been taken, one by Maria Consolidating the facts, we find the mortgage of the Philippine National Bank dated November
Corazon Yu de Sane, and the other by J. M. Po Pauco and Po Suy Liong. These appeals will be 28, 1919, but not recorded in the office of the collector of customs until March 5, 1929. The
disposed of in order. execution sued out by Maria Corazon Yu de Sane was dated December 6, 1928, and noted at
the port of entry two days prior thereto. Under these facts, the execution holder would have a
prior right over the unrecorded mortgage. However, in the decision of the trial court we find an
I. The appeal of Maria Corazon Yu de Sane related to the preference to the two lorchas as
explanation of the delay which appears to have been proved at the trial, and which we must
between herself and the Philippine National Bank. Among the facts found by the trial judge, it
accept since there is nothing in the record to the contrary. His Honor states that the fact that
is gleaned that the lorchas China and Cuylim were owned by the Lim Ponzo Navigation Co. On
the mortgage was not registered in the office of the collector of customs of Iloilo until March 5,
November 6, 1918, the two lorchas were mortgaged to J. M. Po Pauco to guarantee a loan of
1929, was because of the doubts entertained by the collector relative to the applicability of Act
P20,000. Two days later, the mortgage was duly registered in the office of the register of deeds
No. 3324 to a mortgage executed in 1918 in favor of a Chinese subject. This uncontradicted
of Iloilo. On November 28, 1919, J. M. Po Pauco executed a mortgage in favor of the Philippine
fact must be taken as curing the bank's defective title. That the collector of customs did not
National Bank to protect a loan of P50,000, and covering, among other things, the titles, rights,
perform his duty was no fault of the bank. Constructive registration of the mortgage must,
and interests which Po Pauco had the lorchas China and Cuylim. One day later, this mortgage
therefore, be accepted.
was registered in the office of the register of deeds of Iloilo. Subsequently, the credit of Po
Pauco with the Philippine National Bank was increased to P90,000 which, with accrued interest,
is alleged to now reach the sum of P131,994.95. To return again to the chattel mortgage, it was We rule that as between the appellant, Maria Corazon Yu de Sane, and the appellee, the
only recorded in the office of the collector of customs of Iloilo on March 5, 1929. Philippine National Bank, the latter has a superior claim in the amount of P20,000, the amount
of the mortgage of Po Pauco which was transferred to the Philippine National Bank.
II. The remaining appeal concerns the respective rights of Jose M. Po Pauco and Po Suy Liong
on the one hand and the Philippine National Bank on the other. There is no particular merit in
the arguments offered on behalf of Po Suy Liong, for his mortgage was not on the boats
themselves, and moreover his mortgage, so far as the record discloses, has never been
recorded in the office of the collector of customs. But the appeal of Po Pauco does present a
rather anomalous condition of affairs.

It will be recalled that the action was begun by the several parties interpleading. On these
pleadings, the trial judge was led to order the foreclosure of the mortgage of the Philippine
National Bank against Po Pauco. But the record does not disclose that any one other than the
attorney for Po Pauco was notified, that any summons was issued, or that an opportunity was
afforded Po Pauco to interpose his defense, if he had any. Obviously, the procedure provided
by law for the foreclosure of a mortgage must be substantially carried out. It is no answer for
the appellee to state that no objection was interposed in the lower court. The question is one
which goes to the jurisdiction of the court, and a question of this nature may be raised for the
first time on appeal.

With the foregoing pronouncements which, except as they related to the judgment of the
Philippine National Bank against J. M. Po Pauco, in the main coincide with the pronouncements
of the trial judge, the judgment appealed from will in part be affirmed and in part set aside,
and the record remanded to the court of origin for further proceedings. It will be so ordered,
without special pronouncement as to costs in this instance
Vessel:Significance of registration of transaction of affecting vessels. pilot boat Valentina, as its sole owner. He therefore petitioned that the defendant be absolved
from the complaint, with the costs against the plaintiff.
G.R. No. L-11407 October 30, 1917
After the hearing of the case and introduction of documentary evidence, the judgment of
FAUSTO RUBISO and BONIFACIO GELITO, plaintiff-appellee, September 6, 1915, was rendered, from which counsel for the defendant appealed and moved
vs. for a new trial. This motion was denied and the appellant excepted.
FLORENTINO E. RIVERA, defendant-appellant.
The record shows it to have been fully proven that Bonifacio Gelito sold his share in the pilot
Francisco Sevilla for appellant. boat Valentina, consisting of a two-thirds interest therein, to the Chinaman Sy Qui, the
Salvador Q. Araullo for appellee. coowner of the other one-third interest in said vessel; wherefore this vendor is no longer
entitled to exercise any action whatever in respect to the boat in question. Gelito was one of
the partnership owners of the Valentina, as in fact his name appears in the certificate of
protection issued by the Bureau of Customs, and the rights he held are evidenced by the
articles of partnership; but, the whole ownership in the vessel having been consolidated in
TORRES, J.:
behalf of the Chinaman Sy Qui, this latter, in the use of his right as the sole owner of the
Valentina, sold this boat to Florentino E. Rivera for P2,500, on January 4, 1915, which facts, are
This appeal by bill of exceptions was filed by counsel for Florentino E. Rivera against the set forth in a deed ratified on the same date before a notary. This document was registered in
judgment of September 6, 1915, in which the defendant and appellant was ordered to place at the Bureau of Customs on March 17th of the same year.
the disposal of the plaintiff Fausto Rubiso the pilot boat in litigation. No special finding was
made for costs.
On the 23d of January of that year, that is, after the sale of the boat to the defendant Rivera,
suit having been brought in the justice of the peace court against the Chinaman Sy Qui to
On April 10, 1915, counsel for plaintiff brought suit in the Court of the First Instance of this city enforce payment of a certain sum of money, the latter's creditor Fausto Rubiso, the herein
and alleged in the complaint that his clients were the owners of the pilot boat plaintiff, acquired said vessel at a public auction sale and for the sum of P55.45. The certificate
named Valentina, which had been in bad condition since the year 1914 and, on the date of the of sale and adjudication of the boat in question was issued by the sheriff on behalf of Fausto
complaint, was stranded in the place called Tingloy, of the municipality of Bauan, Batangas; Rubiso, in the office of the Collector of Customs, on January 27 of the same year and was also
that the defendant Florentino E. Rivera took charge or possession of said vessel without the entered in the commercial registry on the 14th of March, following.
knowledge or consent of the plaintiff and refused to deliver it to them, under claim that he was
the owner thereof; and that such procedure on the defendant's part caused the plaintiffs to
So that the pilot boat Valentina was twice sold: first privately by its owner Sy Qui to the
suffer damages, not only because they could not proceed to repair the vessel, but also because
defendant Florentino E. Rivera, on January 4, 1915, and afterwards by the sheriff at public
they were unable to derive profit from the voyages for which said pilot boat was customarily
auction in conformity with the order contained in the judgment rendered by the justice of the
used; and that the net amount of such uncollected profit was P1,750. The complaint
peace, court, on January 23 of the same year, against the Chinaman Sy Qui and in behalf of the
terminated with a petition that judgment be rendered by ordering the defendant to deliver
plaintiff, Fausto Rubiso.
said pilot boat to the plaintiffs and indemnify them in the amount aforementioned or in such
amount as should be proven at trial, and to pay the costs.
It is undeniable that the defendant Rivera acquired by purchase the pilot boat Valentina on a
date prior to that of the purchase and adjudication made at public auction, by and on behalf of
Counsel for the defendant entered a general and specific denial of all the facts set forth in the
the plaintiff Rubiso; but it is no less true that the sale of the vessel by Sy Qui to Florentino E.
complaint, with the exception of those admitted in the special defense and consisting in that
Rivera, on January 4, 1915, was entered in the customs registry only on March 17, 1915, while
said pilot boat belonged to the concern named "Gelito and Co.," Bonifacio Gelito being a
its sale at public auction to Fausto Rubiso on the 23d of January of the same year, 1915, was
copartner thereof to the extent of two-thirds, and the Chinaman Sy Qui, to that of the
recorded in the office of the Collector of Customs on the 27th of the same month, and in the
one-third, of the value of said vessel; the subsequently Bonifacio Gelito sold his share to his
commercial registry on the 4th of March, following; that is, the sale on behalf of the defendant
copartner Sy Qui, as attested by the instrument Exhibit A, registered in the office of the
Rivera was prior to that made at public auction to Rubiso, but the registration of this latter sale
Collector of Customs and made a part of his answer; that later said Chinaman, the absolute
was prior by many days to the sale made to the defendant.
owner of the vessel, sold it in turn to the defendant Rivera, according to the public instrument,
also attached to his answer as Exhibit B; and that, for the reason, Rivera took possession of said
Article 573 of the Code of Commerce provides, in its first paragraph:
Merchant vessels constitute property which may be acquired and transferred by any of the recorded in the commercial registry, all the other liabilities of the vessel in favor of the
means recognized by law. The acquisition of a vessel must be included in a written instrument, creditors shall be considered canceled. 1awphil.net
which shall not produce any effect with regard to third persons if not recorded in the
commercial registry. The purchaser at public auction, Fausto Rubiso, who was careful to record his acquisition,
opportunely and on a prior date, has, according to the law, a better right than the defendant
So that, pursuany to the above-quoted article, inscription in the commercial registry was Rivera who subsequently recorded his purchase. The latter is a third person, who was directly
indispensable, in order that said acquisition might affect, and produce consequences with affected by the registration which the plaintiff made of his acquisition.
respect to third persons.
Ships or vessels, whether moved by steam or by sail, partake, to a certain extent, of the nature
However, since the enactment of Act No. 1900, on May 18, 1909, said article of the Code of and conditions of real property, on account of their value and importance in the world
Commerce was amended, as appears by section 2 of that Act, here below transcribed. commerce; and for this reason the provisions of article 573 of the Code of Commerce are
nearly identical with those of article 1473 of the Civil Code.
The documenting, registering, enrolling, and licensing of vessels in accordance with the
Customs Administrative Act and customs rules and regulations shall be deemed to be a registry With respect to the indemnity for losses and damages, requested by the plaintiff, aside from
of vessels within the meaning of the title two of the Code of Commerce, unless otherwise the fact, as shown by the evidence, that, subsequent to the date when the judgment appealed
provided in said Customs Administrative Act or in said customs rules and regulations, and the from was rendered, the vessel in question emerged unharmed from the place where it was
Insular Collector of Customs shall perform the duties of commercial register concerning the stranded, and was, at the time of the trial, anchored in the port of Maricaban, the record
registering of vessels, as defined in title two of the Code of Commerce. certainly does not furnish any positive evidence of the losses and damages alleged to have
been occasioned. On the other hand, it cannot be affirmed that the defendant acted in bad
The requisite of registration in the registry, of the purchase of a vessel, is necessary and faith specifically because he acquired the vessel on a date prior to that of its acquisition at
indispensable in order that the purchaser's rights may be maintained against a claim filed by a public auction by the plaintiff Rubiso, who, for the reason aforestated, is the true and sole
third person. Such registration is required both by the Code of Commerce and by Act No. 1900. owner of said pilot boat.
The amendment solely consisted in charging the Insular Collector of Customs, as at present,
with the fulfillment of the duties of the commercial register concerning the registering of For the foregoing considerations, whereby the errors assigned to the judgment appealed from
vessels; so that the registration of a bill of sale of a vessel shall be made in the office of the are deemed to have been refuted, it is our opinion that said judgment should be, as it is hereby,
insular Collector of Customs, who, since May 18, 1909, has been performing the duties of the affirmed, with costs against the appellant. So ordered.
commercial register in place of this latter official.

In view of said legal provisions, it is undeniable that the defendant Florentino E. Rivera's rights
cannot prevail over those acquired by Fausto Rubiso in the ownership of the pilot
boat Valentina, inasmuch as, though the latter's acquisition of the vessel at public auction, on
January 23, 1915, was subsequent to its purchase by the defendant Rivera, nevertheless said
sale at public auction was antecedently recorded in the office of the Collector of Customs, on
January 27, and entered in the commercial registry — an unnecessary proceeding — on March
4th; while the private and voluntary purchase made by Rivera on a prior date was not recorded
in the office of the Collector of Customs until many days afterwards, that is, not until March 17,
1915.

The legal rule set down in the Mercantile Code subsists, inasmuch as the amendment solely
refers to the official who shall make the entry; but, with respect to the rights of the two
purchasers, whichever of them first registered his acquisition of the vessel is the one entitled
to enjoy the protection of the law, which considers him the absolute owner of the purchased
boat, and this latter to be free of all encumbrance and all claims by strangers for, pursuant to
article 582 of the said code, after the bill of the judicial sale at auction has been executed and
Shipowners and shipagents The first question for discussion is whether the loss of this petroleum was a general average
loss or a particular less to be borne solely by the owner of the cargo. Upon this point it will be
G.R. No. L-13695 October 18, 1921 observed that the cargo was carried upon deck; and it is a general rule, both under the Spanish
Commercial Code and under the doctrines prevailing in the courts of admiralty of England
STANDARD OIL COMPANY OF NEW YORK, plaintiff-appellee, America, as well as in other countries, that ordinarily the loss of cargo carried on deck shall not
vs. be considered a general average loss. This is clearly expressed in Rule I of the York-Antwerp
MANUEL LOPEZ CASTELO, defendant-appellant. Rules, as follows: "No jettison of deck cargo shall be made good as general average." The
reason for this rule is found in the fact that deck cargo is in an extra-hazardous position and, if
on a sailing vessel, its presence is likely to obstruct the free action of the crew in managing the
STREET, J.:
ship. Moreover, especially in the case of small vessels, it renders the boat top-heavy and thus
may have to be cast overboard sooner than would be necessary if it were in the hold; and
By contract of character dated February 8, 1915, Manuel Lopez Castelo, as owner, let the small naturally it is always the first cargo to go over in case of emergency. Indeed, in subsection 1 of
interisland steamer Batangueño for the term of one year to Jose Lim Chumbuque for use in article 815 of the Code of Commerce, it is expressly declared that deck cargo shall be cast
the conveying of cargo between certain ports of the Philippine Islands. In this contract it was overboard before cargo stowed in the hold.
stipulated that the officers and crew of the Batangueño should be supplied by the owner, and
that the charterer should have no other control over the captain, pilot, and engineers than to
But this rule, denying deck cargo the right to contribution by way of general average in case of
specify the voyages that they should make and to require the owner to discipline or relieve
jettison, was first mad in the days of sailing vessels; and with the advent of the steamship as
them as soon as possible in case they should fail to perform the duties respectively assigned to
the principal conveyer of cargo by sea, it has been felt that the reason for the rule has become
them.
less weighty, especially with reference to coastwise trade; and it is now generally held that
jettisoned goods carried on deck, according to the custom of trade, by steam vessels navigating
While the boat was being thus used by the charterer in the interisland trade, the standard Oil coastwise and inland waters, are entitled to contribution as a general average loss (24 R. C. L.,
Company delivered to the agent of the boat in Manila a quantity of petroleum to be conveyed 1419).
to the port of Casiguran, in the Province of Sorsogon. For this consignment a bill of lading of
the usual form was delivered, with the stipulation that freight should be paid at the destination.
Recognition is given to this idea in two different articles in the Spanish Code of Commerce. In
Said bill of lading contained no provision with respect to the storage of the petroleum, but it
the first it is in effect declared that, if the marine ordinances allow cargo to the laden on deck
was in fact placed upon the deck of the ship and not in the hold.
in coastwise navigation, the damages suffered by such merchandise shall not be dealt with as
particular average (art. 809 [3], Comm. Code); and in the other it is stated that merchandise
While the boat was on her way to the port mentioned, and off the western coast of Sorsogon, laden on the upper deck of the vessel shall contribute in the general average if it should be
a violent typhoon passed over that region, and while the storm was at its height the captain saved; but that there shall be no right to indemnity if it should be lost by reason of being
was compelled for the safety of all to jettison the entire consignment of petroleum consisting jettisoned for the general safety, except when the marine ordinances allow its shipment in this
of two hundred cases. When the storm abated the ship made port, and thirteen cases of the manner in coastwise navigation (art. 855, Comm. Code).
petroleum were recovered, but the remainder was wholly lost.
The Marine Regulations now in force in these Islands contain provisions recognizing the right of
To recover the value of the petroleum thus jettisoned but not recovered, the present action vessels engaged in the interisland trade to carry deck cargo; and express provision is made as
was instituted by the Standard Oil Company against the owner of the ship in the Court of First to the manner in which it shall be bestowed and protected from the elements (Phil. Mar. Reg.
Instance of Manila, where judgment was rendered in favor of the plaintiff. From this judgment [1913], par 23). Indeed, there is one commodity, namely, gasoline, which from its inflammable
the defendant appealed. nature is not permitted to be carried in the hold of any passenger vessel, though it may be
carried on the deck if certain precautions are taken. There is no express provision declaring
No question is made upon the point that the captain exercised proper discretion in casting this that petroleum shall be carried on deck in any case; but having regard to its inflammable
petroleum overboard, as a step necessary to the salvation of the ship; and in fact it appears nature and the known practices of the interisland boats, it cannot be denied that this
that even after the vessel was thus eased, she was with difficulty prevented from capsizing, so commodity also, as well as gasoline, may be lawfully carried on deck in our coatwise trade.
great was the intensity of the storm.
The reason for adopting a more liberal rule with respect to deck cargo on vessels used in the
coastwise trade than upon those used for ordinary ocean borne traffic is to be found of course
in the circumstance that in the coastwise trade the boats are small and voyages are short, with But it is said — and the entire defense seems to be planted upon this proposition — that the
the result that the coasting vessel can use more circumspection about the condition of the liquidation of the general average is, under article 852 and related provisions, a condition
weather at the time of departure; and if threatening weather arises, she can often reach a port precedent to the liability of the defendant, and that at any rate the defendant, as owner of the
of safety before disaster overtakes her. Another consideration is that the coastwise trade must ship, should only be held liable for his proportion of the general average. It is also suggested
as a matter of public policy be encouraged, and domestic traffic must be permitted under such that if the plaintiff has any right of action at all upon the state of facts here presented, it is
conditions as are practically possible, even if not altogether ideal. against the captain, who has been delinquent in performing the duty which the law imposes on
him.
From what has been said it is evident that the loss of this petroleum is a general and not a
special average, with the result that the plaintiff is entitled to recover in some way and from This argument involves, we think, a misconception of the true import of the provisions relating
somebody an amount bearing such proportion to its total loss as the value of both the ship and to the adjustment and liquidation of general average. Clearly, for one thing, those provisions
the saved cargo bears to the value of the ship and entire cargo before the jettison was effected. are intended to supply the shipowner, acting of cause in the person of the captain, with a
Who is the person, or persons, who are liable to make good this loss, and what are the means whereby he may escape bearing the entire burden of the loss and may distribute it
conditions under which the action can be maintained? among all the persons who ought to participate in sharing it; but the making of the liquidation
is not a condition precedent to the liability of the shipowner of the shipper whose property has
That the owner of the ship is a person to whom the plaintiff in this case may immediately look been jettisoned.
for reimbursement to the extent above stated is deducible not only from the general doctrines
of admiralty jurisprudence but from the provisions of the Code of Commerce applicable to the It is true that if the captain does not comply with the article relating to the adjustment,
case. It is universally recognized that the captain is primarily the representative of the owner; liquidation, and distribution of the general average, the next article (852) gives to those
and article 586 of the Code of Commerce expressly declares that both the owner of the vessel concerned — whether shipowner (naviero) or shipper — the right to maintain an action
and the naviero, or charterer, shall be civil liable for the acts of the master. In this connection, against the captain for indemnification for the loss; but the recognition of this right of action
it may be noted that there is a discrepancy between the meaning of naviero, in articles 586 of does not by any means involve the suppression of the right of action which is elsewhere
the Code of Commerce, where the word is used in contradistinction to the term "owner of the recognized in the shipper against the ship's owner. The shipper may in our opinion go at once
vessel" ( propietario), and in article 587 where it is used alone, and apparently in a sense broad upon the owner and the latter, if so minded, may have his recourse for indemnization against
enough to include the owner. Fundamentally the word "naviero" must be understood to refer his captain.
to the person undertaking the voyage, who in one case may be the owner and in another the
charterer. But this is not vital to the present discussion. The real point to which we direct In considering the question now before us it is important to remember that the owner of the
attention is that, by the express provision of the Code, the owner of the vessel is civilly liable ship ordinarily has vastly more capital embarked upon a voyage than has any individual shipper
for the acts of the captain; and he can only escape from this civil liability by abandoning his of cargo. Moreover, the owner of the ship, in the person of the captain, has complete and
property in the ship and any freight that he may have earned on the voyage (arts. 587, 588, exclusive control of the crew and of the navigation of the ship, as well as of the disposition of
Code of Comm.). the cargo at the end of the voyage. It is therefore proper that any person whose property may
have been cast overboard by order of the captain should have a right of action directly against
Now, by article 852 of the Code of Commerce the captain is required to initiate the the ship's owner for the breach of any duty which the law may have imposed on the captain
proceedings for the adjustment, liquidation, and distribution of any gross average to which the with respect to such cargo. To adopt the interpretation of the law for which the appellant
circumstances of the voyage may have given origin; and it is therefore his duty to take the contends would place the shipowner in a position to escape all responsibility for a general
proper steps to protect any shipper whose goods may have been jettisoned for the general average of this character by means of the delinquency of his own captain. This cannot be
safety. In ordinary practice this, we supposed, would be primarily accomplished by requiring permitted. The evident intention of the Code, taken in all of its provisions, is to place the
the consignees of other cargo, as a condition precedent to the delivery of their goods to them, primary liability upon the person who has actual control over the conduct of the voyage and
to give a sufficient bond to respond for their proportion of the general average. But it is not who has most capital embarked in the venture, namely, the owner of the ship, leaving him to
necessary here to inquire into details. It is sufficient to say that the captain is required to take obtain recourse, as it is very easy to do, from other individuals who have been drawn into the
the necessary steps to effect the adjustment, liquidation, and distribution of the general venture as shippers.
average. In the case before us the captain of the vessel did not take those steps; and we are of
the opinion that the failure of the captain to take those steps gave rise to a liability for which It results that the plaintiff is entitled to recover in this action; and the only additional point to
the owner of the ship must answer. be inquired into is the amount that should be awarded. In this connection it appears that the
total value of the jettisoned cargo, belonging partly to the plaintiff to another shipper, was
P880.35, of which P719.95 represented the value of the plaintiff's petroleum. Upon the
apportionment of this total loss among the different interests involved, to wit, value of ship,
value of cargo, and the earned but lost freight, it appears that the amount of the loss
apportionable to the plaintiff is P11.28. Deducting this from the value of the petroleum, we
have as a result, the amount of P708.67, which is the amount for which judgment should be
given.

Accordingly, modifying the judgment appealed from to this extent, we affirm the same, with
costs. So ordered.
Shipowners and shipagents: Responsibilities and liabilities. each and all of the allegations thereof and of the defendants' special defense. The
aforementioned motion was overruled by the court, and the defendants excepted.
G.R. No. L-10195 December 29, 1916
At the termination of the trial, the court, in view of the evidence adduced, held that there was
YU CON, plaintiff-appellee, no room to doubt that the sole cause of the disappearance of the money from the
vs. said banca was the negligence of the master and the supercargo, the defendants Ipil and
GLICERIO IPIL, NARCISO LAURON, and JUSTO SOLAMO, defendants-appellants. Solamo, respectively, and that the defendant Narciso Lauron was responsible for that
negligence, as owner of the banca, pursuant to articles 589, 587, and 618 of the Code of
ARAULLO, J.: Commerce, the plaintiff therefore being entitled to recover the amount lost. Judgment was
rendered on April 20, 1914, in favor of the plaintiff and against the defendants jointly and
severally for the sum of P450, with interest thereon at the rage of 6 per cent per annum from
The purpose of the action brought in these proceedings is to enable the plaintiff to recover
the date of filing of the complaint, October 24, 1911, with costs. The plaintiff was absolved
from the defendants jointly and severally the sum of P450, which had been delivered by the
from the defendant's counterclaim. From this judgment the defendants excepted and at the
plaintiff to the first and third of the above-named defendants, master and supercargo,
same time moved for a new trial. Their motion was denied, to which ruling they also excepted,
respectively, of a banca named Maria belonging to the second defendant, to be carried,
and, through the proper bill of exceptions, entered and appeal to this Supreme Court. In their
together with various merchandise belonging to the plaintiff, from the port of Cebu to the
brief they allege that the trial court erred:
town of Catmon of the Province of Cebu. By virtue of the contract executed between the said
second defendant and the plaintiff, the money and merchandise were to be transported by the
said craft between the points above-named in consideration of the payment of a certain sum 1. In applying articles 586, 587, and 618 of the Code of Commerce in favor of the plaintiff;
for each voyage. The money disappeared from said craft during the night of October 18, 1911,
while it was anchored in the port of Cebu and ready to sail for its destination, Catmon, and was 2. In overruling the motion for default presented by the defendants and in sentencing the
not afterwards found. The plaintiff based his action on the charge that the disappearance of defendants jointly and severally to pay the plaintiff the amount mentioned in the judgment;
said sum was due to the abandonment, negligence, or voluntary breach, on the part of the and
defendants, of the duty they had in respect to the safe-keeping of the aforementioned sum.
3. In absolving the plaintiff from the defendant's counterclaim.
The defendants, besides denying the allegations of the complaint, pleaded in special defense
that the plaintiff, at his own expense and under his exclusive responsibility, chartered the The evidence shows that the plaintiff Yu Con, a merchant and a resident of the town of San
said banca, the property of the defendant Lauron, for the fixed period of three days, at the Nicolas, of the city of Cebu, engaged in the sale of cloth and domestic articles and having a
price of P10 per diem, and that, through the misfortune, negligence, or abandonment of the share in a shop, or small store, situated in the town of Catmon, of said province, had several
plaintiff himself, the loss complained of occurred, while said banca was at anchor in the port of times chartered from the defendant Narciso Lauron, a banca named Maria belonging to the
Cebu, and was caused by theft committed by unknown thieves. They further alleged that said latter, of which Glicerio Ipil was master and Justo Solamo, supercargo, for the transportation of
defendant Lauron, the owner of the banca merely placed this craft at the disposal of the certain merchandise and some money to and from the said town and the port of Cebu, that, on
plaintiff for the price and period agreed upon, and did not go with the banca on its voyage or about the 17th of October, 1911, the plaintiff chartered the said banca from the defendant
from Catmon to Cebu. As a counterclaim, the defendants also asked that the plaintiff be Lauron for the transportation of various merchandise from the port of Cebu to Catmon, at the
ordered to pay the freight agreed upon, which had not yet been paid, amounting to P80, plus price of P45 for the round trip, which merchandise was loaded on board the said craft which
the sum of P70, as an indemnity for the losses and damages caused them by the attachment of was then at anchor in front of one of the graded fills of the wharf of said port; that in the
the banca, issued at the instance of the plaintiff upon filing his complaint. They also prayed for afternoon of the following day, he delivered to the other two defendants, Ipil, and Solamo,
the additional sum of P100, for the deterioration of the said banca, and also that of P200 for master and supercargo, respectively, of the afore-named banca, the sum of P450, which was in
other deterioration suffered by the same since November, 1911, and which had not bee paid a trunk belonging to the plaintiff and was taken charge of by said two defendants, who
for. Finally, the defendants asked to be absolved from the complaint. received this money from the plaintiff, for the purpose of its delivery to the latter's shop in
Catmon for the purchase of corn in this town; that while the money was still in said truck
Before commencing the hearing of this case, the defendants made a verbal motion asking that abroad the vessel, on the night of the said 18th of October, the time scheduled for the
the plaintiff be declared in default, with respect to the counterclaim filed by them in their departure of the Maria from the port of Cebu, said master and said supercargo transferred the
answer. On the same date, the plaintiff presented his answer to said counter claim, denying P450 from the plaintiff's trunk, where it was, to theirs, which was in a stateroom of
the banca, from which stateroom both the trunk and the money disappeared during that same stateroom in which the trunk was, nor as to who stole or might have stolen it. The master of
night, and that the investigations, made to ascertain their whereabouts, produced no result. the banca merely testified that they, he and the supercargo, did to know who the robbers
were, for, when the robbery was committed, they were sound asleep, as they were tired, and
The facts are also admitted by the aforementioned master and supercargo, two of the that he believed that the guard Simeon also fell asleep because he, too, was tired. The second
defendants, that they received from the plaintiff said P450, which sum was in the latter's own defendant gave the same testimony. Both of them testified that the small window of the
trunk which was placed outside the stateroom of the banca, for the reason, as they said, that stateroom had been broken, and the first of them, i.e., the master, stated that all the
there was no room for it inside the stateroom; that these defendants therefore transferred window-blinds had been removed from the windows, as well as part of the partition in which
said money to their trunk, which was inside the stateroom, and that this trunk and the P450 they were, and that the trunk in which the money was contained could have been passed
therein contained disappeared from the boat during the night of that same day; that said sum through said small window, because, as this witness himself had verified, the Chinaman's trunk,
had not been found or returned to the plaintiff; that the plaintiff, being on the banca in the which differed but a little from the one stolen, could be passed through the same opening. The
afternoon of that day, when his trunk containing the P450 was carried aboard, and seeing that chief pilot of the harbor of Cebu, Placido Sepeda, who officially visited the said banca, also
said two defendants, who had the key of the trunk, has removed said sum to their trunk inside stated that the small wooden window of the stateroom was broken, and that he believed that
the stateroom, charged them to take special care of the money; that the master Ipil assured in breaking it much noise must have been produced. However, no evidence whatever was
the plaintiff that there was no danger of the money being lost; and that, final, during the night offered by counsel for the defendants to prove that it might have been possible to remove the
in question, both the master and the supercargo and four cabin-boys were aboard the banca. trunk from the stateroom through the opening made by the breaking of the small window,
neither was the size of the trunk proven, in relation to the Chinaman's to which the defendant
It was likewise proven by the affidavits made by the master Ipil, the supercargo Solamo, and master referred in his testimony, so that it might be verified whether the statement made by
the cabin-boys of said vessel, Juan Quiamco and Gabriel Basang, before the provincial fiscal of the latter was true, viz., that it might have been possible to remove from the stateroom
Cebu on the day following the commission of the theft, which affidavits were presented at the through said opening the trunk in which the P450 were contained, which sum, the same as the
trial as Exhibits A, 3, 4, and 5, and by the testimony given at the trial by the defendants Ipil and trunk, its container, had not been found, in spite of the investigation made for the purpose.
Solamo, that both said cabin-boys and the other two, Simeon Solamo, and said cabin-boys ad Furthermore, it was not proven, nor is there any circumstantial evidence to show, that the
the other two, Simeon Solamo, and Eulalio Quiamco, knew of the existence of the money in robbery in question was committed by persons not belonging to the craft.
the trunk inside the stateroom and witnessed its removal to said trunk from the plaintiff's; that
the last two cabin- boys above-named, in company with the master and the supercargo, It is therefore beyond all doubt that the loss or disappearance, on the night aforementioned, of
conveyed the plaintiff's trunk, in which the money was previously contained, from the the P450, the property of the plaintiff, which, were in the possession of the defendants, the
plaintiff's shop to the banca; and that no person not belonging to the vessel knew that the master and the supercargo of the banca Maria, occurred through the manifest fault and
money was in the trunk inside said stateroom. negligence of said defendants, for, not only did they fail to take the necessary precautions in
order that the stateroom containing the trunk in which they kept the money should be
According to the testimony of the master Ipil himself he slept outside the stateroom that night, properly guarded by members of the crew and put in such condition that it would be
but a cabin-boy named Gabriel slept inside. The latter, however, was not presented by the impossible to steal the trunk from it or that persons not belonging to the vessel might force an
defendants to be examined in regard to this point, nor does it appear that he testified in entrance into the stateroom from the outside, but also they did not expressly station some
respect thereto in his affidavit, Exhibit 5, before referred to, presented by the defendant's own person inside the stateroom for the guarding and safe-keeping of the trunk, for it was not
counsel. The master Ipil and the supercargo Solamo also testified that they left the cabin-boy proven that the cabin-boy Gabriel slept there, as the master of the vessel, Ipil, stated, nor that
Simeon Solamo on guard that night; but this affirmation was not corroborated by Solamo at the other Cabin-boy, Simeon Solamo, was on guard that night, for the latter contradicted the
the trial, for he was not introduced as a witness, and only his affidavit, Exhibit 2, taken before statements made by the two defendants on this point. On the contrary, it was proven by the
the fiscal of Cebu on the day following the commission of the crime, was presented by the master's own statement that all the people of the vessel, including himself and the supercargo
defendants. This affidavit, which should have been admitted and not rejected, as was done by Solamo, slept soundly that night; which fact cannot, in any manner, serve them as an excuse,
the court and excepted to by the defendants, shows that Simeon Solamo stated that he was nor can it be accepted as an explanation of the statement that they were not aware of what
not designated to do guard duty that night, but that on the morning of the said 19th of was then occuring on board, if the trunk was actually stolen by outsiders and removed through
October, that is, the next day, all agreed that affiant should say that he was on guard, though it the small window of the stateroom, a detail which also was not proven, but, on the contrary,
was not true that he was. increases their liability, because it is very strange that none of them, who were six and were
around or near the stateroom, should have heard the noise which the robbers must have made
in breaking its window. All of these circumstances, together with that of its having been
Finally, said two defendants, the master and the supercargo, gave no satisfactory explanation
impossible to know who took the trunk and the money and the failure to recover the one or
in regard to the disappearance of the trunk and the money therein contained, from the
the other make the conduct of the two defendants and of the other members of the crew
of banca, eminently supicious and prevent our holding that the disappearance or loss of the of the merchandise which was to be carried, on the date hereinabove mentioned, from the
money was due to a fortuitous event, to force majeure, or that it was an occurrence which port of Cebu to the town of Catmon.
could not have been foreseen, or which, if foreseen, was inevitable.
For legal purposes, that is, for the determination of the nature and effect of the relations
It is unquestionable that the defendants Glicerio Ipil and Justo Solamo were the carriers of the created between the plaintiff, as owner of the merchandise laden on said craft and of the
said P450 belonging to the plaintiff, and that they received this sum from the latter for the money that was delivered to the master, Ipil, and the defendant Lauron, as owner of the craft,
purpose of delivering it to the store of the town of Catmon, to which it had been consigned. the latter was a vessel, according to the meaning and construction given to the word vessel in
Under such circumstances, said defendants were the depositaries of the money.lawphi1.net the Mercantile Code, in treating of maritime commerce, under Title 1,
Book 3.
Manresa, in his Commentaries on the Civil Code (Vol. 10, p. 773), in treating of the provisions
of the said code concerning transportation by sea and by land of both persons and things, says: The word vessel serves to designate every kind of craft by whatever particular or technical
name it may now be known or which nautical advancements may give it in the future.
Liability of carriers. — In order that a thing may be transported, it must be delivered to the (Commentaries on the Code of Commerce, in the General Review of Legislation and
carrier, as the Code says. From the time it is delivered to the carrier or shipper until it is Jurisprudence, founded by D. Jose Reus y Garcia, Vol., 2 p. 136.)
received by the consignee, the carrier has it in his possession, as a necessary condition for its
transportation, and is obliged to preserve and guard it; wherefore it is but natural and logical According to the Dictionary of Legislation and Jurisprudence by Escriche, a vessel is any kind of
that he should be responsible for it. craft, considering solely the hull.

The Code discovers in the relation of all these elements the factors which go to make up the Blanco, the commentator on mercantile law, in referring to the grammatical meaning of the
conception of a trust, and, taking into account that the delivery of the thing on the part of the word "ship" and "vessels," says, in his work aforecited, that these terms designate every kind
shipper is unavoidable, if the transportation is to take place, esteem that, at least in certain of craft, large or small, whether belonging to the merchant marine or to the navy. And
respects, such trusts are necessary. referring to their juridical meaning, he adds: "This does not differ essentially from the
grammatical meaning; the words "ship" and "vessel" also designate every craft, large or small,
The said two defendants being the depositaries of the sum in question, and they having failed so long as it be not an accessory of another, such as the small boat of a vessel, of greater or
to exercise for its safe-keeping the diligence required by the nature of the obligation assumed less tonnage. This definition comprises both the craft intended for ocean or for coastwise
by them and by the circumstances of the time and the place, it is evident that, in pursuance of navigation, as well as the floating docks, mud lighters, dredges, dumpscows or any other
the provisions of articles 1601 and 1602, in their relation to articles 1783 and 1784, and as floating apparatus used in the service of an industry or in that of maritime commerce. . . ." (Vol.
prescribed in articles 1770, of the Civil Code, they are liable for its loss or misplacement and 1, p. 389.)
must restore it to the plaintiff, together with the corresponding interest thereon as an
indemnity for the losses and damages caused him through the loss of the said sum. According to the foregoing definitions, then, we should that the banca called Maria, chartered
by the plaintiff Yu Con from the defendant Narciso Lauron, was a "vessel", pursuant to the
With respect to the other defendant, Narciso Lauron, as he was the owner of the vessel in meaning this word has in mercantile law, that is, in accordance with the provisions of the Code
which the loss or misplacement of the P450 occurred, of which vessel, as aforestated, Glicerio of Commerce in force.
Ipil was master and Justo Solamo, supercargo, both of whom were appointed to, or chosen for,
the positions they held, by the defendant himself, and, as the aforementioned sum was Glicerio Ipil, the master of the said banca Maria, must also be considered as its captain, in the
delivered to the said master, Ipil, and the merchandise to be transported by means of said legal acceptation of this word.
vessel from the port of Cebu to the town of Catmon was laden by virtue of a contract executed
by and between the plaintiff and the owner of the vessel, Narciso Lauron, it behooves us to The same Code of Commerce in force in these Islands compares, in its article 609, masters with
examine whether the latter, also, should be held to be liable, as requested by the plaintiff in his captains. It is to be noted that in the Code of Commerce of Spain the denomination
complaint. of arraeces is not included in said article as equivalent to that of masters, as it is in the Code of
these Islands.
Said vessel was engaged in the transportation of merchandise by sea and made voyages to and
from the port of Cebu to Catmon, and had been equipped and victualed for this purpose by its
owner, Narciso Lauron, with whom, as aforesaid, the plaintiff contracted for the transportation
Commenting on said article, the aforementioned General Review of Legislation and of reasons were set forth the fundamental differences between the provisions contained in
Jurisprudence says: both codes, with respect to the subject-matter now under discussion. He says:

The name of captain or master is given, according to the kind of vessel, to the person in charge Another very important innovation introduced by the Code is that relative to the liability for
of it. misdemeanors and crimes committed by the captain or by members of the crew. This is a
matter of the greatest importance on which a variety of opinions has been expressed by
The first denomination is applied to those who govern vessels that navigate the high seas or different juris-consults.
ships of large dimensions and importance, although they be engaged in the coastwise trade.
The old code declares the captain civilly liable for all damage sustained by the vessel or its
Masters are those who command smaller ships engaged exclusively in the coastwise trade. cargo through lack of skill or care on his part, through violations of the law, or through
unlawful acts committed by the crew. As regards the agent or shipowners, it declares in
For the purposes of maritime commerce, the words "captain" and "master" have the same unmistakeable terms that he shall in no wise be liable for any excesses which, during the
meaning; both being the chiefs or commanders of ships. (Vol. 2, p. 168.) navigation, may be committed by the captain and the crew.

Article 587 of the Code of Commerce in force provides: Upon an examination, in the light of the principles of modern law, of the standing legal
doctrine on the non-liability of the shipowner for the unlawful acts, that is, the crimes or quasi
crimes, committed by the captain and the crew, it is observed that it cannot be maintained in
The agent shall be civilly liable for the indemnities in favor of third persons which arise from
the absolute and categorical terms in which it is formulated.
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. It is well and good that the shipowner be not held criminally liable for such crimes or quasi
crimes; but the cannot be excused from liability for the damage and harm which, in
consequence of those acts, may be suffered by the third parties who contracted with the
Article 618 of the same Code also prescribes:
captain, in his double capacity of agent and subordinate of the shipowner himself. In maritime
commerce, the shippers and passengers in making contracts with the captain do so through
The captain shall be civilly liable to the agent and the latter to the third persons who may have the confidence they have in the shipowner who appointed him; they presume that the owner
made contracts with the former — made a most careful investigation before appointing him, and, above all, they themselves are
unable to make such an investigation, and even though they should do so, they could not
1. For all the damages suffered by the vessel and its cargo by reason of want of skill or obtain complete security, inasmuch as the shipowner can, whenever he sees fir, appoint
negligence on his part, If a misdemeanor or crime has been committed he shall be liable in another captain instead.
accordance with the Penal Code.
The shipowner is in the same case with respect to the members of the crew, for, though he
2. For all the thefts committed by the crew, reserving his right of action against the guilty does not appoint directly, yet, expressly or tacitly, he contributes to their appointment.
parties.
On the other hand, if the shipowner derives profits from the results of the choice of the
The Code of Commerce previous to the one now in force, to wit, that of 1829, in its article 624, captain and the crew, when the choice turns out successful, it is also just that he should suffer
provided that the agent or shipowner should not be liable for any excesses which, during the the consequences of an unsuccessful appointment, by application of the rule of natural law
navigation, might be committed by the captain and crew, and that, for the reason of such contained in the Partidas, viz., that he who enjoys the benefits derived from a thing must
excesses, it was only proper to bring action against the persons and property of those found likewise suffer the losses that ensue therefrom.
guilty.
Moreover, the Penal Code contains a general principle that resolves the question under
Estasen, in his work on the Institutes of Mercantile Law (Vol. 4, p. 280), makes the following consideration, for it declares that such persons as undertake and carry on any iondustry shall
remarks, in referring to the exposition of reasons presented by the Code Commission which be civilly liable, in default of those who may be criminally liable, for the misdemeanors and
prepared and presented for approval the Code of Commerce now in force, in which exposition crimes committed by their subordinates in the discharge of their duties.
The Code of Commerce in force omits the declaration of non-liability contained in the old code,
and clearly makes the shipowner liable civilly for the loss suffered by those who contracted
with the captain, in consequence of the misdemeanors and crimes committed by the latter or
by the members of the crew.

It is therefore evident that, in accordance with the provisions of the Code of Commerce in
force, which are applicable to the instance case, the defendant Narciso Lauron, as the
proprietor and owner of the craft of which Glicerio Ipil was the master and in which, through
the fault and negligence of the latter and of the supercago Justo Solamo, there occurred the
loss, theft, or robbery of the P450 that belonged to the plaintiff and were delivered to said
master and supercargo, a theft which, on the other hand, as shown by the evidence, does not
appear to have been committed by a person not belonging to the craft, should, for said loss or
theft, be held civilly liable to the plaintiff, who executed with said defendant Lauron the
contract for the transportation of the merchandise and money aforementioned between the
port of Cebu and the town of Catmon, by means of the said craft.

Therefore, the trial court did not err in so holding in the judgement appealed from.

The plaintiff having filed his answer to the cross-complaint as soon as the defendant presented
their motion for] a declaration of the plaintiff's default in connection with said cross-complaint,
and it being optional with the court to make in such cases the declaration of default, as
provided in section 129 of the Code of Civil Procedure, the said court did not incur the second
error assigned by the appellants in their brief.

Lastly, as the banca Maria did not make the trip she should have made from the port of Cebu
to the town of Catmon, on the occasion in question, through cases chargeable, as has been
seen, to the captain and the supercargo of said banca, to wit, because of the loss, theft of
robbery of the P450 belonging to the plaintiff, and as a contract was made for the
transportation of the said sum and the merchandise from one of said points to the other, for
the round trip, and not through payment by the plaintiff of the wages due the crew for each
day, as alleged by the defendants, for the proofs presented by the latter in regard to this point
were insufficient, as the trial court so held, neither did the latter incur error in overruling the
cross-complaint formulated by the defendants in their answer against the plaintiff.

Therefore, and for all the reasons above set forth, we affirm the judgment appealed from, with
the costs of this instance against the appellants. So ordered.
Shipowners and shipagents: Responsibilities and liabilities As the cause of the collision, the Court of Appeals affirmed the findings of the Board of Marine
Inquiry, that the commanding officer of the colliding vessels had both been negligent in
[G.R. No. L-9534. September 29, 1956.] operating their respective vessels. Wherefore, the Court held the owners of both vessels
solidarily liable to Plaintiff for the damages caused to him by the collision, under Article 827 of
MANILA STEAMSHIP CO., INC., Petitioner, vs. INSA ABDULHAMAN (MORO) and LIM HONG the Code of Commerce; chan roblesvirtualawlibrarybut exempted Defendant Lim Hong To from
TO, Respondents. liability by reason of the sinking and total loss of his vessel, the M/L “Consuelo V”, while the
other Defendant, the Manila Steamship Co., owner of the M/S “Bowline Knot”, was ordered to
pay all of Plaintiff’s damages in the amount of P20,784.00 plus one-half of the costs. It is from
DECISION this judgment that Defendant Manila Steamship Co. had appealed to this Court.
REYES, J. B. L., J.: Petitioner Manila Steamship Co. pleads that it is exempt from any liability to Plaintiff under
Article 1903 of the Civil Code because it had exercised the diligence of a good father of a family
This case was begun in the Court of First Instance of Zamboanga (Civil Case No. 170) by Insa
in the selection of its employees, particularly Third Mate Simplicio Ilagan, the officer in
Abdulhaman against the Manila Steamship Co., owner of the M/S “Bowline Knot”, and Lim
command of its vessels, the M/S “Bowline Knot”, at the time of the collision. This defense is
Hong To, owner of the M/L “Consuelo V”, to recover damages for the death of his (Plaintiff’s)
untenable. While it is true that Plaintiff’s action against Petitioner is based on a tort or
five children and loss of personal properties on board the M/L “Consuelo V” as a result of a
quasi-delict, the tort in question is not a civil tort under the Civil Code but a maritime tort
maritime collision between said vessel and the M/S “Bowline Knot” on May 4, 1948, a few
resulting in a collision at sea, governed by Articles 826-939 of the Code of Commerce. Under
kilometers distant from San Ramon Beach, Zamboanga City.
Article 827 of the Code of Commerce, in case of collision between two vessels imputable to
On appeal, the Court of Appeals found the following facts to have been both of them, each vessel shall suffer her own damage and both shall be solidarily liable for the
established:chanroblesvirtuallawlibrary 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
“From 7:chanroblesvirtuallawlibrary00 to 8:chanroblesvirtuallawlibrary00 o’clock in the nature of the responsibilities on account of the collision incurred by the shipowner under
evening of May 4, 1948, the M/L “Consuelo V”, laden with cargoes and passengers left the port maritime law, as distinguished from the civil law and mercantile law in general. This direct
of Zamboanga City bound for Siokon under the command of Faustino Macrohon. She was then responsibility is recognized in Article 618 of the Code of Commerce under which the captain
towing a kumpit, named “Sta. Maria Bay”. The weather was good and fair. Among her shall be civilly liable to the ship agent, and the latter is the one liable to third persons, as
passengers were the Plaintiff Insa Abdulhaman, his wife Carimla Mora and their five children pointed out in the collision case of Yueng Sheng Exchange & Trading Co. vs. Urrutia & Co., 12
already mentioned. The Plaintiff and his wife paid their fare before the voyage started. Phil. 747, 753:chanroblesvirtuallawlibrary
On that same night the M/S “Bowline Knot” was navigating from Maribojoc towards “The responsibility involved in the present action is that derived from the management of the
Zamboanga. vessel, which was defective on account of lack of skill, negligence, or fault, either of the captain
Between 9:chanroblesvirtuallawlibrary30 to 10:chanroblesvirtuallawlibrary00 in the evening or of the crew, for which the captain is responsible to the agent, who in his turn is responsible
the dark clouds bloated with rain began to fall and the gushing strong wind began to blow to the third party prejudiced or damaged. (Article 618, Code of Commerce).”
steadily harder, lashing the waves into a choppy and roaring sea. Such weather lasted for In fact, it is a general principle, well established maritime law and custom, that shipowners and
about an hour and then it became fair although it was showering and the visibility was good ship agents are civilly liable for the acts of the captain (Code of Commerce, Article 586) and for
enough. the indemnities due the third persons (Article 587); chan roblesvirtualawlibraryso that injured
When some of the passengers of the M/L “Consuelo V” were then sleeping and some were parties may immediately look for reimbursement to the owner of the ship, it being universally
lying down awake, all of a sudden they felt the shocking collision of the M/L “Consuelo V” and recognized that the ship master or captain is primarily the representative of the owner
a big motorship, which later on was identified as the M/V “Bowline Knot”. (Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256, 260). This direct liability, moderated and
limited by the owner’s right of abandonment of the vessel and earned freight (Article 587), has
Because the M/L “Consuelo V” capsized, her crew and passengers, before realizing what had been declared to exist, not only in case of breached contracts, but also in cases of tortious
happened, found themselves swimming and floating on the crest of the waves and as a result negligence (Yu Biao Sontua vs. Osorio, 43 Phil. 511, 515):chanroblesvirtuallawlibrary
of which nine (9) passengers were dead and missing and all the cargoes carried on said boat,
including those of the Plaintiff as appear in the list, Exhibit “A”, were also lost. “In the second assignment of error, the Appellant contends that the Defendant ought not to be
held liable for the negligence of his agents and employees.
Among the dead passengers found were Maria, Amlasa, Bidoaya and Bidalla, all surnamed
Inasa, while the body of the child Abdula Inasa of 6 years of age was never recovered. Before It is proven that the agents and employees, through whose negligence the explosion and fire in
the collision, none of the passengers were warned or informed of the impending danger as the question occurred, were agents, employees and mandatories of the Defendant. Where the
collision was so sudden and unexpected. All those rescued at sea were brought by the M/V vessel is one of freight, a public concern or public utility, its owner or agents is liable for the
“Bowline Knot” to Zamboanga City.” (Decision of C. A., pp. 5-6). tortious acts of his agents (Articles 587, 613, and 618 Code of Commerce; chan
roblesvirtualawlibraryand Article 1902, 1903, 1908, Civil Code). This principle has been answerable for any negligence, disregard or violation of any of the conditions herein imposed
repeatedly upheld in various decisions of this court. and for any consequence arising from such negligence, disregard or violations.” (Exhibit 3.)
The doctrines cited by the Appellant in support of his theory have reference to the relations The Court of Appeals held that neither the letter (Exhibit 2) nor the permit (Exhibit 3)
between principal and agent in general, but not to the relations between ship agent and his contained any waiver of the right of Respondent Lim Hong To to limit his liability to the value of
agents and employees; chan roblesvirtualawlibraryfor this reason they cannot be applied in the his motor launch and that he did not lose the statutory right to limit his liability by
present case.” abandonment of the vessel, as conferred by Article 587 of the Code of Commerce.
It is easy to see that to admit the defense of due diligence of a bonus paterfamilias (in the We find the ruling untenable. Disregarding the question whether mere inability to meet the
selection and vigilance of the officers and crew) as exempting the shipowner from any liability salary demands of duly licensed masters and engineers constitutes non-availability thereof that
for their faults, would render nugatory the solidary liability established by Article 827 of the would excuse noncompliance with the law and authorize operation without licensed officers
Code of Commerce for the greater protection of injured parties. Shipowners would be able to under Act 3553, the fact remains that by operating with an unlicensed master, Lim Hong To
escape liability in practically every case, considering that the qualifications and licensing of ship deliberately increased the risk to which the passengers and shippers of cargo aboard the
masters and officers are determined by the State, and that vigilance is practically impossible to “Consuelo V” would be subjected. In his desire to reap greater benefits in the maritime trade,
exercise over officers and crew of vessels at sea. To compel the parties prejudiced to look to Lim Hong To willfully augmented the dangers and hazards to his vessel’s unwarry passengers,
the crew for indemnity and redress would be an illusory remedy for almost always its members who would normally assume that the launch officers possessed the necessary skill and
are, from captains down, mere wage earners. experience to evade the perils of the sea. Hence, the liability of said Respondent cannot be the
identical to that of a shipowner who bears in mind the safety of the passengers and cargo by
We, therefore, find no reversible error in the refusal of the Court of Appeals to consider the
employing duly licensed officers. To hold, as the Court of Appeals has done, that Lim Hong To
defense of the Manila Steamship Co., that it is exempt from liability for the collision with the
may limit his liability to the value of his vessels, is to erase all difference between compliance
M/L “Consuelo V” due to absence of negligence on its parts in the selection and supervision of
with law and the deliberate disregard thereof. To such proposition we cannot assent.
the officers and crew of the M/S “Bowline Knot”.
The international rule is to the effect that the right of abandonment of vessels, as a legal
The case of Walter S. Smith & Co. vs. Cadwallader Gibson Lumber Co., 55 Phil. 517, invoked
limitation of a shipowner’s liability, does not apply to cases where the injury or the average is
by Petitioner, is not the point. Said case treated of a civil tort, in that the vessel of
due to shipowner’s own fault. Fariña (Derecho Comercial Maritimo, Vol. I, pp. 122-123), on the
the Defendant, allegedly negligently managed by its captain in the course of its maneuvers to
authority of judicial precedents from various nations, sets the rule to be as
moor at Plaintiff’s wharf, struck the same and partially demolished it, causing damage
follows:chanroblesvirtuallawlibrary
to Plaintiff. Because the tort allegedly committed was civil, the provisions of Article 1903 of the
Civil Code were correctly applied. The present case, on the other hand, involves tortious “Esta generalmente admitido que el propietario del buque no tiene derecho a la limitacion
conduct resulting in a maritime collision; chan roblesvirtualawlibrarywherefore, the liability of legal de responsibilidad si los daños o averias que dan origen a la limitacion provienen de sus
the shipowner is, as already stated, governed by the provisions of the Code of Commerce and propias culpas. El Convenio de Bruselas de 25 de agosto de 1924 tambien invalida la limitacion
not by the Civil Code. en el caso de culpa personal en los accidentes o averías sobrevenidos (Art. 2°).”
We agree, however, with Petitioner-Appellant, that the Court of Appeals was in error in To the same effect, a noted French author states:chanroblesvirtuallawlibrary
declaring the Respondent Lim Hong To, owner of the M/L “Consuelo V”, exempt from liability
“La limitacion de la responsabilidad maritima ha sido admitida para proteger a los armadores
to the original Plaintiff, Abdulhaman, in view of the total loss of his own vessel, that sank as a
contra los actos abusivos de sus encargados y no dejar su patrimonio entero a la discrecion del
result of the collision. It is to be noted that both the master and the engineer of the motor
personal de sus buques, porque este personal cumple sus obligaciones en condiciones
launch “Consuelo V” were not duly licensed as such (Exh. 2). In applying for permission to
especiales; chan roblesvirtualawlibrarypero los armadores no tienen por sobre los demas
operate, despite the lack of properly trained and experienced, crew, Respondent Lim Hong To
derecho a ser amparados contra ellos mismos ni a ser protegidos contra sus propios actos.”
gave as a reason —
(Danjon, Derecho Maritimo, Vol. 2, p. 332). (Emphasis supplied.)
“that the income derived from the vessel is insufficient to pay licensed officers who demand
high salaries”, That Lim Hong To understood that he would incur greater liability than that normally borne by
shipowners, is clear from his assumption of “ full” risk and responsibility for all the
and expressly declared:chanroblesvirtuallawlibrary
consequences” of the operation of the M/L “Consuelo V”; chan roblesvirtualawlibrarya
“That in case of any accident, damage or loss, I shall assume full risk and responsibility for all responsibility expressly assumed in his letter Exhibit 2, and imposed in his special permit, in
the consequences thereof.” (Exhibit 2). addition to the vessel itself being held answerable. This express assumption of “full risk and
responsibility” would be meaningless unless intended to broaden the liability
His permit to operate, in fact, stipulated —
of Respondent Lim Hong To beyond the value of his vessel.
“that in case of any accident, damage or loss, the registered owner thereof shall assume full
In resume, we hold:chanroblesvirtuallawlibrary
risk and responsibility for all the consequences thereof, and that said vessel shall be held
(1) That the Manila Steamship Co., owner of the M/S “Bowline Knot”, is directly and primarily captain of the boat; and the owners of the boat, either Victor S. Fox & Co., Inc., or the United
responsible in tort for the injuries caused to the Plaintiff by the collision of said vessel with the States Shipping Board Emergency Fleet Corporation. Captain Lothigius and the Admiral Line
launch “Consuelo V”, through the negligence of the crews of both vessels, and it may not answered. The owners were not cited to appear. No action against the bark was taken.
escape liability on the ground that it exercised due diligence in the selection and supervision of Following the trial, judgment was rendered dismissing the complaint, without special finding as
the officers and crew of the “Bowline Knot”; to costs. Turning next to the facts, the exhibits of record show that beginning with March 16,
(2) That Lim Hong To, as owner of the motor launch “Consuelo V”, having caused the same to 1921, and ending with August 16, 1921, various supplies were furnished the Bark
sail without licensed officers, is liable for the injuries caused by the collision over and beyond Monongahela by Wing Kee Compradoring Company. Most of the bills for these goods are
the value of said launch; made out against the "Admiral Line, S.S. Monongahela." All are considered by the master and
the first steward. It appears, therefore, that the plaintiff was looking to the Admiral Line for
(3) That both vessels being at fault, the liability of Lim Hong To and Manila Steamship Co. to
the Plaintiff herein is in solidum, as prescribed by Article 827 of the Code of Commerce. payment.

In view of the foregoing, the decision of the Court of Appeals is modified, and that of the Court
The first requisitions for the supplies are on forms headed "The Admiral Line." Then follows
of First Instance affirmed, in the sense of declaring both original Defendants solidarily liable
Manila, the date, and the name, "Wing Kee Compradoring Co." Next is the order, reading:
to Plaintiff Insa Abdulhaman in the sum of P20,784.00 and the cost of the litigation, without
"Please deliver to S. S. Monongahela now lying at Bay, the following goods and send bills to
prejudice to the right of the one who should pay the judgment in full to demand contribution
from his co-Defendant. the Admiral Line:". After this goods are named. At the foot is found, "United States Shipping
Board Emergency Fleet Corporation," although these words are erased in a few of the
requisitions, "The Admiral Line (Pacific Steamship Co.) Operating Agents. By J. J. Armstrong."
Shipowners and shipagents: Responsibilities and liabilities
On the side of the requisitions in red ink is the following: "Note: This requisition must be
receipted by either Chief Officer, Chief Steward or Chief Engineer and returned to the Admiral
G.R. No. L-19540 January 29, 1923
Line, with six copies of invoice immediately after delivery of goods." After May 4, 1921, the
requisitions seem to have been made out by the steward and the master. We deduce from
WING KEE COMPRADORING COMPANY, plaintiff-appellant, these documents that the Admiral Line was the operating agent for Monongahela, and was
vs. responsible as such until the agency was terminated.
THE BARK "MONONGAHELA," VICTOR S. FOX & CO., INC., owner of the bark Monongahela,
THE ADMIRAL LINE, and C. G. LOTHIGIUS, defendants-appellees.
In the Manila Daily Bulletin for August 2, 1921, appeared the following:

Luciano de la Rosa for appellant.

"Notice — Bark Monongahela — The undersigned hereby give notice that they are not
Schwarzkopf and Ohnich for appellees.
responsible in any manner whatsoever for any indebtedness incurred by the Bark
Monongahela, its Master and/or Crew — The Admiral Line." The trial judge found as a fact that
MALCOLM, J.: on or before August 4, 1921, the Admiral Line had ceased to act as agent for the Monongahela.
Nevertheless, supplies were furnished the Monongahela after these dates by the plaintiff.
The plaintiff in this case, Wing Kee Compradoring Company, seeks to recover from the
defendants, principally the Admiral Line, as agent for the Bark Monongahela, the sum of Turning finally to the law, we find section 1 of Title 2 of our Code of Commerce, given up to the
P17,675.64, with interest and costs, on account of goods, wares, and merchandise sold and subject, "Owners of Vessels and Their Agents." The first article in this section (art. 586), and the
delivered by the plaintiff to the defendants for the use of the crew of the Bark Monongahela. provision of law which in our judgment is controlling, reads:
The case, as submitted to the appellate court, must be reconstructed as best it may, from
pleadings not altogether clear and explicit, from facts taken in part from the decision of the
The owner of a vessel and the agent shall be civilly liable for the acts of the captain and for the
trial court, and in part from the exhibits, the stenographic notes not having been written up,
obligations contracted by the latter to repair, equip, and provision the vessel, provided the
and from the briefs on the questions of law which are involved.
creditor proves that the amount claimed was invested therein.

Turning first to the pleadings, we find the plaintiff in its amended complaint praying for
By agent is understood the person intrusted with the provisioning of a vessel, or who
judgment against the defendants jointly and severally for the sum of P17,675.64, meaning,
represents her in the port in which she happens to be.
thereby, we presume, that it had a just and preferred claim upon and against the Bark
Monongahela, and that the debt was due from the Admiral Line, the agent; C. G. Lothigius, the
The civil law, in this respect, is not at all dissimilar to the common law. By the general law of
the United States, as well as of England and of Europe, it has been held, that when the agents
buy in their own names, but really for the account of their principal, the seller has an option to
look to either for payment, unless (1) he trusted the agent exclusively; or (2) by the usage and
understanding of the business the agent only is held; or (3) unless the special circumstances of
the case show that only the agent was intended to be bound and the seller knew it or was
chargeable with knowledge of it. Although the English rule that, where the agents buys in his
own name for the account of a foreign principal, the agent only is bound appears not to have
been followed in the United States, yet the general doctrine is the same, that the seller has an
option to resort to either. (Berwind vs. Schultz [1885], 25 Fed., 912.)

Applying more directly the law to the pleadings and the facts, it is first to be noted that the
plaintiff has not followed out its allegation that it has a claim against the Bark Monongahela,
and might not have prospered any way, considering the rather dubious doctrine announced in
the case of Health vs. Steamer San Nicolas ([1907], 7 Phil., 532). Not only this, but the plaintiff
has made no effort to bring the owner of the bark into the case and has pushed with no
enthusiasm its case against the captain of the boat. What apparently the plaintiff wants is for
the Admiral Line, as the agent for the Bark Monongahela, to pay the claim, leaving the latter to
reimburse itself, if sees fit, from the owners.

To all this appellee answers that as the agency has ceased, action cannot be brought against
the Admiral Line. To our minds this is a rather far-fetched argument, for, pursued to its logical
conclusion, every agent for a vessel could thus avoid responsibility pursuant to article 568 of
the Code of Commerce, by giving up its agency when threatened with suit to enforce the
obligations of third parties. Moreover, the bills were presented when the Admiral Line was yet
the agent.

In resume, therefore, we are of opinion and so hold that the Admiral Line, as agent for
the Bark Monongahela, is liable to the plaintiff for supplies furnished
the Monongahela between March 16, 1921 and August 2, 1921, but is not responsible for
supplies furnished after that date. The mathematical additions show that the debt of the
Admiral Line to the plaintiff amounts to P16,526.29.

In accordance with the foregoing, judgment is reversed, and the plaintiff shall have and recover
from the defendant, the Admiral Line, the sum of P16,526.29, without interest and costs. So
ordered.
Shipowners and shipagents: Responsibilities and liabilities (pp. 34-35, Rollo, GR No. L-49469)

G.R. No. L-49407 August 19, 1988 The facts of these cases as found by the Court of Appeals, are as follows:

NATIONAL DEVELOPMENT COMPANY, petitioner-appellant, The evidence before us shows that in accordance with a memorandum agreement entered into
vs. between defendants NDC and MCP on September 13, 1962, defendant NDC as the first
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY preferred mortgagee of three ocean going vessels including one with the name 'Dona Nati'
CORPORATION, respondents-appellees. appointed defendant MCP as its agent to manage and operate said vessel for and in its behalf
and account (Exh. A). Thus, on February 28, 1964 the E. Philipp Corporation of New York loaded
No. L-49469 August 19, 1988 on board the vessel "Dona Nati" at San Francisco, California, a total of 1,200 bales of American
raw cotton consigned to the order of Manila Banking Corporation, Manila and the People's
MARITIME COMPANY OF THE PHILIPPINES, petitioner-appellant, Bank and Trust Company acting for and in behalf of the Pan Asiatic Commercial Company, Inc.,
vs. who represents Riverside Mills Corporation (Exhs. K-2 to K7-A & L-2 to L-7-A). Also loaded on
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY the same vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to
CORPORATION, respondents- appellees. the order of Manila Banking Corporation consisting of 200 cartons of sodium lauryl sulfate and
10 cases of aluminum foil (Exhs. M & M-1). En route to Manila the vessel Dofia Nati figured in a
collision at 6:04 a.m. on April 15, 1964 at Ise Bay, Japan with a Japanese vessel 'SS Yasushima
Balgos & Perez Law Office for private respondent in both cases.
Maru' as a result of which 550 bales of aforesaid cargo of American raw cotton were lost
and/or destroyed, of which 535 bales as damaged were landed and sold on the authority of the
General Average Surveyor for Yen 6,045,-500 and 15 bales were not landed and deemed lost
(Exh. G). The damaged and lost cargoes was worth P344,977.86 which amount, the plaintiff as
PARAS, J.: insurer, paid to the Riverside Mills Corporation as holder of the negotiable bills of lading duly
endorsed (Exhs. L-7-A, K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3 and R-3}. Also considered
These are appeals by certiorari from the decision * of the Court of Appeals in CA G.R. No: L- totally lost were the aforesaid shipment of Kyokuto, Boekui Kaisa Ltd., consigned to the order
46513-R entitled "Development Insurance and Surety Corporation plaintiff-appellee vs. of Manila Banking Corporation, Manila, acting for Guilcon, Manila, The total loss was
Maritime Company of the Philippines and National Development Company P19,938.00 which the plaintiff as insurer paid to Guilcon as holder of the duly endorsed bill of
defendant-appellants," affirming in toto the decision ** in Civil Case No. 60641 of the then lading (Exhibits M-1 and S-3). Thus, the plaintiff had paid as insurer the total amount of
Court of First Instance of Manila, Sixth Judicial District, the dispositive portion of which reads: P364,915.86 to the consignees or their successors-in-interest, for the said lost or damaged
cargoes. Hence, plaintiff filed this complaint to recover said amount from the defendants-NDC
WHEREFORE, judgment is hereby rendered ordering the defendants National Development and MCP as owner and ship agent respectively, of the said 'Dofia Nati' vessel. (Rollo, L-49469,
Company and Maritime Company of the Philippines, to pay jointly and severally, to the plaintiff p.38)
Development Insurance and Surety Corp., the sum of THREE HUNDRED SIXTY FOUR THOUSAND
AND NINE HUNDRED FIFTEEN PESOS AND EIGHTY SIX CENTAVOS (364,915.86) with the legal On April 22, 1965, the Development Insurance and Surety Corporation filed before the then
interest thereon from the filing of plaintiffs complaint on April 22, 1965 until fully paid, plus Court of First Instance of Manila an action for the recovery of the sum of P364,915.86 plus
TEN THOUSAND PESOS (Pl0,000.00) by way of damages as and for attorney's fee. attorney's fees of P10,000.00 against NDC and MCP (Record on Appeal), pp. 1-6).

On defendant Maritime Company of the Philippines' cross-claim against the defendant Interposing the defense that the complaint states no cause of action and even if it does, the
National Development Company, judgment is hereby rendered, ordering the National action has prescribed, MCP filed on May 12, 1965 a motion to dismiss (Record on Appeal, pp.
Development Company to pay the cross-claimant Maritime Company of the Philippines the 7-14). DISC filed an Opposition on May 21, 1965 to which MCP filed a reply on May 27, 1965
total amount that the Maritime Company of the Philippines may voluntarily or by compliance (Record on Appeal, pp. 14-24). On June 29, 1965, the trial court deferred the resolution of the
to a writ of execution pay to the plaintiff pursuant to the judgment rendered in this case. motion to dismiss till after the trial on the merits (Record on Appeal, p. 32). On June 8, 1965,
MCP filed its answer with counterclaim and cross-claim against NDC.
With costs against the defendant Maritime Company of the Philippines.
NDC, for its part, filed its answer to DISC's complaint on May 27, 1965 (Record on Appeal, pp. THE COURT OF APPEALS ERRED IN NOT DISMISSING THE C0MPLAINT FOR REIMBURSEMENT
22-24). It also filed an answer to MCP's cross-claim on July 16, 1965 (Record on Appeal, pp. FILED BY THE INSURER, HEREIN PRIVATE RESPONDENT-APPELLEE, AGAINST THE CARRIER,
39-40). However, on October 16, 1965, NDC's answer to DISC's complaint was stricken off from HEREIN PETITIONER-APPELLANT. (pp. 1-2, Brief for Petitioner-Appellant National Development
the record for its failure to answer DISC's written interrogatories and to comply with the trial Company; p. 96, Rollo).
court's order dated August 14, 1965 allowing the inspection or photographing of the
memorandum of agreement it executed with MCP. Said order of October 16, 1965 likewise On its part, MCP assigned the following alleged errors:
declared NDC in default (Record on Appeal, p. 44). On August 31, 1966, NDC filed a motion to
set aside the order of October 16, 1965, but the trial court denied it in its order dated I
September 21, 1966.

THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT

On November 12, 1969, after DISC and MCP presented their respective evidence, the trial court DEVELOPMENT INSURANCE AND SURETY CORPORATION HAS NO CAUSE OF ACTION AS
rendered a decision ordering the defendants MCP and NDC to pay jointly and solidarity to DISC AGAINST PETITIONER MARITIME COMPANY OF THE PHILIPPINES AND IN NOT DISMISSING THE
the sum of P364,915.86 plus the legal rate of interest to be computed from the filing of the COMPLAINT.
complaint on April 22, 1965, until fully paid and attorney's fees of P10,000.00. Likewise, in said
decision, the trial court granted MCP's crossclaim against NDC.
II

MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on February 17,
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CAUSE OF ACTION
1970 after its motion to set aside the decision was denied by the trial court in its order dated
OF RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION IF ANY EXISTS AS
February 13,1970.
AGAINST HEREIN PETITIONER MARITIME COMPANY OF THE PHILIPPINES IS BARRED BY THE
STATUTE OF LIMITATION AND HAS ALREADY PRESCRIBED.
On November 17,1978, the Court of Appeals promulgated its decision affirming in toto the
decision of the trial court.
III

Hence these appeals by certiorari.

THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN EVIDENCE PRIVATE
RESPONDENTS EXHIBIT "H" AND IN FINDING ON THE BASIS THEREOF THAT THE COLLISION OF
NDC's appeal was docketed as G.R. No. 49407, while that of MCP was docketed as G.R. No. THE SS DONA NATI AND THE YASUSHIMA MARU WAS DUE TO THE FAULT OF BOTH VESSELS
49469. On July 25,1979, this Court ordered the consolidation of the above cases (Rollo, p. 103). INSTEAD OF FINDING THAT THE COLLISION WAS CAUSED BY THE FAULT, NEGLIGENCE AND
On August 27,1979, these consolidated cases were given due course (Rollo, p. 108) and LACK OF SKILL OF THE COMPLEMENTS OF THE YASUSHIMA MARU WITHOUT THE FAULT OR
submitted for decision on February 29, 1980 (Rollo, p. 136). NEGLIGENCE OF THE COMPLEMENT OF THE SS DONA NATI

In its brief, NDC cited the following assignments of error: IV

I THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT UNDER THE CODE OF
COMMERCE PETITIONER APPELLANT MARITIME COMPANY OF THE PHILIPPINES IS A SHIP
THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827 OF THE CODE OF COMMERCE AND AGENT OR NAVIERO OF SS DONA NATI OWNED BY CO-PETITIONER APPELLANT NATIONAL
NOT SECTION 4(2a) OF COMMONWEALTH ACT NO. 65, OTHERWISE KNOWN AS THE CARRIAGE DEVELOPMENT COMPANY AND THAT SAID PETITIONER-APPELLANT IS SOLIDARILY LIABLE WITH
OF GOODS BY SEA ACT IN DETERMINING THE LIABILITY FOR LOSS OF CARGOES RESULTING SAID CO-PETITIONER FOR LOSS OF OR DAMAGES TO CARGO RESULTING IN THE COLLISION OF
FROM THE COLLISION OF ITS VESSEL "DONA NATI" WITH THE YASUSHIMA MARU"OCCURRED SAID VESSEL, WITH THE JAPANESE YASUSHIMA MARU.
AT ISE BAY, JAPAN OR OUTSIDE THE TERRITORIAL JURISDICTION OF THE PHILIPPINES.
V
II
THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE LOSS OF OR DAMAGES TO
THE CARGO OF 550 BALES OF AMERICAN RAW COTTON, DAMAGES WERE CAUSED IN THE
AMOUNT OF P344,977.86 INSTEAD OF ONLY P110,000 AT P200.00 PER BALE AS ESTABLISHED the colliding vessels. Under the above ruling, it is evident that the laws of the Philippines will
IN THE BILLS OF LADING AND ALSO IN HOLDING THAT PARAGRAPH 1O OF THE BILLS OF LADING apply, and it is immaterial that the collision actually occurred in foreign waters, such as Ise Bay,
HAS NO APPLICATION IN THE INSTANT CASE THERE BEING NO GENERAL AVERAGE TO SPEAK Japan.
OF.
Under Article 1733 of the Civil Code, common carriers from the nature of their business and for
VI 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 circumstances
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE PETITIONERS NATIONAL of each case. Accordingly, under Article 1735 of the same Code, in all other than those
DEVELOPMENT COMPANY AND COMPANY OF THE PHILIPPINES TO PAY JOINTLY AND mentioned is Article 1734 thereof, the common carrier shall be presumed to have been at fault
SEVERALLY TO HEREIN RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION or to have acted negigently, unless it proves that it has observed the extraordinary diligence
THE SUM OF P364,915.86 WITH LEGAL INTEREST FROM THE FILING OF THE COMPLAINT UNTIL required by law.
FULLY PAID PLUS P10,000.00 AS AND FOR ATTORNEYS FEES INSTEAD OF SENTENCING SAID
PRIVATE RESPONDENT TO PAY HEREIN PETITIONERS ITS COUNTERCLAIM IN THE AMOUNT OF It appears, however, that collision falls among matters not specifically regulated by the Civil
P10,000.00 BY WAY OF ATTORNEY'S FEES AND THE COSTS. (pp. 1-4, Brief for the Maritime Code, so that no reversible error can be found in respondent courses application to the case at
Company of the Philippines; p. 121, Rollo) bar of Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively with
collision of vessels.
The pivotal issue in these consolidated cases is the determination of which laws govern loss or
destruction of goods due to collision of vessels outside Philippine waters, and the extent of More specifically, Article 826 of the Code of Commerce provides that where collision is
liability as well as the rules of prescription provided thereunder. imputable to the personnel of a vessel, the owner of the vessel at fault, shall indemnify the
losses and damages incurred after an expert appraisal. But more in point to the instant case is
The main thrust of NDC's argument is to the effect that the Carriage of Goods by Sea Act Article 827 of the same Code, which provides that if the collision is imputable to both vessels,
should apply to the case at bar and not the Civil Code or the Code of Commerce. Under Section each one shall suffer its own damages and both shall be solidarily responsible for the losses
4 (2) of said Act, the carrier is not responsible for the loss or damage resulting from the "act, and damages suffered by their cargoes.
neglect or default of the master, mariner, pilot or the servants of the carrier in the navigation
or in the management of the ship." Thus, NDC insists that based on the findings of the trial Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839,
court which were adopted by the Court of Appeals, both pilots of the colliding vessels were at the shipowner or carrier, is not exempt from liability for damages arising from collision due to
fault and negligent, NDC would have been relieved of liability under the Carriage of Goods by the fault or negligence of the captain. Primary liability is imposed on the shipowner or carrier
Sea Act. Instead, Article 287 of the Code of Commerce was applied and both NDC and MCP in recognition of the universally accepted doctrine that the shipmaster or captain is merely the
were ordered to reimburse the insurance company for the amount the latter paid to the representative of the owner who has the actual or constructive control over the conduct of the
consignee as earlier stated. voyage (Y'eung Sheng Exchange and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).

This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (1 50 There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply
SCRA 469-470 [1987]) where it was held under similar circumstance "that the law of the only to domestic trade and not to foreign trade. Aside from the fact that the Carriage of Goods
country to which the goods are to be transported governs the liability of the common carrier in by Sea Act (Com. Act No. 65) does not specifically provide for the subject of collision, said Act in
case of their loss, destruction or deterioration" (Article 1753, Civil Code). Thus, the rule was no uncertain terms, restricts its application "to all contracts for the carriage of goods by sea to
specifically laid down that for cargoes transported from Japan to the Philippines, the liability of and from Philippine ports in foreign trade." Under Section I thereof, it is explicitly provided that
the carrier is governed primarily by the Civil Code and in all matters not regulated by said Code, "nothing in this Act shall be construed as repealing any existing provision of the Code of
the rights and obligations of common carrier shall be governed by the Code of commerce and Commerce which is now in force, or as limiting its application." By such incorporation, it is
by laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a special law, is obvious that said law not only recognizes the existence of the Code of Commerce, but more
merely suppletory to the provision of the Civil Code. importantly does not repeal nor limit its application.

In the case at bar, it has been established that the goods in question are transported from San On the other hand, Maritime Company of the Philippines claims that Development Insurance
Francisco, California and Tokyo, Japan to the Philippines and that they were lost or due to a and Surety Corporation, has no cause of action against it because the latter did not prove that
collision which was found to have been caused by the negligence or fault of both captains of its alleged subrogers have either the ownership or special property right or beneficial interest
in the cargo in question; neither was it proved that the bills of lading were transferred or As to the extent of their liability, MCP insists that their liability should be limited to P200.00 per
assigned to the alleged subrogers; thus, they could not possibly have transferred any right of package or per bale of raw cotton as stated in paragraph 17 of the bills of lading. Also the MCP
action to said plaintiff- appellee in this case. (Brief for the Maritime Company of the Philippines, argues that the law on averages should be applied in determining their liability.
p. 16).
MCP's contention is devoid of merit. The declared value of the goods was stated in the bills of
The records show that the Riverside Mills Corporation and Guilcon, Manila are the holders of lading and corroborated no less by invoices offered as evidence ' during the trial. Besides,
the duly endorsed bills of lading covering the shipments in question and an examination of the common carriers, in the language of the court in Juan Ysmael & Co., Inc. v. Barrette et al., (51
invoices in particular, shows that the actual consignees of the said goods are the Phil. 90 [1927]) "cannot limit its liability for injury to a loss of goods where such injury or loss
aforementioned companies. Moreover, no less than MCP itself issued a certification attesting was caused by its own negligence." Negligence of the captains of the colliding vessel being the
to this fact. Accordingly, as it is undisputed that the insurer, plaintiff appellee paid the total cause of the collision, and the cargoes not being jettisoned to save some of the cargoes and
amount of P364,915.86 to said consignees for the loss or damage of the insured cargo, it is the vessel, the trial court and the Court of Appeals acted correctly in not applying the law on
evident that said plaintiff-appellee has a cause of action to recover (what it has paid) from averages (Articles 806 to 818, Code of Commerce).
defendant-appellant MCP (Decision, CA-G.R. No. 46513-R, p. 10; Rollo, p. 43).
MCP's claim that the fault or negligence can only be attributed to the pilot of the vessel SS
MCP next contends that it can not be liable solidarity with NDC because it is merely the Yasushima Maru and not to the Japanese Coast pilot navigating the vessel Dona Nati need not
manager and operator of the vessel Dona Nati not a ship agent. As the general managing agent, be discussed lengthily as said claim is not only at variance with NDC's posture, but also contrary
according to MCP, it can only be liable if it acted in excess of its authority. to the factual findings of the trial court affirmed no less by the Court of Appeals, that both
pilots were at fault for not changing their excessive speed despite the thick fog obstructing
As found by the trial court and by the Court of Appeals, the Memorandum Agreement of their visibility.
September 13, 1962 (Exhibit 6, Maritime) shows that NDC appointed MCP as Agent, a term
broad enough to include the concept of Ship-agent in Maritime Law. In fact, MCP was even Finally on the issue of prescription, the trial court correctly found that the bills of lading issued
conferred all the powers of the owner of the vessel, including the power to contract in the allow trans-shipment of the cargo, which simply means that the date of arrival of the ship Dona
name of the NDC (Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40). Consequently, under the Nati on April 18,1964 was merely tentative to give allowances for such contingencies that said
circumstances, MCP cannot escape liability. vessel might not arrive on schedule at Manila and therefore, would necessitate the
trans-shipment of cargo, resulting in consequent delay of their arrival. In fact, because of the
It is well settled that both the owner and agent of the offending vessel are liable for the collision, the cargo which was supposed to arrive in Manila on April 18, 1964 arrived only on
damage done where both are impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil. June 12, 13, 18, 20 and July 10, 13 and 15, 1964. Hence, had the cargoes in question been
281 [1906]); that in case of collision, both the owner and the agent are civilly responsible for saved, they could have arrived in Manila on the above-mentioned dates. Accordingly, the
the acts of the captain (Yueng Sheng Exchange and Trading Co. v. Urrutia & Co., supra citing complaint in the instant case was filed on April 22, 1965, that is, long before the lapse of one (1)
Article 586 of the Code of Commerce; Standard Oil Co. of New York v. Lopez Castelo, 42 Phil. year from the date the lost or damaged cargo "should have been delivered" in the light of
256, 262 [1921]); that while it is true that the liability of the naviero in the sense of charterer Section 3, sub-paragraph (6) of the Carriage of Goods by Sea Act.
or agent, is not expressly provided in Article 826 of the Code of Commerce, it is clearly
deducible from the general doctrine of jurisprudence under the Civil Code but more specially PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the assailed
as regards contractual obligations in Article 586 of the Code of Commerce. Moreover, the decision of the respondent Appellate Court is AFFIRMED.
Court held that both the owner and agent (Naviero) should be declared jointly and severally
liable, since the obligation which is the subject of the action had its origin in a tortious act and SO ORDERED.
did not arise from contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]).
Consequently, the agent, even though he may not be the owner of the vessel, is liable to the
shippers and owners of the cargo transported by it, for losses and damages occasioned to such
cargo, without prejudice, however, to his rights against the owner of the ship, to the extent of
the value of the vessel, its equipment, and the freight (Behn Meyer Y Co. v. McMicking et al. 11
Phil. 276 [1908]).
Shipowners and shipagents: The doctrine of limited liability Brushing aside the incidental issues, the fundamental question here raised is: May the
shipowner or agent, notwithstanding the total loss of the vessel as a result of the negligence of
G.R. No. L-47447-47449 October 29, 1941 its captain, be properly held liable in damages for the consequent death of its passengers? We
are of the opinion and so hold that this question is controlled by the provisions of article 587 of
TEODORO R. YANGCO, ETC., petitioner, the Code of Commerce. Said article reads:
vs.
MANUEL LASERNA, ET AL., respondents. The agent shall also be 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
Claro M. Recto for petitioner. exempt himself therefrom by abandoning the vessel with all her equipments and the freight he
Powell & Vega for respondents. may have earned during the voyage.

The provisions accords a shipowner or agent the right of abandonment; and by necessary
implication, his liability is confined to that which he is entitled as of right to abandon — "the
vessel with all her equipments and the freight it may have earned during the voyage." It is true
MORAN, J.:
that the article appears to deal only with the limited liability of shipowners or agents for
damages arising from the misconduct of the captain in the care of the goods which the vessel
At about one o'clock in the afternoon of May 26, 1927, the steamer S.S. Negros, belonging to carries, but this is a mere deficiency of language and in no way indicates the true extent of
petitioner here, Teodoro R. Yangco, left the port of Romblon on its retun trip to Manila. such liability. The consensus of authorities is to the effect that notwithstanding the language of
Typhoon signal No. 2 was then up, of which fact the captain was duly advised and his attention the aforequoted provision, the benefit of limited liability therein provided for, applies in all
thereto called by the passengers themselves before the vessel set sail. The boat was cases wherein the shipowner or agent may properly be held liable for the negligent or illicit
overloaded as indicated by the loadline which was 6 to 7 inches below the surface of the water. acts of the captain. Dr. Jose Ma. Gonzalez de Echavarri y Vivanco, commenting on said article,
Baggage, trunks and other equipments were heaped on the upper deck, the hold being packed said:
to capacity. In addition, the vessel carried thirty sacks of crushed marble and about one
hundred sacks of copra and some lumber. The passengers, numbering about 180, were
La letra del Codigo, en el articulo 587, presenta una gravisima cuestion. El derecho de
overcrowded, the vessel's capacity being limited to only 123 passengers. After two hours of
abandono, si se atiende a lo escrito, solo se refiere a las indemnizaciones a que dierQe lugar la
sailing, the boat encountered strong winds and rough seas between the islands of Banton and
conducta del Capitan en la custodia de los efectos que cargo en el buque.
Simara, and as the waves splashed the ladies' dresses, the awnings were lowered. As the sea
became increasingly violent, the captain ordered the vessel to turn left, evidently to return to
port, but in the manuever, the vessel was caught sidewise by a big wave which caused it to ¿Es ese el espiritu del legislador? No; ¿habra derecho de abandono en las responsabilidades
capsize and sink. Many of the passengers died in the mishap, among them being Antolin nacidas de obligaciones contraidas por el Capitan y de otros actos de este? Lo reputamos
Aldaña and his son Victorioso, husband and son, respectively, of Emilia Bienvenida who, evidente y, para fortalecer nuestra opinion, basta copiar el siguiente parrafo de la Exposicion
together with her other children and a brother-in-law, are respondents in G.R. No. 47447; de motivos:
Casiana Laserna, the daughter of respondents Manuel Laserna and P.A. de Laserna in G.R.
47448; and Genaro Basaña, son of Filomeno Basaña, respondent in G.R. No. 47449. These "El proyecto, al aplicar estos principios, se inspira tambien en los intereses del comercio
respondents instituted in the Court of First Instance of Capiz separate civil actions against maritimo, que quedaran mas asegurados ofreciendo a todo el que contrata con el naviero o
petitioner here to recover damages for the death of the passengers aforementioned. The court Capitan del buque, la garantia real del mismo, cualesquiera que sean las facultades o
awarded the heirs of Antolin and Victorioso Aldana the sum of P2,000; the heirs of Casiana atribuciones de que se hallen investidos." (Echavarri, Codigo de Comercio, Tomo 4, 2. a ed.,
Laserna, P590; and those of Genaro Basana, also P590. After the rendition of the judgment to pags. 483-484.)
this effcet, petitioner, by a verified pleading, sought to abandon th evessel to the plainitffs in
the three cases, together with all its equipments, without prejudice to his right to appeal. The A cursory examination will disclose that the principle of liomited liability of a shipowner or
abandonment having been denied, an appeal was taken to the Court of Appeals, wherein all agent is provided for in but three articles of the Code of Commerce — article 587 aforequoted
the judgmnets were affirmed except that which sums was increased to P4,000. Petitioner, now and article 590 and 837. Article 590 merely reiterates the principle embodied in article 587,
deceased, appealed and is here represented by his legal representative. applies the same principle in cases of collision, and it has been observed that said article is but
"a necessary consequences 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, quoted in Philippine Shipping Co. vs. Garcia, 6 Phil. 281, 282.) In effect, "As evidence of this real nature of the maritime law we have (1) the limitation of the liability of
therefore, only articles 587 and 590 are the provisions conatined in our Code of Commerce on the agents to the actual value of the vessel and the freight money, and (2) the right to retain
the matter, and the framers of said code had intended those provisions to embody the the cargo and the embargo and detention of the vessel even in cases where the ordinary civil
universal principle of limited liability in all cases. Thus, in the "Exposicon de Motivos" of the law would not allow more than a personal action against the debtor or person liable. It will be
Code of Commerce, we read: 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
The present code (1829) does not determine the juridical status of the agent where such agent of risking his whole fortune in the business, it is also just that his maritime creditor may for any
is not himself the owner of the vessel. This omission is supplied by the proposed code, which reason attach the vessel itself to secure his claim without waiting for a settlement of his rights
provides in accordance with the principles of maritime law that by agent it is to be understood by a final judgment, even to the prejudice of a third person.
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 one who represents the vessel — that "This repeals the civil law to such an extent that, in certain cases, where the mortgaged
is to say, the only one who represents the interests of the owner of the vessel. This provision property is lostno personal action lies against the owner or agent of the vessel. For instance,
has therefore cleared the doubt which existed as to the extent of the liability, both of the agent where the vessel is lost the sailors and members of the crew cannot recover their wages; in
and of the owner of the vessel. Such liability is limited by the proposed code to the value of the case of collision, the liability of the agent is limited as aforesaid, and in case of shipwreck, those
vesseland other things appertaining thereto. who loan their money on the vessel and cargo lose all their rights and cannot claim
reimbursement under the law.
In Philippine Shipping Co. vs. Garcia (6 Phil., 281, 284-286), we have expressed ourselves in
such a comprehensive manner as to leave no room for doubt on the applicability of our ratio "There are two reasons why it is impossible to do away with these privileges, to wit: (1) The
decidendi not only to cases of collision but also to those of shipwrecks, etc. We said: risk to which the thing is exposed, and (2) the real nature of the maritime law, exclusively real,
according to which the liability of the parties is limited to a thing which is at the mercy of the
This is the difference which exists between the lawful acts and lawful obligations of the captain waves. If the agent is only liable with the vessel and freight money and both may be lost
and the liability which he incurs on account of any unlawful act committed by him. In the first through the accidents of navigation it is only just that the maritime creditor have some means
case, the lawful acts and obligations of the captain beneficial to the vessel may be enforced as to obviating this precarious nature of his rights by detaining the ship, his only security, before it
against the agent for the reason that such obligations arise from te the contract of agency is lost.
(provided, however, that the captain does not exceed his authority), while as to any liability
incurred by the captain through his unlawful acts, the ship agent is simply subsidiarily civilly "The liens, tacit or legal, which may exist upon the vessel and which a purchaser of the same
liable. This liability of the agent is limited to the vessel and it does not extend further. For this would be obliged to respect and recognize are — in addition to those existing in favor of the
reason the Code of Commerce makes the agent liable to the extent of the value of the vessel, State by virtue of the privileges which are granted to it by all the laws — pilot, tonnate, and
as the codes of the principal maritime nations provide with the vessel, and not individually. port dues and other similar charges, the wages of the crew earned during the last voyage as
Such is also the spirit of our Code. 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
The spirit of our code s accurately set forth in a treatise on maritime law, from which we deem of the voluntary sale of the ship and the insolvency of the owner as provided in article 608, and
proper to quote the following as the basis of this decision:lawphil.net all other liabilities arising from collisions under articles 837 and 838."

"That which distinguishes the maritime from the civil law and even from the mercantile law in We are shared in this conclusion by the eminent commentators on the subject. Agustin Vicente
general is the real and hypothecary nature of the former, and the many securities of y Gella, asserting, in his "Introduccion al Derecho Mercantil Comparado" 1929 (pages 374-375),
a real nature that maritime customs from time immemorial, the laws, the codes, and the later the like principle of limited liability of shipowners or agent in cases of accidents, collisions,
jurisprudence, have provided for the protection of the various and conflicting interests which shipwrecks, etc., said:
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 De las responsabilities que pueden resultar como consequencia del comercio maritimo, y no
make loans upon the cargo, those of the sailors and members of the crew as to their wages, solo por hechos propios sino tambien por las que se ocasionen por los del capitan y la
and those of a constructor as to repairs made to the vessel. tripulacion, responde frente a tercero el naviero que representa el buque; pero el derecho
maritimo es sobre todo tradicional y siguiendo un viejo principio de la Edad Media la
responsabilidad del naviero se organiza de un modo especifico y particularisimo que no en la negligencia o actos de este que o casionaron daños o perjuicios, puesto que no se
encuentra similar en el derecho general de las obligaciones. aseguro de su pericia o buena fe. Limitase, sin embargo, la responsabilidad del naviero a la
perdida de la nave, sus aparejos, y fletes devengados durante el viaje; porque no pudiendo
Una forma corrientisima de verificarse el comercio maritimo durante la epoca medieval, era vigilar de un modo directo e inmediato la conducta del capitan, hubiera sido duro hacerla
prestar un propietario su navio para que cargase en el mercancias determinada persona, y se extensiva a todos sus bienes que podria comprometer el capitan con sus faltas o delitos.
hiciese a la mar, yendo al frente de la expedicion un patron del buque, que llegado al puerto de
destino se encargaba de venderlas y retornaba al de salida despues de adquirir en aquel otros The views of these learned commentators, including those of Estasen (Derecho Mercantil, Vol.
efectos que igualmente revendia a su regreso, verificado lo cual los beneficios de la expedicion 4, 259) and Supino (Derecho Mercantil, pp. 463-464), leave nothing to be desired and nothing
se repartian entre el dueño del buque, el cargador y el capitan y tripulantes en la proporcion to be doubted on the principle. It only remains to be noted that the rule of limited liability
estipulada. El derecho maritimo empezo a considerar la asociacion asi formada como una provided for in our Code of Commerce reflects merely, or is but a restatement, imperfect
verdadera sociedad mercantil, de responsabilidad limitada, y de acuerdo con los principios que though it is, of the almost universal principle on the subject. While previously under the civil or
gobiernan aquella en los casos de accidentes, abordajes, naufragios, etc., se resolvia que el common law, the owner of a vessel was liable to the full amount for damages caused by the
dueño del buque perdia la nave, el cargador las mercancias embarcadas y el capitan y la misconduct of the master, by the general maritime law of modern Europe, the liability of the
tripulacion su trabajo, sin que en ningun caso el tercer acreedor pudiese reclamar mayor shipowner was subsequently limited to his interest in the vessel. (Norwich & N. Y. Trans.
cantidad de ninguno de ellos, porque su responsabilidad quedaba limitada a lo que cada uno Co. v. Wright, 80 U. S. 104, 20 Law. ed. 585.) A similar limitation was placed by the British
aporto a la sociedad. Recogidas estas ideas en el derecho comercial de tiempos posteriores, la Parliament upon the liability of Englosh shipowners through a series of statutes beginning in
responsabilidad del naviero se edifico sobre aquellos principios, y derogando la norma general 1734 with the Act of 7 George II, chapter 15. The legislatures of Massachusetts and Maine
civil de que del cumplimiento de sus obligaciones responde el deudor con todos sus bienes followed suit in 1818 and 1821, and finally, Congress enacted the Limited Liability Act of March
presentes y futuros, la responsabilidad maritima se considero siempre limitada ipso jure al 3, 1851, embodying most of the provisions contained in the British Statutes (see 24 R. C. L. pp.
patrimonio de mar. Y este es el origen de la regla trascendental de derecho maritimo segun la 1387-1389). Section 4283 of the Revised Statutes (sec. 183, Tit. 46, Code of Laws of U. S. A.)
cual el naviero se libera de toda responsabilidad abandonando el buque y el flete a favor de los reads:
acreedores.
LIABILITY OF OWNER NOT TO EXCEED INTEREST. — The liability of the owner of any vessel, for
From the Enciclopedia Juridica Española, Vol. 23, p. 347, we read: any embezzlement, loss, or destruction, by any person, of any property, goods, or merchandise,
shipped or put on board of such vessel, or for any loss, damage, or injury by collision, or for any
Ahora bien: ¿hasta donde se extiende esta responsabilidad del naviero? ¿sobre que bienes act, matter or thing, loss, damage, or forfeiture, done, occasioned, or incurred without the
pueden los acreedores resarcirse? Esta es otra especialidad del Derecho maritimo; en el privity, or knowledge of such owner or owners, shall in no case exceed the amount or value of
Derecho comun la responsabilidad es limitada; tambien lo era en el antiguo Derecho maritimo the interest of such owner in such vessel, and her freight then pending.
romano; es daba la actio exercitoria contra el exercitor navis sin ninguna restriccion, pero en la
Edad Media una idea nueva se introdujo en los usos maritimos. Las cargas resultantes de las The policy which the rule is designed to promote is the encouragement of shipbuilding and
expediciones maritimas se consideraron limitadas por los propietarios de las naves a los investment in maritime commerce. (Vide: Norwich & N. Y. Trans. Co. v. Wright, supra; The
valores comprometidos por ellos en cada expedicion; se separo ficticiamente el patrimonio de Main v. Williams, 152 U. S. 122; 58 C. J. 634.) And it is in that spirit that the American courts
los navieros en dos partes que todavia se designan de una manera bastante exacta; fortuna de construed the Limited Liability Act of Congress whereby the immunities of the Act were applied
tierra y fortuna de mar o flotante; y se admitio la teoria de que esta era la que respondia solo to claims not only for lost goods but also for injuries and "loss of life of passengers, whether
de las deudas provinientes de los actos del capitan o de la tripulacion, es decir, que el conjunto arising under the general law of admiralty, or under Federal or State statutes." (The City of
del patrimonio del naviero escaparia a estas cargas desde el momento en que abandonara la Columbus, 22 Fed. 460; The Longfellow, 104 Fed. 360; Butler v. Boston & Savannah Steamship
nave y los fletes a los acreedores. . . . Co., 32 Law. ed. 1017; Craig v. Continental Insurance Co., 35 Law. ed. 836.) The Supreme Court
of the United States in Norwich & N. Y. Trans. Co. v. Wright, 80 U. S. 104, 20 Law. ed. 585,
Escriche in his Diccionario de la Legislacion y Jurisprudencia, Vol. 1, p. 38, observes: 589-590, accounting for the history of the principle, clinches our exposition of the supporting
authorities:
La responsabilidad del naviero, en el caso expuesto, se funda en el principio de derecho comun
de ser responsable todo el que pone al frente de un establecimiento a una persona, de los The history of the limitation of liability of shipowners is matter of common knowledge. The
daños o perjuicios que ocasionare esta desempeñando su cometido, y en que estando learned opinion of Judge Ware in the case of The Rebecca, 1 Ware, 187-194, leaves little to be
facultado el naviero para la eleccion de capitan de la nave, viene a tener indirectamente culpa desired on the subject. He shows that it originated in the maritime law of modern Europe; that
whilst the civil, as well as the common law, made the owner responsible to the whole extent of limit such liability to the value of the vessel, or to the insurance thereon, if any. In the instant
damage caused by the wrongful act or negligence of the matter or crew, the maritime law only case it does not appear that the vessel was insured.
made then liable (if personally free from blame) to the amount of their interest in the ship. So
that, if they surrendered the ship, they were discharged. Whether the abandonment of the vessel sought by the petitioner in the instant case was in
accordance with law of not, is immaterial. The vessel having totally perished, any act of
Grotius, in his law of War and Peace, says that men would be deterred from investing in ships if abandonment would be an idle ceremony.
they thereby incurred the apprehension of being rendered liable to an indefinite amount by
the acts of the master and, therefore, in Holland, they had never observed the Roman Law on Judgement is reversed and petitioner is hereby absolved of all the complaints, without costs.
that subject, but had a regulation that the ship owners should be bound no farther than the
value of their ship and freight. His words are: Navis et eorum quae in navi sunt," "the ship and
goods therein." But he is speaking of the owner's interest; and this, as to the cargo, is the
freight thereon, and in that sense he is understood by the commentators. Boulay Paty, Droit
Maritime, tit. 3, sec. 1, p. 276; Book II, c. XI, sec. XIII. The maritime law, as codified in the
celebrated French Ordonance de la Marine, in 1681, expressed the rule thus: 'The proprietors
of vessels shall be responsible for the acts of the master, but they shall be discharged by
abandoning the ship and freight.' Valin, in his commentary on this passage, lib. 2, tit. 8, art. 2,
after specifying certain engagements of the master which are binding on the owners, without
any limit of responsibility, such as contracts for the benefit of the vessel, made during the
voyage (except contracts of bottomry) says: "With these exceptions it is just that the owner
should not be bound for the acts of the master, except to the amount of the ship and freight.
Otherwise he 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 interests of navigation. It is quite sufficient
that he be exposed to the loss of his ship and of the freight, to make it his interest,
independently of any goods he may have on board to select a reliable captain." Pardessus says:
'The owner is bound civilly for all delinquencies committed by the captain within the scope of
his authority, but he may discharge himself therefrom by abandoning the ship and freight; and,
if they are lost, it suffices for his discharge, to surrender all claims in respect of the ship and its
freight," such as insurance, etc. Droit Commercial, part 3, tit. 2, c. 3, sec. 2.

The same general doctrine is laid down by many other writers on maritime law. So that it is
evident that, by this law, the owner's liability was coextensive with his interest in the vessel
and its freight, and ceased by his abandonment and surrender of these to the parties
sustaining loss.

In the light of all the foregoing, we therefore hold that if the shipowner 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. In arriving at this
conclusion, we have not been unmindful of the fact that the ill-fated steamship Negros, as a
vessel engaged in interisland trade, is a common carrier (De Villata v. Stanely, 32 Phil., 541),
and that the as a vessel engaged in interisland trade, is a common carrier (De Villata v. Stanely,
32 Phil., 541), 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
Shipowners and shipagents: The doctrine of limited liability Appellant, who was the owner of the motor ships San Diego II and Bartolome S, states in his
brief the following:
G.R. No. L-773 December 17, 1946
There is no dispute as to the facts involved in these cases and they may be gathered from the
DIONISIA ABUEG, ET AL., plaintiffs-appellees, pleadings and the decision of the trial Court. In case CA-G.R. No. 773, Dionisia Abueg is the
vs. widow of the deceased, Amado Nuñez, who was a machinist on board the M/S San Diego II
BARTOLOME SAN DIEGO, defendant-appellant. belonging to the defendant-appellant. In case CA-G.R. No. 774, plaintiff-appellee, Marciana S.
de Salvacion, is the widow of the deceased, Victoriano Salvacion, who was a machinist on
---------------------------- board the M/S Bartolome S also belonging to the defendant-appellant. In case CA-G.R. No. 775,
the plaintiff-appellee, Rosario R. Oching is the widow of Francisco Oching who was a captain or
patron of the defendant-appellant's M/S Bartolome S.
CA-No. L-774 December 17, 1946

The M/S San Diego II and the M/S Bartolome, while engaged in fishing operations around
MARCIANA DE SALVACION, ET AL., plaintiffs-appellees,
Mindoro Island on Oct. 1, 1941 were caught by a typhoon as a consequence of which they
vs.
were sunk and totally lost. Amado Nuñez, Victoriano Salvacion and Francisco Oching while
BARTOLOME SAN DIEGO, defendant-appellant.
acting in their capacities perished in the shipwreck (Appendix A, p. IV).

----------------------------
It is also undisputed that the above-named vessels were not covered by any insurance.
(Appendix A, p. IV.).
CA-No. L-775 December 17, 1946
Counsel for the appellant cite article 587 of the Code of Commerce which provides that if the
ROSARIO OCHING, ET AL., plaintiffs-appellees, vessel together with all her tackle and freight money earned during the voyage are abandoned,
vs. the agent's liability to third persons for tortious acts of the captain in the care of the goods
BARTOLOME SAN DIEGO, defendant-appellant. which the ship carried is extinguished (Yangco vs. Laserna, 73 Phil., 330); article 837 of the
same code which provides that in cases of collision, the ship owners' liability is limited to the
Lichauco, Picazo and Mejia for appellant. value of the vessel with all her equipment and freight earned during the voyage (Philippine
Cecilio I. Lim and Roberto P. Ancog for appellees. Shipping company vs. Garcia, 6 Phil., 281), and 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. From these premises counsel draw the conclusion that appellant's liability, as
owner of the two motor ships lost or sunk as a result of the typhoon that lashed the island of
PADILLA, J.: Mindoro on October 1, 1941, was extinguished.

This is appeal from a judgment rendered by the Court of First Instance of Manila in the The real and hypothecary nature of the liability of the shipowner or agent embodied in the
above-entitled cases awarding plaintiffs the compensation provided for in the Workmen's provisions of the Maritime Law, Book III, Code of Commerce, had its origin in the prevailing
Compensation Act. 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
The record of the cases was forwarded to the Court of Appeals for review, but as there was no
owner or agent arising from the operation of a ship to the vessel, equipment, and freight, or
question of fact involved in the appeal, said court forwarded the record to this Court. The
insurance, if any, so that if the shipowner or agent abandoned the ship, equipment, and freight,
appeal was pending when the Pacific War broke up, and continued pending until after
his liability was extinguished.
liberation, because the record of the cases was destroyed as a result of the battle waged by the
forces of liberation against the enemy. As provided by law, the record was reconstituted and
we now proceed to dispose of the appeal. But 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 ship, cannot be applied (Lopez vs. Duruelo, 52 Phil., 229). Granting however, that the motor
captain or master of the ship; nor the liability for the loss of the ship as result of collision; nor ships run and operated by the appellant were not engaged in the coastwise and interisland
the responsibility for wages of the crew, but a liability created by a statute to compensate trade, as contemplated in section 38 of the Workmen's Compensation Act, as amended, still
employees and laborers in cases of injury received by or inflicted upon them, while engaged in the deceased officers of the motor ships in question were industrial employees within the
the performance of their work or employment, or the heirs and dependents and laborers and purview of section 39, paragraph (d), as amended, for industrial employment "includes all
employees in the event of death caused by their employment. Such compensation has nothing employment or work at a trade, occupation or profession exercised by an employer for the
to do with the provisions of the Code of Commerce regarding maritime commerce. It is an item purpose of gain." The only exceptions recognized by the Act are agriculture, charitable
in the cost of production which must be included in the budget of any well-managed institutions and domestic service. Even employees engaged in agriculture for the operation of
industry.lawphil.net mechanical implements, are entitled to the benefits of the Workmen's Compensation Act
(Francisco vs. Consing, 63 Phil., 354). In Murillo vs. Mendoza, supra, this Court held that "our
Appellant's assertion that in the case of Enciso vs. Dy-Liaco (57 Phil., 446), and Murillo vs. Legislature has deemed it admissible to include in the Workmen's Compensation Act all
Mendoza (66 Phil., 689), the question of the extinction of the shipowner's liability due to incidents that may occur to workmen or employees in factories, shops and other industrial and
abandonment of the ship by him was not fully discussed, as in the case of Yangco vs. Laserma, agricultural workplaces as well as in the interisland seas of the Archipelago." But we do not
supra, is not entirely correct. In the last mentioned case, the limitation of the shipowner's believe that the term "coastwise and interisland trade" has such a narrow meaning as to
liability to the value of the ship, equipment, freight, and insurance, if any, was the lis mota. In confine it to the carriage for hire of passengers and/or merchandise on vessels between ports
the case of Enciso vs. Dy-Liacco, supra, the application of the Workmen's Compensation Act to and places in the Philippines, because while fishing is an industry, if the catch is brought to a
a master or patron who perished as a result of the sinking of the motorboat of which he was port for sale, it is at the same time a trade.
the master, was the controversy submitted to the court for decision. This Court held in that
case that "It has been repeatedly stated that the Workmen's Compensation Act was enacted to Finding no merit in the appeal filed in these cases, we affirm the judgment of the lower court,
abrogate the common law and our Civil Code upon culpable acts and omissions, and that the with costs against the appellant.
employer need not be guilty of neglect or fault, in order that responsibility may attach to him"
(pp. 449-450); 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. In
the case of Murillo vs. Mendoza, supra, this Court held that "The rights and responsibilities
defined in said Act must be governed by its own peculiar provisions in complete disregard of
other similar mercantile law. 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." This quoted part of the decision is in answer to the
contention that it was not the intention of the Legislature to repeal articles 643 and 837 of the
Code of Commerce with the enactment of the Workmen's Compensation Act.

In the memorandum filed by counsel for the appellant, a new point not relied upon in the court
below is raised. They contend 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.lawphil.net

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
Shipowners and shipagents: The doctrine of limited liability 466, December 26, 1984), which found that such sinking was due toforce majeure and that
subject vessel, at the time of the sinking was seaworthy. This administrative finding
G.R. No. 100446 January 21, 1993 notwithstanding, the trial court in said Civil Case No. 144425 found against the carrier on the
basis that the loss subject matter therein did not occur as a result of force majeure. Thus, in
ABOITIZ SHIPPING CORPORATION, petitioner, said case, plaintiff GAFLAC was allowed to prove, and. was later awarded, its claim. This
vs. decision in favor of GAFLAC was elevated all the way up to this Court in G.R. No. 89757 (Aboitiz
GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, LTD., respondent. v. Court of Appeals, 188 SCRA 387 [1990]), with Aboitiz, like its ill-fated vessel, encountering
rough sailing. The attempted execution of the judgment award in said case in the amount of
P1,072,611.20 plus legal interest has given rise to the instant petition.
Sycip, Salazar, Hernandez & Gamaitan Law Office for petitioner.

On the other hand, other cases have resulted in findings upholding the conclusion of the BMI
Napoleon Rama collaborating counsel for petitioner.
that the vessel was seaworthy at the time of the sinking, and that such sinking was due to force
majeure. One such ruling was likewise elevated to this Court in G.R. No. 100373, Country
Dollete, Blanco, Ejercito & Associates for private respondent. Bankers Insurance Corporation v. Court of Appeals, et al., August 28, 1991 and was sustained.
Part of the task resting upon this Court, therefore, is to reconcile the resulting apparent
contrary findings in cases originating out of a single set of facts.

MELO, J.: It is in this factual milieu that the instant petition seeks a pronouncement as to the applicability
of the doctrine of limited liability on the totality of the claims vis a vis the losses brought about
This refers to a petition for review which seeks to annul and set aside the decision of the Court by the sinking of the vessel M/V P. ABOITIZ, as based on the real and hypothecary nature of
of Appeals dated June 21, 1991, in CA G.R. SP No. 24918. The appellate court dismissed the maritime law. This is an issue which begs to be resolved considering that a number of suits
petition for certiorari filed by herein petitioner, Aboitiz Shipping Corporation, questioning the alleged in the petition number about 110 (p. 10 and pp. 175 to 183, Rollo) still pend and whose
Order of April 30, 1991 issued by the Regional Trial Court of the National Capital Judicial Region resolution shall well-nigh result in more confusion than presently attends the instant case.
(Manila, Branch IV) in its Civil Case No. 144425 granting private respondent's prayer for
execution for the full amount of the judgment award. The trial court in so doing swept aside In support of the instant petition, the following arguments are submitted by the petitioner:
petitioner's opposition which was grounded on the real and hypothecary nature of petitioner's
liability as ship owner. The application of this established principle of maritime law would 1. The Limited Liability Rule warrants immediate stay of execution of judgment to prevent
necessarily result in a probable reduction of the amount to be recovered by private respondent, impairment of other creditors' shares;
since it would have to share with a number of other parties similarly situated in the insurance
proceeds on the vessel that sank.
2. The finding of unseaworthiness of a vessel is not necessarily attributable to the shipowner;
and
The basic facts are not disputed.
3 The principle of "Law of the Case" is not applicable to the present petition. (pp. 2-26, Rollo.)
Petitioner is a corporation organized and operating under Philippine laws and engaged in the
business of maritime trade as a carrier. As such, it owned and operated the ill-fated "M/V P.
On the other hand, private respondent opposes the foregoing contentions, arguing that:
ABOITIZ," a common carrier which sank on a voyage from Hongkong to the Philippines on
October 31, 1980. Private respondent General Accident Fire and Life Assurance Corporation,
Ltd. (GAFLAC), on the other hand, is a foreign insurance company pursuing its remedies as a 1. There is no limited liability to speak of or applicable real and hypothecary rule under Article
subrogee of several cargo consignees whose respective cargo sank with the said vessel and for 587, 590, and 837 of the Code of Commerce in the face of the facts found by the lower court
which it has priorly paid. (Civil Case No. 144425), upheld by the Appellate Court (CA G.R. No. 10609), and affirmed in
toto by the Supreme Court in G.R. No. 89757 which cited G.R. No. 88159 as the Law of the Case;
and
The incident of said vessel's sinking gave rise to the filing of suits for recovery of lost cargo
either by the shippers, their successor-in-interest, or the cargo insurers like GAFLAC as
subrogees. The sinking was initially investigated by the Board of Marine Inquiry (BMI Case No.
2. Under the doctrine of the Law of the Case, cases involving the same incident, parties . . . It is a truism that every court has the power "to control, in the furtherance of justice, the
similarly situated and the same issues litigated should be decided in conformity therewith conduct of its ministerial officers, and of all other persons in any manner connected with a case
following the maxim stare decisis et non quieta movere. (pp. 225 to 279, Rollo.) before it, in every manner appertaining thereto. It has also been said that:

Before proceeding to the main bone of contention, it is important to determine first whether . . . every court having jurisdiction to render a particular judgment has inherent power to
or not the Resolution of this Court in G.R. No. 88159, Aboitiz Shipping, Corporation vs. The enforce it, and to exercise equitable control over such enforcement. The court has authority to
Honorable Court of Appeals and Allied Guaranty Insurance Company, Inc., dated November 13, inquire whether its judgment has been executed, and will remove obstructions to the
1989 effectively bars and precludes the instant petition as argued by respondent GAFLAC. enforcement thereof. Such authority extends not only to such orders and such writs as may be
necessary to carry out the judgment into effect and render it binding and operative, but also to
An examination of the November 13, 1989 Resolution in G.R. No. 88159 (pp. 280 to 282, Rollo) such orders and such writs as may be necessary to prevent an improper enforcement of the
shows that the same settles two principal matters, first of which is that the doctrine of primary judgment. If a judgment is sought to be perverted and made a medium of consummating a
administrative jurisdiction is not applicable therein; and second is that a limitation of liability in wrong the court on proper application can prevent it. (at p. 359)
said case would render inefficacious the extraordinary diligence required by law of common
carriers. and again in the case of Lipana v. Development Bank of Rizal (154 SCRA 257 [1987]), this Court
found that:
It should be pointed out, however, that the limited liability discussed in said case is not the
same one now in issue at bar, but an altogether different aspect. The limited liability settled in The rule that once a decision becomes final and executory, it is the ministerial duty of the court
G.R. No. 88159 is that which attaches to cargo by virtue of stipulations in the Bill of Lading, to order its execution, admits of certain exceptions as in cases of special and exceptional
popularly known as package limitation clauses, which in that case was contained in Section 8 of nature where it becomes the imperative in the higher interest of justice to direct the
the Bill of Lading and which limited the carrier's liability to US$500.00 for the cargo whose suspension of its execution (Vecine v. Geronimo, 59 OG 579); whenever it is necessary to
value was therein sought to be recovered. Said resolution did not tackle the matter of the accomplish the aims of justice (Pascual v Tan, 85 Phil. 164); or when certain facts and
Limited Liability Rule arising out of the real and hypothecary nature of maritime law, which was circumstances transpired after the judgment became final which would render the execution
not raised therein, and which is the principal bone of contention in this case. While the matters of the judgment unjust (Cabrias v. Adil, 135 SCRA 354). (at p. 201)
threshed out in G.R. No. 88159, particularly those dealing with the issues on primary
administrative jurisdiction and the package liability limitation provided in the Bill of Lading are We now come to the determination of the principal issue as to whether the Limited Liability
now settled and should no longer be touched, the instant case raises a completely different Rule arising out of the real and hypothecary nature of maritime law should apply in this and
issue. It appears, therefore, that the resolution in G.R. 88159 adverted to has no bearing other related cases. We rule in the affirmative.
than factual to the instant case.
In deciding the instant case below, the Court of Appeals took refuge in this Court's decision in
This brings us to the primary question herein which is whether or not respondent court erred G.R. No. 89757 upholding private respondent's claims in that particular case, which the Court
in granting execution of the full judgment award in Civil Case No. 14425 (G.R. No. 89757), thus of Appeals took to mean that this Court has "considered, passed upon and resolved Aboitiz's
effectively denying the application of the limited liability enunciated under the appropriate contention that all claims for the losses should first be determined before GAFLAC's judgment
articles of the Code of Commerce. The articles may be ancient, but they are timeless and have may be satisfied," and that such ruling "in effect necessarily negated the application of the
remained to be good law. Collaterally, determination of the question of whether execution of limited liability principle" (p. 175, Rollo). Such conclusion is not accurate. The decision in G.R.
judgments which have become final and executory may be stayed is also an issue. No. 89757 considered only the circumstances peculiar to that particular case, and was not
meant to traverse the larger picture herein brought to fore, the circumstances of which
We shall tackle the latter issue first. This Court has always been consistent in its stand that the heretofore were not relevant. We must stress that the matter of the Limited Liability Rule as
very purpose for its existence is to see to the accomplishment of the ends of justice. Consistent discussed was never in issue in all prior cases, including those before the RTCs and the Court of
with this view, a number of decisions have originated herefrom, the tenor of which is that no Appeals. As discussed earlier, the "limited liability" in issue before the trial courts referred to
procedural consideration is sacrosanct if such shall result in the subverting of substantial the package limitation clauses in the bills of lading and not the limited liability doctrine arising
justice. The right to an execution after finality of a decision is certainly no exception to this. from the real and hypothecary nature of maritime trade. The latter rule was never made a
Thus, in Cabrias v. Adil (135 SCRA 355 [1985]), this Court ruled that: matter of defense in any of the cases a quo, as properly it could not have been made so since it
was not relevant in said cases. The only time it could come into play is when any of the cases
involving the mishap were to be executed, as in this case. Then, and only then, could the neglect or default the owner is responsible: Provided, however, that in regard to the act,
matter have been raised, as it has now been brought before the Court. neglect or default of this last class of person, the owner shall only be entitled to limit his
liability when the act, neglect or default is one which occurs in the navigation or the
The real and hypothecary nature of maritime law simply means that the liability of the carrier management of the ship or in the loading, carriage or discharge of its cargo or in the
in connection with losses related to maritime contracts is confined to the vessel, which is embarkation, carriage or disembarkation of its passengers.
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 (c) any obligation or liability imposed by any law relating to the removal of wreck and arising
when such trade was replete with innumerable and unknown hazards since vessels had to go from or in connection with the raising, removal or destruction of any ship which is sunk,
through largely uncharted waters to ply their trade. It was designed to offset such adverse stranded or abandoned (including anything which may be on board such ship) and any
conditions and to encourage people and entities to venture into maritime commerce despite obligation or liability arising out of damage caused to harbor works, basins and navigable
the risks and the prohibitive cost of shipbuilding. Thus, the liability of the vessel owner and waterways. (Section 1, Article I of the Brussels International Convention of 1957)
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 In this jurisdiction, on the other hand, its application has been well-nigh constricted by the very
effectively wagering their resources against the consideration of the large profits attainable in statute from which it originates. The Limited Liability Rule in the Philippines is taken up in Book
the trade. III of the Code of Commerce, particularly in Articles 587, 590, and 837, hereunder quoted in
toto:
It might be noteworthy to add in passing that despite the modernization of the shipping
industry and the development of high-technology safety devices designed to reduce the risks Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons
therein, the limitation has not only persisted, but is even practically absolute in well-developed which may arise from the conduct of the captain in the care of the goods which he loaded on
maritime countries such as the United States and England where it covers almost all maritime the vessel; but he may exempt himself therefrom by abandoning the vessel with all her
casualties. Philippine maritime law is of Anglo-American extraction, and is governed by equipment and the freight it may have earned during the voyage.
adherence to both international maritime conventions and generally accepted practices
relative to maritime trade and travel. This is highlighted by the following excerpts on the Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their interests in
limited liability of vessel owners and/or agents; the common fund for the results of the acts of the captain referred to in Art. 587.

Sec. 183. The liability of the owner of any vessel, whether American or foreign, for any Each co-owner may exempt himself from this liability by the abandonment, before a notary, of
embezzlement, loss, or destruction by any person of any person or any property, goods, or the part of the vessel belonging to him.
merchandise shipped or put on board such vessel, or for any loss, damage, or forfeiture, done,
occasioned, or incurred, without the privity or knowledge of such owner or owners shall not
Art. 837. The civil liability incurred by shipowners in the case prescribed in this section (on
exceed the amount or value of the interest of such owner in such vessel, and her freight then
collisions), shall be understood as limited to the value of the vessel with all its appurtenances
pending. (Section 183 of the US Federal Limitation of Liability Act).
and freightage served during the voyage. (Emphasis supplied)

—and—
Taken together with related articles, the foregoing cover only liability for injuries to third
parties (Art. 587), acts of the captain (Art. 590) and collisions (Art. 837).
1. The owner of a sea-going ship may limit his liability in accordance with Article 3 of this
Convention in respect of claims arising, from any of the following occurrences, unless the
In view of the foregoing, this Court shall not take the application of such limited liability rule,
occurrence giving rise to the claim resulted from the actual fault or privity of the owner;
which is a matter of near absolute application in other jurisdictions, so lightly as to merely
"imply" its inapplicability, because as could be seen, the reasons for its being are still
(a) loss of life of, or personal injury to, any person being carried in the ship, and loss of, or apparently much in existence and highly regarded.
damage to, any property on board the ship.

We now come to its applicability in the instant case. In the few instances when the matter was
(b) loss of life of, or personal injury to, any other person, whether on land or on water, loss of considered by this Court, we have been consistent in this jurisdiction in holding that
or damage to any other property or infringement of any rights caused by the act, neglect or the only time the Limited Liability Rule does not apply is when there is an actual finding of
default the owner is responsible for, or any person not on board the ship for whose act,
negligence on the part of the vessel owner or agent (Yango v. Laserna, 73 Phil. 330 [1941]; the most compelling of reasons. In the absence of such reasons, this Court chooses to exercise
Manila Steamship Co., Inc. v. Abdulhanan, 101 Phil. 32 [1957]; Heirs of Amparo delos Santos v. prudence and shall not sweep such rights aside on mere whim or surmise, for even in the
Court of Appeals, 186 SCRA 649 [1967]). The pivotal question, thus, is whether there is a existence of cause to do so, such incursion is definitely punitive in nature and must never be
finding of such negligence on the part of the owner in the instant case. taken lightly.

A careful reading of the decision rendered by the trial court in Civil Case No. 144425 (pp. More to the point, the rights of parties to claim against an agent or owner of a vessel may be
27-33, Rollo) as well as the entirety of the records in the instant case will show that there has compared to those of creditors against an insolvent corporation whose assets are not enough
been no actual finding of negligence on the part of petitioner. In its Decision, the trial court to satisfy the totality of claims as against it. While each individual creditor may, and in fact shall,
merely held that: be allowed to prove the actual amounts of their respective claims, this does not mean that
they shall all be allowed to recover fully thus favoring those who filed and proved their claims
. . . Considering the foregoing reasons, the Court holds that the vessel M/V "Aboitiz" and its sooner to the prejudice of those who come later. In such an instance, such creditors too would
cargo were not lost due to fortuitous event or force majeure." (p. 32, Rollo) not also be able to gain access to the assets of the individual shareholders, but must limit their
recovery to what is left in the name of the corporation. Thus, in the case of Lipana v.
The same is true of the decision of this Court in G.R. No. 89757 (pp. 71-86, Rollo) affirming the Development Bank of Rizal earlier cited, We held that:
decision of the Court of Appeals in CA-G.R. CV No. 10609 (pp. 34-50, Rollo) since both decisions
did not make any new and additional finding of fact. Both merely affirmed the factual findings In the instant case, the stay of execution of judgment is warranted by the fact that the
of the trial court, adding that the cause of the sinking of the vessel was because of respondent bank was placed under receivership. To execute the judgment would unduly
unseaworthiness due to the failure of the crew and the master to exercise extraordinary deplete the assets of respondent bank to the obvious prejudice of other depositors and
diligence. Indeed, there appears to have been no evidence presented sufficient to form a creditors, since, as aptly stated in Central Bank v. Morfe (63 SCRA 114), after the Monetary
conclusion that petitioner shipowner itself was negligent, and no tribunal, including this Court Board has declared that a bank is insolvent and has ordered it to cease operations, the Board
will add or subtract to such evidence to justify a conclusion to the contrary. becomes the trustee of its assets for the equal benefit of all creditors, and after its insolvency,
one cannot obtain an advantage or preference over another by an attachment, execution or
The qualified nature of the meaning of "unseaworthiness," under the peculiar circumstances of otherwise. (at p. 261).
this case is underscored by the fact that in the Country Banker's case, supra, arising from the
same sinking, the Court sustained the decision of the Court of Appeals that the sinking of the In both insolvency of a corporation and the sinking of a vessel, the claimants or creditors are
M/V P. Aboitiz was due to force majeure. limited in their recovery to the remaining value of accessible assets. In the case of an insolvent
corporation, these are the residual assets of the corporation left over from its operations. In
On this point, it should be stressed that unseaworthiness is not a fault that can be laid squarely the case of a lost vessel, these are the insurance proceeds and pending freightage for the
on petitioner's lap, absent a factual basis for such a conclusion. The unseaworthiness found in particular voyage.
some cases where the same has been ruled to exist is directly attributable to the vessel's crew
and captain, more so on the part of the latter since Article 612 of the Code of Commerce In the instant case, there is, therefore, a need to collate all claims preparatory to their
provides that among the inherent duties of a captain is to examine a vessel before sailing and satisfaction from the insurance proceeds on the vessel M/V P. Aboitiz and its pending
to comply with the laws of navigation. Such a construction would also put matters to rest freightage at the time of its loss. No claimant can be given precedence over the others by the
relative to the decision of the Board of Marine Inquiry. While the conclusion therein simple expedience of having filed or completed its action earlier than the rest. Thus, execution
exonerating the captain and crew of the vessel was not sustained for lack of basis, the finding of judgment in earlier completed cases, even those already final and executory, must be stayed
therein contained to the effect that the vessel was seaworthy deserves merit. Despite pending completion of all cases occasioned by the subject sinking. Then and only then can all
appearances, it is not totally incompatible with the findings of the trial court and the Court of such claims be simultaneously settled, either completely or pro-rata should the insurance
Appeals, whose finding of "unseaworthiness" clearly did not pertain to the structural condition proceeds and freightage be not enough to satisfy all claims.
of the vessel which is the basis of the BMI's findings, but to the condition it was in at the time of
the sinking, which condition was a result of the acts of the captain and the crew. Finally, the Court notes that petitioner has provided this Court with a list of all pending cases
(pp. 175 to 183, Rollo), together with the corresponding claims and the pro-rated share of each.
The rights of a vessel owner or agent under the Limited Liability Rule are akin to those of the We likewise note that some of these cases are still with the Court of Appeals, and some still
rights of shareholders to limited liability under our corporation law. Both are privileges granted with the trial courts and which probably are still undergoing trial. It would not, therefore, be
by statute, and while not absolute, must be swept aside only in the established existence of entirely correct to preclude the trial courts from making their own findings of fact in those
cases and deciding the same by allotting shares for these claims, some of which, after all, might
not prevail, depending on the evidence presented in each. We, therefore, rule that the
pro-rated share of each claim can only be found after all the cases shall have been decided.

In fairness to the claimants, and as a matter of equity, the total proceeds of the insurance and
pending freightage should now be deposited in trust. Moreover, petitioner should institute the
necessary limitation and distribution action before the proper admiralty court within 15 days
from the 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.

ACCORDINGLY, the petition is hereby GRANTED, and the Orders of the Regional Trial Court of
Manila, Branch IV dated April 30, 1991 and the Court of Appeals dated June 21, 1991 are
hereby set aside. The trial court is hereby directed to desist from proceeding with the
execution of the judgment rendered in Civil Case No. 144425 pending determination of the
totality of claims recoverable from the petitioner as the owner of the M/V P. Aboitiz. Petitioner
is directed to institute the necessary action and to deposit the proceeds of the insurance of
subject vessel as above-described within fifteen (15) days from finality of this decision. The
temporary restraining order issued in this case dated August 7, 1991 is hereby made
permanent.

SO ORDERED.
Shipowners and shipagents: The doctrine of limited liability paid. The trial courts awarded to various claimants the amounts of ₱639,862.02, ₱646,926.30,
and ₱87,633.81 in G.R. Nos. 121833, 130752 and 137801, respectively.
G.R. No. 121833 October 17, 2008
ANTECEDENTS
ABOITIZ SHIPPING CORPORATION, petitioners,
vs. G.R. No. 121833
COURT OF APPEALS, MALAYAN INSURANCE COMPANY, INC., COMPAGNIE MARITIME DES
CHARGEURS REUNIS, and F.E. ZUELLIG (M), INC., respondents. Respondent Malayan Insurance Company, Inc. (Malayan) filed five separate actions against
several defendants for the collection of the amounts of the cargoes allegedly paid by Malayan
x-----------------------------------------x under various marine cargo policies2 issued to the insurance claimants. The five civil cases,
namely, Civil Cases No. 138761, No. 139083, No. 138762, No. R-81-526 and No. 138879, were
G.R. No. 130752 October 17, 2008 consolidated and heard before the Regional Trial Court (RTC) of Manila, Branch 54.

ABOITIZ SHIPPING CORPORATION, petitioners, The defendants in Civil Case No. 138761 and in Civil Case No. 139083 were Malayan
vs. International Shipping Corporation, a foreign corporation based in Malaysia, its local ship agent,
COURT OF APPEALS, THE HON. JUDGE REMEGIO E. ZARI, in his capacity as Presiding Judge of Litonjua Merchant Shipping Agency (Litonjua), and Aboitiz. The defendants in Civil Case No.
the RTC, Branch 20; ASIA TRADERS INSURANCE CORPORATION, and ALLIED GUARANTEE 138762 were Compagnie Maritime des Chargeurs Reunis (CMCR), its local ship agent, F.E.
INSURANCE CORPORATION, respondents. Zuellig (M), Inc. (Zuellig), and Aboitiz. Malayan also filed Civil Case No. R-81-526 only against
CMCR and Zuellig. Thus, defendants CMCR and Zuellig filed a third-party complaint against
x-----------------------------------------x Aboitiz. In the fifth complaint docketed as Civil Case No. 138879, only Aboitiz was impleaded as
defendant.

G.R. No. 137801 October 17, 2008

The shipments were supported by their respective bills of lading and insured separately by
Malayan against the risk of loss or damage. In the five consolidated cases, Malayan sought the
ABOITIZ SHIPPING CORPORATION, petitioners,
recovery of amounts totaling ₱639,862.02.
vs.
EQUITABLE INSURANCE CORPORATION, respondents.
Aboitiz raised the defenses of lack of jurisdiction, lack of cause of action and prescription. It
also claimed that M/V P. Aboitiz was seaworthy, that it exercised extraordinary diligence and
DECISION
that the loss was caused by a fortuitous event.

TINGA, J.:
After trial on the merits, the RTC of Manila rendered a Decision dated 27 November 1989,
adjudging Aboitiz liable on the money claims. The decretal portion reads:
Before this Court are three consolidated Rule 45 petitions all involving the issue of whether the
real and hypothecary doctrine may be invoked by the shipowner in relation to the loss of
WHEREFORE, judgment is hereby rendered as follows:
cargoes occasioned by the sinking of M/V P. Aboitiz on 31 October 1980. The petitions filed by
Aboitiz Shipping Corporation (Aboitiz) commonly seek the computation of its liability in
accordance with the Court’s pronouncement in Aboitiz Shipping Corporation v. General 1. In Civil Case No. 138072 (R-81-526-CV), the defendants are adjudged
Accident Fire and Life Assurance Corporation, Ltd.1 (hereafter referred to as "the liable and ordered to pay to the plaintiffs jointly and severally the amount
1993 GAFLAC case"). of ₱128,896.79; the third-party defendant Aboitiz is adjudged liable to
reimburse and ordered to pay the defendants or whosoever of them paid
the plaintiff up to the said amount;
The three petitions stemmed from some of the several suits filed against Aboitiz before
different regional trial courts by shippers or their successors-in-interest for the recovery of the
monetary value of the cargoes lost, or by the insurers for the reimbursement of whatever they
 2. In Civil Case No. 138761, Aboitiz is adjudged liable and ordered to pay shipment in consonance with the exceptional rule under Section 4(5) 5 of the Carriage of Goods
plaintiff the amount of One Hundred Sixty Three-Thousand Seven Hundred by Sea Act.
Thirteen Pesos and Thirty-Eight Centavos (₱163,713.38).
Aboitiz moved for reconsideration6 to no avail. Hence, it filed this petition for review on
3. In Civil Case No. 138762, defendant Aboitiz is adjudged liable and certiorari docketed as G.R. No. 121833.7 The instant petition is based on the following grounds:
ordered to pay plaintiff the sum of Seventy Three Thousand Five Hundred
Sixty-Nine Pesos and Ninety-Four Centavos (₱73,569.94); and Sixty-Four THE COURT OF APPEALS SHOULD HAVE LIMITED THE RECOVERABLE
Thousand Seven Hundred Four Pesos and Seventy-Seven Centavos AMOUNT FROM ASC TO THAT AMOUNT STIPULATED IN THE BILL OF
(₱64,704.77); LADING.

4. In Civil Case No. 139083, defendant Aboitiz is adjudged liable and IN THE ALTERNATIVE, THE COURT OF APPEALS SHOULD HAVE FOUND THAT
ordered to pay plaintiff the amount of One Hundred Fifty-Six Thousand THE TOTAL LIABILITY OF ASC IS LIMITED TO THE VALUE OF THE VESSEL OR
Two Hundred Eighty-Seven Pesos and Sixty-Four Centavos (₱156,287.64); THE INSURANCE PROCEEDS THEREOF.8

In Civil Case No. 138879, defendant Aboitiz is adjudged liable and ordered On 4 December 1995, the Court issued a Resolution9 denying the petition. Aboitiz moved for
to pay plaintiff the amount of Fifty-Two Thousand Six Hundred Eighty-Nine reconsideration, arguing that the limited liability doctrine enunciated in the 1993 GAFLAC case
Pesos and Fifty Centavos (₱52,689.50). should be applied in the computation of its liability. In the Resolution10 dated 6 March 1996,
the Court granted the motion and ordered the reinstatement of the petition and the filing of a
All the aforesaid award shall bear interest at the legal rate from the filing of comment.
the respective complaints. Considering that there is no clear showing that
the cases fall under Article 2208, Nos. 4 and 5, of the Civil Code, and in G.R. No. 130752
consonance with the basic rule that there be no penalty (in terms of
attorney’s fees) imposed on the right to litigate, no damages by way of Respondents Asia Traders Insurance Corporation (Asia Traders) and Allied Guarantee Insurance
attorney’s fees are awarded; however, costs of the party/parties to whom Corporation (Allied) filed separate actions for damages against Aboitiz to recover by way of
judgment awards are made shall be made by the party ordered to pay the subrogation the value of the cargoes insured by them and lost in the sinking of the vessel M/V
said judgment awards. P. Aboitiz. The two actions were consolidated and heard before the RTC of Manila, Branch 20.

SO ORDERED.3 Aboitiz reiterated the defense of force majeure. The trial court rendered a decision11 on 25
April 1990 ordering Aboitiz to pay damages in the amount of ₱646,926.30. Aboitiz sought
Aboitiz, CMCR and Zuellig appealed the RTC decision to the Court of Appeals. The appeal was reconsideration, arguing that the trial court should have considered the findings of the Board
docketed as CA-G.R. SP No. 35975-CV. During the pendency of the appeal, the Court of Marine Inquiry that the sinking of the M/V P. Aboitiz was caused by a typhoon and should
promulgated the decision in the 1993 GAFLAC case. have applied the real and hypothecary doctrine in limiting the monetary award in favor of the
claimants. The trial court denied Aboitiz’s motion for reconsideration.
On 31 March 1995, the Court of Appeals (Ninth Division) affirmed the RTC decision. It
disregarded Aboitiz’s argument that the sinking of the vessel was caused by a force majeure, in Aboitiz elevated the case to the Court of Appeals. While the appeal was pending, this Court
view of this Court’s finding in a related case, Aboitiz Shipping Corporation v. Court of Appeals, promulgated the decision in the 1993 GAFLAC case. The Court of Appeals subsequently
et al. (the 1990 GAFLAC case).4 In said case, this Court affirmed the Court of Appeals’ finding rendered a decision on 30 May 1994, affirming the RTC decision.12
that the sinking of M/V P. Aboitiz was caused by the negligence of its officers and crew. It is
one of the numerous collection suits against Aboitiz, which eventually reached this Court in Aboitiz appealed the Court of Appeals decision to this Court. 13 In a Resolution dated 20
connection with the sinking of M/V P. Aboitiz. September 1995,14 the Court denied the petition for raising factual issues and for failure to
show that the Court of Appeals committed any reversible error. Aboitiz’s motion for
As to the computation of Aboitiz’s liability, the Court of Appeals again based its ruling on the reconsideration was also denied in a Resolution dated 22 November 1995.15
1990 GAFLAC case that Aboitiz’s liability should be based on the declared value of the
The 22 November 1995 Resolution became final and executory. On 26 February 1996, Asia On 7 September 1989, the RTC of Manila, Branch 7, rendered judgment 24 ordering Aboitiz to
Traders and Allied filed a motion for execution before the RTC of Manila, Branch 20. Aboitiz pay Equitable the amount of ₱87,633.81, plus legal interest and attorney’s fees.25 It found that
opposed the motion. On 16 August 1996, the trial court granted the motion and issued a writ Aboitiz was guilty of contributory negligence and, therefore, liable for the loss.
of execution.
In its appeal, docketed as CA-G.R. CV No. 43458, Aboitiz invoked the doctrine of limited liability
Alleging that it had no other speedy, just or adequate remedy to prevent the execution of the and claimed that the typhoon was the proximate cause of the loss. On 27 November 1998, the
judgment, Aboitiz filed with the Court of Appeals a petition for certiorari and prohibition with Court of Appeals rendered a decision, affirming the RTC decision. 26
an urgent prayer for preliminary injunction and/or temporary restraining order docketed as
CA-G.R. SP No. 41696.16 The petition was mainly anchored on this Court’s ruling in the The Court of Appeals (Fifteenth Division) ruled that the loss of the cargoes and the sinking of
1993 GAFLAC case. the vessel were due to its unseaworthiness and the failure of the crew to exercise
extraordinary diligence. Said findings were anchored on the 1990 GAFLAC case and on this
On 8 August 1997, the Court of Appeals (Special Seventeenth Division) rendered the assailed Court’s resolution dated November 13, 1989 in G.R. No. 88159, dismissing Aboitiz’s petition
decision dismissing the petition.17 Based on the trial court’s finding that Aboitiz was actually and affirming the findings of the appellate court on the vessel’s unseaworthiness and the
negligent in ensuring the seaworthiness of M/V P. Aboitiz, the appellate court held that the crew’s negligence.
real and hypothecary doctrine enunciated in the 1993 GAFLAC case may not be applied in the
case. Its motion for reconsideration27 having been denied,28 Aboitiz filed before this Court a petition
for review on certiorari, docketed as G.R. No. 137801,29 raising this sole issue, to wit:
In view of the denial of its motion for reconsideration,18 Aboitiz filed before this Court the
instant petition for review on certiorari docketed as G.R. No. 130752. 19 The petition attributes WHETHER OR NOT THE DOCTRINE OF REAL AND HYPOTHECARY NATURE OF
the following errors to the Court of Appeals: MARITIME LAW (ALSO KNOWN AS THE "LIMITED LIABILITY RULE")
APPLIES.30
THE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT THE
LOWER COURT HAD MADE AN EXPRESS FINDING OF ISSUES
THE ACTUAL NEGLIGENCE OF ABOITIZ IN THE SINKING OF THE M/V P.
ABOITIZ THEREBY DEPRIVING ABOITIZ OF THE BENEFIT OF THE DOCTRINE The principal issue common to all three petitions is whether Aboitiz can avail limited liability on
OF THE REAL AND HYPOTHECARY NATURE OF MARITIME LAW.20 the basis of the real and hypothecary doctrine of maritime law. Corollary to this issue is the
determination of actual negligence on the part of Aboitiz.
THE COURT OF APPEALS ERRED IN NOT GIVING WEIGHT TO
THE GAFLAC CASE DECIDED BY THE HONORABLE COURT WHICH SUPPORTS These consolidated petitions similarly posit that Aboitiz’s liability to respondents should be
THE APPLICABILITY OF THE REAL AND HYPOTHECARY NATURE OF limited to the value of the insurance proceeds of the lost vessel plus pending freightage and
MARITIME LAW IN THE PRESENT CASE.21 not correspond to the full insurable value of the cargoes paid by respondents, based on the
Court’s ruling in the 1993 GAFLAC case.
G.R. No. 137801
Respondents in G.R. No. 121833 counter that the limited liability rule should not be applied
On 27 February 1981, Equitable Insurance Corporation (Equitable) filed an action for damages because there was a finding of negligence in the care of the goods on the part of Aboitiz based
against Aboitiz to recover by way of subrogation the value of the cargoes insured by Equitable on this Court’s Resolution dated 4 December 1995 in G.R. No. 121833, which affirmed the trial
that were lost in the sinking of M/V P. Aboitiz.22 The complaint, which was docketed as Civil court’s finding of negligence on the part of the vessel’s captain. Likewise, respondent in G.R.
Case No. 138395, was later amended to implead Seatrain Pacific Services S.A. and Citadel Lines, No. 137801 relies on the finding of the trial court, as affirmed by the appellate court, that
Inc. as party defendants.23 The complaint against the latter defendants was subsequently Aboitiz was guilty of negligence.
dismissed upon motion in view of the amicable settlement reached by the parties.
Respondents in G.R No. 130752 argue that this Court had already affirmed in toto the
appellate court’s finding that the vessel was not seaworthy and that Aboitiz failed to exercise
extraordinary diligence in the handling of the cargoes. This being the law of the case, Aboitiz
should not be entitled to the limited liability rule as far as this petition is concerned, A careful reading of the decision rendered by the trial court in Civil Case No.
respondents contend. 144425 as well as the entirety of the records in the instant case will show
that there has been no actual finding of negligence on the part of
RULING of the COURT petitioner. x x x

These consolidated petitions are just among the many others elevated to this Court involving The same is true of the decision of this Court in G.R. No. 89757 affirming
Aboitiz’s liability to shippers and insurers as a result of the sinking of its vessel, M/V P. Aboitiz, the decision of the Court of Appeals in CA-G.R. CV No. 10609 since both
on 31 October 1980 in the South China Sea. One of those petitions is the 1993 GAFLAC case, decisions did not make any new and additional finding of fact. Both merely
docketed as G.R. No. 100446.31 affirmed the factual findings of the trial court, adding that the cause of the
sinking of the vessel was because of unseaworthiness due to the failure of
The 1993 GAFLAC case was an offshoot of an earlier final and executory judgment in the the crew and the master to exercise extraordinary diligence. Indeed, there
1990 GAFLAC case, where the General Accident Fire and Life Assurance Corporation, Ltd. appears to have been no evidence presented sufficient to form a
(GAFLAC), as judgment obligee therein, sought the execution of the monetary award against conclusion that petitioner shipowner itself was negligent, and no tribunal,
Aboitiz. The trial court granted GAFLAC’s prayer for execution of the full judgment award. The including this Court, will add or subtract to such evidence to justify a
appellate court dismissed Aboitiz’s petition to nullify the order of execution, prompting Aboitiz conclusion to the contrary.33 (Citations entitled) (Emphasis supplied)
to file a petition with this Court.
The ruling in the 1993 GAFLAC case cited the real and hypothecary doctrine in maritime law
In the 1993 GAFLAC case, Aboitiz argued that the real and hypothecary doctrine warranted the that the shipowner or agent’s liability is merely co-extensive with his interest in the vessel such
immediate stay of execution of judgment to prevent the impairment of the other creditors’ that a total loss thereof results in its extinction. "No vessel, no liability" expresses in a nutshell
shares. Invoking the rule on the law of the case, private respondent therein countered that the the limited liability rule.34
1990 GAFLAC case had already settled the extent of Aboitiz’s liability.
In this jurisdiction, the limited liability rule is embodied in Articles 587, 590 and 837 under Book
Following the doctrine of limited liability, however, the Court declared in the III of the Code of Commerce, thus:
1993 GAFLAC case that claims against Aboitiz arising from the sinking of M/V P. Aboitiz should
be limited only to the extent of the value of the vessel. Thus, the Court held that the execution Art. 587. The ship agent shall also be civilly liable for the indemnities in
of judgments in cases already resolved with finality must be stayed pending the resolution of favor of third persons which may arise from the conduct of the captain in
all the other similar claims arising from the sinking of M/V P. Aboitiz. Considering that the the care of the goods which he loaded on the vessel; but he may exempt
claims against Aboitiz had reached more than 100, the Court found it necessary to collate all himself therefrom by abandoning the vessel with all her equipment and the
these claims before their payment from the insurance proceeds of the vessel and its pending freight it may have earned during the voyage.
freightage. As a result, the Court exhorted the trial courts before whom similar cases remained
pending to proceed with trial and adjudicate these claims so that the pro-rated share of each Art. 590. The co-owners of the vessel shall be civilly liable in the proportion
claim could be determined after all the cases shall have been decided.32 of their interests in the common fund for the results of the acts of the
captain referred to in Art. 587.
In the 1993 GAFLAC case, the Court applied the limited liability rule in favor of Aboitiz based on
the trial court’s finding therein that Aboitiz was not negligent. The Court explained, thus: Each co-owner may exempt himself from this liability by the abandonment,
before a notary, of the part of the vessel belonging to him.
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 Art. 837. The civil liability incurred by shipowners in the case prescribed in
the Limited Liability Rule does not apply is when there is an actual finding this section, shall be understood as limited to the value of the vessel with
of negligence on the part of the vessel owner or agent x x x. The pivotal all its appurtenances and freightage served during the voyage.
question, thus, is whether there is finding of such negligence on the part of
the owner in the instant case. These articles precisely intend to limit the liability of the shipowner or agent to the value of the
vessel, its appurtenances and freightage earned in the voyage, provided that the owner or
agent abandons the vessel.35When the vessel is totally lost in which case there is no vessel to their claims was stayed or set aside or the lower courts awarded damages only to the extent of
abandon, abandonment is not required. Because of such total loss the liability of the the claimants’ proportionate share in the insurance proceeds of the vessel.
shipowner or agent for damages is extinguished.36 However, despite the total loss of the vessel,
its insurance answers for the damages for which a shipowner or agent may be held liable.37 In Monarch Insurance, the Court deemed it fit to settle once and for all this factual issue by
declaring that the sinking of M/V P. Aboitiz was caused by the concurrence of the
Nonetheless, there are exceptional circumstances wherein the ship agent could still be held unseaworthiness of the vessel and the negligence of both Aboitiz and the vessel’s crew and
answerable despite the abandonment of the vessel, as where the loss or injury was due to the master and not because of force majeure. Notwithstanding this finding, the Court did not
fault of the shipowner and the captain. The international rule is to the effect that the right of reverse but reiterated instead the pronouncement in GAFLAC to the effect that the claimants
abandonment of vessels, as a legal limitation of a shipowner’s liability, does not apply to cases be treated as "creditors in an insolvent corporation whose assets are not enough to satisfy the
where the injury or average was occasioned by the shipowner’s own fault.38Likewise, the totality of claims against it."43 The Court explained that the peculiar circumstances warranted
shipowner may be held liable for injuries to passengers notwithstanding the exclusively real that procedural rules of evidence be set aside to prevent frustrating the just claims of
and hypothecary nature of maritime law if fault can be attributed to the shipowner.39 shippers/insurers. Thus, the Court in Monarch Insurance ordered Aboitiz to institute the
necessary limitation and distribution action before the proper RTC and to deposit with the said
As can be gleaned from the foregoing disquisition in the 1993 GAFLAC case, the Court applied court the insurance proceeds of and the freightage earned by the ill-fated ship.
the doctrine of limited liability in view of the absence of an express finding that Aboitiz’s
negligence was the direct cause of the sinking of the vessel. The circumstances in the However, on 02 May 2006, the Court rendered a decision in Aboitiz Shipping Corporation v.
1993 GAFLAC case, however, are not obtaining in the instant petitions. New India Assurance Company, Ltd.44 (New India), reiterating the well-settled principle that the
exception to the limited liability doctrine applies when the damage is due to the fault of the
A perusal of the decisions of the courts below in all three petitions reveals that there is a shipowner or to the concurrent negligence of the shipowner and the captain. Where the
categorical finding of negligence on the part of Aboitiz. For instance, in G.R. No. 121833, the shipowner fails to overcome the presumption of negligence, the doctrine of limited liability
RTC therein expressly stated that the captain of M/V P. Aboitiz was negligent in failing to take a cannot be applied.45 In New India, the Court clarified that the earlier pronouncement
course of action that would prevent the vessel from sailing into the typhoon. In G.R. No. in Monarch Insurance was not an abandonment of the doctrine of limited liability and that the
130752, the RTC concluded that Aboitiz failed to show that it had exercised the required circumstances therein still made the doctrine applicable. 46
extraordinary diligence in steering the vessel before, during and after the storm. In G.R. No.
137801, the RTC categorically stated that the sinking of M/V P. Aboitiz was attributable to the In New India, the Court declared that Aboitiz failed to discharge its burden of showing that it
negligence or fault of Aboitiz. In all instances, the Court of Appeals affirmed the factual findings exercised extraordinary diligence in the transport of the goods it had on board in order to
of the trial courts. invoke the limited liability doctrine. Thus, the Court rejected Aboitiz’s argument that the award
of damages to respondent therein should be limited to its pro rata share in the insurance
The finding of actual fault on the part of Aboitiz is central to the issue of its liability to the proceeds from the sinking of M/V P. Aboitiz.
respondents. Aboitiz’s contention, that with the sinking of M/V P. Aboitiz, its liability to the
cargo shippers and shippers should be limited only to the insurance proceeds of the vessel The instant petitions provide another occasion for the Court to reiterate the well-settled
absent any finding of fault on the part of Aboitiz, is not supported by the record. Thus, Aboitiz doctrine of the real and hypothecary nature of maritime law. As a general rule, a ship owner’s
is not entitled to the limited liability rule and is, therefore, liable for the value of the lost liability is merely co-extensive with his interest in the vessel, except where actual fault is
cargoes as so duly alleged and proven during trial. attributable to the shipowner. Thus, as an exception to the limited

Events have supervened during the pendency of the instant petitions. On two other occasions, liability doctrine, a shipowner or ship agent may be held liable for damages when the sinking of
the Court ruled on separate petitions involving monetary claims against Aboitiz as a result of the vessel is attributable to the actual fault or negligence of the shipowner or its failure to
the 1980 sinking ensure the seaworthiness of the vessel. The instant petitions cannot be spared from the
application of the exception to the doctrine of limited liability in view of the unanimous
of the vessel M/V P. Aboitiz. One of them is the consolidated petitions of Monarch Ins. Co., Inc findings of the courts below that both Aboitiz and the crew failed to ensure the seaworthiness
v. Court of Appeals,40 Allied Guarantee Insurance Company v. Court of Appeals41 and Equitable of the M/V P. Aboitiz.
Insurance Corporation v. Court of Appeals42 (hereafter collectively referred to as Monarch
Insurance) promulgated on 08 June 2000. This time, the petitioners consisted of claimants
against Aboitiz because either the execution of the judgment awarding full indemnification of
WHEREFORE, the petitions in G.R. Nos. 121833, 130752 and 137801 are DENIED. The decisions casing. He was subsequently instructed to blank off the cooling water and maintain reduced
of the Court of Appeals in CA-G.R. SP No. 35975-CV, CA-G.R. SP No. 41696 and CA-G.R. CV No. RPM unless authorized by the owners.3
43458 are hereby AFFIRMED. Costs against petitioner.
On 29 July 1989, while the vessel was en route to Singapore, Captain Tayong reported that the
Captains and Master: Powers and Duties. vessel had stopped in mid-ocean for six (6) hours and forty-five (45) minutes due to a leaking
economizer. He was instructed to shut down the economizer and use the auxiliary boiler
G.R. No. 115286 August 11, 1994 instead.4

INTER-ORIENT MARITIME ENTERPRISES, INC., SEA HORSE SHIP, INC. and TRENDA WORLD On 31 July 1989 at 0607 hrs., the vessel arrived at the port of Singapore.5 The Chief Engineer
SHIPPING (MANILA), INC., petitioners, reminded Captain Tayong that the oxygen and acetylene supplies had not been
vs. delivered.6 Captain Tayong inquired from the ship's agent in Singapore about the supplies. The
NATIONAL LABOR RELATIONS COMMISSION and RIZALINO D. TAYONG, respondents. ship agent stated that these could only be delivered at 0800 hours on August 1, 1989 as the
stores had closed.7
Marilyn Cacho-Naoe for petitioners.
Captain Tayong called the shipowner, Sea Horse Ship Management, Ltd., in London and
Wilfred L. Pascasio for private respondent. informed them that the departure of the vessel for South Africa may be affected because of
the delay in the delivery of the supplies.8

Sea Horse advised Captain Tayong to contact its Technical Director, Mr. Clark, who was in
Tokyo and who could provide a solution for the supply of said oxygen and acetylene.9
FELICIANO, J.:

On the night of 31 July 1989, Mr. Clark received a call from Captain Tayong informing him that
Private respondent Captain Rizalino Tayong, a licensed Master Mariner with experience in
the vessel cannot sail without the oxygen and acetylene for safety reasons due to the problems
commanding ocean-going vessels, was employed on 6 July 1989 by petitioners Trenda World
with the turbo charger and economizer. Mr. Clark responded that by shutting off the water to
Shipping (Manila), Inc. and Sea Horse Ship Management, Inc. through petitioner Inter-Orient
the turbo chargers and using the auxiliary boiler, there should be no further problems.
Maritime Enterprises, Inc. as Master of the vessel M/V Oceanic Mindoro, for a period of one (1)
According to Mr. Clark, Captain Tayong agreed with him that the vessel could sail as scheduled
year, as evidenced by an employment contract. On 15 July 1989, Captain Tayong assumed
on 0100 hours on 1 August 1989 for South Africa.10
command of petitioners' vessel at the port of Hongkong. His instructions were to replenish
bunker and diesel fuel, to sail forthwith to Richard Bay, South Africa, and there to load 120,000
metric tons of coal. According to Captain Tayong, however, he communicated to Sea Horse his reservations
regarding proceeding to South Africa without the requested supplies, 11 and was advised by Sea
Horse to wait for the supplies at 0800 hrs. of 1 August 1989, which Sea Horse had arranged to
On 16 July 1989, while at the Port of Hongkong and in the process of unloading cargo, Captain
be delivered on board the Oceanic Mindoro.12 At 0800 hours on 1 August 1989, the
Tayong received a weather report that a storm code-named "Gordon" would shortly hit
requisitioned supplies were delivered and Captain Tayong immediately sailed for Richard Bay.
Hongkong. Precautionary measures were taken to secure the safety of the vessel, as well as its
crew, considering that the vessel's turbo-charger was leaking and the vessel was fourteen (14)
years old. When the vessel arrived at the port of Richard Bay, South Africa on 16 August 1989, Captain
Tayong was instructed to turn-over his post to the new captain. He was thereafter repatriated
to the Philippines, after serving petitioners for a little more than two weeks. 13 He was not
On 21 July 1989, Captain Tayong followed-up the requisition by the former captain of
informed of the charges against him.14
the Oceanic Mindoro for supplies of oxygen and acetylene, necessary for the welding-repair of
the turbo-charger and the economizer.1 This requisition had been made upon request of the
Chief Engineer of the vessel and had been approved by the shipowner.2 On 5 October 1989, Captain Tayong instituted a complaint for illegal dismissal before the
Philippine Overseas Employment Administration ("POEA"), claiming his unpaid salary for the
unexpired portion of the written employment contract, plus attorney's fees.
On 25 July 1989, the vessel sailed from Hong Kong for Singapore. In the Master's sailing
message, Captain Tayong reported a water leak from M.E. Turbo Charger No. 2 Exhaust gas
Petitioners, in their answer to the complaint, denied that they had illegally dismissed Captain comment on behalf of the NLRC. We consider that the Solicitor General's comment may be
Tayong. Petitioners alleged that he had refused to sail immediately to South Africa to the dispensed with in this case.
prejudice and damage of petitioners. According to petitioners, as a direct result of Captain
Tayong's delay, petitioners' vessel was placed "off-hire" by the charterers for twelve (12) hours. It is well settled in this jurisdiction that confidential and managerial employees cannot be
This meant that the charterers refused to pay the charter hire or compensation corresponding arbitrarily dismissed at any time, and without cause as reasonably established in an
to twelve (12) hours, amounting to US$15,500.00, due to time lost in the voyage. They stated appropriate investigation.15 Such employees, too, are entitled to security of tenure, fair
that they had dismissed private respondent for loss of trust and confidence. standards of employment and the protection of labor laws.

The POEA dismissed Captain Tayong's complaint and held that there was valid cause for his The captain of a vessel is a confidential and managerial employee within the meaning of the
untimely repatriation. The decision of the POEA placed considerable weight on petitioners' above doctrine. A master or captain, for purposes of maritime commerce, is one who has
assertion that all the time lost as a result of the delay was caused by Captain Tayong and that command of a vessel. A captain commonly performs three (3) distinct roles: (1) he is a general
his concern for the oxygen and acetylene was not legitimate as these supplies were not agent of the shipowner; (2) he is also commander and technical director of the vessel; and (3)
necessary or indispensable for running the vessel. The POEA believed that the Captain had he is a representative of the country under whose flag he navigates.16 Of these roles, by far the
unreasonably refused to follow the instructions of petitioners and their representative, despite most important is the role performed by the captain as commander of the vessel; for such role
petitioners' firm assurances that the vessel was seaworthy for the voyage to South Africa. (which, to our mind, is analogous to that of "Chief Executive Officer" [CEO] of a present-day
corporate enterprise) has to do with the operation and preservation of the vessel during its
On appeal, the National Labor Relations Commission ("NLRC") reversed and set aside the voyage and the protection of the passengers (if any) and crew and cargo. In his role as general
decision of the POEA. The NLRC found that Captain Tayong had not been afforded an agent of the shipowner, the captain has authority to sign bills of lading, carry goods aboard and
opportunity to be heard and that no substantial evidence was adduced to establish the basis deal with the freight earned, agree upon rates and decide whether to take cargo. The ship
for petitioners' loss of trust or confidence in the Captain. The NLRC declared that he had only captain, as agent of the shipowner, has legal authority to enter into contracts with respect to
acted in accordance with his duties to maintain the seaworthiness of the vessel and to insure the vessel and the trading of the vessel, subject to applicable limitations established by statute,
the safety of the ship and the crew. The NLRC directed petitioners to pay the Captain (a) his contract or instructions and regulations of the shipowner.17 To the captain is committed the
salary for the unexpired portion of the contract at US$1,900.00 a month, plus one (1) month governance, care and management of the vessel.18 Clearly, the captain is vested with both
leave benefit; and (b) attorney's fees equivalent to ten percent (10%) of the total award due. management and fiduciary functions.

Petitioners, before this Court, claim that the NLRC had acted with grave abuse of discretion. It is plain from the records of the present petition that Captain Tayong was denied any
Petitioners allege that they had adduced sufficient evidence to establish the basis for private opportunity to defend himself. Petitioners curtly dismissed him from his command and
respondent's discharge, contrary to the conclusion reached by the NLRC. Petitioners insist that summarily ordered his repatriation to the Philippines without informing him of the charge or
Captain Tayong, who must protect the interest of petitioners, had caused them unnecessary charges levelled against him, and much less giving him a chance to refute any such charge. In
damage, and that they, as owners of the vessel, cannot be compelled to keep in their employ a fact, it was only on 26 October 1989 that Captain Tayong received a telegram dated 24 October
captain of a vessel in whom they have lost their trust and confidence. Petitioners finally 1989 from Inter-Orient requiring him to explain why he delayed sailing to South Africa.
contend that the award to the Captain of his salary corresponding to the unexpired portion of
the contract and one (1) month leave pay, including attorney's fees, also constituted grave We also find that the principal contention of petitioners against the decision of the NLRC
abuse of discretion. pertains to facts, that is, whether or not there was actual and sufficient basis for the alleged
loss of trust or confidence. We have consistently held that a question of "fact" is, as a general
The petition must fail. rule, the concern solely of an administrative body, so long as there is substantial evidence of
record to sustain its action.
We note preliminarily that petitioners failed to attach a clearly legible, properly certified, true
copy of the decision of the NLRC dated 23 April 1994, in violation of requirement no. 3 of The record requires us to reject petitioners' claim that the NLRC's conclusions of fact were not
Revised Circular No. 1-88. On this ground alone, the petition could have been dismissed. But supported by substantial evidence. Petitioners rely on self-serving affidavits of their own
the Court chose not to do so, in view of the nature of question here raised and instead officers and employees predictably tending to support petitioners' allegation that Captain
required private respondent to file a comment on the petition. Captain Tayong submitted his Tayong had performed acts inimical to petitioners' interests for which, supposedly, he was
comment. The Office of the Solicitor General asked for an extension of thirty (30) days to file its discharged. The official report of Mr. Clark, petitioners' representative, in fact supports the
NLRC's conclusion that private respondent Captain did not arbitrarily and maliciously delay the
voyage to South Africa. There had been, Mr. Clark stated, a disruption in the normal The danger from which the master of the Sambia fled was a real and not merely an imaginary
functioning of the vessel's turbo-charger19 and economizer and that had prevented the full or one as counsel for shipper contends. Seizure at the hands of an "enemy of the King" though
regular operation of the vessel. Thus, Mr. Clark relayed to Captain Tayong instructions to not inevitable, was a possible outcome of a failure to leave the port of Saigon; and we cannot
"maintain reduced RPM" during the voyage to South Africa, instead of waiting in Singapore for say that under the conditions existing at the time when the master elected to flee from that
the supplies that would permit shipboard repair of the malfunctioning machinery and port, there were no grounds for a "reasonable apprehension of danger" from seizure by the
equipment. French authorities, and therefore no necessity for flight.

More importantly, a ship's captain must be accorded a reasonable measure of discretionary The word "necessity" when applied to mercantile affairs, where the judgment must in the
authority to decide what the safety of the ship and of its crew and cargo specifically requires nature of things be exercised, cannot, of course, mean an irresistible compelling power. What is
on a stipulated ocean voyage. The captain is held responsible, and properly so, for such safety. meant by it in such cases is the force of circumstances which determine the course a man
He is right there on the vessel, in command of it and (it must be presumed) knowledgeable as ought to take. Thus, where by the force of circumstances, a man has the duty cast upon him of
to the specific requirements of seaworthiness and the particular risks and perils of the voyage taking some action for another, and under that obligation adopts a course which, to the
he is to embark upon. The applicable principle is that the captain has control of all departments judgment of a wise and prudent man, is apparently the best for the interest of the persons for
of service in the vessel, and reasonable discretion as to its navigation.20 It is the right and duty whom he acts in a given emergency, it may properly be said of the course so taken that it was
of the captain, in the exercise of sound discretion and in good faith, to do all things with in a mercantile sense necessary to take it.25 (Emphasis supplied)
respect to the vessel and its equipment and conduct of the voyage which are reasonably
necessary for the protection and preservation of the interests under his charge, whether those Compagnie de Commerce contended that the shipowner should, at all events, be held
be of the shipowners, charterers, cargo owners or of underwriters. 21 It is a basic principle of responsible for the deterioration in the value of the cargo incident to its long stay on board the
admiralty law that in navigating a merchantman, the master must be left free to exercise his vessel from the date of its arrival in Manila until the cargo was sold. The Supreme Court, in
own best judgment. The requirements of safe navigation compel us to reject any suggestion rejecting this contention also, declared that:
that the judgment and discretion of the captain of a vessel may be confined within a
straitjacket, even in this age of electronic communications.22 Indeed, if the ship captain is But it is clear that the master could not be required to act on the very day of his arrival; or
convinced, as a reasonably prudent and competent mariner acting in good faith that the before he had a reasonable opportunity to ascertain whether he could hope to carry out his
shipowner's or ship agent's instructions (insisted upon by radio or telefax from their offices contract and earn his freight; and that he should not be held responsible for a reasonable delay
thousands of miles away) will result, in the very specific circumstances facing him, in imposing incident to an effort to ascertain the wishes of the freighter, and upon failure to secure prompt
unacceptable risks of loss or serious danger to ship or crew, he cannot casually seek absolution advice, to decide for himself as to the course which he should adopt to secure the interests of
from his responsibility, if a marine casualty occurs, in such instructions.23 the absent owner of the property aboard the vessel.

Compagnie de Commerce v. Hamburg24 is instructive in this connection. There, this Court The master is entitled to delay for such a period as may be reasonable under the circumstances,
recognized the discretionary authority of the master of a vessel and his right to exercise his before deciding on the course he will adopt. He may claim a fair opportunity of carrying out a
best judgment, with respect to navigating the vessel he commands. In Compagnie de contract, and earning the freight, whether by repairing or transhipping. Should the repair of the
Commerce, a charter party was executed between Compagnie de Commerce and the owners of ship be undertaken, it must be proceeded with diligently; and if so done, the freighter will have
the vessel Sambia, under which the former as charterer loaded on board the Sambia, at the no ground of complaint, although the consequent delay be a long one, unless, indeed, the cargo
port of Saigon, certain cargo destined for the Ports of Dunkirk and Hamburg in Europe. is perishable, and likely to be injured by the delay. Where that is the case, it ought to be
The Sambia, flying the German flag, could not, in the judgment of its master, reach its ports of forwarded, or sold, or given up, as the case may be, without waiting for repairs.
destination because war (World War I) had been declared between Germany and France. The
master of the Sambia decided to deviate from the stipulated voyage and sailed instead for the
A shipowner or shipmaster (if communication with the shipowner is impossible), will be
Port of Manila. Compagnie de Commerce sued in the Philippines for damages arising from
allowed a reasonable time in which to decide what course he will adopt in such cases as those
breach of the charter party and unauthorized sale of the cargo. In affirming the decision of the
under discussion; time must be allowed to him to ascertain the facts, and to balance the
trial court dismissing the complaint, our Supreme Court held that the master of
conflicting interests involved, of shipowner, cargo owner, underwriter on ship and freight. But
the Sambia had reasonable grounds to apprehend that the vessel was in danger of seizure or
once the time has elapsed, he is bound to act promptly according as he has elected either to
capture by the French authorities in Saigon and was justified by necessity to elect the course
repair, or abandon the voyage, or tranship. If he delays, and owing to that delay a perishable
which he took — i.e., to flee Saigon for the Port of Manila — with the result that the
cargo suffers damage, the shipowner will be liable for that damage; he cannot escape that
shipowner was relieved from liability for the deviation from the stipulated route and from
obligation by pleading the absence of definite instructions from the owners of the cargo or
liability for damage to the cargo. The Court said:
their underwriters, since he has control of the cargo and is entitled to elect. 26(Emphasis the case at bar, at the cost of loss of Captain Tayong's rights under his contract with petitioners
supplied) and under Philippine law.

The critical question, therefore, is whether or not Captain Tayong had reasonable grounds to ACCORDINGLY, petitioners having failed to show grave abuse of discretion amounting to loss or
believe that the safety of the vessel and the crew under his command or the possibility of excess of jurisdiction on the part of the NLRC in rendering its assailed decision, the Petition
substantial delay at sea required him to wait for the delivery of the supplies needed for the for Certiorari is hereby DISMISSED, for lack of merit. Costs against petitioners.
repair of the turbo-charger and the economizer before embarking on the long voyage from
Singapore to South Africa. SO ORDERED.

In this connection, it is specially relevant to recall that, according to the report of Mr. Robert
Clark, Technical Director of petitioner Sea Horse Ship Management, Inc., the Oceanic
Mindoro had stopped in mid-ocean for six (6) hours and forty-five (45) minutes on its way to
Singapore because of its leaking economizer.27 Equally relevant is the telex dated 2 August
1989 sent by Captain Tayong to Sea Horse after Oceanic Mindoro had left Singapore and was
en route to South Africa. In this telex, Captain Tayong explained his decision to Sea Horse in the
following terms:

I CAPT. R.D. TAYONG RE: UR PROBLEM IN SPORE (SINGAPORE) I EXPLAIN AGN TO YOU THAT
WE ARE INSECURITY/DANGER TO SAIL IN SPORE W/OUT HAVING SUPPLY OF OXY/ACET. PLS
UNDERSTAND HV PLENTY TO BE DONE REPAIR FM MAIN ENGINE LIKE TURBO CHARGER
PIPELINE, ECONOMIZER LEAKAGE N ETC WE COULD NOT FIX IT W/OUT OXY/ACET ONBOARD. I
AND MR. CLARK WE CONTACTED EACH OTHER BY PHONE IN PAPAN N HE ADVSED US TO SAIL
TO RBAY N WILL SUPPLY OXY/ACET UPON ARRIVAL RBAY HE ALSO EXPLAINED TO MY C/E HOW
TO FIND THE REMEDY W/OUT OXY/ACET BUT C/E HE DISAGREED MR. CLARK IDEA, THAT IS
WHY WE URG REQUEST[ED] YR KIND OFFICE TO ARRANGE SUPPLY OXY/ACET BEFORE
SAILING TO AVOID RISK/DANGER OR DELAY AT SEA N WE TOOK PRECAUTION UR TRIP FOR 16
DAYS FM SPORE TO RBAY. PLS. UNDERSTAND UR SITUATION.28 (Emphasis partly in source and
partly supplied)

Under all the circumstances of this case, we, along with the NLRC, are unable to hold that
Captain Tayong's decision (arrived at after consultation with the vessel's Chief Engineer) to
wait seven (7) hours in Singapore for the delivery on board the Oceanic Mindoro of the
requisitioned supplies needed for the welding-repair, on board the ship, of the turbo-charger
and the economizer equipment of the vessel, constituted merely arbitrary, capricious or
grossly insubordinate behavior on his part. In the view of the NLRC, that decision of Captain
Tayong did not constitute a legal basis for the summary dismissal of Captain Tayong and for
termination of his contract with petitioners prior to the expiration of the term thereof. We
cannot hold this conclusion of the NLRC to be a grave abuse of discretion amounting to an
excess or loss of jurisdiction; indeed, we share that conclusion and make it our own.

Clearly, petitioners were angered at Captain Tayong's decision to wait for delivery of the
needed supplies before sailing from Singapore, and may have changed their estimate of their
ability to work with him and of his capabilities as a ship captain. Assuming that to be
petitioners' management prerogative, that prerogative is nevertheless not to be exercised, in