MARITIME LAW

50. ABOITIZ SHIPPING CORPORATION, petitioner,

vs.
GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, LTD., respondent.

insurance proceeds on the vessel that sank.

The basic facts are not disputed.

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. 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 subrogee of several cargo consignees whose
respective cargo sank with the said vessel and for which it has priorly paid.

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. 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 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 said case, plaintiff GAFLAC was allowed to prove, and. was later awarded, its claim.
This decision in favor of GAFLAC was elevated all the way up to this Court in G.R. No. 89757 (Aboitiz
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.

On the other hand, other cases have resulted in findings upholding the conclusion of the BMI that the
vessel was seaworthy at the time of the sinking, and that such sinking was due to force majeure. One such
ruling was likewise elevated to this Court in G.R. No. 100373, Country 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.

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 by the sinking of
the vessel M/V P. ABOITIZ, as based on the real and hypothecary nature of maritime law. This is an
issue which begs to be resolved considering that a number of suits alleged in the petition number about
110 (p. 10 and pp. 175 to 183, Rollo) still pend and whose resolution shall well-nigh result in more
confusion than presently attends the instant case.

In support of the instant petition, the following arguments are submitted by the petitioner:

1. The Limited Liability Rule warrants immediate stay of execution of judgment to

prevent impairment of other creditors' shares;

2. The finding of unseaworthiness of a vessel is not necessarily attributable to the

shipowner; and

1
 3 The principle of "Law of the Case" is not applicable to the present petition. (pp. 2-
26, Rollo.)

On the other hand, private respondent opposes the foregoing contentions, arguing that:

1. There is no limited liability to speak of or applicable real and hypothecary rule under
Article 587, 590, and 837 of the Code of Commerce in the face of the facts found by the
lower court (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

2. Under the doctrine of the Law of the Case, cases involving the same incident, parties
similarly situated and the same issues litigated should be decided in conformity therewith
following the maxim stare decisis et non quieta movere. (pp. 225 to 279, Rollo.)

Before proceeding to the main bone of contention, it is important to determine first whether or not the
Resolution of this Court in G.R. No. 88159, Aboitiz Shipping, Corporation vs. The Honorable Court of
Appeals and Allied Guaranty Insurance Company, Inc., dated November 13, 1989 effectively bars and
precludes the instant petition as argued by respondent GAFLAC.

An examination of the November 13, 1989 Resolution in G.R. No. 88159 (pp. 280 to 282, Rollo) shows
that the same settles two principal matters, first of which is that the doctrine of primary administrative
jurisdiction is not applicable therein; and second is that a limitation of liability in said case would render
inefficacious the extraordinary diligence required by law of common carriers.

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 G.R. No. 88159 is that
which attaches to cargo by virtue of stipulations in the Bill of Lading, popularly known as package
limitation clauses, which in that case was contained in Section 8 of the Bill of Lading and which limited
the carrier's liability to US$500.00 for the cargo whose value was therein sought to be recovered. Said
resolution did not tackle the matter of the Limited Liability Rule arising out of the real and hypothecary
nature of maritime law, which was not raised therein, and which is the principal bone of contention in this
case. While the matters 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
now settled and should no longer be touched, the instant case raises a completely different issue. It
appears, therefore, that the resolution in G.R. 88159 adverted to has no bearing other than factual to the
instant case.

This brings us to the primary question herein which is whether or not respondent court erred in granting
execution of the full judgment award in Civil Case No. 14425 (G.R. No. 89757), thus effectively denying
the application of the limited liability enunciated under the appropriate articles of the Code of Commerce.
The articles may be ancient, but they are timeless and have remained to be good law. Collaterally,
determination of the question of whether execution of judgments which have become final and executory
may be stayed is also an issue.

We shall tackle the latter issue first. This Court has always been consistent in its stand that the very
purpose for its existence is to see to the accomplishment of the ends of justice. Consistent with this view,
a number of decisions have originated herefrom, the tenor of which is that no procedural consideration is
sacrosanct if such shall result in the subverting of substantial justice. The right to an execution after

2
finality of a decision is certainly no exception to this. Thus, in Cabrias v. Adil (135 SCRA 355 [1985]),
this Court ruled that:

. . . It is a truism that every court has the power "to control, in the furtherance of justice,
the conduct of its ministerial officers, and of all other persons in any manner connected
with a case before it, in every manner appertaining thereto. It has also been said that:

. . . every court having jurisdiction to render a particular judgment has

inherent power to enforce it, and to exercise equitable control over such
enforcement. The court has authority to inquire whether its judgment has
been executed, and will remove obstructions to the 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 such orders and such writs as may be necessary to
prevent an improper enforcement of the judgment. If a judgment is
sought to be perverted and made a medium of consummating a wrong the
court on proper application can prevent it. (at p. 359)

and again in the case of Lipana v. Development Bank of Rizal (154 SCRA 257 [1987]), this Court found
that:

The rule that once a decision becomes final and executory, it is the ministerial duty of the
court to order its execution, admits of certain exceptions as in cases of special and
exceptional nature where it becomes the imperative in the higher interest of justice to
direct the suspension of its execution (Vecine v. Geronimo, 59 OG 579); whenever it is
necessary to accomplish the aims of justice (Pascual v Tan, 85 Phil. 164); or when certain
facts and circumstances transpired after the judgment became final which would render
the execution of the judgment unjust (Cabrias v. Adil, 135 SCRA 354). (at p. 201)

We now come to the determination of the principal issue as to whether the Limited Liability Rule arising
out of the real and hypothecary nature of maritime law should apply in this and related cases. We rule in
the affirmative.

In deciding the instant case below, the Court of Appeals took refuge in this Court's decision in G.R. No.
89757 upholding private respondent's claims in that particular case, which the Court of Appeals took to
mean that this Court has "considered, passed upon and resolved Aboitiz's contention that all claims for the
losses should first be determined before GAFLAC's judgment may be satisfied," and that such ruling "in
effect necessarily negated the application of the limited liability principle" (p. 175, Rollo). Such
conclusion is not accurate. The decision in G.R. 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 heretofore were not relevant. We must stress that the matter of the Limited
Liability Rule as discussed was never in issue in all prior cases, including those before the RTCs and the
Court of Appeals. As discussed earlier, the "limited liability" in issue before the trial courts referred to the
package limitation clauses in the bills of lading and not the limited liability doctrine arising from the real
and hypothecary nature of maritime trade. The latter rule was never made a matter of defense in any of
the cases a quo, as properly it could not have been made so since it was not relevant in said cases. The
only time it could come into play is when any of the cases involving the mishap were to be executed, as in
this case. Then, and only then, could the matter have been raised, as it has now been brought before the
Court.

3
The real and hypothecary nature of maritime law simply means that the liability of the carrier in
connection with losses related to maritime contracts is confined to the vessel, which is hypothecated for
such obligations or which stands as the guaranty for their settlement. It has its origin by reason of the
conditions and risks attending maritime trade in its earliest years when such trade was replete with
innumerable and unknown hazards since vessels had to go through largely uncharted waters to ply their
trade. It was designed to offset such adverse conditions and to encourage people and entities to venture
into maritime commerce despite the risks and the prohibitive cost of shipbuilding. Thus, the liability of
the vessel owner and agent arising from the operation of such vessel were confined to the vessel itself, its
equipment, freight, and insurance, if any, which limitation served to induce capitalists into effectively
wagering their resources against the consideration of the large profits attainable in the trade.

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 therein, the limitation has not
only persisted, but is even practically absolute in well-developed maritime countries such as the United
States and England where it covers almost all maritime casualties. Philippine maritime law is of Anglo-
American extraction, and is governed by 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 limited liability of vessel owners and/or agents;

Sec. 183. The liability of the owner of any vessel, whether American or foreign, for any
embezzlement, loss, or destruction by any person of any person or any property, goods,
or 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 exceed the amount or value of the interest of such owner in such
vessel, and her freight then pending. (Section 183 of the US Federal Limitation of
Liability Act).

—and—

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 occurrence giving rise to the claim resulted from the actual fault or privity of
the owner;

(a) loss of life of, or personal injury to, any person being carried in the ship, and loss of,
or damage to, any property on board the ship.

(b) loss of life of, or personal injury to, any other person, whether on land or on water,
loss of or damage to any other property or infringement of any rights caused by the act,
neglect or default the owner is responsible for, or any person not on board the ship for
whose act, neglect or default the owner is responsible: Provided, however, that in regard
to the act, 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 management of the ship or in the loading, carriage or discharge of its cargo or in the
embarkation, carriage or disembarkation of its passengers.

(c) any obligation or liability imposed by any law relating to the removal of wreck and
arising from or in connection with the raising, removal or destruction of any ship which is
sunk, stranded or abandoned (including anything which may be on board such ship) and
any obligation or liability arising out of damage caused to harbor works, basins and

4
 navigable waterways. (Section 1, Article I of the Brussels International Convention of
1957)

In this jurisdiction, on the other hand, its application has been well-nigh constricted by the very statute
from which it originates. The Limited Liability Rule in the Philippines is taken up in Book III of the Code
of Commerce, particularly in Articles 587, 590, and 837, hereunder quoted in toto:

Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third
persons which may arise from the conduct of the captain in the care of the goods which
he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel
with all her equipment and the freight it may have earned during the voyage.

Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their
interests in the common fund for the results of the acts of the captain referred to in Art.
587.

Each co-owner may exempt himself from this liability by the abandonment, before a
notary, of the part of the vessel belonging to him.

Art. 837. The civil liability incurred by shipowners in the case prescribed in this section
(on collisions), shall be understood as limited to the value of the vessel with all its
appurtenances and freightage served during the voyage. (Emphasis supplied)

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).

In view of the foregoing, this Court shall not take the application of such limited liability rule, 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 apparently much in existence
and highly regarded.

We now come to its applicability in the instant case. In the few instances when the matter was considered
by this Court, we have been consistent in this jurisdiction in holding that the only time the Limited
Liability Rule does not apply is when there is an actual finding of negligence on the part of the vessel
owner or agent (Yango v. Laserna, 73 Phil. 330 [1941]; Manila Steamship Co., Inc. v. Abdulhanan, 101
Phil. 32 [1957]; Heirs of Amparo delos Santos v. Court of Appeals, 186 SCRA 649 [1967]). The pivotal
question, thus, is whether there is a finding of such negligence on the part of the owner in the instant case.

A careful reading of the decision rendered by the trial court in Civil Case No. 144425 (pp. 27-33, Rollo)
as well as the entirety of the records in the instant case will show that there has been no actual finding of
negligence on the part of petitioner. In its Decision, the trial court merely held that:

. . . Considering the foregoing reasons, the Court holds that the vessel M/V "Aboitiz" and
its cargo were not lost due to fortuitous event or force majeure." (p. 32, Rollo)

The same is true of the decision of this Court in G.R. No. 89757 (pp. 71-86, Rollo) affirming the 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 of the trial court, adding
that the cause of the sinking of the vessel was because of unseaworthiness due to the failure of the crew
and the master to exercise extraordinary diligence. Indeed, there appears to have been no evidence

5
presented sufficient to form a conclusion that petitioner shipowner itself was negligent, and no tribunal,
including this Court will add or subtract to such evidence to justify a conclusion to the contrary.

The qualified nature of the meaning of "unseaworthiness," under the peculiar circumstances of this case is
underscored by the fact that in the Country Banker's case, supra, arising from the same sinking, the Court
sustained the decision of the Court of Appeals that the sinking of the M/V P. Aboitiz was due to force
majeure.

On this point, it should be stressed that unseaworthiness is not a fault that can be laid squarely on
petitioner's lap, absent a factual basis for such a conclusion. The unseaworthiness found in 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 provides that among the inherent duties
of a captain is to examine a vessel before sailing and to comply with the laws of navigation. Such a
construction would also put matters to rest relative to the decision of the Board of Marine Inquiry. While
the conclusion therein exonerating the captain and crew of the vessel was not sustained for lack of basis,
the finding therein contained to the effect that the vessel was seaworthy deserves merit. Despite
appearances, it is not totally incompatible with the findings of the trial court and the Court of Appeals,
whose finding of "unseaworthiness" clearly did not pertain to the structural condition of the vessel which
is the basis of the BMI's findings, but to the condition it was in at the time of the sinking, which condition
was a result of the acts of the captain and the crew.

The rights of a vessel owner or agent under the Limited Liability Rule are akin to those of the rights of
shareholders to limited liability under our corporation law. Both are privileges granted by statute, and
while not absolute, must be swept aside only in the established existence of the most compelling of
reasons. In the absence of such reasons, this Court chooses to exercise prudence and shall not sweep such
rights aside on mere whim or surmise, for even in the existence of cause to do so, such incursion is
definitely punitive in nature and must never be taken lightly.

More to the point, the rights of parties to claim against an agent or owner of a vessel may be compared to
those of creditors against an insolvent corporation whose assets are not enough to satisfy the totality of
claims as against it. While each individual creditor may, and in fact shall, be allowed to prove the actual
amounts of their respective claims, this does not mean that they shall all be allowed to recover fully thus
favoring those who filed and proved their claims sooner to the prejudice of those who come later. In such
an instance, such creditors too would 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. Development Bank of Rizal earlier cited, We held that:

In the instant case, the stay of execution of judgment is warranted by the fact that the
respondent bank was placed under receivership. To execute the judgment would unduly
deplete the assets of respondent bank to the obvious prejudice of other depositors and
creditors, since, as aptly stated in Central Bank v. Morfe (63 SCRA 114), after the
Monetary Board has declared that a bank is insolvent and has ordered it to cease
operations, the Board 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 otherwise. (at p. 261).

In both insolvency of a corporation and the sinking of a vessel, the claimants or creditors are limited in
their recovery to the remaining value of accessible assets. In the case of an insolvent corporation, these
are the residual assets of the corporation left over from its operations. In the case of a lost vessel, these are
the insurance proceeds and pending freightage for the particular voyage.

6
In the instant case, there is, therefore, a need to collate all claims preparatory to their satisfaction from the
insurance proceeds on the vessel M/V P. Aboitiz and its pending freightage at the time of its loss. No
claimant can be given precedence over the others by the simple expedience of having filed or completed
its action earlier than the rest. Thus, execution of judgment in earlier completed cases, even those already
final and executory, must be stayed pending completion of all cases occasioned by the subject sinking.
Then and only then can all such claims be simultaneously settled, either completely or pro-rata should the
insurance proceeds and freightage be not enough to satisfy all claims.

Finally, the Court notes that petitioner has provided this Court with a list of all pending cases (pp. 175 to
183, Rollo), together with the corresponding claims and the pro-rated share of each. We likewise note that
some of these cases are still with the Court of Appeals, and some still with the trial courts and which
probably are still undergoing trial. It would not, therefore, be 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.

51. CHUA YEK HONG, petitioner,

vs.
INTERMEDIATE APPELLATE COURT, MARIANO GUNO, and DOMINADOR
OLIT, respondents.

Francisco D. Estrada for petitioner.

Purita Hontanosas-Cortes for private respondents.

MELENCIO-HERRERA, J.:

In this Petition for Review on certiorari petitioner seeks to set aside the Decision of respondent Appellate
Court in AC G.R. No. 01375 entitled "Chua Yek Hong vs. Mariano Guno, et al.," promulgated on 3 April
1986, reversing the Trial Court and relieving private respondents (defendants below) of any liability for
damages for loss of cargo.

7
The basic facts are not disputed:

Petitioner is a duly licensed copra dealer based at Puerta Galera, Oriental Mindoro, while private
respondents are the owners of the vessel, "M/V Luzviminda I," a common carrier engaged in coastwise
trade from the different ports of Oriental Mindoro to the Port of Manila.

In October 1977, petitioner loaded 1,000 sacks of copra, valued at P101,227.40, on board the vessel "M/V
Luzviminda I" for shipment from Puerta Galera, Oriental Mindoro, to Manila. Said cargo, however, did
not reach Manila because somewhere between Cape Santiago and Calatagan, Batangas, the vessel
capsized and sank with all its cargo.

On 30 March 1979, petitioner instituted before the then Court of First Instance of Oriental Mindoro, a
Complaint for damages based on breach of contract of carriage against private respondents (Civil Case
No. R-3205).

In their Answer, private respondents averred that even assuming that the alleged cargo was truly loaded
aboard their vessel, their liability had been extinguished by reason of the total loss of said vessel.

On 17 May 1983, the Trial Court rendered its Decision, the dispositive portion of which follows:

WHEREFORE, in view of the foregoing considerations, the court believes and so holds
that the preponderance of evidence militates in favor of the plaintiff and against the
defendants by ordering the latter, jointly and severally, to pay the plaintiff the sum of
P101,227.40 representing the value of the cargo belonging to the plaintiff which was lost
while in the custody of the defendants; P65,550.00 representing miscellaneous expenses
of plaintiff on said lost cargo; attorney's fees in the amount of P5,000.00, and to pay the
costs of suit. (p. 30, Rollo).

On appeal, respondent Appellate Court ruled to the contrary when it applied Article 587 of the Code of
Commerce and the doctrine in Yangco vs. Lasema (73 Phil. 330 [1941]) and held that private
respondents' liability, as ship owners, for the loss of the cargo is merely co-extensive with their interest in
the vessel such that a total loss thereof results in its extinction. The decretal portion of that
Decision 1 reads:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the decision appealed from is

hereby REVERSED, and another one entered dismissing the complaint against
defendants-appellants and absolving them from any and all liabilities arising from the
loss of 1,000 sacks of copra belonging to plaintiff-appellee. Costs against appellee.
(p. 19, Rollo).

Unsuccessful in his Motion for Reconsideration of the aforesaid Decision, petitioner has availed of the
present recourse.

The basic issue for resolution is whether or not respondent Appellate Court erred in applying the doctrine
of limited liability under Article 587 of the Code of Commerce as expounded in Yangco vs.
Laserna, supra.

Article 587 of the Code of Commerce provides:

8
 Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third
persons which may arise from the conduct of the captain in the care of the goods which
he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel
with all the equipments and the freight it may have earned during the voyage.

The term "ship agent" as used in the foregoing provision is broad enough to include the ship owner
(Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256 [1921]). Pursuant to said provision, therefore, both the
ship owner and ship agent are civilly and directly liable for the indemnities in favor of third persons,
which may arise from the conduct of the captain in the care of goods transported, as well as for the safety
of passengers transported Yangco vs. Laserna, supra; Manila Steamship Co., Inc. vs. Abdulhaman et al.,
100 Phil. 32 [1956]).

However, under the same Article, this direct liability is moderated and limited by the ship agent's or ship
owner's right of abandonment of the vessel and earned freight. This expresses the universal principle of
limited liability under maritime law. The most fundamental effect of abandonment is the cessation of the
responsibility of the ship agent/owner (Switzerland General Insurance Co., Ltd. vs. Ramirez, L-48264,
February 21, 1980, 96 SCRA 297). It has thus been held that by necessary implication, the ship agent's or
ship owner's liability is confined to that which he is entitled as of right to abandon the vessel with all her
equipment and the freight it may have earned during the voyage," and "to the insurance thereof if any"
(Yangco vs. Lasema, supra). In other words, the ship owner's or agent's liability is merely co-extensive
with his interest in the vessel such that a total loss thereof results in its extinction. "No vessel, no liability"
expresses in a nutshell the limited liability rule. The total destruction of the vessel extinguishes maritime
liens as there is no longer any res to which it can attach (Govt. Insular Maritime Co. vs. The Insular
Maritime, 45 Phil. 805, 807 [1924]).

As this Court held:

If the ship owner or agent may in any way be held civilly liable at all for injury to or
death of passengers arising from the negligence of the captain in cases of collisions or
shipwrecks, his liability is merely co-extensive with his interest in the vessel such that a
total loss thereof results in its extinction. (Yangco vs. Laserna, et al., supra).

The rationale therefor has been explained as follows:

The real and hypothecary nature of the liability of the ship owner or agent embodied in
the provisions of the Maritime Law, Book III, Code of Commerce, had its origin in the
prevailing conditions of the maritime trade and sea voyages during the medieval ages,
attended by innumerable hazards and perils. To offset against these adverse conditions
and to encourage ship building and maritime commerce, it was deemed necessary to
confine the liability of the owner or agent arising from the operation of a ship to the
vessel, equipment, and freight, or insurance, if any, so that if the ship owner or agent
abandoned the ship, equipment, and freight, his liability was extinguished. (Abueg vs.
San Diego, 77 Phil. 730 [1946])

—0—

Without the principle of limited liability, a ship owner and investor in maritime
commerce would run the risk of being ruined by the bad faith or negligence of his
captain, and the apprehension of this would be fatal to the interest of navigation." Yangco
vs. Lasema, supra).

9
—0—

As evidence of this real nature of the maritime law we have (1) the limitation of the
liability of the agents to the actual value of the vessel and the freight money, and (2) the
right to retain the cargo and the embargo and detention of the vessel even in cases where
the ordinary civil law would not allow more than a personal action against the debtor or
person liable. It will be observed that these rights are correlative, and naturally so,
because if the agent can exempt himself from liability by abandoning the vessel and
freight money, thus avoiding the possibility of risking his whole fortune in the business, it
is also just that his maritime creditor may for any reason attach the vessel itself to secure
his claim without waiting for a settlement of his rights by a final judgment, even to the
prejudice of a third person. (Phil. Shipping Co. vs. Vergara, 6 Phil. 284 [1906]).

The limited liability rule, however, is not without exceptions, namely: (1) where the injury or death to a
passenger is due either to the fault of the ship owner, or to the concurring negligence of the ship owner
and the captain (Manila Steamship Co., Inc. vs. Abdulhaman supra); (2) where the vessel is insured; and
(3) in workmen's compensation claims Abueg vs. San Diego, supra). In this case, there is nothing in the
records to show that the loss of the cargo was due to the fault of the private respondent as shipowners, or
to their concurrent negligence with the captain of the vessel.

What about the provisions of the Civil Code on common carriers? Considering the "real and hypothecary
nature" of liability under maritime law, these provisions would not have any effect on the principle of
limited liability for ship owners or ship agents. As was expounded by this Court:

In arriving at this conclusion, the fact is not ignored that the illfated, S.S. Negros, as a
vessel engaged in interisland trade, is a common carrier, and that the relationship between
the petitioner and the passengers who died in the mishap rests on a contract of carriage.
But assuming that petitioner is liable for a breach of contract of carriage, the exclusively
'real and hypothecary nature of maritime law operates to limit such liability to the value
of the vessel, or to the insurance thereon, if any. In the instant case it does not appear that
the vessel was insured. (Yangco vs. Laserila, et al., supra).

Moreover, Article 1766 of the Civil Code provides:

Art. 1766. In all matters not regulated by this Code, the rights and obligations of common
carriers shall be governed by the Code of Commerce and by special laws.

In other words, the primary law is the Civil Code (Arts. 17321766) and in default thereof, the Code of
Commerce and other special laws are applied. Since the Civil Code contains no provisions regulating
liability of ship owners or agents in the event of total loss or destruction of the vessel, it is the provisions
of the Code of Commerce, more particularly Article 587, that govern in this case.

In sum, it will have to be held that since the ship agent's or ship owner's liability is merely co-extensive
with his interest in the vessel such that a total loss thereof results in its extinction (Yangco vs.
Laserna, supra), and none of the exceptions to the rule on limited liability being present, the liability of
private respondents for the loss of the cargo of copra must be deemed to have been extinguished. There is
no showing that the vessel was insured in this case.

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

10
52. MONARCH INSURANCE CO., INC., TABACALERA INSURANCE CO., INC and Hon.
Judge AMANTE PURISIMA, petitioners, vs. COURT OF APPEALS and ABOITIZ SHIPPING
CORPORATION, respondents.

[G.R. No. 94867. June 8, 2000]

ALLIED GUARANTEE INSURANCE COMPANY, petitioner, vs. COURT OF APPEALS,

Presiding Judge, RTC Manila, Br. 24 and ABOITIZ SHIPPING CORPORATION, respondents.

[G.R. No. 95578. June 8, 2000]

EQUITABLE INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS, Former First

Division Composed of Hon. Justices RODOLFO NOCON, PEDRO RAMIREZ, and JESUS
ELBINIAS and ABOITIZ SHIPPING CORPORATION, respondents.

DECISION

DE LEON, JR., J.:

Before us are three consolidated petitions. G.R. No. 92735 is a petition for review filed under Rule 45 of
the Rules of Court assailing the decision of the Court of Appeals dated March 29, 1990 in CA-G.R. SP.
Case No. 17427 which set aside the writ of execution issued by the lower court for the full
indemnification of the claims of the petitioners, Monarch Insurance Company (hereafter "Monarch") and
Tabacalera Insurance Company, Incorporated (hereafter "Tabacalera") against private respondent, Aboitiz
Shipping Corporation (hereafter "Aboitiz") on the ground that the latter is entitled to the benefit of the
limited liability rule in maritime law; G.R. No. 94867 is a petition for certiorari under Rule 65 of the
Rules of Court to annul and set aside the decision of the Court of Appeals dated August 15, 1990 in CA-
G.R. SP No. 20844 which ordered the lower court to stay the execution of the judgment in favor of the
petitioner, Allied Guarantee Insurance Company (hereafter "Allied") against Aboitiz insofar as it impairs
the rights of the other claimants to their pro-rata share in the insurance proceeds from the sinking of the
M/V P. Aboitiz, in accordance with the rule on limited liability; and G.R. No. 95578 is a petition for
review under Rule 45 of the Rules of Court seeking a reversal of the decision of the Court of Appeals
dated August 24, 1990 and its resolution dated October 4, 1990 in C.A. G.R. Civil Case No. 15071 which
modified the judgment of the lower court by applying the hypothecary rule on limited liability to limit the
lower courts award of actual damages to petitioner Equitable Insurance Corporation (hereafter
"Equitable") to its pro-rata share in the insurance proceeds from the sinking of the M/V P. Aboitiz.

All cases arose from the loss of cargoes of various shippers when the M/V P. Aboitiz, a common carrier
owned and operated by Aboitiz, sank on her voyage from Hong Kong to Manila on October 31, 1980.
Seeking indemnification for the loss of their cargoes, the shippers, their successors-in-interest, and the
cargo insurers such as the instant petitioners filed separate suits against Aboitiz before the Regional Trial
Courts. The claims numbered one hundred and ten (110) for the total amount of P41,230,115.00 which is
almost thrice the amount of insurance proceeds of P14,500,000.00 plus earned freight of P500,000.00
according to Aboitiz. To this day, some of these claims, including those of herein petitioners, have not yet
been settled.

G.R. No. 92735.

Monarch and Tabacalera are insurance carriers of lost cargoes. They indemnified the shippers and were
consequently subrogated to their rights, interests and actions against Aboitiz, the cargo carrier.[1] Because

11
Aboitiz refused to compensate Monarch, it filed two complaints against Aboitiz, docketed as Civil Cases
Nos. 82-2767 and 82-2770. For its part, Tabacalera also filed two complaints against the same defendant,
docketed as Civil Cases Nos. 82-2768 and 82-2769. As these four (4) cases had common causes of action,
they were consolidated and jointly tried.[2]

In Civil Case No. 82-2767 where Monarch also named Malaysian International Shipping Corporation and
Litonjua Merchant Shipping Agency as Aboitizs co-defendants, Monarch sought recovery of P29,719.88
representing the value of three (3) pallets of glass tubing that sank with the M/V P. Aboitiz, plus attorneys
fees of not less than P5,000.00, litigation expenses, interest at the legal rate on all these amounts, and cost
of suit.[3] Civil Case No. 82-2770 was a complaint filed by Monarch against Aboitiz and co-defendants
Compagnie Maritime des Chargeurs Reunis and F.E. Zuellig (M), Inc. for the recovery of P39,579.66
representing the value of one case of motor vehicle parts which was lost when the M/V P. Aboitiz sank on
her way to Manila, plus attorneys fees of not less than P10, 000.00 and cost of suit.[4]

Tabacalera sought against Franco Belgian Services, F. E. Zuellig and Aboitiz in Civil Case No. 82-2768
the recovery of P284,218.00 corresponding to the value of nine (9) cases of Renault spare
parts, P213,207.00 for the value of twenty-five (25) cases of door closers and P42,254.00 representing the
value of eighteen (18) cases of plastic spangle, plus attorneys fees of not less than P50,000.00 and cost of
suit.[5] In Civil Case No. 82-2769, Tabacalera claimed from Hong Kong Island Shipping Co., Ltd., Citadel
Lines and Aboitiz indemnification in the amount of P75,058.00 for the value of four (4) cartons of motor
vehicle parts that foundered with the M/V P. Aboitiz, plus attorneys fees of not less than P20,000.00 and
cost of suit.[6]

In its answer with counterclaim, Aboitiz rejected responsibility for the claims on the ground that the
sinking of its cargo vessel was due to force majeure or an act of God.[7] Aboitiz was subsequently
declared as in default for its failure to appear during the pre-trial. Its counsel filed a motion to set aside
the order of default with notice of his withdrawal as such counsel. Before the motion could be acted upon,
Judge Bienvenido Ejercito, the presiding judge of the trial court, was promoted to the then Intermediate
Appellate Court. The cases were thus re-raffled to Branch VII of the RTC of Manila presided by Judge
Amante P. Purisima, the co-petitioner in G.R. No. 92735. Without resolving the pending motion to set
aside the order of default, the trial court set the cases for hearing. However, since Aboitiz had repeatedly
failed to appear in court, the trial court denied the said motion and allowed Monarch and Tabacalera to
present evidence ex-parte.[8]

Monarch and Tabacalera proffered in evidence the survey of Perfect Lambert, a surveyor commissioned
to investigate the possible cause of the sinking of the cargo vessel. The survey established that on her
voyage to Manila from Hong Kong, the vessel did not encounter weather so inclement that Aboitiz would
be exculpated from liability for losses. In his note of protest, the master of M/V P. Aboitiz described the
wind force encountered by the vessel as from ten (10) to fifteen (15) knots, a weather condition classified
as typical and moderate in the South China Sea at that particular time of the year. The survey added that
the seaworthiness of the vessel was in question especially because the breaches of the hull and the serious
flooding of two (2) cargo holds occurred simultaneously in "seasonal weather."[9]

In due course, the trial court rendered judgment against Aboitiz but the complaint against all the other
defendants was dismissed. Aboitiz was held liable for the following: (a) in Civil Case No. 82-
2767, P29,719.88 with legal interest from the filing of the complaint until fully paid plus attorneys fees
of P30,000.00 and cost of suit; (b) in Civil Case No. 82-2768, P539,679.00 with legal interest of 12% per
annum from date of filing of the complaint until fully paid, plus attorneys fees of P30,000.00, litigation
expenses and cost of suit; (c) in Civil Case No. 82-2769, P75,058.00 with legal interest of 12% per annum
from date of filing of the complaint until fully paid, plus P5,000.00 attorneys fees, litigation expenses and

12
cost of suit, and (d) in Civil Case No. 82-2770, P39,579.66 with legal interest of 12% per annum from
date of filing of the complaint until fully paid, plus attorneys fees of P5,000.00, litigation expenses and
cost of suit.

Aboitiz filed a motion for reconsideration of the decision and/or for new trial to lift the order of default.
The court denied the motion on August 27, 1986.[10] Aboitiz appealed to the Court of Appeals but the
appeal was dismissed for its failure to file appellants brief. It subsequently filed an urgent motion for
reconsideration of the dismissal with prayer for the admission of its attached appellants brief. The
appellate court denied that motion for lack of merit in a Resolution dated July 8, 1988.[11]

Aboitiz thus filed a petition for review before this Court. Docketed as G.R. No. 84158, the petition was
denied in the Resolution of October 10, 1988 for being filed out of time. Aboitizs motion for the
reconsideration of said Resolution was similarly denied.[12] Entry of judgment was made in the case.[13]

Consequently, Monarch and Tabacalera moved for execution of judgment. The trial court granted the
motion on April 4, 1989[14] and issued separate writs of execution. However, on April 12, 1989, Aboitiz,
invoking the real and hypothecary nature of liability in maritime law, filed an urgent motion to quash the
writs of execution.[15] According to Aboitiz, since its liability is limited to the value of the vessel which
was insufficient to satisfy the aggregate claims of all 110 claimants, to indemnify Monarch and
Tabacalera ahead of the other claimants would be prejudicial to the latter. Monarch and Tabacalera
opposed the motion to quash.[16]

On April 17, 1989, before the motion to quash could be heard, the sheriff levied upon five (5) heavy
equipment owned by Aboitiz for public auction sale. At said sale, Monarch was the highest bidder for one
(1) unit FL-151 Fork Lift (big) and one (1) unit FL-25 Fork Lift (small). Tabacalera was also the highest
bidder for one (1) unit TCH TL-251 Hyster Container Lifter, one (1) unit Hyster Top Lifter (out of order),
and one (1) unit ER-353 Crane. The corresponding certificates of sale[17] were issued to Monarch and
Tabacalera.

On April 18, 1989, the day before the hearing of the motion to quash, Aboitiz filed a supplement to its
motion, to add the fact that an auction sale had taken place. On April 19, 1989, Judge Purisima issued an
order denying the motion to quash but freezing execution proceedings for ten (10) days to give Aboitiz
time to secure a restraining order from a higher court.[18]Execution was scheduled to resume to fully
satisfy the judgment when the grace period shall have lapsed without such restraining order having been
obtained by Aboitiz.

Aboitiz filed with the Court of Appeals a petition for certiorari and prohibition with prayer for
preliminary injunction and/or temporary restraining order under CA-G.R. No. SP-17427.[19] On March 29,
1990, the appellate court rendered a Decision the dispositive portion of which reads:

"WHEREFORE, the writ of certiorari is hereby granted, annulling the subject writs of
execution, auction sale, certificates of sale, and the assailed orders of respondent Judge
dated April 4 and April 19, 1989 insofar as the money value of those properties of
Aboitiz, levied on execution and sold at public auction, has exceeded the pro-rata shares
of Monarch and Tabacalera in the insurance proceeds of Aboitiz in relation to the pro-rata
shares of the 106 other claimants.

"The writ of prohibition is also granted to enjoin respondent Judge, Monarch and
Tabacalera from proceeding further with execution of the judgments in question insofar
as the execution would satisfy the claims of Monarch and Tabacalera in excess of their

13
 pro-rata shares and in effect reduce the balance of the proceeds for distribution to the
other claimants to their prejudice.

"The question of whether or how much of the claims of Monarch and Tabacalera against
the insurance proceeds has already been settled through the writ of execution and auction
sale in question, being factual issues, shall be threshed out before respondent Judge.

"The writ of preliminary injunction issued in favor of Aboitiz, having served its purpose,
is hereby lifted. No pronouncement as to costs.

"SO ORDERED."[20]

Hence, the instant petition for review on certiorari where petitioners Monarch, Tabacalera and Judge
Purisima raise the following assignment of errors:

1.....The appellate court grievously erred in re-opening the Purisima decisions, already
final and executory, on the alleged ground that the issue of real and hypothecary liability
had not been previously resolved by Purisima, the appellate court, and this Hon. Supreme
Court;

2.....The appellate court erred when it resolved that Aboitiz is entitled to the limited real
and hypothecary liability of a ship owner, considering the facts on record and the law on
the matter.

3.....The appellate court erred when it concluded that Aboitiz does not have to present
evidence to prove its entitlement to the limited real and hypothecary liability.

4.....The appellate court erred in ignoring the case of "Aboitiz Shipping Corporation v.
CA and Allied Guaranty Insurance Co., Inc." (G.R. No. 88159), decided by this
Honorable Supreme Court as early as November 13, 1989, considering that said case,
now factual and executory, is in pari materia with the instant case.

5.....The appellate court erred in not concluding that irrespective of whether Aboitiz is
entitled to limited hypothecary liability or not, there are enough funds to satisfy all the
claimants.

6.....The appellate court erred when it concluded that Aboitiz had made an
"abandonment" as envisioned by Art. 587 of the Code of Commerce.

7.....The appellate court erred when it concluded that other claimants would suffer if
Tabacalera and Monarch would be fully paid.

8.....The appellate court erred in concluding that certiorari was the proper remedy for
Aboitiz.[21]

G.R. NOS. 94867 & 95578

Allied as insurer-subrogee of consignee Peak Plastic and Metal Products Limited, filed a complaint
against Aboitiz for the recovery of P278,536.50 representing the value of 676 bags of PVC compound

14
and 10 bags of ABS plastic lost on board the M/V P. Aboitiz, with legal interest from the date of filing of
the complaint, plus attorneys fees, exemplary damages and costs.[22] Docketed as Civil Case No. 138643,
the case was heard before the Regional Trial Court of Manila, Branch XXIV, presided by Judge Sergio D.
Mabunay.

On the other hand, Equitable, as insurer-subrogee of consignee-assured Axel Manufacturing Corporation,

filed an amended complaint against Franco Belgian Services, F.E. Zuellig, Inc. and Aboitiz for the
recovery of P194,794.85 representing the value of 76 drums of synthetic organic tanning substances and
1,000 kilograms of optical bleaching agents which were also lost on board the M/V P. Aboitiz, with legal
interest from the date of filing of the complaint, plus 25% attorneys fees, exemplary damages, litigation
expenses and costs of suit.[23]Docketed as Civil Case No. 138396, the complaint was assigned to the
Regional Trial Court of Manila, Branch VIII.

In its answer with counterclaim in the two cases, Aboitiz disclaimed responsibility for the amounts being
recovered, alleging that the loss was due to a fortuitous event or an act of God. It prayed for the dismissal
of the cases and the payment of attorneys fees, litigation expenses plus costs of suit. It similarly relied on
the defenses of force mejeure, seaworthiness of the vessel and exercise of due diligence in the carriage of
goods as regards the cross-claim of its co-defendants.[24]

In support of its position, Aboitiz presented the testimonies of Capt. Gerry N. Racines, master mariner of
the M/V P. Aboitiz, and Justo C. Iglesias, a meteorologist of the Philippine Atmospheric Geophysical and
Astronomical Services Administration (PAGASA). The gist of the testimony of Capt. Racines in the two
cases follows:

The M/V P. Aboitiz left Hong Kong for Manila at about 7:30 in the evening of October 29, 1980 after
securing a departure clearance from the Hong Kong Port Authority. The departure was delayed for two
hours because he (Capt. Racines) was observing the direction of the storm that crossed the Bicol Region.
He proceeded with the voyage only after being informed that the storm had abated. At about 8:00 oclock
in the morning of October 30, 1980, after more than twelve (12) hours of navigation, the vessel suddenly
encountered rough seas with waves about fifteen to twenty-five feet high. He ordered his chief engineer to
check the cargo holds. The latter found that sea water had entered cargo hold Nos. 1 and 2. He
immediately directed that water be pumped out by means of the vessels bilge pump, a device capable of
ejecting 180 gallons of water per minute. They were initially successful in pumping out the water.

At 6:00 a.m. of October 31, 1980, however, Capt. Racines received a report from his chief engineer that
the water level in the cargo holds was rapidly rising. He altered the vessels course and veered towards the
northern tip of Luzon to prevent the vessel from being continuously pummeled by the waves. Despite
diligent efforts of the officers and crew, however, the vessel, which was approximately 250 miles away
from the eye of the storm, began to list on starboard side at 27 degrees. Capt. Racines and his crew were
not able to make as much headway as they wanted because by 12:00 noon of the same day, the cargo
holds were already flooded with sea water that rose from three to twelve feet, disabling the bilge pump
from containing the water.

The M/V P. Aboitiz sank at about 7:00 p.m. of October 31, 1980 at latitude 18 degrees North, longitude
170 degrees East in the South China Sea in between Hong Kong, the Philippines and Taiwan with the
nearest land being the northern tip of Luzon, around 270 miles from Cape Bojeador, Bangui, Ilocos Norte.
Responding to the captains distress call, the M/V Kapuas (Capuas) manned by Capt. Virgilio Gonzales
rescued the officers and crew of the ill-fated M/V P. Aboitiz and brought them to Waileen, Taiwan where
Capt. Racines lodged his marine protest dated November 3, 1980.

15
Justo Iglesias, meteorologist of PAGASA and another witness of Aboitiz, testified in both cases that
during the inclusive dates of October 28-31, 1980, a stormy weather condition prevailed within the
Philippine area of responsibility, particularly along the sea route from Hong Kong to Manila, because of
tropical depression "Yoning."[25] PAGASA issued weather bulletins from October 28-30, 1980 while the
storm was still within Philippine territory. No domestic bulletins were issued the following day when the
storm which hit Eastern Samar, Southern Quezon and Southern Tagalog provinces, had made its exit to
the South China Sea through Bataan.

Allied and Equitable refuted the allegation that the M/V P. Aboitiz and its cargo were lost due to force
majeure, relying mainly on the marine protest filed by Capt. Racines as well as on the Beaufort Scale of
Wind. In his marine protest under oath, Capt. Racines affirmed that the wind force on October 29-30,
1980 was only ten (10) to fifteen (15) knots. Under the Beaufort Scale of Wind, said wind velocity falls
under scale No. 4 that describes the sea condition as "moderate breeze," and "small waves becoming
longer, fairly frequent white horses."[26]

To fortify its position, Equitable presented Rogelio T. Barboza who testified that as claims supervisor and
processor of Equitable, he recommended payment to Axel Manufacturing Corporation as evidenced by
the cash voucher, return check and subrogation receipt. Barboza also presented a letter of demand to
Aboitiz which, however, the latter ignored.[27]

On April 24, 1984, the trial court rendered a decision that disposed of Civil Case No. 138643 as follows:

"WHEREFORE, judgment is hereby rendered ordering defendant Aboitiz Shipping

Company to pay plaintiff Allied Guarantee Insurance Company, Inc. the sum
of P278,536.50, with legal interest thereon from March 10, 1981, then date of the filing
of the complaint, until fully paid, plus P30,000.00 as attorneys fees, with costs of suit.

"SO ORDERED."[28]

A similar decision was arrived at in Civil Case No. 138396, the dispositive portion of which reads:

"WHEREFORE, in view of the foregoing, this Court hereby renders judgment in favor of
plaintiff and against defendant Aboitiz Shipping Corporation, to pay the sum of P194,
794. 85 with legal rate of interest thereon from February 27, 1981 until fully paid;
attorneys fees of twenty-five (25%) percent of the total claim, plus litigation expenses
and costs of litigation.

SO ORDERED."[29]

In Civil Case No. 138643, Aboitiz appealed to the Court of Appeals under CA-G.R. CV No. 04121. On
March 23, 1987, the Court of Appeals affirmed the decision of the lower court. A motion for
reconsideration of the said decision was likewise denied by the Court of Appeals on May 3, 1989.
Aggrieved, Aboitiz then filed a petition for review with this Court docketed as G.R. No. 88159 which was
denied for lack merit. Entry of judgment was made and the lower courts decision in Civil Case No.
138643 became final and executory. Allied prayed for the issuance of a writ of execution in the lower
court which was granted by the latter on April 4, 1990. To stay the execution of the judgment of the lower
court, Aboitiz filed a petition for certiorari and prohibition with preliminary injunction with the Court of
Appeals docketed as CA-G.R. SP No. 20844.[30] On August 15, 1990, the Court of Appeals rendered the
assailed decision, the dispositive portion of which reads as follows:

16
 "WHEREFORE, the challenged order of the respondent Judge dated April 4, 1990
granting the execution is hereby set aside. The respondent Judge is further ordered to stay
the execution of the judgment insofar as it impairs the rights of the 100 other claimants to
the insurance proceeds including the rights of the petitioner to pay more than the value of
the vessel or the insurance proceeds and to desist from executing the judgment insofar as
it prejudices the pro-rata share of all claimants to the insurance proceeds. No
pronouncement as to costs.

"SO ORDERED."[31]

Hence, Allied filed the instant petition for certiorari, mandamus and injunction with preliminary
injunction and/or restraining order before this Court alleging the following assignment of errors:

1.....Respondent Court of Appeals gravely erred in staying the immediate execution of the
judgment of the lower court as it has no authority nor jurisdiction to directly or indirectly
alter, modify, amend, reverse or invalidate a final judgment as affirmed by the Honorable
Supreme Court in G.R. No. 88159.

2.....Respondent Court of Appeals with grave abuse of discretion amounting to lack or

excess of jurisdiction, brushed aside the doctrine in G.R. No. 88159 which is now the law
of the case and observance of time honored principles of stare decisis, res adjudicata and
estoppel by judgment.

3.....Real and hypothecary rule under Articles 587, 590 and 837 of the Code of
Commerce which is the basis of the questioned decision (Annex "C" hereof) is without
application in the face of the facts found by the lower court, sustained by the Court of
Appeals in CA-G.R. No. 04121 and affirmed in toto by the Supreme Court in G.R. No.
88159.

4.....Certiorari as a special remedy is unavailing for private respondent as there was no

grave abuse of discretion nor lack or excess of jurisdiction for Judge Mabunay to issue
the order of April 4, 1990 which was in accord with law and jurisprudence, nor were
there intervening facts and/or supervening events that will justify respondent court to
issue a writ of certiorari or a restraining order on a final and executory judgment of the
Honorable Supreme Court.[32]

From the decision of the trial court in Civil Case No. 138396 that favored Equitable, Aboitiz likewise
appealed to the Court of Appeals through CA-G.R. CV No. 15071. On August 24, 1990, the Court of
Appeals rendered the Decision quoting extensively its Decision in CA-G.R. No. SP-17427 (now G.R. No.
92735) and disposing of the appeal as follows:

"WHEREFORE, we hereby affirm the trial courts awards of actual damages, attorney s
fees and litigation expenses, with the exception of legal interest, in favor of plaintiff-
appellee Equitable Insurance Corporation as subrogee of the consignee for the loss of its
shipment aboard the M/V `P. Aboitiz and against defendant-appellant Aboitiz Shipping
Corporation. However, the amount and payment of those awards shall be subject to a
determination of the pro-rata share of said appellee in relation to the pro-rata shares of the
109 other claimants, which determination shall be made by the trial court. This case is
therefore hereby ordered remanded to the trial court which shall reopen the case and

17
 receive evidence to determine appellees pro-rata share as aforesaid. No pronouncement as
to costs.

"SO ORDERED."[33]

On September 12, 1990, Equitable moved to reconsider the Court of Appeals Decision. The Court of
Appeals denied the motion for reconsideration on October 4, 1990.[34] Consequently, Equitable filed with
this Court a petition for review alleging the following assignment of errors:

1.....Respondent Court of Appeals, with grave abuse of discretion amounting to lack or

excess of jurisdiction, erroneously brushed aside the doctrine in G.R. No. 88159 which is
now the law of the case as held in G.R. No. 89757 involving the same and identical set of
facts and cause of action relative to the sinking of the M/V `P. Aboitiz and observance of
the time honored principles of stare decisis, and estoppel by judgment.

2.....Real and hypothecary rule under Articles 587, 590 and 837 of the Code of
Commerce which is the basis of the assailed decision and resolution is without
application in the face of the facts found by the trial court which conforms to the
conclusion and finding of facts arrived at in a similar and identical case involving the
same incident and parties similarly situated in G.R. No. 88159 already declared as the
`law of the case in a subsequent decision of this Honorable Court in G.R. No. 89757
promulgated on August 6, 1990.

3.....Respondent Court of Appeals gravely erred in concluding that limited liability rule
applies in case of loss of cargoes when the law itself does not distinguish; fault of the
shipowner or privity thereto constitutes one of the exceptions to the application of limited
liability under Article 587, 590 and 837 of the Code of Commerce, Civil Code provisions
on common carriers for breach of contract of carriage prevails.[35]

These three petitions in G.R. Nos. 92735, 94867 and 95578 were consolidated in the Resolution of
August 5, 1991 on the ground that the petitioners "have identical causes of action against the same
respondent and similar reliefs are prayed for."[36]

The threshold issue in these consolidated petitions is the applicability of the limited liability rule in
maritime law in favor of Aboitiz in order to stay the execution of the judgments for full indemnification
of the losses suffered by the petitioners as a result of the sinking of the M/V P. Aboitiz. Before we can
address this issue, however, there are procedural matters that need to be threshed out.

First. At the outset, the Court takes note of the fact that in G.R. No. 92735, Judge Amante Purisima,
whose decision in the Regional Trial Court is sought to be upheld, is named as a co-petitioner.
In Calderon v. Solicitor General,[37] where the petitioner in the special civil action
of certiorari and mandamus was also the judge whose order was being assailed, the Court held that said
judge had no standing to file the petition because he was merely a nominal or formal party-respondent
under Section 5 of Rule 65 of the Rules of Court. He should not appear as a party seeking the reversal of a
decision that is unfavorable to the action taken by him. The Court there said:

"Judge Calderon should be reminded of the well-known doctrine that a judge should
detach himself from cases where his decision is appealed to a higher court for review.
The raison detre for such doctrine is the fact that a judge is not an active combatant in
such proceeding and must leave the opposing parties to contend their individual positions

18
 and for the appellate court to decide the issues without his active participation. By filing
this case, petitioner in a way ceased to be judicial and has become adversarial instead."[38]

While the petition in G.R. No. 92735 does not expressly show whether or not Judge Purisima himself is
personally interested in the disposition of this petition or he was just inadvertently named as petitioner by
the real parties in interest, the fact that Judge Purisima is named as petitioner has not escaped this Courts
notice. Judges and litigants should be reminded of the basic rule that courts or individual judges are not
supposed to be interested "combatants" in any litigation they resolve.

Second. The petitioners contend that the inapplicability of the limited liability rule to Aboitiz has already
been decided on by no less than this Court in G.R. No. 88159 as early as November 13, 1989 which was
subsequently declared as "law of the case" in G.R. No. 89757 on August 6, 1990. Herein petitioners cite
the aforementioned cases in support of their theory that the limited liability rule based on the real and
hypothecary nature of maritime law has no application in the cases at bar.

The existence of what petitioners insist is already the "law of the case" on the matter of limited liability is
at best illusory. Petitioners are either deliberately misleading this Court or profoundly confused. As
elucidated in the case of Aboitiz Shipping Corporation vs. General Accident Fire and Life Assurance
Corporation,[39]

"An examination of the November 13, 1989 Resolution in G.R. No. 88159 (pp. 280-282,
Rollo) shows that the same settles two principal matters, first of which is that the doctrine
of primary administrative jurisdiction is not applicable therein; and second is that a
limitation of liability in said case would render inefficacious the extraordinary diligence
required by law of common carriers.

"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 G.R. No. 88159 is that which attaches to cargo by virtue of stipulations in the
Bill of Lading, popularly known as package limitation clauses, which in that case was
contained in Section 8 of the Bill of Lading and which limited the carriers liability to
US$500.00 for the cargo whose value was therein sought to be recovered. Said resolution
did not tackle the matter of the Limited Liability Rule arising out of the real and
hypothecary nature of maritime law, which was not raised therein, and which is the
principal bone of contention in this case. While the matters 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 now settled and
should no longer be touched, the instant case raises a completely different issue."[40]

Third. Petitioners asseverate that the judgments of the lower courts, already final and executory, cannot be
directly or indirectly altered, modified, amended, reversed or invalidated.

The rule that once a decision becomes final and executory, it is the ministerial duty of the court to order
its execution, is not an absolute one. We have allowed the suspension of execution in cases of special and
exceptional nature when it becomes imperative in the higher interest of justice.[41] The unjust and
inequitable effects upon various other claimants against Aboitiz should we allow the execution of
judgments for the full indemnification of petitioners claims impel us to uphold the stay of execution as
ordered by the respondent Court of Appeals. We reiterate our pronouncement in Aboitiz Shipping
Corporation vs. General Accident Fire and Life Assurance Corporation on this very same issue.

19
 "This brings us to the primary question herein which is whether or not respondent court
erred in granting execution of the full judgment award in Civil Case No. 14425 (G.R. No.
89757), thus effectively denying the application of the limited liability enunciated under
the appropriate articles of the Code of Commerce. x x x. Collaterally, determination of
the question of whether execution of judgments which have become final and executory
may be stayed is also an issue.

"We shall tackle the latter issue first. This Court has always been consistent in its stand
that the very purpose for its existence is to see the accomplishment of the ends of justice.
Consistent with this view, a number of decisions have originated herefrom, the tenor of
which is that no procedural consideration is sancrosanct if such shall result in the
subverting of justice. The right to execution after finality of a decision is certainly no
exception to this. Thus, in Cabrias v. Adil (135 SCRA 355 [1885]), this Court ruled that:

xxx............xxx............xxx

x x x every court having jurisdiction to render a particular judgment has inherent

power to enforce it, and to exercise equitable control over such enforcement. The
court has authority to inquire whether its judgment has been executed, and will
remove obstructions to the enforcement thereof. Such authority extends not only
to such orders and such writs as may be necessary to prevent an improper
enforcement of the judgment. If a judgment is sought to be perverted and made a
medium of consummating a wrong the court on proper application can prevent
it."[42]

Fourth. Petitioners in G.R. No. 92735 aver that it was error for the respondent Court of Appeals to allow
Aboitiz the benefit of the limited liability rule despite its failure to present evidence to prove its
entitlement thereto in the court below. Petitioners Monarch and Tabacalera remind this Court that from
the inception of G.R. No. 92735 in the lower court and all the way to the Supreme Court, Aboitiz had not
presented an iota of evidence to exculpate itself from the charge of negligence for the simple reason that it
was declared as in default.[43]

It is true that for having been declared in default, Aboitiz was precluded from presenting evidence to
prove its defenses in the court a quo. We cannot, however, agree with petitioners that this circumstance
prevents the respondent Court of Appeals from taking cognizance of Aboitiz defenses on appeal.

It should be noted that Aboitiz was declared as in default not for its failure to file an answer but for its
absence during pre-trial and the trial proper. In Aboitiz answer with counterclaim, it claimed that the
sinking of the M/V P. Aboitiz was due to an act of God or unforeseen event and that the said ship had
been seaworthy and fit for the voyage. Aboitiz also alleged that it exercised the due diligence required by
law, and that considering the real and hypothecary nature of maritime trade, the sinking justified the
extinguishment of its liability for the lost shipment.[44]

A judgment of default does not imply a waiver of rights except that of being heard and presenting
evidence in defendants favor. It does not imply admission by the defendant of the facts and causes of
action of the plaintiff, because the codal section[45] requires the latter to adduce evidence in support of his
allegations as an indispensable condition before final judgment could be given in his favor. Nor could it
be interpreted as an admission by the defendant that the plaintiffs causes of action find support in the law
or that the latter is entitled to the relief prayed for.[46] This is especially true with respect to a defendant
who had filed his answer but had been subsequently declared in default for failing to appear at the trial

20
since he has had an opportunity to traverse, via his answer, the material averments contained in the
complaint. Such defendant has a better standing than a defendant who has neither answered nor appeared
at trial.[47] The former should be allowed to reiterate all affirmative defenses pleaded in his answer before
the Court of Appeals. Likewise, the Court of Appeals may review the correctness of the evaluation of the
plaintiffs evidence by the lower court.

It should also be pointed out that Aboitiz is not raising the issue of its entitlement to the limited liability
rule for the first time on appeal thus, the respondent Court of Appeals may properly rule on the same.

However, whether or not the respondent Court of Appeals erred in finding, upon review, that Aboitiz is
entitled to the benefit of the limited liability rule is an altogether different matter which shall be discussed
below.

Rule on Limited Liability. The petitioners assert in common that the vessel M/V P. Aboitiz did not sink by
reason of force majeure but because of its unseaworthiness and the concurrent fault and/or negligence of
Aboitiz, the captain and its crew, thereby barring Aboitiz from availing of the benefit of the limited
liability rule.

The principle of limited liability is enunciated in the following provisions of the Code of Commerce:

Art. 587. The shipagent shall also be civilly liable for the indemnities in favor of third
persons which may arise from the conduct of the captain in the care of goods which he
loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel
with all the equipments and the freight it may have earned during the voyage.

Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their
interests in the common fund for the results of the acts of the captain referred to in Art.
587.

Each co-owner may exempt himself from his liability by the abandonment, before a
notary, of the part of the vessel belonging to him.

Art. 837. The civil liability incurred by shipowners in the case prescribed in this section,
shall be understood as limited to the value of the vessel with all its appurtenances and the
freightage served during the voyage.

Article 837 applies the principle of limited liability in cases of collision, hence, Arts. 587 and 590
embody the universal principle of limited liability in all cases. In Yangco v. Laserna,[48] this Court
elucidated on the import of Art. 587 as follows:

"The provision accords a shipowner or agent the right of abandonment; and by necessary
implication, his liability is confined to that which he is entitled as of right to abandon-the
vessel with all her equipments and the freight it may have earned during the voyage. It is
true that the article appears to deal only with the limited liability of the shipowners or
agents for damages arising from the misconduct of the captain in the care of the goods
which the vessel carries, but this is a mere deficiency of language and in no way indicates
the true extent of such liability. The consensus of authorities is to the effect that
notwithstanding the language of the aforequoted provision, the benefit of limited liability
therein provided for, applies in all cases wherein the shipowner or agent may properly be
held liable for the negligent or illicit acts of the captain."[49]

21
"No vessel, no liability," expresses in a nutshell the limited liability rule. The shipowners or agents
liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its
extinction. The total destruction of the vessel extinguishes maritime liens because there is no longer
any res to which it can attach.[50] This doctrine is based on the real and hypothecary nature of maritime
law which has its origin in the prevailing conditions of the maritime trade and sea voyages during the
medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and
to encourage shipbuilding and maritime commerce it was deemed necessary to confine the liability of the
owner or agent arising from the operation of a ship to the vessel, equipment, and freight, or insurance, if
any.[51]

Contrary to the petitioners theory that the limited liability rule has been rendered obsolete by the advances
in modern technology which considerably lessen the risks involved in maritime trade, this Court
continues to apply the said rule in appropriate cases. This is not to say, however, that the limited liability
rule is without exceptions, namely: (1) where the injury or death to a passenger is due either to the fault of
the shipowner, or to the concurring negligence of the shipowner and the captain;[52] (2) where the vessel is
insured; and (3) in workmens compensation claims.[53]

We have categorically stated that Article 587 speaks only of situations where the fault or negligence is
committed solely by the captain. In cases where the ship owner is likewise to be blamed, Article 587 does
not apply. Such a situation will be covered by the provisions of the Civil Code on common carriers.[54]

A finding that a fortuitous event was the sole cause of the loss of the M/V P. Aboitiz would absolve
Aboitiz from any and all liability pursuant to Article 1734(1) of the Civil Code which provides in part that
common carriers are responsible for the loss, destruction, or deterioration of the goods they carry, unless
the same is due to flood, storm, earthquake, lightning, or other natural disaster or calamity. On the other
hand, a finding that the M/V P. Aboitiz sank by reason of fault and/or negligence of Aboitiz, the ship
captain and crew of the M/V P. Aboitiz would render inapplicable the rule on limited liability. These
issues are therefore ultimately questions of fact which have been subject of conflicting determinations by
the trial courts, the Court of Appeals and even this Court.

In Civil Cases Nos. 82-2767-82-2770 (now G.R. No. 92735), after receiving Monarchs and Tabacaleras
evidence, the trial court found that the complete loss of the shipment on board the M/V P. Aboitiz when it
sank was neither due to a fortuitous event nor a storm or natural cause. For Aboitiz failure to present
controverting evidence, the trial court also upheld petitioners allegation that the M/V P. Aboitiz was
unseaworthy.[55] However, on appeal, respondent Court of Appeals exculpated Aboitiz from fault or
negligence and ruled that:

"x x x, even if she (M/V P. Aboitiz) was found to be unseaworthy,

this fault (distinguished from civil liability) cannot be laid on the shipowners door. Such
fault was directly attributable to the captain. This is so, because under Art. 612 of the
Code of Commerce, among the inherent duties of a captain, are to examine the vessel
before sailing and to comply with the laws on navigation."[56];

and that:

"x x x although the shipowner may be held civilly liable for the captains fault x x x
having abandoned the vessel in question, even if the vessel was unseaworthy due to the
captains fault, Aboitiz is still entitled to the benefit under the rule of limited liability
accorded to shipowners by the Code of Commerce."[57]

22
Civil Case No. 138396 (now G.R. No. 95578) was similarly resolved by the trial court, which found that
the sinking of the M/V P. Aboitiz was not due to an act of God or force majeure. It added that the
evidence presented by the petitioner Equitable demonstrated the negligence of Aboitiz Shipping
Corporation in the management and operation of its vessel M/V P. Aboitiz.[58]

However, Aboitiz appeal was favorably acted upon by the respondent Court of Appeals which reiterated
its ruling in G.R. No. 92735 that the unseaworthiness of the M/V P. Aboitiz was not a fault directly
attributable to Aboitiz but to the captain, and that Aboitiz is entitled to the benefit of the limited liability
rule for having abandoned its ship.[59]

Finally, in Civil Case No. 138643 (now G.R. No. 94867), the trial court held that the M/V P. Aboitiz was
not lost due to a fortuitous event or force majeure, and that Aboitiz had failed to satisfactorily establish
that it had observed extraordinary diligence in the vigilance over the goods transported by it.[60]

In CA-G.R. CV No. 04121, the Court of Appeals initially ruled against Aboitiz and found that the sinking
of the vessel was due to its unseaworthiness and the failure of its crew and master to exercise
extraordinary diligence.[61] Subsequently, however, Aboitiz petition before the Court of Appeals, docketed
as CA-G.R. SP No. 20844 (now G.R. No. 94867) to annul and set aside the order of execution issued by
the lower court was resolved in favor of Aboitiz. The Court of Appeals brushed aside the issue of Aboitiz
negligence and/or fault and proceeded to allow the application of the limited liability rule "to accomplish
the aims of justice."[62] It elaborated thus: "To execute the judgment in this case would prejudice the
substantial right of other claimants who have filed suits to claim their cargoes that was lost in the vessel
that sank and also against the petitioner to be ordered to pay more than what the law requires."[63]

It should be pointed out that the issue of whether or not the M/V P. Aboitiz sank by reason of force
majeure is not a novel one for that question has already been the subject of conflicting pronouncements
by the Supreme Court. In Aboitiz Shipping Corporation v. Court of Appeals,[64] this Court approved the
findings of the trial court and the appellate court that the sinking of the M/V P. Aboitiz was not due to the
waves caused by tropical storm "Yoning" but due to the fault and negligence of Aboitiz, its master and
crew.[65] On the other hand, in the later case of Country Bankers Insurance Corporation v. Court of
Appeals,[66] this Court issued a Resolution on August 28, 1991 denying the petition for review on the
ground that the Court of Appeals committed no reversible error, thereby affirming and adopting as its
own, the findings of the Court of Appeals that force majeure had caused the M/V P. Aboitiz to founder.

In view of these conflicting pronouncements, we find that now is the opportune time to settle once and for
all the issue of whether or not force majeure had indeed caused the M/V P. Aboitiz to sink. After
reviewing the records of the instant cases, we categorically state that by the facts on record, the M/V P.
Aboitiz did not go under water because of the storm "Yoning."

It is true that as testified by Justo Iglesias, meteorologist of Pag-Asa, during the inclusive dates of October
28-31, 1980, a stormy weather condition prevailed within the Philippine area of responsibility,
particularly along the sea route from Hong Kong to Manila, because of tropical depression
"Yoning".[67] But even Aboitiz own evidence in the form of the marine protest filed by Captain Racines
affirmed that the wind force when the M/V P. Aboitiz foundered on October 31, 1980 was only ten (10)
to fifteen (15) knots which, under the Beaufort Scale of Wind, falls within scale No. 4 that describes the
wind velocity as "moderate breeze," and characterizes the waves as "small x x x becoming longer, fairly
frequent white horses."[68] Captain Racines also testified in open court that the ill-fated M/V P. Aboitiz
was two hundred (200) miles away from storm "Yoning" when it sank.[69]

23
The issue of negligence on the part of Aboitiz, and the captain and crew of the M/V P. Aboitiz has also
been subject of conflicting rulings by this Court. In G.R. No. 100373, Country Bankers Insurance
Corporation v. Court of Appeals, this Court found no error in the findings of the Court of Appeals that the
M/V P. Aboitiz sank by reason of force majeure, and that there was no negligence on the part of its
officers and crew. In direct contradiction is this Courts categorical declaration in Aboitiz Shipping
Corporation v. Court of Appeals,[70] to wit:

"The trial court and the appellate court found that the sinking of the M/V P. Aboitiz was
not due to the waves caused by tropical storm "Yoning" but due to the fault and
negligence of petitioner, its master and crew. The court reproduces with approval said
findings x x x."[71]

However, in the subsequent case of Aboitiz Shipping Corporation v. General Accident Fire and Life
Assurance Corporation, Ltd.,[72] this Court exculpated Aboitiz from fault and/or negligence while holding
that the unseaworthiness of the M/V P. Aboitiz was only attributable to the negligence of its captain and
crew. Thus,

"On this point, it should be stressed that unseaworthiness is not a fault that can be laid
squarely on petitioners lap, absent a factual basis for such conclusion. The
unseaworthiness found in some cases where the same has been ruled to exist is directly
attributable to the vessels crew and captain, more so on the part of the latter since Article
612 of the Code of Commerce provides that among the inherent duties of a captain is to
examine a vessel before sailing and to comply with the laws of navigation. Such a
construction would also put matters to rest relative to the decision of the Board of Marine
Inquiry. While the conclusion therein exonerating the captain and crew of the vessel was
not sustained for lack of basis, the finding therein contained to the effect that the vessel
was seaworthy deserves merit. Despite appearances, it is not totally incompatible with the
findings of the trial court and the Court of Appeals, whose finding of "unseaworthiness"
clearly did not pertain to the structural condition of the vessel which is the basis of the
BMIs 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."[73]

It therefore becomes incumbent upon this Court to answer with finality the nagging question of whether
or not it was the concurrent fault and/or negligence of Aboitiz and the captain and crew of the ill-fated
vessel that had caused it to go under water.

Guided by our previous pronouncements and illuminated by the evidence now on record, we reiterate our
findings in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance Corporation,
Ltd.[74], that the unseaworthiness of the M/V P. Aboitiz had caused it to founder. We, however, take
exception to the pronouncement therein that said unseaworthiness could not be attributed to the ship
owner but only to the negligent acts of the captain and crew of the M/V P. Aboitiz. On the matter of
Aboitiz negligence, we adhere to our ruling in Aboitiz Shipping Corporation v. Court of Appeals,[75] that
found Aboitiz, and the captain and crew of the M/V P. Aboitiz to have been concurrently negligent.

During the trial of Civil Case Nos. 82-2767-82-2770 (now G.R. No. 92735), petitioners Monarch and
Tabacalera presented a survey from Perfect Lambert, a surveyor based in Hong Kong that conducted an
investigation on the possible cause of the sinking of the vessel. The said survey established that the cause
of the sinking of the vessel was the leakage of water into the M/V P. Aboitiz which probably started in the
forward part of the No. 1 hull, although no explanation was proffered as to why the No. 2 hull was
likewise flooded. Perfect Lambert surmised that the flooding was due to a leakage in the shell plating or a

24
defect in the water tight bulk head between the Nos. 1 and 2 holds which allowed the water entering hull
No.1 to pass through hull No. 2. The surveyor concluded that whatever the cause of the leakage of water
into these hulls, the seaworthiness of the vessel was definitely in question because the breaches of the
hulls and serious flooding of the two cargo holds occurred simultaneously in seasonal weather.[76]

We agree with the uniform finding of the lower courts that Aboitiz had failed to prove that it observed the
extraordinary diligence required of it as a common carrier. We therefore reiterate our pronouncement
in Aboitiz Corporation v. Court of Appeals[77] on the issue of Aboitiz liability in the sinking of its
vessel, to wit:

"In accordance with Article 1732 of the Civil Code, the defendant common carrier from
the nature of its business and for reasons of public policy, is bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by it according to all circumstances of the case. While the goods
are in the possession of the carrier, it is but fair that it exercise extraordinary diligence in
protecting them from loss or damage, and if loss occurs, the law presumes that it was due
to the carriers fault or negligence; that is necessary to protect the interest of the shipper
which is at the mercy of the carrier x x x. In the case at bar, the defendant failed to prove
hat the loss of the subject cargo was not due to its fault or negligence."[78]

The failure of Aboitiz to present sufficient evidence to exculpate itself from fault and/or negligence in the
sinking of its vessel in the face of the foregoing expert testimony constrains us to hold that Aboitiz was
concurrently at fault and/or negligent with the ship captain and crew of the M/V P. Aboitiz. This is in
accordance with the rule that in cases involving the limited liability of shipowners, the initial burden of
proof of negligence or unseaworthiness rests on the claimants. However, once the vessel owner or any
party asserts the right to limit its liability, the burden of proof as to lack of privity or knowledge on its
part with respect to the matter of negligence or unseaworthiness is shifted to it.[79] This burden, Aboitiz
had unfortunately failed to discharge. That Aboitiz failed to discharge the burden of proving that the
unseaworthiness of its vessel was not due to its fault and/or negligence should not however mean that the
limited liability rule will not be applied to the present cases. The peculiar circumstances here demand that
there should be no strict adherence to procedural rules on evidence lest the just claims of shippers/insurers
be frustrated. The rule on limited liability should be applied in accordance with the latest ruling in Aboitiz
Shipping Corporation v. General Accident Fire and Life Assurance Corporation, Ltd.,[80] promulgated on
January 21, 1993, that claimants be treated as "creditors in an insolvent corporation whose assets are not
enough to satisfy the totality of claims against it."[81] To do so, the Court set out in that case the
procedural guidelines:

"In the instant case, there is, therefore, a need to collate all claims preparatory to their
satisfaction from the insurance proceeds on the vessel M/V P. Aboitiz and its pending
freightage at the time of its loss. No claimant can be given precedence over the others by
the simple expedience of having completed its action earlier than the rest. Thus,
execution of judgment in earlier completed cases, even those already final and executory
must be stayed pending completion of all cases occasioned by the subject sinking. Then
and only then can all such claims be simultaneously settled, either completely or pro-rata
should the insurance proceeds and freightage be not enough to satisfy all claims.

"x x x............x x x............x x x.

" In fairness to the claimants, and as a matter of equity, the total proceeds of the insurance
and pending freightage should now be deposited in trust. Moreover, petitioner should

25
 institute the necessary limitation and distribution action before the proper admiralty court
within 15 days from finality of this decision, and thereafter deposit with it the proceeds
from the insurance company and pending freightage in order to safeguard the same
pending final resolution of all incidents, for final pro-rating and settlement
thereof."[82] (Underscoring supplied.)

There is no record that Aboitiz has instituted such action or that it has deposited in trust the insurance
proceeds and freightage earned. The pendency of the instant cases before the Court is not a reason for
Aboitiz to disregard the aforementioned order of the Court. In fact, had Aboitiz complied therewith, even
these cases could have been terminated earlier. We are inclined to believe that instead of filing the suit as
directed by this Court, Aboitiz tolerated the situation of several claimants waiting to get hold of its
insurance proceeds, which, if correctly handled must have multiplied in amount by now. By its failure to
abide by the order of this Court, it had caused more damage to the claimants over and above that which
they have endured as a direct consequence of the sinking of the M/V P. Aboitiz. It was obvious that from
among the many cases filed against it over the years, Aboitiz was waiting for a judgment that might prove
favorable to it, in blatant violation of the basic provisions of the Civil Code on abuse of rights.

Well aware of the 110 claimants against it, Aboitiz preferred to litigate the claims singly rather than exert
effort towards the consolidation of all claims. Consequently, courts have arrived at conflicting decisions
while claimants waited over the years for a resolution of any of the cases that would lead to the eventual
resolution of the rest. Aboitiz failed to give the claimants their due and to observe honesty and good faith
in the exercise of its rights.[83]

Aboitiz blatant disregard of the order of this Court in Aboitiz Shipping Corporation v. General Accident
Fire and Life Assurance Corporation, Ltd.[84] cannot be anything but willful on its part. An act is
considered willful if it is done with knowledge of its injurious effect; it is not required that the act be done
purposely to produce the injury.[85] Aboitiz is well aware that by not instituting the said suit, it caused the
delay in the resolution of all claims against it. Having willfully caused loss or injury to the petitioners in a
manner that is contrary to morals, good customs or public policy, Aboitiz is liable for damages to the
latter.[86]

Thus, for its contumacious act of defying the order of this Court to file the appropriate action to
consolidate all claims for settlement, Aboitiz must be held liable for moral damages which may be
awarded in appropriate cases under the Chapter on human relations of the Civil Code (Articles 19 to
36).[87]

On account of Aboitiz refusal to satisfy petitioners claims in accordance with the directive of the Court
in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance Corporation, Ltd., it acted
in gross and evident bad faith. Accordingly, pursuant to Article 2208 of the Civil Code,[88] petitioners
should be granted attorneys fees.

WHEREFORE, the petitions in G.R. Nos. 92735, 94867, and 95578 are DENIED. The decisions of the
Court of Appeals in CA-G.R. No. SP-17427 dated March 29, 1990, CA-G.R. SP No. 20844 dated August
15, 1990, and CA-G.R. CV No. 15071 dated August 24, 1990 are AFFIRMED with the
MODIFICATION that respondent Aboitiz Shipping Corporation is ordered to pay each of the respective
petitioners the amounts of P100,000.00 as moral damages and P50,000.00 as attorneys fees, and treble the
cost of suit.

Respondent Aboitiz Shipping Corporation is further directed to comply with the Order promulgated by
this Court on January 21, 1993 in Aboitiz Shipping Corporation v. General Accident Fire and Life

26
Assurance Corporation, Ltd., G.R. No. 100446, January 21, 1993, to (a) institute the necessary limitation
and distribution action before the proper Regional Trial Court, acting as admiralty court, within fifteen
(15) days from the finality of this decision, and (b) thereafter to deposit with the said court the insurance
proceeds from the loss of the vessel, M/V P. Aboitiz, and the freightage earned in order to safeguard the
same pending final resolution of all incidents relative to the final pro-rating thereof and to the settlement
of all claims.

53. DIONISIA ABUEG, ET AL., plaintiffs-appellees,

vs.
BARTOLOME SAN DIEGO, defendant-appellant.

----------------------------

CA-No. L-774 December 17, 1946

MARCIANA DE SALVACION, ET AL., plaintiffs-appellees,

vs.
BARTOLOME SAN DIEGO, defendant-appellant.

----------------------------

CA-No. L-775 December 17, 1946

ROSARIO OCHING, ET AL., plaintiffs-appellees,

vs.
BARTOLOME SAN DIEGO, defendant-appellant.

Lichauco, Picazo and Mejia for appellant.

Cecilio I. Lim and Roberto P. Ancog for appellees.

PADILLA, J.:

This is appeal from a judgment rendered by the Court of First Instance of Manila in the above-entitled
cases awarding plaintiffs the compensation provided for in the Workmen's Compensation Act.

The record of the cases was forwarded to the Court of Appeals for review, but as there was no question of
fact involved in the appeal, said court forwarded the record to this Court. The appeal was pending when
the Pacific War broke up, and continued pending until after 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.

Appellant, who was the owner of the motor ships San Diego II and Bartolome S, states in his brief the
following:

There is no dispute as to the facts involved in these cases and they may be gathered from the
pleadings and the decision of the trial Court. In case CA-G.R. No. 773, Dionisia Abueg is the

27
 widow of the deceased, Amado Nuñez, who was a machinist on board the M/S San Diego II
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.

The M/S San Diego II and the M/S Bartolome, while engaged in fishing operations around
Mindoro Island on Oct. 1, 1941 were caught by a typhoon as a consequence of which they were
sunk and totally lost. Amado Nuñez, Victoriano Salvacion and Francisco Oching while 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.).

Counsel for the appellant cite article 587 of the Code of Commerce which provides that if the vessel
together with all her tackle and freight money earned during the voyage are abandoned, the agent's
liability to third persons for tortious acts of the captain in the care of the goods which the ship carried is
extinguished (Yangco vs. Laserna, 73 Phil., 330); article 837 of the same code which provides that in
cases of collision, the ship owners' liability is limited to the value of the vessel with all her equipment and
freight earned during the voyage (Philippine Shipping company vs. Garcia, 6 Phil., 281), 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
Mindoro on October 1, 1941, was extinguished.

The real and hypothecary nature of the liability of the shipowner or agent embodied in the provisions of
the Maritime Law, Book III, Code of Commerce, had its origin in the prevailing continues of the maritime
trade and sea voyages during the medieval ages, attended by innumerable hazards and perils. To offset
against these adverse conditions and encourage shipbuilding and maritime commerce, it was deemed
necessary to confine the liability of the owner or agent arising from the operation of a ship to the vessel,
equipment, and freight, or insurance, if any, so that if the shipowner or agent abandoned the ship,
equipment, and freight, his liability was extinguished.

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 captain or master of the ship; nor the liability for the loss
of the ship as result of collision; nor the responsibility for wages of the crew, but a liability created by a
statute to compensate employees and laborers in cases of injury received by or inflicted upon them, while
engaged in the performance of their work or employment, or the heirs and dependents and laborers and
employees in the event of death caused by their employment. Such compensation has nothing to do with
the provisions of the Code of Commerce regarding maritime commerce. It is an item in the cost of
production which must be included in the budget of any well-managed industry.lawphil.net

Appellant's assertion that in the case of Enciso vs. Dy-Liaco (57 Phil., 446), and Murillo vs. Mendoza (66
Phil., 689), the question of the extinction of the shipowner's liability due to abandonment of the ship by
him was not fully discussed, as in the case of Yangco vs. Laserma, supra, is not entirely correct. In the
last mentioned case, the limitation of the shipowner's liability to the value of the ship, equipment, freight,
and insurance, if any, was the lis mota. In the case of Enciso vs. Dy-Liacco, supra, the application of the

28
Workmen's Compensation Act to a master or patron who perished as a result of the sinking of the
motorboat of which he was the master, was the controversy submitted to the court for decision. This
Court held in that case that "It has been repeatedly stated that the Workmen's Compensation Act was
enacted to abrogate the common law and our Civil Code upon culpable acts and omissions, and that the
employer need not be guilty of neglect or fault, in order that responsibility may attach to him" (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 ship, cannot be applied
(Lopez vs. Duruelo, 52 Phil., 229). Granting however, that the motor ships run and operated by the
appellant were not engaged in the coastwise and interisland trade, as contemplated in section 38 of the
Workmen's Compensation Act, as amended, still the deceased officers of the motor ships in question were
industrial employees within the purview of section 39, paragraph (d), as amended, for industrial
employment "includes all employment or work at a trade, occupation or profession exercised by an
employer for the purpose of gain." The only exceptions recognized by the Act are agriculture, charitable
institutions and domestic service. Even employees engaged in agriculture for the operation of mechanical
implements, are entitled to the benefits of the Workmen's Compensation Act (Francisco vs. Consing, 63
Phil., 354). In Murillo vs. Mendoza, supra, this Court held that "our Legislature has deemed it admissible
to include in the Workmen's Compensation Act all incidents that may occur to workmen or employees in
factories, shops and other industrial and agricultural workplaces as well as in the interisland seas of the
Archipelago." But we do not believe that the term "coastwise and interisland trade" has such a narrow
meaning as to confine it to the carriage for hire of passengers and/or merchandise on vessels between
ports and places in the Philippines, because while fishing is an industry, if the catch is brought to a port
for sale, it is at the same time a trade.

54. LUZON STEVEDORING CORPORATION, petitioner,

vs.
COURT OF APPEALS, HIJOS DE F. ESCANO, INC., and DOMESTIC INSURANCE
COMPANY OF THE PHILIPPINES, respondents.

29
GANCAYCO, J.:

On May 30, 1968 at past 6:00 in the morning a maritime collision occurred within the vicinity of the
entrance to the North Harbor, Manila between the tanker LSCO "Cavite" owned by Luzon Stevedoring
Corporation and MV "Fernando Escano" a passenger ship owned by Hijos de F. Escano, Inc. as a result of
which said passenger ship sunk. An action in admiralty was filed by Hijos de F. Escano, Inc. and
Domestic Insurance Company of the Philippines against the Luzon Stevedoring Company (LSC) in the
Court of First Instance of Cebu. In the course of the trial, the trial court appointed two commissioners
representing the plaintiffs and defendant to determine the value of the LSCO "CAVITE." Said
commissioners found the value thereof to be P180,000.00.

After trial on the merits, a decision was rendered on January 24, 1974 finding that LSCO "Cavite" was
solely to blame for the collision, thus its dispositive portion reads as follows:

WHEREFORE, based on all the foregoing considerations, the Court renders judgment in
favor of the plaintiffs and against the defendant ordering the latter to pay to the plaintiff
Domestic Insurance Company of the Philippines the sum of P514,000.00, and to the
plaintiff Hijos de F. Escano, Inc. the sum of P68,819.00, with interest on both sums at the
legal rate, from the date the complaint was filed and the further sum of P252,346.70, with
interest at the legal rate from August 7, 1972 and the sum of P163,721.91, without
interest in trust for, and with direction that it pay the same to, the claimants concerned.

With costs against the defendant. 1

In the penultimate paragraph of the decision the trial court held:

With respect to the defense that defendant's liability is limited to the value of the LSCO
"Cavite" and freight earned, invoking Art. 837 of the Code of Commerce, the Court
believes and so holds that the defense has not been established. Moreover, the evidence is
such that in principle Art. 837 does not apply here. The counterclaim of the defendant is
likewise ordered dismissed for lack of merit. 2

Not satisfied therewith the defendant interposed an appeal therefrom to the Court of Appeals wherein in
due course a decision was rendered on June 30, 1981 affirming the decision of the court a quo in toto with
costs against appellant. The motion for reconsideration filed by the defendant of the decision was denied
in a resolution of the Court of Appeals of November 7, 1981. Hence said defendant filed a petition for
certiorari in this Court based on the following grounds:

THE LOWER COURT ERRED IN FINDING THAT THE LSCO "CAVITE" WAS THE
VESSEL AT FAULT IN THE COLLISION.

II

THE LOWER COURT ERRED IN NOT FINDING THAT THE COLLISION

BETWEEN THE M/V "FERNANDO ESCANO" AND THE LSCO "CAVITE" WAS
DUE SOLELY AND EXCLUSIVELY TO THE FAULT, NEGLIGENCE AND LACK
OF SKILL OF THE MASTER OF THE FORMER VESSEL.

30
 III

THE LOWER COURT ERRED IN NOT RULING THAT THE CIVIL LIABILITY OF
THE PETITIONER, IF ANY THERE BE, SHOULD BE LIMITED TO THE VALUE
OF THE LSCO "CAVITE" WITH ALL ITS APPURTENANCES AND FREIGHT-
AGE WHEN THE COLLISION TOOK PLACE. 3

In a resolution of February 26, 1982 this Court denied the petition for lack of merit.

A motion for reconsideration of said resolution was filed by petitioner limiting the issue to the legal
question of whether under Art. 837 of the Code of Commerce abandonment of vessel at fault is necessary
in order that the liability of owner of said vessel shall be limited only to the extent of the value thereof, its
appurtenances and freightage earned in the voyage. After respondents submitted their comment to the
motion as required, on September 29, 1982 this Court denied the motion for reconsideration for lack of
merit.

With leave of court petitioner filed a second motion for reconsideration of said resolution raising the
following issues:

1. Whether abandonment is required under Article 837 of the Code of Commerce. The
decisions of this Honorable Court cited by the parties in support of their respective
positions only imply the answer to the question, and the implied answers
are contradictory.

2. If abandonment is required under Article 837 of the Code of Commerce, when should
it be made? The Code of Commerce is silent on the matter. The decision of this
Honorable Court in Yangco v. Laserna, 13 Phil. 330, left the question open and no other
decision, as far as petitioner can ascertain, has resolved the question.

3. Is the decision of this Honorable Court in Manila Steamship Co., Inc.

v. Abdulhama,n 100 Phil. 32, wherein it was held that "(t)he international rule to the
effect that the right of abandonment of vessels, as a legal station of a shipowner's own
fault," invoked by private respondents and apparently a major consideration in the denial
of the motion for reconsideration, applicable to petitioner under the circumstances of the
case at bar?4

The respondents were required to comment thereto and after said comment was submitted petitioners
submitted a reply thereto to which the respondents filed a rejoinder.

On November 28, 1983, the Court gave due course to the petition for review and considered the
respondents' comment thereto as the Answer. The parties were required to file their briefs. Both parties
having filed their briefs the case is now submitted for decision.

Articles 587, 590, and 837 of the Code of Commerce provide as follows:

ART. 587. The ship agent shall also be civilly liable for the indemnities in favor of third
persons which arise from the conduct of the captain in the vigilance over the goods which
the vessel carried; but he may exempt himself therefrom by abandoning the vessel with
all her equipment and the freight he may have earned during the voyage.

31
 xxx xxx xxx

ART. 590. The co-owners of the vessel shall be civilly liable in the proportion of their
contribution to the common fund for the results of the acts of the captain, referred to in
Article 587.

Each co-owner may exempt himself from this liability by the abandonment, before a
notary, of that part of the vessel belonging to him.

xxx xxx xxx

ART. 837. The civil liability incurred by the shipowners in the cases prescribed in this
section, shall be understood as limited to the value of the vessel with all her
appurtenances and freight earned during the voyage.5

In the case of Philippine Shipping Company vs. Garcia,6 which is an action for damages instituted by the
Philippine Shipping Company for the loss of Steamship "Ntra. Sra. de Lourdes" as a result of the collision
with the Steamship "Navarra" of Garcia, it was found that the "Navarra" was responsible for the collision.
The claim of the Philippine Shipping is that the defendant should pay P18,000.00, the value of the
"Navarro" at the time of its loss, in accordance with the provision of Article 837 of the Code of
Commerce, and that it was immaterial that the "Navarro" had been entirely lost provided the value could
be ascertained since the extent of liability of the owner of the colliding vessel resulting from the collision
is to be determined by its value.

This Court speaking through the then Chief Justice Arellano held:

Article 837 of the Code of Commerce provides: "The civil liability contracted by the
shipowners in the cases prescribed in this section shall be understood as limited to the
value of the vessel with all her equipment and all the freight money earned during the
voyage "

"This section is a necessary consequence of the right to abandon the vessel given to the
shipowner in article 587 of the code, and it is one of the many superfluities contained in
the code." (Lorenzo Benito, "Lecciones," 352.)

ART. 587. The agent shall also 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 exempt himself therefrom by abandoning the vessel with all her
equipments and the freight he may have earned during the trip.

ART. 590. The part owners of a vessel shall be civilly liable, in the proportion of their
contribution to the common fund, for the results of the acts of the captain referred to in
Article 587. Each part owner may exempt himself from this liability by the abandonment,
before a notary, of the part of the vessel belonging to him.

The "Exposicion de motivos" of the Code of Commerce contains the following: "The
present code (1829) does not determine the juridical status of the agent where such agent
is not himself the owner of the vessel. This omission is supplied by the proposed code,
which provides in accordance with the principles of maritime law that by agent it is to be
understood the person intrusted with the provisioning of the vessel, or the one who

32
represents her in the port in which she happens to be. This person is the only one who
represents the vessel that is to say, the only one who represents the interests of the owner
of the vessel. This provision has therefore cleared the doubt which existed as to the extent
of the liability, both of the agent and of the owner of the vessel. Such liability is limited
by the proposed code to the value of the vessel and other things appertaining thereto."

There is no doubt that if the Navarro had not been entirely lost, the agent, having been
held liable for the negligence of the captain of the vessel could have abandoned her with
all her equipment and the freight money earned during the voyage, thus bringing himself
within the provisions of article 837 in so far as the subsidiary civil liability is
concerned This abandonment which would have amounted to an offer of the value of the
vessel, of her equipment, and freight money earned could not have been refused, and the
agent could not have been personally compelled, under such circumstances, to pay the
18,000 pesos, the estimated value of the vessel at the time of the collision.

This is the difference which exists between the lawful acts and lawful obligations of the
captain and the liability which he incurs on account of any unlawful act committed by
him. In the first case, the lawful acts and obligations of the captain beneficial to the vessel
may be enforced as against the agent for the reason that such obligations arise from the
contract of agency (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 liable. This liability of the agent is limited to the vessel and
it does not extend further. For this reason the Code of Commerce makes the agent liable
to the extent of the value of the vessel, as the codes of the principal maritime nations
provide, with the vessel, and not individually. Such is also the spirit of our code.

The spirit of our code is accurately set forth in a treatise on maritime law, from which we
deem proper to quote the following as the basis of this decision:

That which distinguishes the maritime from the civil law and even from the mercantile
law in general is the real and hypothecary nature of the former, and the many securities of
a real nature that maritime customs from time immemorial the laws, the codes, and the
later jurisprudence, have provided for the protection of the various and conflicting
interests which are ventured and risked in maritime expeditions, such as the interests of
the vessel and of the agent, those of the owners of the cargo and consignees, those who
salvage the ship, those who make loans upon the cargo, those of the sailors and members
of the crew as to their wages, and those of a constructor as to repairs made to the vessel.

As evidence of this "real" nature of the maritime law we have (1) the limitation of the
liability of the agents to the actual value of the vessel and the freight money, and (2) the
right to retain the cargo and the embargo and detention of the vessel even in cases where
the ordinary civil law would not allow more than a personal action against the debtor or
person liable. It will be observed that these rights are correlative, and naturally so,
because if the agent can exempt himself from liability by abandoning the vessel and
freight money, thus avoiding the possibility of risking his whole fortune in the business, it
is also just that his maritime creditor may for any reason attach the vessel itself to secure
his claim without waiting for a settlement of his rights by a final judgment, even to the
prejudice of a third person.

33
 This repeals the civil law to such an extent that, in certain cases, where the mortgaged
property is lost no personal action lies against the owner or agent of the vessel. For
instance, where the' vessel is lost the sailors and members of the crew can not recover
their wages; in case of collision, the liability of the agent is limited as aforesaid, and in
case of shipwreck, those who loan their money on the vessel and cargo lose all their
rights and can not claim reimbursement under the law.

There are two reasons why it is impossible to do away with these privileges, to wit: (1)
The risk to which the thing is exposed, and (2) the "real" nature of 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 waves. If the agent is only liable with the vessel and freight
money and both may be lost through the accidents of navigation it is only just that the
maritime creditor have some means of obviating this precarious nature of his rights by
detaining the ship, his only security, before it is lost.

The liens tacit or legal, which may exist upon the vessel and which a purchaser of the
same would be obliged to respect and recognize are — in addition to those existing in
favor of the State by virtue of the privileges which are granted to it by all the laws —
pilot, tonnage, and port dues and other similar charges, the wages of the crew earned
during the last voyage as provided in article 646 of the Code of Commerce, salvage dues
under article 842, the indemnification due to the captain of the vessel in case his contract
is terminated on account of the voluntary sale of the ship and the insolvency of the owner
as provided in article 608, and all other liabilities arising from collisions under Articles
837 and 838.' (Madariaga pp. 60, 62, 63, 85.

We accordingly hold that the defendant is liable for the indemnification to which the
plaintiff is entitled by reason of the collision but he is not required to pay such
indemnification for the reason that the obligation thus incurred has been extinguished on
account of the loss of the thing bound for the payment thereof and in this respect the
judgment of the court below is affirmed except in so far as it requires the plaintiff to pay
the costs of this action, which is not exactly proper. No special order is made as to costs
of this appeal. After the expiration of twenty days let judgment be entered in accordance
herewith and ten days thereafter the record be remanded to the Court of First Instance for
execution. So ordered. 7

From the foregoing the rule is that in the case of collision, abandonment of the vessel is necessary in order
to limit the liability of the shipowner or the agent to the value of the vessel, its appurtenances and
freightage earned in the voyage in accordance with Article 837 of the Code of Commerce. The only
instance where such abandonment is dispensed with is when the vessel was entirely lost. In such case, the
obligation is thereby extinguished.

In the case of Government of the Philippines vs. Maritime this Court citing Philippine Shipping stated the
exception thereto in that while "the total destruction of the vessel extinguishes a maritime lien, as there is
no longer any risk to which it can attach, but the total destruction of the vessel does not affect the liability
of the owner for repairs of the vessel completed before its loss,8 interpreting the provision of Article 591
of the Code of Commerce in relation with the other Articles of the same Code.

In Ohta Development Company vs. Steamship "Pompey" 9 it appears that at the pier sunk and the
merchandise was lost due to the fault of the steamship "Pompey" that was then docked at said pier. This
Court ruled that the liability of the owner of "Pompey" may not be limited to its value under Article 587

34
of the Code of Commerce as there was no abandonment of the ship. We also held that Article 837 cannot
apply as it refers to collisions which is not the case here. 10

In the case of Guison vs. Philippine Shipping Company 11 involving the collision at the mouth of the
Pasig river between the motor launches Martha and Manila H in which the latter was found to be at fault,
this Court, applying Article 837 of the Code of Commerce limited the liability of the agent to its value.

In the case of Yangco vs. Laserna 12 which involved the steamers SS "Negros" belonging to Yangco
which after two hours of sailing from Romblon to Manila encountered rough seas as a result of which it
capsized such that many of its passengers died in the mishap, several actions for damages were filed
against Yangco, by a verified pleading, he sought to abandon the vessel to the plaintiffs in the three cases
together with all the equipment without prejudice to the right to appeal. This Court in resolving the issue
held as follows:

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 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
provision of article 587 of the Code of Commerce. Said article reads:

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 exempt himself therefrom by abandoning the vessel with all her equipments
and the freight he may have earned during the voyage.

The provision accords a shipowner or agent the right of abandonment; and by necessary
implication, his liability is confined to that which he is entitled as of right to -abandon —
"the vessel with all her equipments and the freight it may have earned during the
voyage." It is true that the article apears 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 carries, but this is a mere deficiency of language and in no
way indicates the true extent of such liability. The consensus of authorities is to the effect
that notwithstanding the language of the afore-quoted provision, the benefit of limited
liability therein provided for, applies in all cases wherein the shipowner or agent may
properly be held liable for the negligent or illicit acts of the captain. Dr. Jose Ma.
Gonzalez de Echavarri y Vivanco commenting on said article, said:

La letra del Codigo, en el articulo 587, presenta una gravisima cuestion. El derecho de
abandono, si se atiende a lo escrito, solo se refiere a las indemnizaciones a que diere lugar
la conducta del Capitan en la custodia de los efectos que cargo en el buque.

Es ese el espiritu del legislador? No; habra derecho de abandono en las responsabilidades
nacidas de obligaciones contraidas por el Capitan y de otros actos de este? Lo reputamos
evidente y, para fortalecer nuestra opinion, basta copiar el siguiente parrafo de la
Exposicion de motivos:

El proyecto, al aplicar estos principios, se inspira tambien en los intereses del comercio
maritimo que quedaran mas asegurados ofreciendo a todo el que contrata con el naviero o
Capitan del buque, la garantia real del mismo, cualesquiera que sean las facultades o

35
 atribuciones de que se hallen investidos; (Echavarri, Codigo de Comercio, Tomo 4, 2.
ed., pags. 483- 484.)

A cursory examination will disclose that the principle of limited liability of a shipowner
or agent is provided for in but three articles of the Code of Commerce — Article 587
aforequoted and articles 590 and 837. Article 590 merely reiterates the principle
embodied in article 587, where the vessel is owned by several person Article 837 applies
the same principle in cases of collision and it has been observed that said article is but 'a
necessary consequence of the right to abandon the vessel given to the shipowner in
Article 587 to 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 therefore, only Articles 587 and 590 are the provisions contained in
our Code of Commerce on the matter, and the framers of said code had intended those
provisions to embody the universal principle of limited liability in all cases. ... . 13

In the said case We invoked our ruling in Philippine Shipping and concluded as follows:

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
coextensive 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 relationship between the petitioner and
the passengers who died in the mishap rests on a contract of carriage. But assuming that
petitioner is liable for a breach of contract of carriage, the exclusively "real and
hypothecary nature" of maritime law operates to limit such liability to the value of the
vessel, or to the insurance thereon, if any. In the instant case it does not appear that the
vessel was insured.

Whether the abandonment of the vessel sought by the petitioner in the instant case was in
accordance with law or not, is immaterial The vessel having totally perished any act of
abandonment would be an Idle ceremony. 14

In the case of Abueg vs. San Diego,15 which involves a claim of compensation under the Workmen's
Compensation Act for the deceased members of the crew of the MS "San Diego II" and MS "Bartolome"
which were caught by a typhoon in the vicinity of Mindoro Island and as a consequence of which they
were sunk and totally lost, this Court held as follows:

Counsel for the appellant cite article 7837 of the Code of Commerce which provides that
if the vessel together with all her tackle and freight money earned during the voyage are
abandoned, the agent's liability to third persons for tortious acts of the captain in the care
of the goods which the ship carried is extinguished (Yangco vs. Laserna, 73 Phil. 330)
Article 937 of the same Code which provides that in cases of collision, the shipowners'
liability is limited to the value of the vessel with all her equipment and freight earned
during the voyage (Philippine Shipping Company vs. Garcia, 6 Phil. 281); 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

36
result of the typhoon that lashed the island of Mindoro on October 1, 1941, was
extinguished.

The real and hypothecary nature of the liability of the shipowner or agent embodied in
the provisions of the Maritime Law, Book III, Code of Commerce, had its origin in the
prevailing conditions of the maritime trade and sea voyages during the medieval ages,
attended by innumerable hazards and perils. To offset against these adverse conditions
and to encourage shipbuilding and maritime commerce, it was deemed necessary to
confine the liability of the owner or agent arising from the operation of a ship to the
vessel equipment, and freight, or insurance, if any, so that if the shipowner or agent
abandoned the ship, equipment, and freight, his liability was extinguished

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 captain or master of the ship; nor the liability for the loss of the ship as
a result of collision; nor the responsibility for wages of the crew, but a liability created by
a statute to compensate employees and laborers in cases of injury received by or inflicted
upon them, while engaged in the performance of their work or employment, or the heirs
and dependents of such laborers and employees in the event of death caused by their
employment. Such compensation has nothing to do with the provisions of the Code of
Commerce regarding maritime commerce. It is an item in the cost of production which
must be included in the budget of any well managed industry.

Appellant's assertion that in the case of Enciso vs. Dy-Liaco (57 Phil. 446), and Murillo
vs. Mendoza (66 Phil. 689), the question of the extinction of the shipowner's liability due
to abandonment of the ship by him was not fully discussed, as in the case of Yangco vs.
Laserna, supra, is not entirely correct. In the last mentioned case, the limitation of the
shipowner's liability to the value of the ship, equipment, freight, and insurance, if any,
was the lis mota In the case of Enciso vs. Dy-Liaco, supra, the application of the
Workmen's Compensation Act to a master or patron who perished as a result of the
sinking of the motorboat of which he was the master, was the controversy submitted to
the court for decision. This Court held in that case that .It has been repeatedly stated that
the Workmen's Compensation Act was enacted to abrogate the common law and our Civil
Code upon culpable acts and omissions, and that the employer need not be guilty of
neglect or fault in order that responsibility may attach to him' (pp. 449-450); and that the
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
provisions of the Civil as well as the 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 of
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. 16

37
In said case the Court reiterated that the liability of the shipowner or agent under the provision of Articles
587 and 837 of the Code of Commerce is limited to the value of the vessel with all her equivalent and
freight earned during the voyage if the shipowner or agent abandoned the ship with all the equipment and
freight. However, it does not apply to the liability under the Workmen's Compensation Act where even as
in said case the vessel was lost the liability thereunder is still enforceable against the employer or
shipowner.

The case of Manila Steamship Company, Inc. vs. Insa Abdulhaman and Lim Hong To 17 is a case of
collision of the ML "Consuelo V" and MS "Bowline Knot" as a result of which the ML "Consuelo V"
capsized and was lost where nine (9) passengers died or were missing and all its cargoes were lost. In the
action for damages arising from the collision, applying Article 837 of the Code of Commerce, this Court
held that in such case where the collision was imputable to both of them, each vessel shall suffer her own
damages and both shall be solidarily liable for the damages occasioned to their cargoes.18 Thus, We held:

In fact, it is a general principle, well established maritime law and custom, that
shipowners and ship agents are civilly liable for the acts of the captain (Code of
Commerce, Article 586) and for the indemnities due the third persons (Article 587); so
that injured parties may immediately look for reimbursement to the owner of the ship, it
being universally recognized that the ship master or captain is primarily the
representative of the owner (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 been declared to exist not only in case of breached
contracts, but also in cases of tortious negligence (Yu Biao Sontua vs. Osorio, 43 Phil.
511; 515):

xxx xxx xxx

It is easy to see that to admit the defense of due diligence of a bonus paterfamilias (in the
selection and vigilance of the officers and crew) as exempting the shipowner from any
liability for their faults, would render nugatory the solidary liability established by Article
827 of the Code of Commerce for the greater protection of injured parties. Shipowners
would be able to escape liability in practically every case, considering that the
qualifications and licensing of ship masters and officers are determined by the State, and
that vigilance is practically impossible to exercise over officers and crew of vessels at
sea. To compel the parties prejudiced to look to the crew for indemnity and redress would
be an illusory remedy for almost always its members. are, from captains down, mere
wage earners.

We, therefore, find no reversible error in the refusal of the Court of Appeals to consider
the defense of the Manila Steamship Co., that it is exempt from liability for the collision
with the M L "Consuelo V " due to the absence of negligence on its part in the selection
and supervision of the officers and crew of the M/S "Bowline Knot. 19

However, insofar as respondent Lim Hong To, owner of M L "Consuelo V" who admittedly employed an
unlicensed master and engineer and who in his application for permission to operate expressly assumed
full risk and responsibility thereby (Exh. 2) this Court held that the liability of Lim Hong To cannot be
limited to the value of his motor launch by abandonment of the vessel as invoked in Article 587 of the
Code of Commerce, We said:

38
 The international rule is to the effect that the right of abandonment of vessels, as a legal
limitation of a shipowner's liability, does not apply to cases where the injury or the
average is due to shipowner's own fault. Farina (Derecho Commercial Maritima Vol. 1,
pp. 122-123), on the authority of judicial precedents from various nations, sets the rule to
be as follows:

xxx xxx xxx 20

From the foregoing, it is clear that in case of collision of vessels, in order to avail of the benefits of
Article 837 of the Code of Commerce the shipowner or agent must abandon the vessel. In such case the
civil liability shall be limited to the value of the vessel with all the appurtenances and freight earned
during the voyage. However, where the injury or average is due to the ship-owner's fault as in said case,
the shipowner may not avail of his right to limited liability by abandoning the vessel.

We reiterate what We said in previous decisions that the real and hypothecary nature of the liability of the
shipowner or agent is embodied in the provisions of the Maritime Law, Book III, Code of
Commerce. 21 Articles 587, 590 and 837 of the same code are precisely intended 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 owner or agent abandons the vessel. Although it is not specifically provided for in Article
837 of the same code that in case of collision there should be such abandonment to enjoy such limited
liability, said article on collision of vessels is a mere amplification of the provisions of Articles 587 and
590 of same code where abandonment of the vessel is a pre-condition. Even without said article, the
parties may avail of the provisions of Articles 587 and 590 of same code in case of collision. This is the
reason why Article 837 of the same code is considered a superfluity. 22

Hence the rule is that in case of collision there should be abandonment of the vessel by the shipowner or
agent in order to enjoy the limited liability provided for under said Article 837.

The exception to this rule is when the vessel is totally lost in which case there is no vessel to abandon so
abandonment is not required. Because of such total loss the liability of the shipowner or agent for
damages is extinguished. Nevertheless, the shipowner or agent is personally liable for claims under the
Workmen's Compensation Act and for repairs of the vessel before its loss. 23

In case of illegal or tortious acts of the captain the liability of the shipowner and agent is subsidiary. In
such instance the shipowner or agent may avail of the provisions of Article 837 of the Code by
abandoning the vessel. 24

However, if the injury or damage is caused by the shipowner's fault as where he engages the services of
an inexperienced and unlicensed captain or engineer, he cannot avail of the provisions of Article 837 of
the Code by abandoning the vessel. 25 He is personally liable for the damages arising thereby.

In the case now before the Court there is no question that the action arose from a collision and the fault is
laid at the doorstep of LSCO "Cavite" of petitioner. Undeniably petitioner has not abandoned the vessel.
Hence petitioner can not invoke the benefit of the provisions of Article 837 of the Code of Commerce to
limit its liability to the value of the vessel, all the appurtenances and freightage earned during the voyage.

In the light of the foregoing conclusion, the issue as to when abandonment should be made need not be
resolved.

WHEREFORE, the petition is DENIED with costs against petitioner.

39
55. TEODORO R. YANGCO, ETC., petitioner,
vs.
MANUEL LASERNA, ET AL., respondents.

Claro M. Recto for petitioner.

Powell & Vega for respondents.

MORAN, J.:

At about one o'clock in the afternoon of May 26, 1927, the steamer S.S. Negros, belonging to petitioner
here, Teodoro R. Yangco, left the port of Romblon on its retun trip to Manila. Typhoon signal No. 2 was
then up, of which fact the captain was duly advised and his attention thereto called by the passengers
themselves before the vessel set sail. The boat was overloaded as indicated by the loadline which was 6 to
7 inches below the surface of the water. Baggage, trunks and other equipments were heaped on the upper
deck, the hold being packed 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
overcrowded, the vessel's capacity being limited to only 123 passengers. After two hours of sailing, the
boat encountered strong winds and rough seas between the islands of Banton and 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 capsize and sink. Many of the passengers died in the
mishap, among them being Antolin Aldaña and his son Victorioso, husband and son, respectively, of
Emilia Bienvenida who, together with her other children and a brother-in-law, are respondents in G.R.
No. 47447; 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 respondents
instituted in the Court of First Instance of Capiz separate civil actions against petitioner here to recover
damages for the death of the passengers aforementioned. The court awarded the heirs of Antolin and
Victorioso Aldana the sum of P2,000; the heirs of Casiana Laserna, P590; and those of Genaro Basana,
also P590. After the rendition of the judgment to 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 abandonment having been denied, an appeal was taken to the Court of Appeals,
wherein all the judgmnets were affirmed except that which sums was increased to P4,000. Petitioner, now
deceased, appealed and is here represented by his legal representative.

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 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 the Code of Commerce. Said article reads:

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 exempt
himself therefrom by abandoning the vessel with all her equipments and the freight he may have
earned during the voyage.

The provisions accords a shipowner or agent the right of abandonment; and by necessary implication, his
liability is confined to that which he is entitled as of right to abandon — "the vessel with all her
equipments and the freight it may have earned during the voyage." It is true that the article appears to deal

40
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 carries, but this is a mere deficiency of language and in
no way indicates the true extent of such liability. The consensus of authorities is to the effect that
notwithstanding the language of the aforequoted provision, the benefit of limited liability therein provided
for, applies in all cases wherein the shipowner or agent may properly be held liable for the negligent or
illicit acts of the captain. Dr. Jose Ma. Gonzalez de Echavarri y Vivanco, commenting on said article,
said:

La letra del Codigo, en el articulo 587, presenta una gravisima cuestion. El derecho de abandono,
si se atiende a lo escrito, solo se refiere a las indemnizaciones a que dierQe lugar la conducta del
Capitan en la custodia de los efectos que cargo en el buque.

¿Es ese el espiritu del legislador? No; ¿habra derecho de abandono en las responsabilidades
nacidas de obligaciones contraidas por el Capitan y de otros actos de este? Lo reputamos evidente
y, para fortalecer nuestra opinion, basta copiar el siguiente parrafo de la Exposicion de motivos:

"El proyecto, al aplicar estos principios, se inspira tambien en los intereses del comercio
maritimo, que quedaran mas asegurados ofreciendo a todo el que contrata con el naviero
o Capitan del buque, la garantia real del mismo, cualesquiera que sean las facultades o
atribuciones de que se hallen investidos." (Echavarri, Codigo de Comercio, Tomo 4, 2. a
ed., pags. 483-484.)

A cursory examination will disclose that the principle of liomited liability of a shipowner or agent is
provided for in but three articles of the Code of Commerce — article 587 aforequoted and article 590 and
837. Article 590 merely reiterates the principle embodied in article 587, 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, therefore, only articles 587 and 590 are the provisions
conatined in our Code of Commerce on the matter, and the framers of said code had intended those
provisions to embody the universal principle of limited liability in all cases. Thus, in the "Exposicon de
Motivos" of the Code of Commerce, we read:

The present code (1829) does not determine the juridical status of the agent where such agent is
not himself the owner of the vessel. This omission is supplied by the proposed code, which
provides in accordance with the principles of maritime law that by agent it is to be understood the
person intrusted with the provisioning of the vessel, or the one who represents her in the port in
which she happens to be. This person is the only one who represents the vessel — that is to say,
the only one who represents the interests of the owner of the vessel. This provision has therefore
cleared the doubt which existed as to the extent of the liability, both of the agent and of the owner
of the vessel. Such liability is limited by the proposed code to the value of the vesseland other
things appertaining thereto.

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 decidendi not only
to cases of collision but also to those of shipwrecks, etc. We said:

This is the difference which exists between the lawful acts and lawful obligations of the captain
and the liability which he incurs on account of any unlawful act committed by him. In the first
case, the lawful acts and obligations of the captain beneficial to the vessel may be enforced as

41
against the agent for the reason that such obligations arise from te the contract of agency
(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
liable. This liability of the agent is limited to the vessel and it does not extend further. For this
reason the Code of Commerce makes the agent liable to the extent of the value of the vessel, as
the codes of the principal maritime nations provide with the vessel, and not individually. Such is
also the spirit of our Code.

The spirit of our code s accurately set forth in a treatise on maritime law, from which we deem
proper to quote the following as the basis of this decision:lawphil.net

"That which distinguishes the maritime from the civil law and even from the mercantile
law in general is the real and hypothecary nature of the former, and the many securities
of a real nature that maritime customs from time immemorial, the laws, the codes, and
the later jurisprudence, have provided for the protection of the various and conflicting
interests which are ventured and risked in maritime expeditions, such as the interests of
the vessel and of the agent, those of the owners of the cargo and consignees, those who
salvage the ship, those who make loans upon the cargo, those of the sailors and members
of the crew as to their wages, and those of a constructor as to repairs made to the vessel.

"As evidence of this real nature of the maritime law we have (1) the limitation of the
liability of the agents to the actual value of the vessel and the freight money, and (2) the
right to retain the cargo and the embargo and detention of the vessel even in cases where
the ordinary civil law would not allow more than a personal action against the debtor or
person liable. It will be observed that these rights are correlative, and naturally so,
because if the agent can exempt himself from liability by abandoning the vessel and
freight money, thus avoiding the possibility of risking his whole fortune in the business, it
is also just that his maritime creditor may for any reason attach the vessel itself to secure
his claim without waiting for a settlement of his rights by a final judgment, even to the
prejudice of a third person.

"This repeals the civil law to such an extent that, in certain cases, where the mortgaged
property is lostno personal action lies against the owner or agent of the vessel. For
instance, where the vessel is lost the sailors and members of the crew cannot recover their
wages; in case of collision, the liability of the agent is limited as aforesaid, and in case of
shipwreck, those who loan their money on the vessel and cargo lose all their rights and
cannot claim reimbursement under the law.

"There are two reasons why it is impossible to do away with these privileges, to wit: (1)
The risk to which the thing is exposed, and (2) the real nature of 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 waves. If the agent is only liable with the vessel and freight money
and both may be lost through the accidents of navigation it is only just that the maritime
creditor have some means to obviating this precarious nature of his rights by detaining
the ship, his only security, before it is lost.

"The liens, tacit or legal, which may exist upon the vessel and which a purchaser of the
same would be obliged to respect and recognize are — in addition to those existing in
favor of the State by virtue of the privileges which are granted to it by all the laws —
pilot, tonnate, and port dues and other similar charges, the wages of the crew earned

42
 during the last voyage as provided in article 646 of the Code of Commerce, salvage dues
under article 842, the indemnification due to the captain of the vessel in case his contract
is terminated on account of the voluntary sale of the ship and the insolvency of the owner
as provided in article 608, and all other liabilities arising from collisions under articles
837 and 838."

We are shared in this conclusion by the eminent commentators on the subject. Agustin Vicente y Gella,
asserting, in his "Introduccion al Derecho Mercantil Comparado" 1929 (pages 374-375), the like principle
of limited liability of shipowners or agent in cases of accidents, collisions, shipwrecks, etc., said:

De las responsabilities que pueden resultar como consequencia del comercio maritimo, y no solo
por hechos propios sino tambien por las que se ocasionen por los del capitan y la 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 encuentra similar en el derecho general
de las obligaciones.

Una forma corrientisima de verificarse el comercio maritimo durante la epoca medieval, era
prestar un propietario su navio para que cargase en el mercancias determinada persona, y se
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
efectos que igualmente revendia a su regreso, verificado lo cual los beneficios de la expedicion se
repartian entre el dueño del buque, el cargador y el capitan y tripulantes en la proporcion
estipulada. El derecho maritimo empezo a considerar la asociacion asi formada como una
verdadera sociedad mercantil, de responsabilidad limitada, y de acuerdo con los principios que
gobiernan aquella en los casos de accidentes, abordajes, naufragios, etc., se resolvia que el dueño
del buque perdia la nave, el cargador las mercancias embarcadas y el capitan y la tripulacion su
trabajo, sin que en ningun caso el tercer acreedor pudiese reclamar mayor cantidad de ninguno de
ellos, porque su responsabilidad quedaba limitada a lo que cada uno aporto a la sociedad.
Recogidas estas ideas en el derecho comercial de tiempos posteriores, la responsabilidad del
naviero se edifico sobre aquellos principios, y derogando la norma general civil de que del
cumplimiento de sus obligaciones responde el deudor con todos sus bienes presentes y futuros, la
responsabilidad maritima se considero siempre limitada ipso jure al patrimonio de mar. Y este es
el origen de la regla trascendental de derecho maritimo segun la cual el naviero se libera de toda
responsabilidad abandonando el buque y el flete a favor de los acreedores.

From the Enciclopedia Juridica Española, Vol. 23, p. 347, we read:

Ahora bien: ¿hasta donde se extiende esta responsabilidad del naviero? ¿sobre que bienes pueden
los acreedores resarcirse? Esta es otra especialidad del Derecho maritimo; en el Derecho comun
la responsabilidad es limitada; tambien lo era en el antiguo Derecho maritimo 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 expediciones
maritimas se consideraron limitadas por los propietarios de las naves a los valores comprometidos
por ellos en cada expedicion; se separo ficticiamente el patrimonio de los navieros en dos partes
que todavia se designan de una manera bastante exacta; fortuna de tierra y fortuna de mar o
flotante; y se admitio la teoria de que esta era la que respondia solo de las deudas provinientes de
los actos del capitan o de la tripulacion, es decir, que el conjunto del patrimonio del naviero
escaparia a estas cargas desde el momento en que abandonara la nave y los fletes a los acreedores.
...

43
Escriche in his Diccionario de la Legislacion y Jurisprudencia, Vol. 1, p. 38, observes:

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 daños o
perjuicios que ocasionare esta desempeñando su cometido, y en que estando facultado el naviero
para la eleccion de capitan de la nave, viene a tener indirectamente culpa en la negligencia o actos
de este que o casionaron daños o perjuicios, puesto que no se 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 vigilar de un modo directo e inmediato la
conducta del capitan, hubiera sido duro hacerla extensiva a todos sus bienes que podria
comprometer el capitan con sus faltas o delitos.

The views of these learned commentators, including those of Estasen (Derecho Mercantil, Vol. 4, 259)
and Supino (Derecho Mercantil, pp. 463-464), leave nothing to be desired and nothing to be doubted on
the principle. It only remains to be noted that the rule of limited liability provided for in our Code of
Commerce reflects merely, or is but a restatement, imperfect though it is, of the almost universal principle
on the subject. While previously under the civil or common law, the owner of a vessel was liable to the
full amount for damages caused by the misconduct of the master, by the general maritime law of modern
Europe, the liability of the shipowner was subsequently limited to his interest in the vessel. (Norwich &
N. Y. Trans. Co. v. Wright, 80 U. S. 104, 20 Law. ed. 585.) A similar limitation was placed by the British
Parliament upon the liability of Englosh shipowners through a series of statutes beginning in 1734 with
the Act of 7 George II, chapter 15. The legislatures of Massachusetts and Maine followed suit in 1818 and
1821, and finally, Congress enacted the Limited Liability Act of March 3, 1851, embodying most of the
provisions contained in the British Statutes (see 24 R. C. L. pp. 1387-1389). Section 4283 of the Revised
Statutes (sec. 183, Tit. 46, Code of Laws of U. S. A.) reads:

LIABILITY OF OWNER NOT TO EXCEED INTEREST. — The liability of the owner of any
vessel, for 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 act, matter or thing, loss, damage, or forfeiture, done, occasioned, or incurred
without the privity, or knowledge of such owner or owners, shall in no case exceed the amount or
value of the interest of such owner in such vessel, and her freight then pending.

The policy which the rule is designed to promote is the encouragement of shipbuilding and investment in
maritime commerce. (Vide: Norwich & N. Y. Trans. Co. v. Wright, supra; The Main v. Williams, 152 U.
S. 122; 58 C. J. 634.) And it is in that spirit that the American courts construed the Limited Liability Act
of Congress whereby the immunities of the Act were applied to claims not only for lost goods but also for
injuries and "loss of life of passengers, whether arising under the general law of admiralty, or under
Federal or State statutes." (The City of Columbus, 22 Fed. 460; The Longfellow, 104 Fed. 360;
Butler v. Boston & Savannah Steamship 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, 589-590, accounting for the history of the principle, clinches our exposition of
the supporting authorities:

The history of the limitation of liability of shipowners is matter of common knowledge. The
learned opinion of Judge Ware in the case of The Rebecca, 1 Ware, 187-194, leaves little to be
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
damage caused by the wrongful act or negligence of the matter or crew, the maritime law only

44
 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.

Grotius, in his law of War and Peace, says that men would be deterred from investing in ships if
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 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 limit
such liability to the value of the vessel, or to the insurance thereon, if any. In the instant case it does not
appear that the vessel was insured.

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 abandonment would be an idle
ceremony.

Judgement is reversed and petitioner is hereby absolved of all the complaints, without costs.

45
56. YU CON, plaintiff-appellee,
vs.
GLICERIO IPIL, NARCISO LAURON, and JUSTO SOLAMO, defendants-appellants.

Felix Sevilla y Macam for appellants.

Juan Singson and Dionisio Jakosalem for appellee.

ARAULLO, J.:

The purpose of the action brought in these proceedings is to enable the plaintiff to recover from the
defendants jointly and severally the sum of P450, which had been delivered by the plaintiff to the first and
third of the above-named defendants, master and supercargo, respectively, of
a banca named Maria belonging to the second defendant, to be carried, together with various
merchandise belonging to the plaintiff, from the port of Cebu to the 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 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 not afterwards found. The plaintiff based his action on the charge that the
disappearance of said sum was due to the abandonment, negligence, or voluntary breach, on the part of
the defendants, of the duty they had in respect to the safe-keeping of the aforementioned sum.

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 said banca, the property
of the defendant Lauron, for the fixed period of three days, at the price of P10 per diem, and that, through
the misfortune, negligence, or abandonment of the plaintiff himself, the loss complained of occurred,
while said banca was at anchor in the port of Cebu, and was caused by theft committed by unknown
thieves. They further alleged that said defendant Lauron, the owner of the banca merely placed this craft
at the disposal of the plaintiff for the price and period agreed upon, and did not go with the banca on its
voyage from Catmon to Cebu. As a counterclaim, the defendants also asked that the plaintiff be ordered
to pay the freight agreed upon, which had not yet been paid, amounting to P80, plus the sum of P70, as an
indemnity for the losses and damages caused them by the attachment of the banca, issued at the instance
of the plaintiff upon filing his complaint. They also prayed for the additional sum of P100, for the
deterioration of the said banca, and also that of P200 for other deterioration suffered by the same since
November, 1911, and which had not bee paid for. Finally, the defendants asked to be absolved from the
complaint.

Before commencing the hearing of this case, the defendants made a verbal motion asking that the plaintiff
be declared in default, with respect to the counterclaim filed by them in their answer. On the same date,
the plaintiff presented his answer to said counter claim, denying 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.

At the termination of the trial, the court, in view of the evidence adduced, held that there was no room to
doubt that the sole cause of the disappearance of the money from the said banca was the negligence of the
master and the supercargo, the defendants Ipil and 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

46
of the Code of 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 date of filing of the
complaint, October 24, 1911, with costs. The plaintiff was absolved from the defendant's counterclaim.
From this judgment the defendants excepted and at the same time moved for a new trial. Their motion
was denied, to which ruling they also excepted, and, through the proper bill of exceptions, entered and
appeal to this Supreme Court. In their brief they allege that the trial court erred:

1. In applying articles 586, 587, and 618 of the Code of Commerce in favor of the plaintiff;

2. In overruling the motion for default presented by the defendants and in sentencing the
defendants jointly and severally to pay the plaintiff the amount mentioned in the judgment; and

3. In absolving the plaintiff from the defendant's counterclaim.

The evidence shows that the plaintiff Yu Con, a merchant and a resident of the town of San Nicolas, of
the city of Cebu, engaged in the sale of cloth and domestic articles and having a share in a shop, or small
store, situated in the town of Catmon, of said province, had several times chartered from the defendant
Narciso Lauron, a banca named Maria belonging to the latter, of which Glicerio Ipil was master and Justo
Solamo, supercargo, for the transportation of certain merchandise and some money to and from the said
town and the port of Cebu, that, on or about the 17th of October, 1911, the plaintiff chartered the
said banca from the defendant Lauron for the transportation of various merchandise from the port of Cebu
to Catmon, at the price of P45 for the round trip, which merchandise was loaded on board the said craft
which was then at anchor in front of one of the graded fills of the wharf of said port; that in the afternoon
of the following day, he delivered to the other two defendants, Ipil, and Solamo, master and supercargo,
respectively, of the afore-named banca, the sum of P450, which was in a trunk belonging to the plaintiff
and was taken charge of by said two defendants, who 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 abroad the vessel, on the night of the said 18th of October, the time
scheduled for the departure of the Maria from the port of Cebu, said master and said supercargo
transferred the 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 night, and
that the investigations, made to ascertain their whereabouts, produced no result.

The facts are also admitted by the aforementioned master and supercargo, two of the defendants, that they
received from the plaintiff said P450, which sum was in the latter's own trunk which was placed outside
the stateroom of the banca, for the reason, as they said, that there was no room for it inside the stateroom;
that these defendants therefore transferred said money to their trunk, which was inside the stateroom, and
that this trunk and the P450 therein contained disappeared from the boat during the night of that same
day; that said sum had not been found or returned to the plaintiff; that the plaintiff, being on the banca in
the afternoon of that day, when his trunk containing the P450 was carried aboard, and seeing that said two
defendants, who had the key of the trunk, has removed said sum to their trunk inside the stateroom,
charged them to take special care of the money; that the master Ipil assured the plaintiff that there was no
danger of the money being lost; and that, final, during the night in question, both the master and the
supercargo and four cabin-boys were aboard the banca.

It was likewise proven by the affidavits made by the master Ipil, the supercargo Solamo, and the cabin-
boys of said vessel, Juan Quiamco and Gabriel Basang, before the provincial fiscal of Cebu on the day
following the commission of the theft, which affidavits were presented at the trial as Exhibits A, 3, 4, and
5, and by the testimony given at the trial by the defendants Ipil and Solamo, that both said cabin-boys and

47
the other two, Simeon Solamo, and said cabin-boys ad the other two, Simeon Solamo, and Eulalio
Quiamco, knew of the existence of the money in 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, conveyed the plaintiff's trunk, in which the money was previously contained, from the
plaintiff's shop to the banca; and that no person not belonging to the vessel knew that the money was in
the trunk inside said stateroom.

According to the testimony of the master Ipil himself he slept outside the stateroom that night, but a
cabin-boy named Gabriel slept inside. The latter, however, was not presented by the defendants to be
examined in regard to this point, nor does it appear that he testified in respect thereto in his affidavit,
Exhibit 5, before referred to, presented by the defendant's own counsel. The master Ipil and the
supercargo Solamo also testified that they left the cabin-boy Simeon Solamo on guard that night; but this
affirmation was not corroborated by Solamo at the trial, for he was not introduced as a witness, and only
his affidavit, Exhibit 2, taken before the fiscal of Cebu on the day following the commission of the crime,
was presented by the defendants. This affidavit, which should have been admitted and not rejected, as was
done by the court and excepted to by the defendants, shows that Simeon Solamo stated that he was not
designated to do guard duty that night, but that on the morning of the said 19th of October, that is, the
next day, all agreed that affiant should say that he was on guard, though it was not true that he was.

Finally, said two defendants, the master and the supercargo, gave no satisfactory explanation in regard to
the disappearance of the trunk and the money therein contained, from the stateroom in which the trunk
was, nor as to who stole or might have stolen it. The master of 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 that he believed that the guard Simeon also fell asleep because he,
too, was tired. The second defendant gave the same testimony. Both of them testified that the small
window of the stateroom had been broken, and the first of them, i.e., the master, stated that all the
window-blinds had been removed from the windows, as well as part of the partition in which they were,
and that the trunk in which the money was contained could have been passed through said small window,
because, as this witness himself had verified, the Chinaman's trunk, which differed but a little from the
one stolen, could be passed through the same opening. The chief pilot of the harbor of Cebu, Placido
Sepeda, who officially visited the said banca, also stated that the small wooden window of the stateroom
was broken, and that he believed that in breaking it much noise must have been produced. However, no
evidence whatever was offered by counsel for the defendants to prove that it might have been possible to
remove the 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 master
referred in his testimony, so that it might be verified whether the statement made by the latter was true,
viz., that it might have been possible to remove from the stateroom through said opening the trunk in
which the P450 were contained, which sum, the same as the trunk, its container, had not been found, in
spite of the investigation made for the purpose. Furthermore, it was not proven, nor is there any
circumstantial evidence to show, that the robbery in question was committed by persons not belonging to
the craft.

It is therefore beyond all doubt that the loss or disappearance, on the night aforementioned, of the P450,
the property of the plaintiff, which, were in the possession of the defendants, the master and the
supercargo of the banca Maria, occurred through the manifest fault and 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 properly guarded by members of the crew and put in such
condition that it would be impossible to steal the trunk from it or that persons not belonging to the vessel
might force an entrance into the stateroom from the outside, but also they did not expressly station some
person inside the stateroom for the guarding and safe-keeping of the trunk, for it was not proven that the

48
cabin-boy Gabriel slept there, as the master of the vessel, Ipil, stated, nor that the other Cabin-boy,
Simeon Solamo, was on guard that night, for the latter contradicted the statements made by the two
defendants on this point. On the contrary, it was proven by the master's own statement that all the people
of the vessel, including himself and the supercargo Solamo, slept soundly that night; which fact cannot, in
any manner, serve them as an excuse, nor can it be accepted as an explanation of the statement that they
were not aware of what was then occuring on board, if the trunk was actually stolen by outsiders and
removed through the small window of the stateroom, a detail which also was not proven, but, on the
contrary, 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 impossible to know who took
the trunk and the money and the failure to recover the one or 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 money was due to a fortuitous event, to force majeure, or that it was
an occurrence which could not have been foreseen, or which, if foreseen, was inevitable.

It is unquestionable that the defendants Glicerio Ipil and Justo Solamo were the carriers of the said P450
belonging to the plaintiff, and that they received this sum from the latter for the purpose of delivering it to
the store of the town of Catmon, to which it had been consigned. Under such circumstances, said
defendants were the depositaries of the money.lawphi1.net

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:

Liability of carriers. — In order that a thing may be transported, it must be delivered to the
carrier, as the Code says. From the time it is delivered to the carrier or shipper until it is 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 that
he should be responsible for it.

The Code discovers in the relation of all these elements the factors which go to make up the
conception of a trust, and, taking into account that the delivery of the thing on the part of the
shipper is unavoidable, if the transportation is to take place, esteem that, at least in certain
respects, such trusts are necessary.

The said two defendants being the depositaries of the sum in question, and they having failed to exercise
for its safe-keeping the diligence required by the nature of the obligation assumed by them and by the
circumstances of the time and the place, it is evident that, in pursuance of the provisions of articles 1601
and 1602, in their relation to articles 1783 and 1784, and as prescribed in articles 1770, of the Civil Code,
they are liable for its loss or misplacement and 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.

With respect to the other defendant, Narciso Lauron, as he was the owner of the vessel in which the loss
or misplacement of the P450 occurred, of which vessel, as aforestated, Glicerio 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 delivered to the said master, Ipil, and the
merchandise to be transported by means of said 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 examine whether the latter, also, should be held to be liable, as requested by the
plaintiff in his complaint.

49
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 of the merchandise which
was to be carried, on the date hereinabove mentioned, from the port of Cebu to the town of Catmon.

For legal purposes, that is, for the determination of the nature and effect of the relations created between
the plaintiff, as owner of the merchandise laden on said craft and of the money that was delivered to the
master, Ipil, and the defendant Lauron, as owner of the craft, the latter was a vessel, according to the
meaning and construction given to the word vessel in the Mercantile Code, in treating of maritime
commerce, under Title 1,
Book 3.

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. (Commentaries
on the Code of Commerce, in the General Review of Legislation and Jurisprudence, founded by
D. Jose Reus y Garcia, Vol., 2 p. 136.)

According to the Dictionary of Legislation and Jurisprudence by Escriche, a vessel is any kind of craft,
considering solely the hull.

Blanco, the commentator on mercantile law, in referring to the grammatical meaning of the word "ship"
and "vessels," says, in his work aforecited, that these terms designate every kind of craft, large or small,
whether belonging to the merchant marine or to the navy. And 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, so long as it be not an accessory of another, such as the small boat of
a vessel, of greater or less tonnage. This definition comprises both the craft intended for ocean or for
coastwise navigation, as well as the floating docks, mud lighters, dredges, dumpscows or any other
floating apparatus used in the service of an industry or in that of maritime commerce. . . ." (Vol. 1, p.
389.)

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 meaning this word
has in mercantile law, that is, in accordance with the provisions of the Code of Commerce in force.

Glicerio Ipil, the master of the said banca Maria, must also be considered as its captain, in the legal
acceptation of this word.

The same Code of Commerce in force in these Islands compares, in its article 609, masters with captains.
It is to be noted that in the Code of Commerce of Spain the denomination of arraeces is not included in
said article as equivalent to that of masters, as it is in the Code of these Islands.

Commenting on said article, the aforementioned General Review of Legislation and Jurisprudence says:

The name of captain or master is given, according to the kind of vessel, to the person in charge of
it.

The first denomination is applied to those who govern vessels that navigate the high seas or ships
of large dimensions and importance, although they be engaged in the coastwise trade.

Masters are those who command smaller ships engaged exclusively in the coastwise trade.

50
 For the purposes of maritime commerce, the words "captain" and "master" have the same
meaning; both being the chiefs or commanders of ships. (Vol. 2, p. 168.)

Article 587 of the Code of Commerce in force provides:

The agent shall 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 exempt
himself therefrom by abandoning the vessel with all her equipments and the freight he may have
earned during the trip.

Article 618 of the same Code also prescribes:

The captain shall be civilly liable to the agent and the latter to the third persons who may have
made contracts with the former —

1. For all the damages suffered by the vessel and its cargo by reason of want of skill or negligence
on his part, If a misdemeanor or crime has been committed he shall be liable in accordance with
the Penal Code.

2. For all the thefts committed by the crew, reserving his right of action against the guilty parties.

The Code of Commerce previous to the one now in force, to wit, that of 1829, in its article 624, provided
that the agent or shipowner should not be liable for any excesses which, during the navigation, might be
committed by the captain and crew, and that, for the reason of such excesses, it was only proper to bring
action against the persons and property of those found guilty.

Estasen, in his work on the Institutes of Mercantile Law (Vol. 4, p. 280), makes the following remarks, in
referring to the exposition of reasons presented by the Code Commission which prepared and presented
for approval the Code of Commerce now in force, in which exposition of reasons were set forth the
fundamental differences between the provisions contained in both codes, with respect to the subject-
matter now under discussion. He says:

Another very important innovation introduced by the Code is that relative to the liability for
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 different juris-
consults.

The old code declares the captain civilly liable for all damage sustained by the vessel or its 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 unmistakeable terms
that he shall in no wise be liable for any excesses which, during the navigation, may be
committed by the captain and the crew.

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 absolute
and categorical terms in which it is formulated.

51
 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 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 confidence they have in the
shipowner who appointed him; they presume that the owner 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 obtain complete security, inasmuch as the
shipowner can, whenever he sees fir, appoint another captain instead.

The shipowner is in the same case with respect to the members of the crew, for, though he does
not appoint directly, yet, expressly or tacitly, he contributes to their appointment.

On the other hand, if the shipowner derives profits from the results of the choice of the captain
and the crew, when the choice turns out successful, it is also just that he should suffer the
consequences of an unsuccessful appointment, by application of the rule of natural law contained
in the Partidas, viz., that he who enjoys the benefits derived from a thing must likewise suffer the
losses that ensue therefrom.

Moreover, the Penal Code contains a general principle that resolves the question under
consideration, for it declares that such persons as undertake and carry on any iondustry shall be
civilly liable, in default of those who may be criminally liable, for the misdemeanors and 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

52
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.

57. INTER-ORIENT MARITIME ENTERPRISES, INC., SEA HORSE SHIP, INC. and TRENDA
WORLD SHIPPING (MANILA), INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and RIZALINO D. TAYONG, respondents.

Marilyn Cacho-Naoe for petitioners.

Wilfred L. Pascasio for private respondent.

FELICIANO, J.:

Private respondent Captain Rizalino Tayong, a licensed Master Mariner with experience in commanding
ocean-going vessels, was employed on 6 July 1989 by petitioners Trenda World Shipping (Manila), Inc.
and Sea Horse Ship Management, Inc. through petitioner Inter-Orient Maritime Enterprises, Inc. as
Master of the vessel M/V Oceanic Mindoro, for a period of one (1) year, as evidenced by an employment
contract. On 15 July 1989, Captain Tayong assumed 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.

On 16 July 1989, while at the Port of Hongkong and in the process of unloading cargo, Captain Tayong
received a weather report that a storm code-named "Gordon" would shortly hit 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.

On 21 July 1989, Captain Tayong followed-up the requisition by the former captain of 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 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 casing. He was
subsequently instructed to blank off the cooling water and maintain reduced RPM unless authorized by
the owners.3

On 29 July 1989, while the vessel was en route to Singapore, Captain Tayong reported that the 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 instead.4

53
On 31 July 1989 at 0607 hrs., the vessel arrived at the port of Singapore.5 The Chief Engineer reminded
Captain Tayong that the oxygen and acetylene supplies had not been delivered.6 Captain Tayong inquired
from the ship's agent in Singapore about the supplies. The ship agent stated that these could only be
delivered at 0800 hours on August 1, 1989 as the stores had closed.7

Captain Tayong called the shipowner, Sea Horse Ship Management, Ltd., in London and 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

On the night of 31 July 1989, Mr. Clark received a call from Captain Tayong informing him that the
vessel cannot sail without the oxygen and acetylene for safety reasons due to the problems with the turbo
charger and economizer. Mr. Clark responded that by shutting off the water to the turbo chargers and
using the auxiliary boiler, there should be no further problems. According to Mr. Clark, Captain Tayong
agreed with him that the vessel could sail as scheduled on 0100 hours on 1 August 1989 for South
Africa.10

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 be delivered on board
the Oceanic Mindoro.12 At 0800 hours on 1 August 1989, the requisitioned supplies were delivered and
Captain Tayong immediately sailed for Richard Bay.

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 informed of the charges against him.14

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.

Petitioners, in their answer to the complaint, denied that they had illegally dismissed Captain Tayong.
Petitioners alleged that he had refused to sail immediately to South Africa to the 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. This meant that the charterers refused to pay the
charter hire or compensation corresponding to twelve (12) hours, amounting to US$15,500.00, due to
time lost in the voyage. They stated that they had dismissed private respondent for loss of trust and
confidence.

The POEA dismissed Captain Tayong's complaint and held that there was valid cause for his untimely
repatriation. The decision of the POEA placed considerable weight on petitioners' assertion that all the
time lost as a result of the delay was caused by Captain Tayong and that his concern for the oxygen and
acetylene was not legitimate as these supplies were not necessary or indispensable for running the vessel.
The POEA believed that the Captain had unreasonably refused to follow the instructions of petitioners
and their representative, despite petitioners' firm assurances that the vessel was seaworthy for the voyage
to South Africa.

54
On appeal, the National Labor Relations Commission ("NLRC") reversed and set aside the decision of the
POEA. The NLRC found that Captain Tayong had not been afforded an opportunity to be heard and that
no substantial evidence was adduced to establish the basis for petitioners' loss of trust or confidence in the
Captain. The NLRC declared that he had only acted in accordance with his duties to maintain the
seaworthiness of the vessel and to insure the safety of the ship and the crew. The NLRC directed
petitioners to pay the Captain (a) his salary for the unexpired portion of the contract at US$1,900.00 a
month, plus one (1) month leave benefit; and (b) attorney's fees equivalent to ten percent (10%) of the
total award due.

Petitioners, before this Court, claim that the NLRC had acted with grave abuse of discretion. Petitioners
allege that they had adduced sufficient evidence to establish the basis for private respondent's discharge,
contrary to the conclusion reached by the NLRC. Petitioners insist that Captain Tayong, who must protect
the interest of petitioners, had caused them unnecessary damage, and that they, as owners of the vessel,
cannot be compelled to keep in their employ a captain of a vessel in whom they have lost their trust and
confidence. Petitioners finally 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 abuse of discretion.

The petition must fail.

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 Revised Circular No. 1-
88. On this ground alone, the petition could have been dismissed. But the Court chose not to do so, in
view of the nature of question here raised and instead required private respondent to file a comment on
the petition. Captain Tayong submitted his comment. The Office of the Solicitor General asked for an
extension of thirty (30) days to file its comment on behalf of the NLRC. We consider that the Solicitor
General's comment may be dispensed with in this case.

It is well settled in this jurisdiction that confidential and managerial employees cannot be arbitrarily
dismissed at any time, and without cause as reasonably established in an appropriate investigation.15 Such
employees, too, are entitled to security of tenure, fair standards of employment and the protection of labor
laws.

The captain of a vessel is a confidential and managerial employee within the meaning of the above
doctrine. A master or captain, for purposes of maritime commerce, is one who has command of a vessel.
A captain commonly performs three (3) distinct roles: (1) he is a general agent of the shipowner; (2) he is
also commander and technical director of the vessel; and (3) he is a representative of the country under
whose flag he navigates.16 Of these roles, by far the most important is the role performed by the captain as
commander of the vessel; for such role (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 voyage and the protection of the passengers (if any) and crew and cargo. In his role as
general agent of the shipowner, the captain has authority to sign bills of lading, carry goods aboard and
deal with the freight earned, agree upon rates and decide whether to take cargo. The ship captain, as agent
of the shipowner, has legal authority to enter into contracts with respect to the vessel and the trading of
the vessel, subject to applicable limitations established by statute, contract or instructions and regulations
of the shipowner.17 To the captain is committed the governance, care and management of the
vessel.18 Clearly, the captain is vested with both management and fiduciary functions.

It is plain from the records of the present petition that Captain Tayong was denied any opportunity to
defend himself. Petitioners curtly dismissed him from his command and summarily ordered his

55
repatriation to the Philippines without informing him of the charge or charges levelled against him, and
much less giving him a chance to refute any such charge. In fact, it was only on 26 October 1989 that
Captain Tayong received a telegram dated 24 October 1989 from Inter-Orient requiring him to explain
why he delayed sailing to South Africa.

We also find that the principal contention of petitioners against the decision of the NLRC 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 rule, the concern solely of
an administrative body, so long as there is substantial evidence of record to sustain its action.

The record requires us to reject petitioners' claim that the NLRC's conclusions of fact were not supported
by substantial evidence. Petitioners rely on self-serving affidavits of their own officers and employees
predictably tending to support petitioners' allegation that Captain Tayong had performed acts inimical to
petitioners' interests for which, supposedly, he was 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 functioning of the vessel's turbo-charger19 and economizer and that had
prevented the full or regular operation of the vessel. Thus, Mr. Clark relayed to Captain Tayong
instructions to "maintain reduced RPM" during the voyage to South Africa, instead of waiting in
Singapore for the supplies that would permit shipboard repair of the malfunctioning machinery and
equipment.

More importantly, a ship's captain must be accorded a reasonable measure of discretionary authority to
decide what the safety of the ship and of its crew and cargo specifically requires on a stipulated ocean
voyage. The captain is held responsible, and properly so, for such safety. He is right there on the vessel, in
command of it and (it must be presumed) knowledgeable as to the specific requirements of seaworthiness
and the particular risks and perils of the voyage he is to embark upon. The applicable principle is that the
captain has control of all departments of service in the vessel, and reasonable discretion as to its
navigation.20 It is the right and duty of the captain, in the exercise of sound discretion and in good faith, to
do all things with 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 be of the
shipowners, charterers, cargo owners or of underwriters.21 It is a basic principle of admiralty law that in
navigating a merchantman, the master must be left free to exercise his own best judgment. The
requirements of safe navigation compel us to reject any suggestion 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 convinced, as a reasonably prudent and competent
mariner acting in good faith that the shipowner's or ship agent's instructions (insisted upon by radio or
telefax from their offices thousands of miles away) will result, in the very specific circumstances facing
him, in imposing unacceptable risks of loss or serious danger to ship or crew, he cannot casually seek
absolution from his responsibility, if a marine casualty occurs, in such instructions.23

Compagnie de Commerce v. Hamburg24 is instructive in this connection. There, this Court recognized the
discretionary authority of the master of a vessel and his right to exercise his best judgment, with respect to
navigating the vessel he commands. In Compagnie de Commerce, a charter party was executed
between Compagnie de Commerce and the owners of the vessel Sambia, under which the former as
charterer loaded on board the Sambia, at the port of Saigon, certain cargo destined for the Ports of
Dunkirk and Hamburg in Europe. The Sambia, flying the German flag, could not, in the judgment of its
master, reach its ports of 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
Port of Manila. Compagnie de Commerce sued in the Philippines for damages arising from breach of the

56
charter party and unauthorized sale of the cargo. In affirming the decision of the trial court dismissing the
complaint, our Supreme Court held that the master of the Sambia had reasonable grounds to apprehend
that the vessel was in danger of seizure or capture by the French authorities in Saigon and was justified by
necessity to elect the course which he took — i.e., to flee Saigon for the Port of Manila — with the result
that the shipowner was relieved from liability for the deviation from the stipulated route and from liability
for damage to the cargo. The Court said:

The danger from which the master of the Sambia fled was a real and not merely an
imaginary one as counsel for shipper contends. Seizure at the hands of an "enemy of the
King" though not inevitable, was a possible outcome of a failure to leave the port of
Saigon; and we cannot say that under the conditions existing at the time when the master
elected to flee from that port, there were no grounds for a "reasonable apprehension of
danger" from seizure by the French authorities, and therefore no necessity for flight.

The word "necessity" when applied to mercantile affairs, where the judgment must in the
nature of things be exercised, cannot, of course, mean an irresistible compelling power.
What is meant by it in such cases is the force of circumstances which determine the
course a man ought to take. Thus, where by the force of circumstances, a man has the
duty cast upon him of taking some action for another, and under that obligation adopts a
course which, to the judgment of a wise and prudent man, is apparently the best for the
interest of the persons for whom he acts in a given emergency, it may properly be said of
the course so taken that it was in a mercantile sense necessary to take it.25 (Emphasis
supplied)

Compagnie de Commerce contended that the shipowner should, at all events, be held responsible for the
deterioration in the value of the cargo incident to its long stay on board the vessel from the date of its
arrival in Manila until the cargo was sold. The Supreme Court, in rejecting this contention also, declared
that:

But it is clear that the master could not be required to act on the very day of his arrival; or
before he had a reasonable opportunity to ascertain whether he could hope to carry out
his contract and earn his freight; and that he should not be held responsible for a
reasonable delay incident to an effort to ascertain the wishes of the freighter, and upon
failure to secure prompt advice, to decide for himself as to the course which he should
adopt to secure the interests of the absent owner of the property aboard the vessel.

The master is entitled to delay for such a period as may be reasonable under the
circumstances, before deciding on the course he will adopt. He may claim a fair
opportunity of carrying out a contract, and earning the freight, whether by repairing or
transhipping. Should the repair of the ship be undertaken, it must be proceeded with
diligently; and if so done, the freighter will have no ground of complaint, although the
consequent delay be a long one, unless, indeed, the cargo is perishable, and likely to be
injured by the delay. Where that is the case, it ought to be forwarded, or sold, or given
up, as the case may be, without waiting for repairs.

A shipowner or shipmaster (if communication with the shipowner is impossible), will be

allowed a reasonable time in which to decide what course he will adopt in such cases as
those under discussion; time must be allowed to him to ascertain the facts, and to balance
the conflicting interests involved, of shipowner, cargo owner, underwriter on ship and
freight. But once the time has elapsed, he is bound to act promptly according as he has

57
 elected either to repair, or abandon the voyage, or tranship. If he delays, and owing to that
delay a perishable cargo suffers damage, the shipowner will be liable for that damage; he
cannot escape that obligation by pleading the absence of definite instructions from the
owners of the cargo or their underwriters, since he has control of the cargo and is entitled
to elect.26(Emphasis supplied)

The critical question, therefore, is whether or not Captain Tayong had reasonable grounds to believe that
the safety of the vessel and the crew under his command or the possibility of substantial delay at sea
required him to wait for the delivery of the supplies needed for the repair of the turbo-charger and the
economizer before embarking on the long voyage from Singapore to South Africa.

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 the case at bar, at the cost of loss of Captain Tayong's
rights under his contract with petitioners and under Philippine law.

58
ACCORDINGLY, petitioners having failed to show grave abuse of discretion amounting to loss or excess
of jurisdiction on the part of the NLRC in rendering its assailed decision, the Petition for Certiorari is
hereby DISMISSED, for lack of merit. Costs against petitioners.

SO ORDERED.

58. FAR EASTERN SHIPPING COMPANY, petitioner, vs. COURT OF APPELAS and
PHILIPPINE PORTS AUTHORITY, respondents.

[G.R. No. 130150. October 1, 1998]

MANILA PILOTS ASSOCIATION, petitioner, vs. PHILIPPINE PORTS AUTHORITY and FAR
EASTERN SHIPPING COMPANY, respondents.

DECISION
REGALADO, J.:

These consolidated petitions for review on certiorari seek in unison to annul and set aside the
decision[1] of respondent Court of Appeals of November 15, 1996 and its resolution[2]dated July 31, 1997
in CA-G.R. CV No. 24072, entitled Philippine Ports Authority, Plaintiff-Appellee vs. Far Eastern
Shipping Company, Senen C. Gavino and Manila Pilots Association.Defendants-Appellants, which
affirmed with modification the judgment of the trial court holding the defendants-appellants therein
solidarily liable for damages in favor of herein private respondent.
There is no dispute about the facts as found by the appellate court, thus --

x x x On June 20, 1980, the M/V PAVLODAR, flying under the flagship of the USSR, owned and
operated by the Far Eastern Shipping Company (FESC for brevitys sake), arrived at the Port of Manila
from Vancouver, British Columbia at about 7:00 oclock in the morning. The vessel was assigned Berth 4
of the Manila International Port, as its berthing space. Captain Roberto Abellana was tasked by the
Philippine Port Authority to supervise the berthing of the vessel. Appellant Senen Gavino was assigned
by the appellant Manila Pilots Association (MPA for brevitys sake) to conduct docking maneuvers for the
safe berthing of the vessel to Berth No. 4.

Gavino boarded the vessel at the quarantine anchorage and stationed himself in the bridge, with the
master of the vessel, Victor Kavankov, beside him. After a briefing of Gavino by Kavankov of the
particulars of the vessel and its cargo, the vessel lifted anchor from the quarantine anchorage and
proceeded to the Manila International Port. The sea was calm and the wind was ideal for docking
maneuvers.

When the vessel reached the landmark (the big church by the Tondo North Harbor) one-half mile from
the pier, Gavino ordered the engine stopped. When the vessel was already about 2,000 feet from the pier,
Gavino ordered the anchor dropped. Kavankov relayed the orders to the crew of the vessel on the
bow. The left anchor, with two (2) shackles were dropped.However, the anchor did not take hold as
expected. The speed of the vessel did not slacken. A commotion ensued between the crew members. A

59
brief conference ensued between Kavankov and the crew members. When Gavino inquired what was all
the commotion about, Kavankov assured Gavino that there was nothing of it.

After Gavino noticed that the anchor did not take hold, he ordered the engines half-astern. Abellana, who
was then on the pier apron, noticed that the vessel was approaching the pier fast. Kavankov likewise
noticed that the anchor did not take hold. Gavino thereafter gave the full-astern code. Before the right
anchor and additional shackles could be dropped, the bow of the vessel rammed into the apron of the pier
causing considerable damage to the pier. The vessel sustained damage too. (Exhibit 7-Far Eastern
Shipping). Kavankov filed his sea protest (Exhibit 1-Vessel). Gavino submitted his report to the Chief
Pilot (Exhibit 1-Pilot) who referred the report to the Philippine Ports Authority (Exhibit 2-Pilot) Abellana
likewise submitted his report of the incident (Exhibit B).

Per contract and supplemental contract of the Philippine Ports Authority and the contractor for the
rehabilitation of the damaged pier, the same cost the Philippine Ports Authority the amount
of P1,126,132.25 (Exhibits D and E).[3]

On January 10, 1983, the Philippine Ports Authority (PPA, for brevity), through the Solicitor
General, filed before the Regional Trial Court of Manila, Branch 39, a complaint for a sum of money
against Far Eastern Shipping Co., Capt. Senen C. Gavino and the Manila Pilots Association, docketed as
Civil Case No. 83-14958,[4] praying that the defendants therein be held jointly and severally liable to pay
the plaintiff actual and exemplary damages plus costs of suit. In a decision dated August 1, 1985, the trial
court ordered the defendants therein jointly and severally to pay the PPA the amount of P1,053,300.00
representing actual damages and the cost of suit.[5]
The defendants appealed to the Court of Appeals and raised the following issues: (1) Is the pilot of a
commercial vessel, under compulsory pilotage, solely liable for the damage caused by the vessel to the
pier, at the port of destination, for his negligence? And (2) Would the owner of the vessel be liable
likewise if the damage is caused by the concurrent negligence of the master of vessel and the pilot under a
compulsory pilotage?
As stated at the outset, respondent appellate court affirmed the findings of the court a quo except that
it found no employer-employee relationship existing between herein private respondents Manila Pilots
Association (MPA, for short) and Capt. Gavino.[6] This being so, it ruled instead that the liability of MPA
is anchored, not on Article 2180 of the Civil Code, but on the provisions of Customs Administrative
Order No. 15-65,[7] and accordingly modified said decision of the trial court by holding MPA, along with
its co-defendants therein, still solidarily liable to PPA but entitled MPA to reimbursement from Capt.
Gavino for such amount of the adjudged pecuniary liability in excess of the amount equivalent to seventy-
five percent (75%) of its prescribed reserve fund.[8]
Neither Far Eastern Shipping Co. (briefly, FESC) nor MPA was happy with the decision of the Court
of Appeals and both of them elevated their respective plaints to us via separate petitions for review
on certiorari.
In G.R. No. 130068, which was assigned to the Second Division of this Court, FESC imputed that
the Court of Appeals seriously erred:

1. in not holding Senen C. Gavino and the Manila Pilots Association as the parties solely responsible for
the resulting damages sustained by the pier deliberately ignoring the established jurisprudence on the
matter.

2. in holding that the master had not exercised the required diligence demanded from him by the
circumstances at the time the incident happened;

60
3. in affirming the amount of damages sustained by the respondent Philippine Ports Authority despite a
strong and convincing evidence that the amount is clearly exorbitant and unreasonable;

4. in not awarding any amount of counterclaim prayed for by the petitioner in its answer; and

5. in not granting herein petitioner's claim against pilot Senen C. Gavino and Manila Pilots' Association in
the event that it be held liable.[9]

Petitioner asserts that since the MV PAVLODAR was under compulsory pilotage at the time of the
incident, it was a compulsory pilot, Capt. Gavino, who was in command and had complete control in the
navigation and docking of the vessel. It is the pilot who supersedes the master for the time being in the
command and navigation of a ship and his orders must be obeyed in all respects connected with her
navigation. Consequently, he was solely responsible for the damage caused upon the pier apron, and not
the owners of the vessel. It claims that the master of the boat did not commit any act of negligence when
he failed to countermand or overrule the orders of the pilot because he did not see any justifiable reason to
do so.In other words, the master cannot be faulted for relying absolutely on the competence of the
compulsory pilot. If the master does not observe that a compulsory pilot is incompetent or physically
incapacitated, the master is justified in relying on the pilot.[10]
Respondent PPA, in its comment, predictably in full agreement with the ruling of respondent court
on the solidary liability of FESC, MPA and Capt. Gavino, stresses the concurrent negligence of Capt.
Gavino, the harbor pilot, and Capt. Viktor Kabankov, * shipmaster of MV Pavlodar, as the basis of their
solidary liability for damages sustained by PPA. It posits that the vessel was being piloted by Capt.
Gavino with Capt. Kabankov beside him all the while on the bridge of the vessel, as the former took over
the helm of MV Pavlodar when it rammed and damaged the apron of the pier of Berth No. 4 of the Manila
International Port. Their concurrent negligence was the immediate and proximate cause of the collision
between the vessel and the pier - Capt. Gavino, for his negligence in the conduct of docking maneuvers
for the safe berthing of the vessel; and Capt. Kabankov, for failing to countermand the orders of the
harbor pilot and to take over and steer the vessel himself in the face of imminent danger, as well as for
merely relying on Capt. Gavino during the berthing procedure.[11]
On the other hand, in G.R. No. 130150, originally assigned to the Court's First Division and later
transferred to the Third Division, MPA, now as petitioner in this case, avers the respondent court's errors
consisted in disregarding and misinterpreting Customs Administrative Order No. 15-65 which limits the
liability of MPA. Said pilots' association asseverates that it should not be held solidarily liable with Capt.
Gavino who, as held by respondent court, is only a member, not an employee, thereof. There being no
employer-employee relationship, neither can MPA be held liable for any vicarious liability for the
respective exercise of profession by its members nor be considered a joint tortfeasor as to be held jointly
and severally liable.[12] It further argues that there was erroneous reliance on Customs Administrative
Order No. 15-65 and the constitution and by-laws of MPA, instead of the provisions of the Civil Code on
damages which, being a substantive law, is higher in category than the aforesaid constitution and by-laws
of a professional organization or an administrative order which bears no provision classifying the nature
of the liability of MPA for the negligence its member pilots.[13]
As for Capt. Gavino, counsel for MPA states that the former had retired from active pilotage services
since July 28, 1994 and has ceased to be a member of petitioner pilots' association. He is not joined as a
petitioner in this case since his whereabouts are unknown.[14]
FESC's comment thereto relied on the competence of the Court of Appeals in construing provisions
of law or administrative orders as basis for ascertaining the liability of MPA, and expressed full accord
with the appellate court's holding of solidary liability among itself, MPA and Capt. Gavino. It further

61
avers that the disputed provisions of Customs Administrative Order No. 15-65 clearly established MPA's
solidary liability.[15]
On the other hand, public respondent PPA, likewise through representations by the Solicitor General,
assumes the same supportive stance it took in G.R. No. 130068 in declaring its total accord with the
ruling of the Court of Appeals that MPA is solidarily liable with Capt. Gavino and FESC for damages,
and in its application to the fullest extent of the provisions of Customs Administrative Order No. 15-65 in
relation to MPA's constitution and by-laws which spell out the conditions of and govern their respective
liabilities. These provisions are clear and ambiguous as regards MPA's liability without need for
interpretation or construction. Although Customs Administrative Order No. 15-65 is a mere regulation
issued by an administrative agency pursuant to delegated legislative authority to fix details to implement
the law, it is legally binding and has the same statutory force as any valid statute.[16]
Upon motion[17] by FESC dated April 24, 1998 in G.R. No. 130150, said case was consolidated with
G.R. No. 130068.[18]
Prefatorily, on matters of compliance with procedural requirements, it must be mentioned that the
conduct of the respective counsel for FESC and PPA leaves much to be desired, to the displeasure and
disappointment of this Court.
Section 2, Rule 42 of the 1997 Rules of Civil Procedure[19] incorporates the former Circular No. 28-
91 which provided for what has come to be known as the certification against forum shopping as an
additional requisite for petitions filed with the Supreme Court and the Court of Appeals, aside from the
other requirements contained in pertinent provisions of the Rules of Court therefor, with the end in view
of preventing the filing of multiple complaints involving the same issues in the Supreme Court, Court of
Appeals or different divisions thereof or any other tribunal or agency.
More particularly, the second paragraph of Section 2, Rule 42 provides:
xxxxxxxxx

The petitioner shall also submit together with the petition a certification under oath that he has not
therefore commenced any other action involving the same issues in the Supreme Court, the Court of
Appeals or different divisions thereof, or any other tribunal or agency; if there is such other action or
proceeding, he must state the status of the same; and if he should thereafter learn that a similar action or
proceeding has been filed or is pending before the Supreme Court, the Court of Appeals or different
divisions thereof, or any other tribunal or agency, he undertakes to promptly inform the aforesaid courts
and other tribunal or agency thereof within five (5) days therefrom. (Italics supplied.)

For petitions for review filed before the Supreme Court, Section 4(e), Rule 45 specifically requires that
such petition shall contain a sworn certification against forum shopping as provided in the last paragraph
of Section 2, Rule 42.
The records show that the law firm of Del Rosario and Del Rosario through its associate, Atty.
Herbert A. Tria, is the counsel of record for FESC in both G.R. No. 130068 and G.R. No. 130150.
G.R. No. 130068, which is assigned to the Court's Second Division, commenced with the filing by
FESC through counsel on August 22, 1997 of a verified motion for extension of time to file its petition
for thirty (30) days from August 28, 1997 or until September 27, 1997.[20] Said motion contained the
following certification against forum shopping[21] signed by Atty. Herbert A. Tria as affiant:
CERTIFICATION
AGAINST FORUM SHOPPING

62
I/we hereby certify that I/we have not commenced any other action or proceeding involving the same
issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency; that to the best of my
own knowledge, no such action or proceeding is pending in the Supreme Court, the Court of Appeals, or
any other tribunal or agency; that if I/we should thereafter learn that a similar action or proceeding has
been filed or is pending before the Supreme Court, the Court of Appeals, or any other tribunal or agency,
I/we undertake to report that fact within five (5) days therefrom to this Honorable Court.

This motion having been granted, FESC subsequently filed its petition on September 26, 1997, this time
bearing a "verification and certification against forum-shopping" executed by one Teodoro P. Lopez on
September 24, 1997,[22] to wit:
VERIFICATION AND CERTIFICATION
AGAINST FORUM SHOPPING

in compliance with Section 4(e), Rule 45 in relation to Section 2, Rule 42 of the Revised Rules of Civil
Procedure

I, Teodoro P. Lopez, of legal age, after being duly sworn, depose and state:

1. That I am the Manager, Claims Department of Filsov Shipping Company, the local agent of petitioner
in this case.

2. That I have caused the preparation of this Petition for Review on Certiorari.

3. That I have read the same and the allegations therein contained are true and correct based on the
records of this case.

4. That I certify that petitioner has not commenced any other action or proceeding involving the same
issues in the Supreme Court or Court of Appeals, or any other tribunal or agency, that to the best of my
own knowledge, no such action or proceeding is pending in the Supreme Court, the Court of Appeals or
any other tribunal or agency, that I should thereafter learn that a similar action or proceeding has been
filed or is pending before the Supreme Court, the Court of Appeals, or any other tribunal or agency, I
undertake to report the fact within five (5) days therefrom to this Honorable Court. (Italics supplied for
emphasis.)
Reviewing the records, we find that the petition filed by MPA in G.R. No. 130150 then pending with
the Third Division was duly filed on August 29, 1997 with a copy thereof furnished on the same date by
registered mail to counsel for FESC.[23] Counsel of record for MPA, Atty. Jesus P. Amparo, in his
verification accompanying said petition dutifully revealed to the Court that--
xxxxxxxxx

3. Petitioner has not commenced any other action or proceeding involving the same issues in his
Honorable Court, the Court of Appeals or different Divisions thereof, or any other tribunal or agency, but
to the best of his knowledge, there is an action or proceeding pending in this Honorable Court, entitled
Far Eastern Shipping Co., Petitioner, vs. Philippine Ports Authority and Court of Appeals with a Motion
for Extension of time to file Petition for Review by Certiorari filed sometime on August 18, 1997. If
undersigned counsel will come to know of any other pending action or claim filed or pending he
undertakes to report such fact within five (5) days to this Honorable Court.[24] (Italics supplied.)
Inasmuch as MPA's petition in G.R. No. 130150 was posted by registered mail on August 29, 1997
and taking judicial notice of the average period of time it takes local mail to reach its destination, by

63
reasonable estimation it would be fair to conclude that when FESC filed its petition in G.R. No. 130068
on September 26, 1997, it would already have received a copy of the former and would then have
knowledge of the pendency of the other petition initially filed with the First Division. It was therefore
incumbent upon FESC to inform the Court of that fact through its certification against forum
shopping. For failure to make such disclosure, it would appear that the aforequoted certification
accompanying the petition in G.R. No. 130068 is defective and could have been a ground for dismissal
thereof.
Even assuming that FESC has not yet received its copy of MPA's petition at the time it filed its own
petition and executed said certification, its signatory did state "that if I should thereafter learn that a
similar action or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals
or any other tribunal or agency, I undertake to report the fact within five (5) days therefrom in this
Honorable Court."[25] Scouring the records page by page in this case, we find that no manifestation
concordant with such undertaking was then or at any other time thereafter ever filed by FESC nor was
there any attempt to bring such matter to the attention of the Court. Moreover, it cannot feign non-
knowledge of the existence of such other petition because FESC itself filed the motion for consolidation
in G.R. No. 130150 of these two cases on April 24, 1998.
It is disturbing to note that counsel for FESC, the law firm of Del Rosario and Del Rosario, displays
an unprofessional tendency of taking the Rules for granted, in this instance exemplified by its pro
forma compliance therewith but apparently without full comprehension of and with less than faithful
commitment to its undertakings to this Court in the interest of just, speedy and orderly administration of
court proceedings.
As between the lawyer and the courts, a lawyer owes candor, fairness and good faith to the
court.[26] He is an officer of the court exercising a privilege which is indispensable in the administration of
justice.[27] Candidness, especially towards the courts, is essential for the expeditious administration of
justice. Courts are entitled to expect only complete honesty from lawyers appearing and pleading before
them.[28] Candor in all dealings is the very essence of honorable membership in the legal
profession.[29] More specifically, a lawyer is obliged to observe the rules of procedure and not to misuse
them to defeat the ends of justice.[30] It behooves a lawyer, therefore, to exert every effort and consider it
his duty to assist in the speedy and efficient administration of justice.[31] Being an officer of the court, a
lawyer has a responsibility in the proper administration of justice. Like the court itself, he is an instrument
to advance its ends -- the speedy, efficient, impartial, correct and inexpensive adjudication of cases and
the prompt satisfaction of final judgments. A lawyer should not only help attain these objectives but
should likewise avoid any unethical or improper practices that impede, obstruct or prevent their
realization, charged as he is with the primary task of assisting in the speedy and efficient administration of
justice.[32]
Sad to say, the members of said law firm sorely failed to observe their duties as responsible members
of the Bar. Their actuations are indicative of their predisposition to take lightly the avowed duties of
officers of the Court to promote respect for law and for legal processes. [33] We cannot allow this state of
things to pass judicial muster.
In view of the fact that at around the time these petitions were commenced, the 1997 Rules of Civil
Procedure had just taken effect, the Court treated infractions of the new Rules then with relative liberality
in evaluating full compliance therewith. Nevertheless, it would do well to remind all concerned that the
penal provisions of Circular No. 28-91 which remain operative provides, inter alia:

3. Penalties.-
xxxxxxxxx

64
(c) The submission of a false certification under Par. 2 of the Circular shall likewise constitute contempt
of court, without prejudice to the filing of criminal action against the guilty party.The lawyer may also be
subjected to disciplinary proceedings.
It must be stressed that the certification against forum shopping ordained under the Rules is to be
executed by the petitioner, and not by counsel. Obviously it is the petitioner, and not always the counsel
whose professional services have been retained for a particular case, who is in the best position to know
whether he or it actually filed or caused the filing of a petition in that case. Hence, a certification against
forum shopping by counsel is a defective certification. It is clearly equivalent to non-compliance with the
requirement under Section 2, Rule 42 in relation to Section 4, Rule 45, and constitutes a valid cause for
dismissal of the petition.
Hence, the initial certification appended to the motion for extension of time to file petition n G.R.
No. 130068 executed in behalf of FESC by Atty. Tria is procedurally deficient. But considering that it
was a superfluity at that stage of the proceeding, it being unnecessary to file such a certification with a
mere motion for extension, we shall disregard such error. Besides, the certification subsequently executed
by Teodoro P. Lopez in behalf of FESC cures that defect to a certain extent, despite the inaccuracies
earlier pointed out. In the same vein, we shall consider the verification signed in behalf of MPA by its
counsel, Atty. Amparo, in G.R. No. 130150 as substantial compliance inasmuch as it served the purpose
of the Rules of informing the Court of the pendency of another action or proceeding involving the same
issues.
It bears stressing that procedural rules are instruments in the speedy and efficient administration of
justice. They should be used to achieve such end and not to derail it.[34]
Counsel for PPA did not make matters any better. Despite the fact that, save for the Solicitor General
at the time, the same legal team of the Office of the Solicitor General (OSG, for short) composed of
Assistant Solicitor General Roman G. Del Rosario and Solicitor Luis F. Simon, with the addition of
Assistant Solicitor General Pio C. Guerrero very much later in the proceedings, represented PPA
throughout the appellate proceedings in both G.R. No. 130068 and G.R. No. 130150 and was presumably
fully acquainted with the facts and issues of the case, it took the OSG an inordinately and almost
unreasonably long period of time to file its comment, thus unduly delaying the resolution of these cases. It
took several changes of leadership in the OSG -- from Silvestre H. Bello III to Romeo C. dela Cruz and,
finally, Ricardo P. Galvez -- before the comment in behalf of PPA was finally filed.
In G.R. No. 130068, it took eight (8) motions for extension of time totaling 210 days, a warning that
no further extensions shall be granted, and personal service on the Solicitor General himself of the
resolution requiring the filing of such comment before the OSG indulged the Court with the long required
comment on July 10, 1998.[35] This, despite the fact that said office was required to file its comment way
back on November 12, 1997.[36] A closer scrutiny of the records likewise indicates that petitioner FESC
was not even furnished a copy of said comment as required by Section 5, Rule 42. Instead, a copy thereof
was inadvertently furnished to MPA which, from the point of view of G.R. No. 130068, was a non-
party.[37] The OSG fared slightly better in G.R. No. 130150 in that it took only six (6) extensions, or a
total of 180 days, before the comment was finally filed.[38] And while it properly furnished petitioner
MPA with a copy of its comment, it would have been more desirable and expedient in this case to have
furnished its therein co-respondent FESC with a copy thereof, if only as a matter of professional
courtesy.[39]
This undeniably dilatory disinclination of the OSG to seasonably file required pleadings constitutes
deplorable disservice to the tax-paying public and can only be categorized as censurable inefficiency on
the part of the government law office. This is most certainly professionally unbecoming of the OSG.
Another thing that baffles the Court is why the OSG did not take the initiative of filing a motion for
consolidation in either G.R. No. 130068 or G.R. No. 130150, considering its familiarity with the

65
background of the case and if only to make its job easier by having to prepare and file only one
comment. It could not have been unaware of the pendency of one or the other petition because, being
counsel for respondent in both cases, petitioner is required to furnish it with a copy of the petition under
pain of dismissal of the petition for failure otherwise.[40]
Besides, in G.R. 130068, it prefaces its discussions thus --

Incidentally, the Manila Pilots' Association (MPA), one of the defendants-appellants in the case before
the respondent Court of Appeals, has taken a separate appeal from the said decision to this Honorable
Court, which was docketed as G.R. No. 130150 and entitled "Manila Pilots' Association, Petitioner,
versus Philippine Ports Authority and Far Eastern Shipping Co., Respondents.[41]
Similarly, in G.R. No. 130150, it states -
Incidentally, respondent Far Eastern Shipping Co. (FESC) had also taken an appeal from the said decision
to this Honorable Court, docketed as G.R. No. 130068, entitled "Far Eastern Shipping Co. vs. Court of
Appeals and Philippine Ports Authority."[42]

We find here a lackadaisical attitude and complacency on the part of the OSG in the handling of its
cases and an almost reflexive propensity to move for countless extensions, as if to test the patience of the
Court, before favoring it with the timely submission of required pleadings.
It must be emphasized that the Court can resolve cases only as fast as the respective parties in a case
file the necessary pleadings. The OSG, be needlessly extending the pendency of these cases through its
numerous motions for extension, came very close to exhausting this Court's forbearance and has
regrettably fallen short of its duties as the People's Tribune.
The OSG is reminded that just like other members of the Bar, the canons under the Code of
Professional Responsibility apply with equal force on lawyers in government service in the discharge of
their official tasks.[43] These ethical duties are rendered even more exacting as to them because, as
government counsel, they have the added duty to abide by the policy of the State to promote a high
standard of ethics in public service.[44] Furthermore, it is incumbent upon the OSG, as part of the
government bureaucracy, to perform and discharge its duties with the highest degree of professionalism,
intelligence and skill[45] and to extend prompt, courteous and adequate service to the public.[46]
Now, on the merits of the case. After a judicious examination of the records of this case, the
pleadings filed, and the evidence presented by the parties in the two petitions, we find no cogent reason to
reverse and set aside the questioned decision. While not entirely a case of first impression, we shall
discuss the issues seriatim and, correlatively by way of a judicial once-over, inasmuch as the matters
raised in both petitions beg for validation and updating of well worn maritime jurisprudence. Thereby, we
shall write finis to the endless finger-pointing in this shipping mishap which has been stretched beyond
the limits of judicial tolerance.
The Port of Manila is within the Manila Pilotage District which is under compulsory pilotage
pursuant to Section 8, Article III of Philippine Ports Authority Administrative Order No. 03-85,[47] which
provides that:

SEC. 8. Compulsory Pilotage Service.- For entering a harbor and anchoring thereat, or passing through
rivers or straits within a pilotage district, as well as docking and undocking at any pier/wharf, or shifting
from one berth or another, every vessel engaged in coastwise and foreign trade shall be under compulsory
pilotage. x x x

66
 In case of compulsory pilotage, the respective duties and responsibilities of the compulsory pilot and
the master have been specified by the same regulation in this wise:

SEC. 11. Control of vessels and liability for damage. - On compulsory pilotage grounds, the Harbor Pilot,
providing the service to a vessel shall be responsible for the damage caused to a vessel or to life and
property at ports due to his negligence or fault. He can only be absolved from liability if the accident is
caused by force majeure or natural calamities provided he has exercised prudence and extra diligence to
prevent or minimize damage.

The Master shall retain overall command of the vessel even on pilotage grounds whereby he can
countermand or overrule the order or command of the Harbor Pilot on board. In such event, any damage
caused to a vessel or to life and property at ports by reason of the fault or negligence of the Master shall
be the responsibility and liability of the registered owner of the vessel concerned without prejudice to
recourse against said Master.

Such liability of the owner or Master of the vessel or its pilots shall be determined by competent authority
in appropriate proceedings in the light of the facts and circumstances of each particular case.

SEC. 32. Duties and responsibilities of the Pilot or Pilots' Association. - The duties and responsibilities of
the Harbor Pilot shall be as follows:

xxxxxxxxx

f) a pilot shall be held responsible for the direction of a vessel from the time he assumes his work as a
pilot thereof until he leaves it anchored or berthed safely; Provided, however, that his responsibility shall
cease at the moment the Master neglects or refuses to carry out his order.

Customs Administrative Order No. 15-65 issued twenty years earlier likewise provided in Chapter I
thereof for the responsibilities of pilots:

Par. XXXIX. - A Pilot shall be held responsible for the direction of a vessel from the time he assumes
control thereof until he leaves it anchored free from shoal; Provided, That his responsibility shall cease at
the moment the master neglects or refuses to carry out his instructions.

xxxxxxxxx

Par. XLIV. - Pilots shall properly and safely secure or anchor vessels under their control when requested
to do so by the master of such vessels.

I. G.R. No. 130068

Petitioner FESC faults the respondent court with serious error in not holding MPA and Capt. Gavino
solely responsible for the damages caused to the pier. It avers that since the vessel was under compulsory
pilotage at the time with Capt. Gavino in command and having exclusive control of the vessel during the
docking maneuvers, then the latter should be responsible for damages caused to the pier.[48] It likewise
holds the appellate court in error for holding that the master of the ship, Capt. Kabankov, did not exercise
the required diligence demanded by the circumstances.[49]
We start our discussion of the successive issues bearing in mind the evidentiary rule in American
jurisprudence that there is a presumption of fault against a moving vessel that strikes a stationary object

67
such as a dock or navigational aid. In admiralty, this presumption does more than merely require the ship
to go forward and produce some evidence on the presumptive matter. The moving vessel must show that
it was without fault or that the collision was occasioned by the fault of the stationary object or was the
result of inevitable accident.It has been held that such vessel must exhaust every reasonable possibility
which the circumstances admit and show that in each, they did all that reasonable care required. [50] In the
absence of sufficient proof in rebuttal, the presumption of fault attaches to a moving vessel which collides
with a fixed object and makes a prima facie case of fault against the vessel.[51]Logic and experience
support this presumption:

The common sense behind the rule makes the burden a heavy one. Such accidents simply do not occur in
the ordinary course of things unless the vessel has been mismanaged in some way. It is not sufficient for
the respondent to produce witnesses who testify that as soon as the danger became apparent
everything possible was done to avoid an accident. The question remains, How then did the collision
occur? The answer must be either that, in spite of the testimony of the witnesses, what was done was too
little or too late or, if not, then the vessel was at fault for being in a position in which an unavoidable
collision would occur.[52]

The task, therefore, in these cases is to pinpoint who was negligent - the master of the ship, the harbor
pilot or both.
A pilot, in maritime law, is a person duly qualified, and licensed, to conduct a vessel into or out of
ports, or in certain waters. In a broad sense, the term "pilot" includes both (1) those whose duty it is to
guide vessels into or out of ports, or in particular waters and (2) those entrusted with the navigation of
vessels on the high seas.[53] However, the term "pilot" is more generally understood as a person taken on
board at a particular place for the purpose of conducting a ship through a river, road or channel, or from a
port.[54]
Under English and American authorities, generally speaking, the pilot supersedes the master for the
time being in the command and navigation of the ship, and his orders must be obeyed in all matters
connected with her navigation. He becomes the master pro hac vice and should give all directions as to
speed, course, stopping and reversing, anchoring, towing and the like. And when a licensed pilot is
employed in a place where pilotage is compulsory, it is his duty to insist on having effective control of the
vessel, or to decline to act as pilot.Under certain systems of foreign law, the pilot does not take entire
charge of the vessel, but is deemed merely the adviser of the master, who retains command and control of
the navigation even on localities where pilotage is compulsory.[55]
It is quite common for states and localities to provide for compulsory pilotage, and safety laws have
been enacted requiring vessels approaching their ports, with certain exceptions, to take on board pilots
duly licensed under local law. The purpose of these laws is to create a body of seamen thoroughly
acquainted with the harbor, to pilot vessels seeking to enter or depart, and thus protect life and property
from the dangers of navigation.[56]
In line with such established doctrines, Chapter II of Customs Administrative Order No. 15-65
prescribes the rules of compulsory pilotage in the covered pilotage districts, among which is the Manila
Pilotage District, viz. --

PARAGRAPH I. - Pilotage for entering a harbor and anchoring thereat, as well as docking and
undocking in any pier or shifting from one berth to another shall be compulsory, except Government
vessels and vessels of foreign governments entitled to courtesy, and other vessels engaged solely in river
or harbor work, or in a daily ferry service between ports which shall be exempt from compulsory pilotage
provisions of these regulations: provided, however, that compulsory pilotage shall not apply in pilotage
districts whose optional pilotage is allowed under these regulations.

68
 Pursuant thereto, Capt. Gavino was assigned to pilot MV Pavlodar into Berth 4 of the Manila
International Port. Upon assuming such office as compulsory pilot, Capt. Gavino is held to the universally
accepted high standards of care and diligence required of a pilot, whereby he assumes to have skill and
knowledge in respect to navigation in the particular waters over which his license extends superior to and
more to be trusted than that of the master.[57] A pilot should have a thorough knowledge of general and
local regulations and physical conditions affecting the vessel in his charge and the waters for which he is
licensed, such as a particular harbor or river. He is not held to the highest possible degree of skill and
care, but must have and exercise the ordinary skill and care demanded by the circumstances, and usually
shown by an expert in his profession. Under extraordinary circumstances, a pilot must exercise
extraordinary care.[58]
In Atlee vs. The Northwestern Union Packet Company,[59] Mr. Justice Miller spelled out in great
detail the duties of a pilot:

x x x (T)he pilot of a river steamer, like the harbor pilot, is selected for his personal knowledge of
the topography through which he steers his vessel. In the long course of a thousand miles in one of these
rivers, he must be familiar with the appearance of the shore on each side of the river as he goes along. Its
banks, towns, its landings, its houses and trees, are all landmarks by which he steers his vessel. The
compass is of little use to him. He must know where the navigable channel is, in its relation to all these
external objects, especially in the night. He must also be familiar with all dangers that are permanently
located in the course of the river, as sand-bars, snags, sunken rocks or trees or abandoned vessels or
barges. All this he must know and remember and avoid. To do this, he must be constantly informed of the
changes in the current of the river, of the sand-bars newly made, of logs or snags, or other objects newly
presented, against which his vessel might be injured.

xxxxxxxxx

It may be said that this is exacting a very high order of ability in a pilot. But when we consider the
value of the lives and property committed to their control, for in this they are absolute masters, the high
compensation they receive, the care which Congress has taken to secure by rigid and frequent
examinations and renewal of licenses, this very class of skill, we do not think we fix the standard too
high.

Tested thereby, we affirm respondent court's finding that Capt. Gavino failed to measure up to such
strict standard of care and diligence required of pilots in the performance of their duties. Witness this
testimony of Capt. Gavino:
Court:
You have testified before that the reason why the vessel bumped the pier was because the anchor
was not released immediately or as soon as you have given the order. Do you remember having
stated that?
A Yes, your Honor.
Q And you gave this order to the captain of the vessel?
A Yes, your Honor.
Q By that testimony, you are leading the Court to understand that is that anchor was released
immediately at the time you gave the order, the incident would not have happened. Is that
correct?

69
 A Yes, sir, but actually it was only a presumption on my part because there was a commotion between
the officers who are in charge of the dropping of the anchor and the captain. I could not
understand their language, it was in Russian, so I presumed the anchor was not dropped on time.
Q So, you are not sure whether it was really dropped on time or not?
A I am not sure, your Honor.
xxxxxxxxx
Q You are not even sure what could have caused the incident. What factor could have caused the
incident?
A Well, in this case now, because either the anchor was not dropped on time or the anchor did not
hold, that was the cause of the incident, your Honor.[60]
It is disconcertingly riddled with too much incertitude and manifests a seeming indifference for the
possibly injurious consequences his commands as pilot may have. Prudence required that he, as pilot,
should have made sure that his directions were promptly and strictly followed. As correctly noted by the
trial court -

Moreover, assuming that he did indeed give the command to drop the anchor on time, as pilot he
should have seen to it that the order was carried out, and he could have done this in a number of ways,
one of which was to inspect the bow of the vessel where the anchor mechanism was installed. Of course,
Captain Gavino makes reference to a commotion among the crew members which supposedly caused the
delay in the execution of the command. This account was reflected in the pilot's report prepared four
hours later, but Capt. Kavankov, while not admitting whether or not such a commotion occurred,
maintained that the command to drop anchor was followed "immediately and precisely." Hence, the Court
cannot give much weight or consideration to this portion of Gavino's testimony."[61]

An act may be negligent if it is done without the competence that a reasonable person in the position
of the actor would recognize as necessary to prevent it from creating an unreasonable risk of harm to
another.[62] Those who undertake any work calling for special skills are required not only to exercise
reasonable care in what they do but also possess a standard minimum of special knowledge and ability.[63]
Every man who offers his services to another, and is employed, assumes to exercise in the
employment such skills he possesses, with a reasonable degree of diligence. In all these employments
where peculiar skill is requisite, if one offers his services he is understood as holding himself out to the
public as possessing the degree of skill commonly possessed by others in the same employment, and if his
pretensions are unfounded he commits a species of fraud on every man who employs him in reliance on
his public profession.[64]
Furthermore, there is an obligation on all persons to take the care which, under ordinary
circumstances of the case, a reasonable and prudent man would take, and the omission of that care
constitutes negligence.[65] Generally, the degree of care required is graduated according to the danger a
person or property attendant upon the activity which the actor pursues or the instrumentality which he
uses. The greater the danger the greater the degree of care required. What is ordinary under extraordinary
of conditions is dictated by those conditions; extraordinary risk demands extraordinary care. Similarly,
the more imminent the danger, the higher the degree of care.[66]
We give our imprimatur to the bases for the conclusion of the Court of Appeals that Capt. Gavino
was indeed negligent in the performance of his duties:
xxxxxxxxx

70
 x x x As can be gleaned from the logbook, Gavino ordered the left anchor and two (2) shackles
dropped at 8:30 o'clock in the morning. He ordered the engines of the vessel stopped at 8:31 o'clock. By
then, Gavino must have realized that the anchor did not hit a hard object and was not clawed so as to
reduce the momentum of the vessel. In point of fact, the vessel continued travelling towards the pier at the
same speed. Gavino failed to react. At 8:32 o'clock, the two (2) tugboats began to push the stern part of
the vessel from the port side but the momentum of the vessel was not contained. Still, Gavino did not
react. He did not even order the other anchor and two (2) more shackles dropped to arrest the momentum
of the vessel. Neither did he order full-astern. It was only at 8:34 o'clock, or four (4) minutes, after the
anchor was dropped that Gavino reacted. But his reaction was even (haphazard) because instead of
arresting fully the momentum of the vessel with the help of the tugboats, Gavino ordered merely "half-
astern". It took Gavino another minute to order a "full-astern". By then, it was too late. The vessel's
momentum could no longer be arrested and, barely a minute thereafter, the bow of the vessel hit the apron
of the pier. Patently, Gavino miscalculated. He failed to react and undertake adequate measures to arrest
fully the momentum of the vessel after the anchor failed to claw to the seabed. When he reacted, the same
was even (haphazard). Gavino failed to reckon the bulk of the vessel, its size and its cargo. He
erroneously believed that only one (1) anchor would suffice and even when the anchor failed to claw into
the seabed or against a hard object in the seabed, Gavino failed to order the other anchor dropped
immediately. His claim that the anchor was dropped when the vessel was only 1,000 feet from the pier is
but a belated attempt to extricate himself from the quagmire of his own insouciance and negligence. In
sum, then, Appellants' claim that the incident was caused by "force majeure" is barren of factual basis.

xxxxxxxxx

The harbor pilots are especially trained for this job. In the Philippines, one may not be a harbor pilot
unless he passed the required examination and training conducted then by the Bureau of Custom, under
Customs Administrative Order No. 15-65, now under the Philippine Ports Authority under PPA
Administrative Order 63-85. Paragraph XXXIX of the Customs Administrative Order No. 15-65 provides
that "the pilot shall be held responsible for the direction of the vessel from the time he assumes control
thereof, until he leaves it anchored free from shoal: Provided, that his responsibility shall cease at the
moment the master neglects or refuse(s) to carry out his instructions." The overall direction regarding the
procedure for docking and undocking the vessel emanates from the harbor pilot. In the present recourse,
Gavino failed to live up to his responsibilities and exercise reasonable care or that degree of care required
by the exigencies of the occasion. Failure on his part to exercise the degree of care demanded by the
circumstances is negligence (Reese versus Philadelphia & RR Co. 239 US 463, 60 L ed. 384, 57 Am Jur.
2d 12age 418).[67]

This affirms the findings of the trial court regarding Capt. Gavino's negligence:

This discussion should not however, divert the court from the fact that negligence in manuevering
the vessel must be attributed to Capt. Senen Gavino. He was an experienced pilot and by this time should
have long familiarized himself with the depth of the port and the distance he could keep between the
vessel and port in order to berth safely.[68]

The negligence on the part of Capt. Gavino is evident; but Capt. Kabankov is no less responsible for
the allision. His unconcerned lethargy as master of the ship in the face of troublous exigence constitutes
negligence.
While it is indubitable that in exercising his functions a pilot-is in sole command of the ship[69] and
supersedes the master for the time being in the command and navigation of a ship and that he becomes
master pro hac vice of a vessel piloted by him,[70] there is overwhelming authority to the effect that the
master does not surrender his vessel to the pilot and the pilot is not the master. The master is still in

71
command of the vessel notwithstanding the presence of a pilot. There are occasions when the master may
and should interfere and even displace the pilot, as when the pilot is obviously incompetent or intoxicated
and the circumstances may require the master to displace a compulsory pilot because of incompetency or
physical incapacity. If, however, the master does not observe that a compulsory pilot is incompetent or
physically incapacitated, the master is justified in relying on the pilot, but not blindly.[71]
The master is not wholly absolved from his duties while a pilot is on board his vessel, and may
advise with or offer suggestions to him. He is still in command of the vessel, except so far as her
navigation is concerned, and must cause the ordinary work of the vessel to be properly carried on and the
usual precaution taken. Thus, in particular, he is bound to see that there is sufficient watch on deck, and
that the men are attentive to their duties, also that engines are stopped, towlines cast off, and the anchors
clear and ready to go at the pilot's order.[72]
A perusal of Capt. Kabankov's testimony makes it apparent that he was remiss in the discharge of his
duties as master of the ship, leaving the entire docking procedure up to the pilot, instead of maintaining
watchful vigilance over this risky maneuver:
Q Will you please tell us whether you have the right to intervene in docking of your ship in the
harbor?
A No sir, I have no right to intervene in time of docking, only in case there is imminent danger to the
vessel and to the pier.
Q Did you ever intervene during the time that your ship was being docked by Capt. Gavino?
A No sir, I did not intervene at the time when the pilot was docking my ship.
Q Up to the time it was actually docked at the pier, is that correct'?
A No sir, I did not intervene up to the very moment when the vessel was docked.
xxxxxxxxx
Atty. Del Rosario (to the witness)
Q Mr. Witness, what happened, if any, or was there anything unusual that happened during the
docking?
A Yes sir, our ship touched the pier and the pier was damaged.
Court (to the witness)
Q When you said touched the pier, are you leading the court to understand that your ship bumped the
pier?
A I believe that my vessel only touched the pier but the impact was very weak.
Q Do you know whether the pier was damaged as a result of that slight or weak impact?
A Yes sir, after the pier was damaged.
xxxxxxxxx
Q Being most concerned with the safety of your vessel, in the maneuvering of your vessel, to the port,
did you observe anything irregular in the maneuvering by Capt. Gavino at the time he was trying
to cause the vessel to be docked at the pier?
A You mean the action of Capt. Gavino or his condition?
Court:

72
Q Not the actuation that conform to the safety maneuver of the ship to the harbor?
A No sir, it was a usual docking.
Q By that statement of yours, you are leading the court to understand that there was nothing irregular
in the docking of the ship?
A Yes sir, during the initial period, of the docking, there was nothing unusual that happened.
Q What about in the last portion of the docking of the ship, was there anything unusual or abnormal
that happened?
A None Your Honor, I believe that Capt. Gavino thought that the anchor could keep or hold the vessel.
Q You want us to understand, Mr. Witness, that the dropping of the anchor of the vessel was not
timely?
A I don't know the depth of this port but I think, if the anchor was dropped earlier and with more
shackles, there could not have been an incident.
Q So you could not precisely tell the court that the dropping of the anchor was timely because you are
not well aware of the seabed, is that correct?
A Yes sir, that, is right.
xxxxxxxxx
Q Alright, Capt. Kavankov, did you come to know later whether the anchor held its ground so much
so that the vessel could not travel?
A It is difficult for me to say definitely. I believe that the anchor did not hold the ship.
Q You mean you don't know whether the anchor blades stuck to the ground to stop the ship from
further moving?
A Yes sir, it is possible.
Q What is possible?
A I think, the 2 shackles were not enough to hold the vessel.
Q Did you know that the 2 shackles were dropped?
A Yes sir, I knew that.
Q If you knew that the shackles were not enough to hold the ship, did you not make any protest to the
pilot?
A No sir, after the incident, that was my assumption.
Q Did you come to know later whether that presumption is correct?
A I still don't know the ground in the harbor or the depths.
Q So from the beginning, you were not competent whether the 2 shackles were also dropped to hold
the ship?
A No sir, at the beginning, I did not doubt it because I believe Capt. Gavino to be an experienced pilot
and he should be more aware as to the depths of the harbor and the ground and I was confident in
his actions.

73
 xxxxxxxxx
Solicitor Abad (to the witness)
Q Now, you were standing with the pilot on the bridge of the vessel before the incident happened,
were you not?
A Yes sir, all the time, I was standing with the pilot.
Q And so whatever the pilot saw, you could also see from that point of view?
A That is right.
Q Whatever the pilot can read from the panel of the bridge, you also could read, is that correct?
A What is the meaning of panel'?
Q All indications necessary for men on the bridge to be informed of the movements of the ship?
A That is right.
Q And whatever sound the captain... Capt. Gavino would hear from the bridge, you could also hear?
A That is right.
Q Now, you said that when the command to lower the anchor was given, it was obeyed, is that right?
A This command was executed by the third mate and boatswain.
Court (to the witness)
Q Mr. Witness, earlier in today's hearing, you said that you did not intervene with the duties of the
pilot and that, in your opinion, you can only intervene if the ship is placed in imminent danger, is
that correct?
A That is right, I did say that.
Q In your observation before the incident actually happened, did you observe whether or not the ship,
before the actual incident, the ship was placed in imminent danger?.
A No sir, I did not observe.
Q By that answer, are you leading the court to understand that because you did not intervene and
because you believed that it was your duty to intervene when the vessel is placed in imminent
danger to which you did not observe any imminent danger thereof, you have not intervened in
any manner to the command of the pilot?
A That is right, sir.
xxxxxxxxx
Q Assuming that you disagreed with the pilot regarding the step being taken by the pilot in
maneuvering the vessel. whose command will prevail, in case of imminent danger to the vessel?
A I did not consider the situation as having an imminent danger. I believed that the vessel will dock
alongside the pier.
Q You want us to understand that you did not see an imminent danger to your ship, is that what you
mean?
A Yes sir, up to the very last moment, I believed that there was no imminent danger.

74
Q Because of that, did you ever intervene in the command of the pilot?
A Yes sir, I did not intervene because I believed that the command of the pilot to be correct.
Solicitor Abad (to the witness)
Q As a captain of M/V Pavlodar, you consider docking maneuvers a serious matter, is it not?
A Yes sir, that is right.
Q Since it affects not only the safety of the port or pier, but also the safety of the vessel and the cargo,
is it not?
A That is right.
Q So that, I assume that you were watching Capt. Gavino very closely at the time he was making his
commands?
A I was close to him, I was hearing his command and being executed.
Q And that you were also alert for any possible mistakes he might commit in the maneuvering of the
vessel?
A Yes sir, that is right.
Q But at no time during the maneuver did you issue order contrary to the orders Capt. Gavino made?
A No sir.
Q So that you were in full accord with all of Capt. Gavino's orders?
A Yes sir.
Q Because, otherwise, you would have issued order that would supersede his own order?
A In that case, I should take him away from his command or remove the command from him.
Court (to the witness)
Q You were in full accord with the steps being taken by Capt. Gavino because you relied on his
knowledge, on his familiarity of the seabed and shoals and other surroundings or conditions under
the sea, is that correct?
A Yes sir, that is right.
xxxxxxxxx
Solicitor Abad (to the witness)
Q And so after the anchors were ordered dropped and they did not take hold of the seabed, you were
alerted that there was danger already on hand?
A No sir, there was no imminent danger to the vessel.
Q Do you mean to tell us that even if the anchor was supposed to take hold of the bottom and it did
not, there was no danger to the ship?
A Yes sir, because the anchor dragged on the ground later.
Q And after a few moments when the anchor should have taken hold the seabed but not done (sic), as
you expected, you already were alerted that there was danger to the ship, is that correct?

75
 A Yes sir, I was alerted but there was no danger.
Q And you were alerted that somebody was wrong?
A Yes sir, I was alerted.
Q And this alert you assumed was the ordinary alertness that you have for normal docking?
A Yes sir, I mean that it was usual condition of any man in time of docking to be alert.
Q And that is the same alertness when the anchor did not hold onto the ground, is that correct?
A Yes sir, me and Capt. Gavino (thought) that the anchor will hold the ground.
Q Since, as you said that you agreed all the while with the orders of Capt. Gavino, you also therefore
agreed with him in his failure to take necessary precaution against the eventuality that the anchor
will not hold as expected?
Atty. Del Rosario:
May I ask that the question ...
Solicitor Abad:
Never mind, I will reform the question.
xxxxxxxxx
Solicitor Abad (to the witness)
Q Is it not a fact that the vessel bumped the pier?
A That is right, it bumped the pier.
Q For the main reason that the anchor of the vessel did not hold the ground as expected?
A Yes sir, that is my opinion.[73]
Further, on redirect examination, Capt. Kabankov fortified his apathetic assessment of the situation:
Q Now, after the anchor was dropped, was there any point in time that you felt that the vessel was in
imminent danger.
A No, at that time, the vessel was not in imminent danger, sir."[74]
This cavalier appraisal of the event by Capt. Kabankov is disturbingly antipodal to Capt. Gavino's
anxious assessment of the situation:
Q When a pilot is on board a vessel, it is the pilot's command which should be followed-at that
moment until the vessel is, or goes to port or reaches port?
A Yes, your Honor, but it does not take away from the Captain his prerogative to countermand the
pilot.
Q In what way?
A In any case, which he thinks the pilot is not maneuvering correctly, the Captain always has the
prerogative to countermand the pilot's order.
Q But insofar as competence, efficiency and functional knowledge of the seabed which are vital or
decisive in the safety (sic) bringing of a vessel to the port, he is not competent?

76
 A Yes, your Honor. That is why they hire a pilot in an advisory capacity, but still, the safety of the
vessel rest(s) upon the Captain, the Master of the vessel.
Q In this case, there was not a disagreement between you and the Captain of the vessel in the bringing
of the vessel to port?
A No, your Honor.
Court:
May proceed.
Atty. Catris:
In fact, the Master of the vessel testified here that he was all along in conformity with the orders
you gave to him, and, as matter of fact, as he said, he obeyed all your orders. Can you tell, if in
the course of giving such normal orders for the saf(e) docking of the MV Pavlodar, do you
remember of any instance that the Master of the vessel did not obey your command for the safety
docking of the MV Pavlodar?
Atty. del Rosario:
Already answered, he already said yes sir.
Court:
Yes, he has just answered yes sir to the Court that there was no disagreement insofar as the
bringing of the vessel safely to the port.
Atty. Catris:
But in this instance of docking of the MV Pavlodar, do you remember of a time during the course
of the docking that the MV Pavlodar was in imminent danger of bumping the pier?
A When we were about more than one thousand meters from the pier. I think, the anchor was not
holding, so I immediately ordered to push the bow at a fourth quarter, at the back of the vessel in
order to swing the bow away from the pier and at the same time, I ordered for a full astern of the
engine."[75]
These conflicting reactions can only imply, at the very least, unmindful disregard or, worse, neglectful
relinquishment of duty by the shipmaster, tantamount to negligence.
The findings of the trial court on this aspect is noteworthy:

For, while the pilot Gavino may indeed have been charged with the task of docking the vessel in the
berthing space, it is undisputed that the master of the vessel had the corresponding duty to countermand
any of the orders made by the pilot, aid even maneuver the vessel himself, in case of imminent danger to
the vessel and the port.

In fact, in his testimony, Capt. Kavankov admitted that all throughout the man(eu)vering procedures
he did not notice anything was going wrong, and even observed that the order given to drop the anchor,
was done at the proper time. He even ventured the opinion that the accident occurred because the anchor
failed to take hold but that this did not alarm him because there was still time to drop a second anchor.

Under normal circumstances, the above-mentioned facts would have caused the master of a vessel to
take charge of the situation and see to the man(eu)vering of the vessel himself. Instead, Capt. Kavankov
chose to rely blindly upon his pilot, who by this time was proven ill-equipped to cope with the situation.

77
 xxxxxxxxx

It is apparent that Gavino was negligent but Far Eastern's employee Capt. Kavankov was no less
responsible for as master of the vessel he stood by the pilot during the man(eu)vering procedures and was
privy to every move the latter made, as well as the vessel's response to each of the commands. His choice
to rely blindly upon the pilot's skills, to the point that despite being appraised of a notice of alert he
continued to relinquish control of the vessel to Gavino, shows indubitably that he was not performing his
duties with the diligence required of him and therefore may be charged with negligence along with
defendant Gavino.[76]

As correctly affirmed by the Court of Appeals -

We are in full accord with the findings and disquisitions of the Court a quo.

In the present recourse, Captain Viktor Kavankov had been a mariner for thirty-two years before the
incident. When Gavino was (in) the command of the vessel, Kavankov was beside Gavino, relaying the
commands or orders of Gavino to the crewmembers-officers of the vessel concerned. He was thus fully
aware of the docking maneuvers and procedure Gavino undertook to dock the vessel. Irrefragably,
Kavankov was fully aware of the bulk and size of the vessel and its cargo as well as the weight of the
vessel. Kavankov categorically admitted that, when the anchor and two (2) shackles were dropped to the
sea floor, the claws of the anchor did not hitch on to any hard object in the seabed. The momentum of the
vessel was not arrested. The use of the two (2) tugboats was insufficient. The momentum of the vessel,
although a little bit arrested, continued (sic) the vessel going straightforward with its bow towards the port
(Exhibit "A-1"). There was thus a need for the vessel to move "full-astern" and to drop the other anchor
with another shackle or two '(2), for the vessel to avoid hitting the pier. Kavankov refused to act even as
Gavino failed to act. Even as Gavino gave mere "half-astern" order, Kavankov supinely stood by. The
vessel was already about twenty (20) meters away from the pier when Gavino gave the 'full-astern"
order. Even then, Kavankov did nothing to prevent the vessel from hitting the pier simply because he
relied on the competence and plan of Gavino. While the "full-astern" maneuver momentarily arrested the
momentum of the vessel, it was, by then, too late. All along, Kavankov stood supinely beside Gavino,
doing nothing but relay the commands of Gavino. Inscrutably, then, Kavankov was negligent.

xxxxxxxxx

The stark incompetence of Kavankov is competent evidence to prove the unseaworthiness of the vessel. It
has been held that the incompetence of the navigator, the master of the vessel or its crew makes the vessel
unseaworthy (Tug Ocean Prince versus United States of America, 584 F. 2nd, page 1151). Hence, the
Appellant FESC is likewise liable for the damage sustained by the Appellee."[77]

We find strong and well-reasoned support in time-tested American maritime jurisprudence, on which
much of our laws and jurisprudence on the matter are based, for the conclusions of the Court of Appeals
adjudging both Capt. Gavino and Capt. Kabankov negligent.
As early as 1869, the U.S. Supreme Court declared, through Mr. Justice Swayne, in The Steamship
China vs. Walsh,[78] that it is the duty of the master to interfere in cases of the pilot's intoxication or
manifest incapacity, in cases of danger which he does not foresee, and in all cases of great necessity. The
master has the same power to displace the pilot that he has to remove any subordinate officer of the
vessel, at his discretion.
In 1895, the U.S. Supreme Court, this time through Mr. Justice Brown, emphatically ruled that:

78
 Nor are we satisfied with the conduct of the master in leaving the pilot in sole charge of the
vessel. While the pilot doubtless supersedes the master for the time being in the command and navigation
of the ship, and his orders must be obeyed in all matters connected with her navigation, the master is not
wholly absolved from his duties while the pilot is on board, and may advise with him, and even displace
him in case he is intoxicated or manifestly incompetent. He is still in command of the vessel, except so far
as her navigation is concerned, and bound to see that there is a sufficient watch on deck, and that the men
are attentive to their duties.

xxx (N)otwithstanding the pilot has charge, it is the duty of the master to prevent accident, and not
to abandon the vessel entirely to the pilot; but that there are certain duties he has to discharge
(notwithstanding there is a pilot on board) for the benefit of the owners. x x x that in well conducted ships
the master does not regard the presence of a duly licensed pilot in compulsory pilot waters as freeing him
from every obligation to attend to the safety of the vessel; but that, while the master sees that his officers
and crew duly attend to the pilot's orders, he himself is bound to keep a vigilant eye on the navigation of
the vessel, and, when exceptional circumstances exist, not only to urge upon the pilot to use every
precaution, but to insist upon, such being taken."[79] (Italics for emphasis.)

In Jure vs. United Fruit Co.,[80] which, like the present petitions, involved compulsory pilotage, with
a similar scenario where at and prior to the time of injury, the vessel was in the charge of a pilot with the
master on the bridge of the vessel beside said pilot, the court therein ruled:

The authority of the master of a vessel is not in complete abeyance while a pilot, who is required by
law to be accepted, is in discharge of his functions. x x x It is the duty of the master to interfere in cases of
the pilot's intoxication or manifest incapacity, in cases of danger which he does not foresee, and in all
cases of great necessity . The master has the same power to displace the pilot that he has to remove any
subordinate officer of the vessel. He may exercise it, or not, according to his discretion. There was
evidence to support findings that plaintiff's injury was due to the negligent operation of the Atenas, and
that the master of that vessel was negligent in failing to take action to avoid endangering a vessel situated
as the City of Canton was and persons or property thereon.

A phase of the evidence furnished support for the inferences x x x that he negligently failed to
suggest to the pilot the danger which was disclosed, and means of avoiding such danger; and that the
master's negligence in failing to give timely admonition to the pilot proximately contributed to the injury
complained of. We are of opinion that the evidence mentioned tended to prove conduct of the pilot,
known to the master, giving rise to a case of danger or great necessity, calling for the intervention of the
master. A master of a vessel is not Without fault in acquiescing in conduct of a pilot which involves
apparent and avoidable danger, whether such danger is to the vessel upon which the pilot is, or to
another vessel, or persons or property thereon or on shore. (Italics ours.)

Still in another case involving a nearly identical setting, the captain of a vessel alongside the compulsory
pilot was deemed to be negligent, since, in the words of the court, "he was in a position to exercise his
superior authority if he had deemed the speed excessive on the occasion in question. I think it was clearly
negligent of him not to have recognized the danger to any craft moored at Gravell Dock and that he
should have directed the pilot to reduce his speed as required by the local governmental regulations. His
failure amounted to negligence and renders the respondent liable."[81] (Italics supplied.) Though a
compulsory pilot might be regarded as an independent contractor, he is at all times subject to the ultimate
control of the ship's master.[82]
In sum, where a compulsory pilot is in charge of a ship, the master being required to permit him to
navigate it, if the master observes that the pilot is incompetent or physically incapable, then it is the duty
of the master to refuse to permit the pilot to act. But if no such reasons are present, then the master is

79
justified in relying upon the pilot, but not blindly. Under the circumstances of this case, if a situation
arose where the master, exercising that reasonable vigilance which the master of a ship should exercise,
observed, or should have observed, that the pilot was so navigating the vessel that she was going, or was
likely to go, into danger, and there was in the exercise of reasonable care and vigilance an opportunity for
the master to intervene so as to save the ship from danger, the master should have acted
accordingly.[83] The master of a vessel must exercise a degree of vigilance commensurate with the
circumstances.[84]
Inasmuch as the matter of negligence is a question of fact,[85] we defer to the findings of the trial
court, especially as this is affirmed by the Court of Appeals.[86] But even beyond that, our own evaluation
is that Capt. Kabankov's shared liability is due mainly to the fact that he failed to act when the perilous
situation should have spurred him into quick and decisive action as master of the ship. In the face of
imminent or actual danger, he did not have to wait for the happenstance to occur before countermanding
or overruling the pilot. By his own admission, Capt. Kabankov concurred with Capt. Gavino's decisions,
and this is precisely the reason why he decided not to countermand any of the latter's orders. Inasmuch as
both lower courts found Capt. Gavino negligent, by expressing full agreement therewith Capt. Kabankov
was just as negligent as Capt. Gavino.
In general, a pilot is personally liable for damages caused by his own negligence or default to the
owners of the vessel, and to third parties for damages sustained in a collision. Such negligence of the pilot
in the performance of duty constitutes a maritime tort.[87] At common law, a shipowner is not liable for
injuries inflicted exclusively by the negligence of a pilot accepted by a vessel compulsorily. [88] The
exemption from liability for such negligence shall apply if the pilot is actually in charge and solely in
fault. Since, a pilot is responsible only for his own personal negligence, he cannot be held accountable for
damages proximately caused by the default of others,[89] or, if there be anything which concurred with the
fault of the pilot in producing the accident, the vessel master and owners are liable.
Since the colliding vessel is prima facie responsible, the burden of proof is upon the party claiming
benefit of the exemption from liability. It must be shown affirmatively that the pilot was at fault, and that
there was no fault on the part of the officers or crew, which might have been conducive to the
damage. The fact that the law compelled the master to take the pilot does not exonerate the vessel from
liability. The parties who suffer are entitled to have their remedy against the vessel that occasioned the
damage, and are not under necessity to look to the pilot from whom redress is not always had for
compensation. The owners of the vessel are responsible to the injured party for the acts of the pilot, and
they must be left to recover the amount as well as they can against him. It cannot be maintained that the
circumstance of having a pilot on board, and acting in conformity to his directions operate as a discharge
of responsibility of the owners.[90] Except insofar as their liability is limited or exempted by statute, the
vessel or her owner are liable for all damages caused by the negligence or other wrongs of the owners or
those in charge of the vessel. Where the pilot of a vessel is not a compulsory one in the sense that the
owner or master of the vessel are bound to accept him, but is employed voluntarily, the owners of the
vessel are, all the more, liable for his negligent act.[91]
In the United States, the owners of a vessel are not personally liable for the negligent acts of a
compulsory pilot, but by admiralty law, the fault or negligence of a compulsory pilot is imputable to the
vessel and it may be held liable therefor in rem. Where, however, by the provisions of the statute the pilot
is compulsory only in the sense that his fee must be paid, and is not in compulsory charge of the vessel,
there is no exemption from liability. Even though the pilot is compulsory, if his negligence was not the
sole cause of the injury, but the negligence of the master or crew contributed thereto, the owners are
liable.[92] But the liability of the ship in rem does not release the pilot from the consequences of his own
negligence.[93] The rationale for this rule is that the master is not entirely absolved of responsibility with
respect to navigation when a compulsory pilot is in charge.[94]

80
 By way of validation and in light of the aforecited guidepost rulings in American maritime cases, we
declare that our rulings during the early years of this century in City of Manila vs.Gambe, [95] China
Navigation Co., Ltd. vs. Vidal,[96] and Yap Tico & Co. vs. Anderson, et al.[97] have withstood the
proverbial test of time and remain good and relevant case law to this day.
City of Manila stands for the doctrine that the pilot who was in command and complete control of a
vessel, and not the owners, must be held responsible for an accident which was solely the result of the
mistake of the pilot in not giving proper orders, and which did not result from the failure of the owners to
equip the vessel with the most modern and improved machinery. In China Navigation Co., the pilot
deviated from the ordinary and safe course, without heeding the warnings of the ship captain. It was this
careless deviation that caused the vessel to collide with a pinnacle rock which, though uncharted, was
known to pilots and local navigators. Obviously, the captain was blameless. It was the negligence of the
pilot alone which was the proximate cause of the collision. The Court could not but then rule that -

The pilot in the case at bar having deviated from the usual and ordinary course followed by
navigators in passing through the strait in question, without a substantial reason, was guilty of negligence,
and that negligence having been the proximate cause of the damages, he is liable for such damages as
usually and naturally flow therefrom. x x x.

x x x (T)he defendant should have known of the existence and location of the rock upon which the
vessel struck while under his control and management. x x x.

Consistent with the pronouncements in these two earlier cases, but on a slightly different tack, the
Court in Yap Tico & Co. exonerated the pilot from liability for the accident where the order's of the pilot
in the handling of the ship were disregarded by the officers and crew of the ship. According to the Court,
a pilot is "x x x responsible for a full knowledge of the channel and the navigation only so far as he can
accomplish it through the officers and crew of the ship, and I don't see that he can be held responsible for
damage when the evidence shows, as it does in this case, that the officers and crew of the ship failed to
obey his orders." Nonetheless, it is possible for a compulsory pilot and the master of the vessel to be
concurrently negligent and thus share the blame for the resulting damage as Joint tortfeasors, [98] but only
under the circumstances obtaining in and demonstrated by the instant petitions.
It may be said, as a general rule, that negligence in order to render a person liable need not be the
sole cause of an injury. It is sufficient that his negligence, concurring with one or more efficient causes
other than plaintiff's, is the proximate cause of the injury. Accordingly, where several causes combine to
produce injuries, a person is not relieved from liability because he is responsible for only one of them, it
being sufficient that the negligence of the person charged with injury is an efficient cause without which
the injury would not have resulted to as great an extent, and that such cause is not attributable to the
person injured. It is no defense to one of the concurrent tortfeasors that the injury would not have resulted
from his negligence alone, without the negligence or wrongful acts of the other concurrent
tortfeasor.[99] Where several causes producing an injury are concurrent and each is an efficient cause
without which the injury would not have happened, the injury may be attributed to all or any of the causes
and recovery may be had against any or all of the responsible persons although under the circumstances
of the case, it may appear that one of them was more culpable, and that the duty owed by them to the
injured person was not the same. No actor's negligence ceases to be a proximate cause merely because it
does not exceed the negligence of other actors. Each wrongdoer is responsible for the entire result and is
liable as though his acts were the sole cause of the injury.[100]
There is no contribution between joint tortfeasors whose liability is solidary since both of them are
liable for the total damage. Where the concurrent or successive negligent acts or omissions of two or more
persons, although acting independently, are in combination the direct and proximate cause of a single
injury to a third person, it is impossible to determine in what proportion each contributed to the injury and

81
either of them is responsible for the whole injury. Where their concurring negligence resulted in injury or
damage to a third party, they become joint tortfeasors and are solidarity liable for the resulting damage
under Article 2194[101] of the Civil Code.[102]
As for the amount of damages awarded by the trial court, we find the same to be reasonable. The
testimony of Mr. Pascual Barral, witness for PPA, on cross and redirect examination, appears to be
grounded on practical considerations:
Q So that the cost of the two additional piles as well as the (two) square meters is already included in
this -P1,300,999.77.
A Yes sir, everything. It is (the) final cost already.
Q For the eight piles.
A Including the reduced areas and other reductions.
Q (A)nd the two square meters.
A Yes sir.
Q In other words, this P1,300,999.77 does not represent only for the six piles that was damaged as
well as the corresponding two piles.
A The area was corresponding, was increased by almost two in the actual payment. That was why the
contract was decreased, the real amount was P1,124,627.40 and the final one is P1300,999.77.
Q Yes, but that P1,300,999.77 included the additional two new posts.
A It was increased.
Q Why was it increased?
A The original was 48 and the actual was 46.
Q Now, the damage was somewhere in 1980. It took place in 1980 and you started the repair and
reconstruction in 1982, that took almost two years?
A Yes sir.
Q May it not happen that by natural factors, the existing damage in 1980 was aggravated for the 2 year
period that the damage portion was not repaired?
A I don't think so because that area was at once marked and no vehicles can park, it was closed.
Q Even if or even natural elements cannot affect the damage?
A Cannot, sir.
xxxxxxxxx
Q You said in the cross-examination that there were six piles damaged by the accident, but that in the
reconstruction of the pier, PPA drove and constructed 8 piles. Will you explain to us why there
was change in the number of piles from the original number?
A In piers where the piles are withdrawn or pulled out, you cannot re-drive or drive piles at the same
point. You have to redesign the driving of the piles. We cannot drive the piles at the same point
where the piles are broken or damaged or pulled out. We have to redesign, and you will note that
in the reconstruction, we redesigned such that it necessitated 8 piles.
Q Why not, why could you not drive the same number of piles and on the same spot?

82
 A The original location was already disturbed. We cannot get required bearing capacity. The area is
already disturbed.
Q Nonetheless, if you drove the original number of piles, six, on different places, would not that have
sustained the same load?
A It will not suffice, sir."[103]
We quote the findings of the lower court with approval:

With regards to the amount of damages that is to be awarded to plaintiff, the Court finds that the amount
of P1,053,300.00 is justified. Firstly, the doctrine of res ipsa loquitur best expounded upon in the
landmark case of Republic vs. Luzon Stevedoring Corp. (21 SCRA 279) establishes the presumption that
in the ordinary course of events the ramming of the dock would not have occurred if proper care was
used.

Secondly, the various estimates and plans justify the cost of the port construction price. The new structure
constructed not only replaced the damaged one but was built of stronger materials to forestall the
possibility of any similar accidents in the future.

The Court inevitably finds that the plaintiff is entitled to an award of P1,053,300.00 which represents
actual damages caused by the damage to Berth 4 of the Manila International Port.Co-defendants Far
Eastern Shipping, Capt. Senen Gavino and Manila Pilots Association are solidarity liable to pay this
amount to plaintiff.[104]

The Solicitor General rightly commented that the adjudicated amount of damages represents the
proportional cost of repair and rehabilitation of the damaged section of the pier.[105]
Except insofar as their liability is limited or exempted by statute, the vessel or her owners are liable
for all damages caused by the negligence or other wrongs of the owners or those in charge of the
vessel. As a general rule, the owners or those in possession and control of a vessel and the vessel are
liable for all natural and proximate damages caused to persons or property by reason of her negligent
management or navigation.[106]
FESC's imputation of PPA's failure to provide a safe and reliable berthing place is obtuse, not only
because it appears to be a mere afterthought, being tardily raised only in this petition, but also because
there is no allegation or evidence on record about Berth No. 4 being unsafe and unreliable, although
perhaps it is a modest pier by international standards.There was, therefore, no error on the part of the
Court of Appeals in dismissing FESC's counterclaim.

II. G.R. No. 130150

This consolidated case treats on whether the Court of Appeals erred in holding MPA jointly and
solidarity liable with its member pilot, Capt. Gavino, in the absence of employer-employee relationship
and in applying Customs Administrative Order No. 15-65, as basis for the adjudged solidary liability of
MPA and Capt. Gavino.
The pertinent provisions in Chapter I of Customs Administrative Order No. 15-65 are:

"PAR. XXVII.-- In all pilotage districts where pilotage is compulsory, there shall be created and
maintained by the pilots or pilots' association, in the manner hereinafter prescribed, a reserve fund equal

83
to P1,000.00 for each pilot thereof for the purpose of paying claims for damages to vessels or property
caused through acts or omissions of its members while rendered in compulsory pilotage service. In
Manila, the reserve fund shall be P2,000.00 for each pilot.

PAR. XXVIII.-- A pilots' association shall not be liable under these regulations for damage to any vessel,
or other property, resulting from acts of a member of an association in the actual performance of his duty
for a greater amount than seventy-five per centum (75%) of its prescribed reserve fund; it being
understood that if the association is held liable for an amount greater than the amount above-stated, the
excess shall be paid by the personal funds of the member concerned.

PAR. XXXI.-- If a payment is made from the reserve fund of an association on account of damages
caused by a member thereof, and he shall have been found at fault, such member shall reimburse the
association in the amount so paid as soon as practicable; and for this purpose, not less than twenty-five
per centum of his dividends shall be retained each month until the full amount has been returned to the
reserve fund.

PAR. XXXIV. - Nothing in these regulations shall relieve any pilots' association or members thereof,
individually or collectively, from civil responsibility for damages to life or property resulting from the
acts of members in the performance of their duties.

Correlatively, the relevant provisions of PPA Administrative Order No. 03-85, which timely
amended this applicable maritime regulation, state:

Article IV

SEC. 17. Pilots' Association -- The Pilots in a Pilotage District shall organize themselves into a Pilots'
Association or firm, the members of which shall promulgate their own By-Laws not in conflict with the
rules and regulations promulgated by the Authority. These By-Laws shall be submitted not later than one
(1) month after the organization of the Pilots' Association for approval by the General Manager of the
Authority. Subsequent amendments thereto shall likewise be submitted for approval.

SEC. 25. Indemnity Insurance and Reserve Fund--

a) Each Pilots' Association shall collectively insure its membership at the rate
of P50,000.00 each member to cover in whole or in part any liability arising from
any accident resulting in damage to vessel(s), port facilities and other properties
and/or injury to persons or death which any member may have caused in the
course of his performance of pilotage duties. x x x.

b) The Pilotage Association shall likewise set up and maintain a reserve fund which shall
answer for any part of the liability referred to in the immediately preceding
paragraph which is left unsatisfied by the insurance proceeds, in the following
manner:

1) Each pilot in the Association shall contribute from his own account an amount
of P4,000.00 (P6,000.00 in the Manila Pilotage District) to the reserve fund. This
fund shall not be considered part of the capital of the Association nor charged as
an expense thereof.

84
 2) Seventy-five percent (75%) of the reserve fund shall be set aside for use, in the
payment of damages referred to above incurred in the actual performance of
pilots' duties and the excess shall be paid from the personal funds of the member
concerned.

xxxxxxxxx

5) If payment is made from the reserve fund of an Association on account of damage

caused by a member thereof who is found at fault, he shall reimburse the
Association in the amount so paid as soon as practicable; and for this purpose,
not less than twenty-five percentum (25%) of his dividend shall be retained each
month until the full amount has been returned to the reserve fund. Thereafter,
the pilot involved shall be entitled to his full dividend.

6) When the reimbursement has been completed as prescribed in the preceding

paragraph, the ten percentum (10%) and the interest withheld from the shares of
the other pilots in accordance with paragraph (4) hereof shall be returned to
them.

c) Liability of Pilots' Association -- Nothing in these regulations shall relieve any

Pilots' Association or members thereof, individually or collectively, from any
civil, administrative and/or criminal responsibility for damages to life or
property resulting from the individual acts of its members as well as those of the
Association's employees and crew in the performance of their duties.

The Court of Appeals, while affirming the trial court's finding of solidary liability on the part of
FESC, MPA and Capt. Gavino, correctly based MPA's liability not on the concept of employer-employee
relationship between Capt. Gavino and itself, but on the provisions of Customs Administrative Order No.
15-65:

The Appellant MPA avers that, contrary to the findings and disquisitions of the Court a quo, the
Appellant Gavino was not and has never been an employee of the MPA but was only a member
thereof. The Court a quo, it is noteworthy,, did not state the factual basis on which it anchored its finding
that Gavino was the employee of MPA. We are in accord with MPA's pose. Case law teaches Us that, for
an employer-employee relationship to exist the confluence of the following elements must be established:
(1) selection and engagement of employees; (2) the payment of wages; (3) the power of dismissal; (4) the
employer's power to control the employees with respect to the means and method by which the work is to
be performed (Ruga versus NLRC, 181SCRA 266).

xxxxxxxxx

The liability of MPA for damages is not anchored on Article 2180 of the New Civil Code as erroneously
found and declared by the Court a quo but under the provisions of Customs Administrative Order No. 15-
65, supra, in tandem with the by-laws of the MPA."[107]

There being no employer-employee relationship, clearly Article 2180[108] of the Civil Code is
inapplicable since there is no vicarious liability of an employer to speak of. It is so stated in American
law, as follows:

85
The well-established rule is that pilot associations are immune to vicarious liability for the tort of their
members. They are not the employer of their members and exercise no control over them once they take
the helm of the vessel. They are also not partnerships because the members do not function as agents for
the association or for each other. Pilots' associations are also not liable for negligently assuring, the
competence of their members because as professional associations they made no guarantee of the
professional conduct of their members to the general public.[109]

Where under local statutes and regulations, pilot associations lack the necessary legal incidents of
responsibility, they have been held not liable for damages caused by the default of a member
pilot.[110] Whether or not the members of a pilots' association are in legal effect a copartnership depends
wholly on the powers and duties of the members in relation to one another under the provisions of the
governing statutes and regulations. The relation of a pilot to his association is not that of a servant to the
master, but of an associate assisting and participating in a common purpose. Ultimately, the rights and
liabilities between a pilots' association and an individual member depend largely upon the constitution,
articles or by-laws of the association, subject to appropriate government regulations.[111]
No reliance can be placed by MPA on the cited American rulings as to immunity from liability of a
pilots' association in light of existing positive regulation under Philippine law. The Court of Appeals
properly applied the clear and unequivocal provisions of Customs Administrative Order No. 15-65. In
doing so, it was just being consistent with its finding of the non-existence of employer-employee
relationship between MPA and Capt. Gavino precludes the application of Article 2180 of the Civil Code.
True, Customs Administrative Order No. 15-65 does not categorically characterize or label MPA's
liability as solidary in nature. Nevertheless, a careful reading and proper analysis of the correlated
provisions lead to the conclusion that MPA is solidarity liable for the negligence of its member pilots,
without prejudice to subsequent reimbursement from the pilot at fault.
Article 1207 of the Civil Code provides that there is solidary liability only when the obligation
expressly so states, or when the law or the nature of the obligation requires solidarity.Plainly, Customs
Administrative Order No. 15-65, which as an implementing rule has the force and effect of law, can
validly provide for solidary liability. We note the Solicitor General's comment hereon, to wit:

x x x Customs Administrative Order No. 15-65 may be a mere rule and regulation issued by an
administrative agency pursuant to a delegated authority to fix "the details" in the execution or
enforcement of a policy set out in the law itself. Nonetheless, said administrative order, which adds to the
procedural or enforcing provisions of substantive law, is legally binding and receives the same statutory
force upon going into effect. In that sense, it has equal, not lower, statutory force and effect as a regular
statute passed by the legislature."[112]

MPA's prayer for modification of the appellate court's decision under review by exculpating
petitioner MPA "from liability beyond seventy-five percent (75%) of Reserve Fund" is unnecessary
because the liability of MPA under Par. XXVIII of Customs Administrative Order No. 15-65 is in fact
limited to seventy-five percent (75%) of its prescribed reserve fund, any amount of liability beyond that
being for the personal account of the erring pilot and subject to reimbursement in case of a finding of fault
by the member concerned. This is clarified by the Solicitor General:

Moreover, contrary to petitioners pretensions, the provisions of Customs Administrative Order No. 15-65
do not limit the liability of petitioner as a pilots' association to an absurdly small amount of seventy-five
per centum (75%) of the member pilots' contribution of P2,000.00 to the reserve fund. The law speaks of
the entire reserve fund required to be maintained by the pilots' association to answer (for) whatever
liability arising from the tortious act of its members. And even if the association is held liable for an
amount greater than the reserve fund, the association may not resist the liability by claiming to be liable

86
only up to seventy-five per centum (75%) of the reserve fund because in such instance it has the right to
be reimbursed by the offending member pilot for the excess."[113]

WHEREFORE, in view of all of the foregoing, the consolidated petitions for review are DENIED
and the assailed decision of the Court of Appeals is AFFIRMED in toto.
Counsel for FESC, the law firm of Del Rosario and Del Rosario, specifically its associate,
Atty. Herbert A. Tria, is REPRIMANDED and WARNED that a repetition of the same or similar acts of
heedless disregard of its undertakings under the Rules shall be dealt with more severely.
The original members of the legal team of the Office of the Solicitor General assigned to this case,
namely, Assistant Solicitor General Roman G. Del Rosario and Solicitor Luis F. Simon, are
ADMONISHED and WARNED that a repetition of the same or similar acts of unduly delaying
proceedings due to delayed filing of required pleadings shall also be dealt with more stringently.
The Solicitor General is DIRECTED to look into the circumstances of this case and to adopt
provident measures to avoid a repetition of this incident and which would ensure prompt compliance with
orders of this Court regarding the timely filing of requisite pleadings, in the interest of just, speedy and
orderly administration of justice.
Let copies of this decision be spread upon the personal records of the lawyers named herein in the
Office of the Bar Confidant.
SO ORDERED.

59. PLANTERS PRODUCTS, INC., petitioner,

vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN
KABUSHIKI KAISHA, respondents.

Gonzales, Sinense, Jimenez & Associates for petitioner.

Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.

BELLOSILLO, J.:

Does a charter-party1 between a shipowner and a charterer transform a common carrier into a private one
as to negate the civil law presumption of negligence in case of loss or damage to its cargo?

Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of
New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk
on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen
Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union,
Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued on the
date of departure.

87
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to
the Uniform General Charter2 was entered into between Mitsubishi as shipper/charterer and KKKK as
shipowner, in Tokyo, Japan.3 Riders to the aforesaid charter-party starting from par. 16 to 40 were
attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also
subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively.

Before loading the fertilizer aboard the vessel, four (4) of her holds4 were all presumably inspected by the
charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the charter-
party which reads:

16. . . . At loading port, notice of readiness to be accomplished by certificate from

National Cargo Bureau inspector or substitute appointed by charterers for his account
certifying the vessel's readiness to receive cargo spaces. The vessel's hold to be properly
swept, cleaned and dried at the vessel's expense and the vessel to be presented clean for
use in bulk to the satisfaction of the inspector before daytime commences. (emphasis
supplied)

After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the
shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin, then
tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage.5

Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with
the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its steelbodied dump trucks
which were parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and
conditions of the charter-partly (which provided for an F.I.O.S. clause).6 The hatches remained open
throughout the duration of the discharge.7

Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was
transported to the consignee's warehouse located some fifty (50) meters from the wharf. Midway to the
warehouse, the trucks were made to pass through a weighing scale where they were individually weighed
for the purpose of ascertaining the net weight of the cargo. The port area was windy, certain portions of
the route to the warehouse were sandy and the weather was variable, raining occasionally while the
discharge was in progress.8 The petitioner's warehouse was made of corrugated galvanized iron (GI)
sheets, with an opening at the front where the dump trucks entered and unloaded the fertilizer on the
warehouse floor. Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain
spillages of the ferilizer.9

It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th
and 18th).10A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired
by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and
after discharge. 11 The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974
revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18
M/T was contaminated with dirt. The same results were contained in a Certificate of Shortage/Damaged
Cargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered was indeed short of
94.839 M/T and about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust
and
dirt. 12

88
Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA),
the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in
the goods shipped and the diminution in value of that portion said to have been contaminated with dirt. 13

Respondent SSA explained that they were not able to respond to the consignee's claim for payment
because, according to them, what they received was just a request for shortlanded certificate and not a
formal claim, and that this "request" was denied by them because they "had nothing to do with the
discharge of the shipment." 14 Hence, on 18 July 1975, PPI filed an action for damages with the Court of
First Instance of Manila. The defendant carrier argued that the strict public policy governing common
carriers does not apply to them because they have become private carriers by reason of the provisions of
the charter-party. The court a quo however sustained the claim of the plaintiff against the defendant
carrier for the value of the goods lost or damaged when it ruled thus: 15

. . . Prescinding from the provision of the law that a common carrier is presumed
negligent in case of loss or damage of the goods it contracts to transport, all that a
shipper has to do in a suit to recover for loss or damage is to show receipt by the carrier
of the goods and to delivery by it of less than what it received. After that, the burden of
proving that the loss or damage was due to any of the causes which exempt him from
liability is shipted to the carrier, common or private he may be. Even if the provisions of
the charter-party aforequoted are deemed valid, and the defendants considered private
carriers, it was still incumbent upon them to prove that the shortage or contamination
sustained by the cargo is attributable to the fault or negligence on the part of the shipper
or consignee in the loading, stowing, trimming and discharge of the cargo. This they
failed to do. By this omission, coupled with their failure to destroy the presumption of
negligence against them, the defendants are liable (emphasis supplied).

On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability
for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case of Home Insurance
Co. v. American Steamship Agencies, Inc.,17 the appellate court ruled that the cargo vessel M/V "Sun
Plum" owned by private respondent KKKK was a private carrier and not a common carrier by reason of
the time charterer-party. Accordingly, the Civil Code provisions on common carriers which set forth a
presumption of negligence do not find application in the case at bar. Thus —

. . . In the absence of such presumption, it was incumbent upon the plaintiff-appellee to

adduce sufficient evidence to prove the negligence of the defendant carrier as alleged in
its complaint. It is an old and well settled rule that if the plaintiff, upon whom rests the
burden of proving his cause of action, fails to show in a satisfactory manner the facts
upon which he bases his claim, the defendant is under no obligation to prove his
exception or defense (Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing
Belen v. Belen, 13 Phil. 202).

But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its
cause of action, i.e. the alleged negligence of defendant carrier. It appears that the
plaintiff was under the impression that it did not have to establish defendant's negligence.
Be that as it may, contrary to the trial court's finding, the record of the instant case
discloses ample evidence showing that defendant carrier was not negligent in performing
its obligation . . . 18 (emphasis supplied).

Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of Appeals.
Petitioner theorizes that the Home Insurance case has no bearing on the present controversy because the

89
issue raised therein is the validity of a stipulation in the charter-party delimiting the liability of the
shipowner for loss or damage to goods cause by want of due deligence on its part or that of its manager to
make the vessel seaworthy in all respects, and not whether the presumption of negligence provided under
the Civil Code applies only to common carriers and not to private carriers. 19 Petitioner further argues that
since the possession and control of the vessel remain with the shipowner, absent any stipulation to the
contrary, such shipowner should made liable for the negligence of the captain and crew. In fine, PPI faults
the appellate court in not applying the presumption of negligence against respondent carrier, and instead
shifting the onus probandi on the shipper to show want of due deligence on the part of the carrier, when
he was not even at hand to witness what transpired during the entire voyage.

As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier by
reason of a charter-party; in the negative, whether the shipowner in the instant case was able to prove that
he had exercised that degree of diligence required of him under the law.

It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so, we
find it fitting to first define important terms which are relevant to our discussion.

A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by
the owner to another person for a specified time or use; 20 a contract of affreightment by which the owner
of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of
goods, on a particular voyage, in consideration of the payment of freight; 21 Charter parties are of two
types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the
owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by
the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and
possession and consequent control over its navigation, including the master and the crew, who are his
servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the
charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. 22 In
both cases, the charter-party provides for the hire of vessel only, either for a determinate period of time or
for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the
master and the crew, and defray the expenses for the maintenance of the ship.

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil
Code. 23 The definition extends to carriers either by land, air or water which hold themselves out as ready
to engage in carrying goods or transporting passengers or both for compensation as a public employment
and not as a casual occupation. The distinction between a "common or public carrier" and a "private or
special carrier" lies in the character of the business, such that if the undertaking is a single transaction, not
a part of the general business or occupation, although involving the carriage of goods for a fee, the person
or corporation offering such service is a private carrier. 24

Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their
business, should observe extraordinary diligence in the vigilance over the goods they carry.25 In the case
of private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice.
Moreover, in the case of loss, destruction or deterioration of the goods, common carriers are presumed to
have been at fault or to have acted negligently, and the burden of proving otherwise rests on them.26 On
the contrary, no such presumption applies to private carriers, for whosoever alleges damage to or
deterioration of the goods carried has the onus of proving that the cause was the negligence of the carrier.

It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier,
transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun
Plum", the ship captain, its officers and compliment were under the employ of the shipowner and

90
therefore continued to be under its direct supervision and control. Hardly then can we charge the
charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer
did not have any control of the means in doing so. This is evident in the present case considering that the
steering of the ship, the manning of the decks, the determination of the course of the voyage and other
technical incidents of maritime navigation were all consigned to the officers and crew who were screened,
chosen and hired by the shipowner. 27

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in
the case of a time-charter or voyage-charter. It is only when the charter includes both the vessel and its
crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular
voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter
retains possession and control of the ship, although her holds may, for the moment, be the property of the
charterer. 28

Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies,
supra, is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation
in the charter-party exempting the shipowners from liability for loss due to the negligence of its agent,
and not the effects of a special charter on common carriers. At any rate, the rule in the United States that a
ship chartered by a single shipper to carry special cargo is not a common carrier, 29 does not find
application in our jurisdiction, for we have observed that the growing concern for safety in the
transportation of passengers and /or carriage of goods by sea requires a more exacting interpretation of
admiralty laws, more particularly, the rules governing common carriers.

We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30 —

As a matter of principle, it is difficult to find a valid distinction between cases in which a

ship is used to convey the goods of one and of several persons. Where the ship herself is
let to a charterer, so that he takes over the charge and control of her, the case is different;
the shipowner is not then a carrier. But where her services only are let, the same grounds
for imposing a strict responsibility exist, whether he is employed by one or many. The
master and the crew are in each case his servants, the freighter in each case is usually
without any representative on board the ship; the same opportunities for fraud or
collusion occur; and the same difficulty in discovering the truth as to what has taken
place arises . . .

In an action for recovery of damages against a common carrier on the goods shipped, the shipper or
consignee should first prove the fact of shipment and its consequent loss or damage while the same was in
the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to
prove that he has exercised extraordinary diligence required by law or that the loss, damage or
deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its
liability. 31

To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima
faciepresumption of negligence.

The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before
the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before
the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated. After
completing the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closed and

91
sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins which were tied with
steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight of
the steel covers made it impossible for a person to open without the use of the ship's boom. 32

It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the
possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel. 33 When
M/V "Sun Plum" docked at its berthing place, representatives of the consignee boarded, and in the
presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor
representing CSCI, opened the hatches and inspected the condition of the hull of the vessel. The
stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the whole
operation on rotation basis. 34

Verily, the presumption of negligence on the part of the respondent carrier has been efficaciously
overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the
cargo. This was confirmed by respondent appellate court thus —

. . . Be that as it may, contrary to the trial court's finding, the record of the instant case
discloses ample evidence showing that defendant carrier was not negligent in performing
its obligations. Particularly, the following testimonies of plaintiff-appellee's own
witnesses clearly show absence of negligence by the defendant carrier; that the hull of the
vessel at the time of the discharge of the cargo was sealed and nobody could open the
same except in the presence of the owner of the cargo and the representatives of the
vessel (TSN, 20 July 1977, p. 14); that the cover of the hatches was made of steel and it
was overlaid with tarpaulins, three layers of tarpaulins and therefore their contents were
protected from the weather (TSN, 5 April 1978, p. 24); and, that to open these hatches,
the seals would have to be broken, all the seals were found to be intact (TSN, 20 July
1977, pp. 15-16) (emphasis supplied).

The period during which private respondent was to observe the degree of diligence required of it as a
public carrier began from the time the cargo was unconditionally placed in its charge after the vessel's
holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its
destination and its hull was reexamined by the consignee, but prior to unloading. This is clear from the
limitation clause agreed upon by the parties in the Addendum to the standard "GENCON" time charter-
party which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the
cargo was to be done by the charterer, free from all risk and expense to the carrier. 35 Moreover, a
shipowner is liable for damage to the cargo resulting from improper stowage only when the stowing is
done by stevedores employed by him, and therefore under his control and supervision, not when the same
is done by the consignee or stevedores under the employ of the latter. 36

Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss,
destruction or deterioration of the goods if caused by the charterer of the goods or defects in the
packaging or in the containers. The Code of Commerce also provides that all losses and deterioration
which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the
inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of these
accidents is incumbent upon the carrier. 37 The carrier, nonetheless, shall be liable for the loss and damage
resulting from the preceding causes if it is proved, as against him, that they arose through his negligence
or by reason of his having failed to take the precautions which usage has established among careful
persons. 38

92
Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and the
expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working with Atlas
Fertilizer, described Urea as a chemical compound consisting mostly of ammonia and carbon monoxide
compounds which are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water.
However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage,
provided that the temperature inside the hull does not exceed eighty (80) degrees centigrade. Mr.
Chupungco further added that in unloading fertilizer in bulk with the use of a clamped shell, losses due to
spillage during such operation amounting to one percent (1%) against the bill of lading is deemed
"normal" or "tolerable." The primary cause of these spillages is the clamped shell which does not seal
very tightly. Also, the wind tends to blow away some of the materials during the unloading process.

The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an extremely
high temperature in its place of storage, or when it comes in contact with water. When Urea is drenched
in water, either fresh or saline, some of its particles dissolve. But the salvaged portion which is in liquid
form still remains potent and usable although no longer saleable in its original market value.

The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was
made greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the inimical
effects of the elements and the grimy condition of the various pieces of equipment used in transporting
and hauling it.

The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into
the vessel's holds during the voyage since the hull of the vessel was in good condition and her hatches
were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry the
cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have
occurred while the same was being transported from the ship to the dump trucks and finally to the
consignee's warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of
CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bar order cargo" as
contained in their report to PPI was just an approximation or estimate made by them after the fertilizer
was discharged from the vessel and segregated from the rest of the cargo.

The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo. It
rained from time to time at the harbor area while the cargo was being discharged according to the supply
officer of PPI, who also testified that it was windy at the waterfront and along the shoreline where the
dump trucks passed enroute to the consignee's warehouse.

Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer carries
with it the risk of loss or damage. More so, with a variable weather condition prevalent during its
unloading, as was the case at bar. This is a risk the shipper or the owner of the goods has to face. Clearly,
respondent carrier has sufficiently proved the inherent character of the goods which makes it highly
vulnerable to deterioration; as well as the inadequacy of its packaging which further contributed to the
loss. On the other hand, no proof was adduced by the petitioner showing that the carrier was remise in the
exercise of due diligence in order to minimize the loss or damage to the goods it carried.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which
reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the First
Instance, now Regional Trial Court, of Manila should be, as it is hereby DISMISSED.

Costs against petitioner.

93
60. MACONDRAY & CO., INC., petitioner, vs. PROVIDENT INSURANCE
CORPORATION, respondent.

DECISION
PANGANIBAN, J.:

Hornbook is the doctrine that the negligence of counsel binds the client. Also settled is the rule that
clients should take the initiative of periodically checking the progress of their cases, so that they could
take timely steps to protect their interest.

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to set aside the
February 28, 2002 Decision[2] and the July 12, 2002 Resolution[3] of the Court of Appeals (CA) in CA-GR
CV No. 57077. The dispositive portion of the Decision reads as follows:

WHEREFORE, premises considered, the assailed Decision dated September 17, 1996 is hereby
REVERSED and SET ASIDE. Accordingly, [Petitioner] Macondray & Co., Inc., is hereby ORDERED to
pay the [respondent] the amount of P1,657,700.95.

The assailed Resolution denied petitioners Motion for Reconsideration.

The Facts

The CA adopted the factual antecedents narrated by the trial court, as follows:

x x x. On February 16, 1991, at Vancouver, B.C. Canada, CANPOTEX SHIPPING SERVICES

LIMITED INC., of Saskatoon, Saskatchewan, (hereinafter the SHIPPER), shipped and loaded on board
the vessel M/V Trade Carrier, 5000 metric tons of Standard Grade Muriate of Potash in bulk for
transportation to and delivery at the port of Sangi, Toledo City, Cebu, in favor of ATLAS FERTILIZER
CORPORATION, (hereinafter CONSIGNEE) covered by B/L Nos. VAN-SAN-1 for the 815.96 metric
tons and VAN-SAN-2 for the 4,184.04 metric tons. Subject shipments were insured with [respondent]
against all risks under and by virtue of an Open Marine Policy No. MOP-00143 and Certificate of Marine
Insurance No. CMI-823-91.

When the shipment arrived, CONSIGNEE discovered that the shipment sustained losses/shortage of
476.140 metric tons valued at One Million Six Hundred Fifty Seven Thousand Seven Hundred Pesos and
Ninety Five Centavos (P1,657,700.95), Philippine Currency. Provident paid losses. Formal claims was
then filed with Trade & Transport and Macondray but the same refused and failed to settle the
same. Hence, this complaint.

As per Officers Return dated 4 June 1992, summons was UNSERVED to defendant TRADE AND
TRANSPORT at the given address for reason that TRADE AND TRANSPORT is no longer connected
with Macondray & Co. Inc., and is not holding office at said address as alleged by Ms. Guadalupe

94
Tan. For failure to effect service of summons the case against TRADE & TRANSPORT was considered
dismissed without prejudice.

Defendant MACONDRAY filed ANSWER, denying liability over the losses, having NO absolute
relation with defendant TRADE AND TRANSPORT, the alleged operator of the vessel who transported
the subject shipment; that accordingly, MACONDRAY is the local representative of the SHIPPER; the
charterer of M/V TRADE CARRIER and not party to this case; that it has no control over the acts of the
captain and crew of the Carrier and cannot be held responsible for any damage arising from the fault or
negligence of said captain and crew; that upon arrival at the port of Sangi, Toledo City, Cebu, the M/V
Trade Carrier discharged the full amount of shipment, as shown by the draft survey with a total quantity
of 5,033.59 metric tons discharged from the vessel and delivered to the CONSIGNEE.

ISSUES: Whether or not Macondray and Co. Inc., as an agent is responsible for any loss sustained by any
party from the vessel owned by defendant Trade and Transport. Whether or not Macondray is liable for
loss which was allegedly sustained by the plaintiff in this case.

EVIDENCE FOR THE PLAINTIFF

Plaintiff presented the testimonies of Marina Celerina P. Aguas and depositions of Alberto Milan and
Alfonso Picson submitted as additional witnesses for PROVIDENT to prove the material facts of the
complaint are deemed admitted by defendant MACONDRAY, on their defense that it is not an agent of
TRADE AND TRANSPORT.

EVIDENCE FOR THE DEFENDANT MACONDRAY:

Witness Ricardo de la Cruz testified as Supercargo of MACONDRAY, that MACONDRAY was not an
agent of defendant TRADE AND TRANSPORT; that his functions as Supercargo was to prepare a notice
of readiness, statement of facts, sailing notice and customs clearance in order to attend to the formalities
and the need of the vessel; that MACONDRAY is performing functions in behalf of CANPOTEX and
was appointed as local agent of the vessel, which duty includes arrangement of the entrance and clearance
of the vessel.

The trial court, in the decision dated September 17, 1996 earlier adverted to, ruled in favor of the
[petitioner] x x x, the dispositive portion of which reads:

WHEREFORE, PREMISES CONSIDERED, the case as against [petitioner] MACONDRAY is hereby

DISMISSED.

No pronouncement as to costs.[4]

Ruling of the Court of Appeals

The CA affirmed the trial courts finding that petitioner was not the agent of Trade and
Transport. The appellate court ruled, however, that petitioner could still be held liable for the shortages of
the shipment, because the latter was the ship agent of Canpotex Shipping Services Ltd. -- the shipper and
charterer of the vessel M/V Trade Carrier.

95
 All told, the CA held petitioner liable for the losses incurred in the shipment of the subject cargoes to
the [respondent], who, being the insurer of the risk, was subrogated to the rights and causes of action
which the consignee, Atlas Fertilizer Corporation, had against the [petitioner].[5]
Hence, this Petition.[6]

The Issues

Petitioner raises the following issues for our consideration:

Whether or not liability attached to petitioner despite the unequivocal factual findings, that it was not a
ship agent.

Whether or not the 28 February 2002 Decision of the Court of Appeals has attained finality.

Whether or not by filing the instant Petition for Review on Certiorari, petitioner is guilty of forum-
shopping.[7]

The Courts Ruling

The Petition has no merit.

First Issue:
Petitioners Liability

As a rule, factual findings of the Court of Appeals -- when not in conflict with those of the trial court
-- are not disturbed by this Court,[8] to which only questions of law may be raised in an appeal by
certiorari.[9]
In the present case, we find no compelling reason to overturn the Court of Appeals in its categorical
finding that petitioner was the ship agent. Such factual finding was not in conflict with the trial courts
ruling, which had merely stated that petitioner was not the agent of Trade and Transport. Indeed, although
it is not an agent of Trade and Transport, petitioner can still be the ship agent of the vessel M/V Trade
Carrier.
Article 586 of the Code of Commerce states that a ship agent is the person entrusted with
provisioning or representing the vessel in the port in which it may be found.
Hence, whether acting as agent of the owner[10] of the vessel or as agent of the charterer,[11] petitioner
will be considered as the ship agent[12] and may be held liable as such, as long as the latter is the one that
provisions or represents the vessel.
The trial court found that petitioner was appointed as local agent of the vessel, which duty includes
arrangement for the entrance and clearance of the vessel.[13] Further, the CA found and the evidence
shows that petitioner represented the vessel. The latter prepared the Notice of Readiness, the Statement of
Facts, the Completion Notice, the Sailing Notice and Customs Clearance.[14] Petitioners employees were
present at Sangi, Toledo City, one day before the arrival of the vessel, where they stayed until it

96
departed. They were also present during the actual discharging of the cargo.[15] Moreover, Mr. de la Cruz,
the representative of petitioner, also prepared for the needs of the vessel, like money, provision, water and
fuel.[16]
These acts all point to the conclusion that it was the entity that represented the vessel in
the Port of Manila and was the ship agent[17] within the meaning and context of Article 586 of the Code of
Commerce.
As ship agent, it may be held civilly liable in certain instances. The Code of Commerce provides:

Article 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the
obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves
that the amount claimed was invested for the benefit of the same.

Article 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which
may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he
may exempt himself therefrom by abandoning the vessel with all her equipments and the freight it may
have earned during the voyage.

Petitioner does not dispute the liabilities of the ship agent for the loss/shortage of 476.140 metric
tons of standard-grade Muriate of Potash valued at P1,657,700.95. Hence, we find no reason to delve
further into the matter or to disturb the finding of the CA holding petitioner, as ship agent, liable to
respondent for the losses sustained by the subject shipment.

Second Issue:
Finality of the CA Decision

Petitioner claims that it picked up the February 28, 2002 Decision of the CA on May 14, 2002, after
receiving the postal notice the day before. It further attributes gross negligence to its previous counsel for
not informing the CA of his change of address. It thus contends that notice of the assailed Decision given
to the previous counsel cannot be considered as notice to petitioner.
We are not persuaded. It is well-settled that when a party is represented by counsel, notice should be
made upon the counsel of record at his given address to which notices of all kinds emanating from the
court should be sent in the absence of a proper and adequate notice to the court of a change of address.[18]
In the present case, service of the assailed Decision was made on petitioners counsels of record,
Attys. Moldez and Galoz, on March 6, 2002. That copy of the Decision was, however, returned to the
sender for the reason that the addressee had move[d] out. If counsel moves to another address without
informing the court of that change, such omission or neglect is inexcusable and will not stay the finality
of the decision.[19] The court cannot be expected to take judicial notice of the new address of a lawyer who
has moved or to ascertain on its own whether or not the counsel of record has been changed and who the
new counsel could possibly be or where he probably resides or holds office.[20]
It is unfortunate that the lawyer of petitioner neglected his duties to the latter. Be that as it may, the
negligence of counsel binds the client.[21] Service made upon the present counsel of record at his given
address is service to petitioner. Hence, the assailed Decision has already become final and unappealable.
In the present case, there is no compelling reason to overturn well-settled jurisprudence or to
interpret the rules liberally in favor of petitioner, who is not entirely blameless. It should have taken the
initiative of periodically keeping in touch with its counsel, checking with the court, and inquiring about

97
the status of its case.[22] In so doing, it could have taken timely steps to neutralize the negligence of its
chosen counsel and to protect its interests. Litigants represented by counsel should not expect that all they
need to do is sit back, relax and await the outcome of their case.[23]
In view of the foregoing, there is no necessity of passing upon the third issue raised by petitioner.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioner.

98