G.R. No.

L-13695 October 18, 1921

STANDARD OIL COMPANY OF NEW YORK, plaintiff-appellee,

vs.
MANUEL LOPEZ CASTELO, defendant-appellant.

Gabriel La O for appellant.

Lawrence and Ross for appellee.

STREET, J.:

By contract of character dated February 8, 1915, Manuel Lopez Castelo, as owner, let the small
interisland steamer Batangueño for the term of one year to Jose Lim Chumbuque for use in the
conveying of cargo between certain ports of the Philippine Islands. In this contract it was stipulated
that the officers and crew of the Batangueño should be supplied by the owner, and that the charterer
should have no other control over the captain, pilot, and engineers than to specify the voyages that
they should make and to require the owner to discipline or relieve them as soon as possible in case
they should fail to perform the duties respectively assigned to them.

While the boat was being thus used by the charterer in the interisland trade, the standard Oil
Company delivered to the agent of the boat in Manila a quantity of petroleum to be conveyed to the
port of Casiguran, in the Province of Sorsogon. For this consignment a bill of lading of the usual form
was delivered, with the stipulation that freight should be paid at the destination. Said bill of lading
contained no provision with respect to the storage of the petroleum, but it was in fact placed upon
the deck of the ship and not in the hold.

While the boat was on her way to the port mentioned, and off the western coast of Sorsogon, a
violent typhoon passed over that region, and while the storm was at its height the captain was
compelled for the safety of all to jettison the entire consignment of petroleum consisting of two
hundred cases. When the storm abated the ship made port, and thirteen cases of the petroleum
were recovered, but the remainder was wholly lost.

To recover the value of the petroleum thus jettisoned but not recovered, the present action was
instituted by the Standard Oil Company against the owner of the ship in the Court of First Instance of
Manila, where judgment was rendered in favor of the plaintiff. From this judgment the defendant
appealed.

No question is made upon the point that the captain exercised proper discretion in casting this
petroleum overboard, as a step necessary to the salvation of the ship; and in fact it appears that
even after the vessel was thus eased, she was with difficulty prevented from capsizing, so great was
the intensity of the storm.

The first question for discussion is whether the loss of this petroleum was a general average loss or
a particular less to be borne solely by the owner of the cargo. Upon this point it will be observed that
the cargo was carried upon deck; and it is a general rule, both under the Spanish Commercial Code
and under the doctrines prevailing in the courts of admiralty of England America, as well as in other
countries, that ordinarily the loss of cargo carried on deck shall not be considered a general average
loss. This is clearly expressed in Rule I of the York-Antwerp Rules, as follows: "No jettison of deck
cargo shall be made good as general average." The reason for this rule is found in the fact that deck
cargo is in an extra-hazardous position and, if on a sailing vessel, its presence is likely to obstruct
the free action of the crew in managing the ship. Moreover, especially in the case of small vessels, it
renders the boat top-heavy and thus may have to be cast overboard sooner than would be
necessary if it were in the hold; and naturally it is always the first cargo to go over in case of
emergency. Indeed, in subsection 1 of article 815 of the Code of Commerce, it is expressly declared
that deck cargo shall be cast overboard before cargo stowed in the hold.

But this rule, denying deck cargo the right to contribution by way of general average in case of
jettison, was first mad in the days of sailing vessels; and with the advent of the steamship as the
principal conveyer of cargo by sea, it has been felt that the reason for the rule has become less
weighty, especially with reference to coastwise trade; and it is now generally held that jettisoned
goods carried on deck, according to the custom of trade, by steam vessels navigating coastwise and
inland waters, are entitled to contribution as a general average loss (24 R. C. L., 1419).

Recognition is given to this idea in two different articles in the Spanish Code of Commerce. In the
first it is in effect declared that, if the marine ordinances allow cargo to the laden on deck in
coastwise navigation, the damages suffered by such merchandise shall not be dealt with as
particular average (art. 809 [3], Comm. Code); and in the other it is stated that merchandise laden on
the upper deck of the vessel shall contribute in the general average if it should be saved; but that
there shall be no right to indemnity if it should be lost by reason of being jettisoned for the general
safety, except when the marine ordinances allow its shipment in this manner in coastwise navigation
(art. 855, Comm. Code).

The Marine Regulations now in force in these Islands contain provisions recognizing the right of
vessels engaged in the interisland trade to carry deck cargo; and express provision is made as to
the manner in which it shall be bestowed and protected from the elements (Phil. Mar. Reg. [1913],
par 23). Indeed, there is one commodity, namely, gasoline, which from its inflammable nature is not
permitted to be carried in the hold of any passenger vessel, though it may be carried on the deck if
certain precautions are taken. There is no express provision declaring that petroleum shall be
carried on deck in any case; but having regard to its inflammable nature and the known practices of
the interisland boats, it cannot be denied that this commodity also, as well as gasoline, may be
lawfully carried on deck in our coatwise trade.

The reason for adopting a more liberal rule with respect to deck cargo on vessels used in the
coastwise trade than upon those used for ordinary ocean borne traffic is to be found of course in the
circumstance that in the coastwise trade the boats are small and voyages are short, with the result
that the coasting vessel can use more circumspection about the condition of the weather at the time
of departure; and if threatening weather arises, she can often reach a port of safety before disaster
overtakes her. Another consideration is that the coastwise trade must as a matter of public policy be
encouraged, and domestic traffic must be permitted under such conditions as are practically
possible, even if not altogether ideal.

From what has been said it is evident that the loss of this petroleum is a general and not a special
average, with the result that the plaintiff is entitled to recover in some way and from somebody an
amount bearing such proportion to its total loss as the value of both the ship and the saved cargo
bears to the value of the ship and entire cargo before the jettison was effected. Who is the person, or
persons, who are liable to make good this loss, and what are the conditions under which the action
can be maintained?

That the owner of the ship is a person to whom the plaintiff in this case may immediately look for
reimbursement to the extent above stated is deducible not only from the general doctrines of
admiralty jurisprudence but from the provisions of the Code of Commerce applicable to the case. It is
universally recognized that the captain is primarily the representative of the owner; and article 586 of
the Code of Commerce expressly declares that both the owner of the vessel and the naviero, or
charterer, shall be civil liable for the acts of the master. In this connection, it may be noted that there
is a discrepancy between the meaning of naviero, in articles 586 of the Code of Commerce, where
the word is used in contradistinction to the term "owner of the vessel" ( propietario), and in article
587 where it is used alone, and apparently in a sense broad enough to include the owner.
Fundamentally the word "naviero" must be understood to refer to the person undertaking the voyage,
who in one case may be the owner and in another the charterer. But this is not vital to the present
discussion. The real point to which we direct attention is that, by the express provision of the Code,
the owner of the vessel is civilly liable for the acts of the captain; and he can only escape from this
civil liability by abandoning his property in the ship and any freight that he may have earned on the
voyage (arts. 587, 588, Code of Comm.).

Now, by article 852 of the Code of Commerce the captain is required to initiate the proceedings for
the adjustment, liquidation, and distribution of any gross average to which the circumstances of the
voyage may have given origin; and it is therefore his duty to take the proper steps to protect any
shipper whose goods may have been jettisoned for the general safety. In ordinary practice this, we
supposed, would be primarily accomplished by requiring the consignees of other cargo, as a
condition precedent to the delivery of their goods to them, to give a sufficient bond to respond for
their proportion of the general average. But it is not necessary here to inquire into details. It is
sufficient to say that the captain is required to take the necessary steps to effect the adjustment,
liquidation, and distribution of the general average. In the case before us the captain of the vessel
did not take those steps; and we are of the opinion that the failure of the captain to take those steps
gave rise to a liability for which the owner of the ship must answer.

But it is said — and the entire defense seems to be planted upon this proposition — that the
liquidation of the general average is, under article 852 and related provisions, a condition precedent
to the liability of the defendant, and that at any rate the defendant, as owner of the ship, should only
be held liable for his proportion of the general average. It is also suggested that if the plaintiff has
any right of action at all upon the state of facts here presented, it is against the captain, who has
been delinquent in performing the duty which the law imposes on him.

This argument involves, we think, a misconception of the true import of the provisions relating to the
adjustment and liquidation of general average. Clearly, for one thing, those provisions are intended
to supply the shipowner, acting of cause in the person of the captain, with a means whereby he may
escape bearing the entire burden of the loss and may distribute it among all the persons who ought
to participate in sharing it; but the making of the liquidation is not a condition precedent to the liability
of the shipowner of the shipper whose property has been jettisoned.

It is true that if the captain does not comply with the article relating to the adjustment, liquidation, and
distribution of the general average, the next article (852) gives to those concerned — whether
shipowner (naviero) or shipper — the right to maintain an action against the captain for
indemnification for the loss; but the recognition of this right of action does not by any means involve
the suppression of the right of action which is elsewhere recognized in the shipper against the ship's
owner. The shipper may in our opinion go at once upon the owner and the latter, if so minded, may
have his recourse for indemnization against his captain.

In considering the question now before us it is important to remember that the owner of the ship
ordinarily has vastly more capital embarked upon a voyage than has any individual shipper of cargo.
Moreover, the owner of the ship, in the person of the captain, has complete and exclusive control of
the crew and of the navigation of the ship, as well as of the disposition of the cargo at the end of the
voyage. It is therefore proper that any person whose property may have been cast overboard by
order of the captain should have a right of action directly against the ship's owner for the breach of
any duty which the law may have imposed on the captain with respect to such cargo. To adopt the
interpretation of the law for which the appellant contends would place the shipowner in a position to
escape all responsibility for a general average of this character by means of the delinquency of his
own captain. This cannot be permitted. The evident intention of the Code, taken in all of its
provisions, is to place the primary liability upon the person who has actual control over the conduct
of the voyage and who has most capital embarked in the venture, namely, the owner of the ship,
leaving him to obtain recourse, as it is very easy to do, from other individuals who have been drawn
into the venture as shippers.

It results that the plaintiff is entitled to recover in this action; and the only additional point to be
inquired into is the amount that should be awarded. In this connection it appears that the total value
of the jettisoned cargo, belonging partly to the plaintiff to another shipper, was P880.35, of which
P719.95 represented the value of the plaintiff's petroleum. Upon the apportionment of this total loss
among the different interests involved, to wit, value of ship, value of cargo, and the earned but lost
freight, it appears that the amount of the loss apportionable to the plaintiff is P11.28. Deducting this
from the value of the petroleum, we have as a result, the amount of P708.67, which is the amount for
which judgment should be given.

Accordingly, modifying the judgment appealed from to this extent, we affirm the same, with costs. So
ordered.

Johnson and Villamor, JJ., concur.

Mapa, C.J., concurs in the result.

Separate Opinions

ARAULLO, J., dissenting:

As the loss of the petroleum shipped by the plaintiff company on board the vessel Batangueño,
which belongs to the defendant, constitutes gross average and, as the latter, being, according to the
law, an agent, all of which is admitted in the foregoing decision, the provisions applicable to the case
and which should be taken into consideration in deciding the appeal before this court are those of
various articles in sections 1 of title 4 and sections 1, 2, and 3, of title 5, of Book 3 of the Code of
Commerce.

Article 811 defines gross or general averages as damages and expenses which are deliberately
caused in order to save the vessel, her cargo, or both at the same time, from a real and known risk,
and particularly, such as goods jettisoned to lighten the vessel, whether they belong to the vessel, to
the cargo, or to the crew, and the damage suffered through said act by the goods or board; the
damage caused to the vessel by scuttling or entering her hold in order to save the cargo; and the
expenses of the liquidation of the average. Article 812 provides that in order to satisfy the amount of
the gross or general average, all persons having an interests in the vessel and cargo at the time of
the occurrence of the average shall contribute. Article 846 provides that the persons interested in the
proof and liquidation of averages may mutually agree and bind themselves at any time with regard to
the liability, liquidation and payment thereof, and that, in the absence of agreements, the proof of the
average shall take place in the port where the repairs are made, should any be necessary, or in the
port of unloading; that the liquidation shall take place in the port of unloading should it be a Spanish
port (now Filipino); that should the average have occurred outside of the jurisdictional waters of the
Philippines or should the cargo have been sold in a foreign port by reason of the arrival of the vessel
under stress in said port, liquidation shall be made in the port of arrival; and, finally, if the average
should have occurred near the port of destination, and that port is made, the proceedings for the
proof and liquidation above-mentioned shall he had there.

Article 847 provides that when the liquidation of the averages is made privately by virtue of
agreement, as well as when a judicial authority takes part therein at the request of any of the parties
interested who do not agree thereto, all of them shall be cited and heard, should they not have
renounced this right; that should they not be present or not have a legitimate representative, the
liquidation shall be made by the consul in said port, and where there is none, by the judge or court of
competent jurisdiction, accordance to the laws of the country, and for the account of the proper
person; and, finally, desiring to furnish all possible means to effect the liquidation, legislator provides
in the last part of said article that, when the representative is a person well-known in the place where
the liquidation takes place, his intervention shall be admitted and will produce legal effect, even
though he be authorized only by a letter of the shipowner, freighter, or underwriter; and as to general
or gross averages, he lays down concrete and conclusive rules in articles 853, 854, and 858, with
respect to the form and mode in which the experts appointed by the interested parties or by the court
shall fulfill their duties, as to the examination of the vessel, the repairs and the appraisement of their
cost, as well as to the appraisement of the goods which are to contribute to the gross average and
those which constitute the average, likewise providing in article 857 that, after the appraisement by
the experts of the goods saved, lost, and those which constitute the gross average, and after the
repairs have been made to the vessel, should any be necessary, and in such case, after the
approval of the accounts by the persons interested or by the court, the entire record shall be turned
over to the liquidator appointed, in order that he may proceed with thepro rata distribution of the
average among the contributing values, after fixing the amount mentioned in said article of the
contributing capital: (1) By the value of the cargo, according to the rules established in article 854;
(2) by the value of the vessel in her actual condition, according to a statement of experts; (3) by 50
per cent of the amount of the freight, deducting the remaining 50 per cent for wages and
maintenance of the crew. 1aw ph!l.net

Lastly, in relation to said provisions, article 851 authorizes the captain to proceed privately, upon the
agreement of the parties interested, in the adjustment, liquidation, and distribution of the gross
average, and for this purpose, it is his duty to call, within forty hours following the arrival of the vessel
at the port, the persons interested in order that they may decide whether the adjustment or
liquidation of the gross average is to be made by experts and liquidators appointed by themselves, in
which case this shall be done should the persons interested agree, and said article also provides
that should an agreement not be possible, the captain shall apply to the judge or court of competent
jurisdiction, who shall be the one of the port where the proceedings are to be held in accordance
with the provisions of the Code of Commerce, to the consul of Spain (now of the United States),
should there be one, or otherwise to the local authority when the proceedings are to be held in a
foreign port. And finally, the next article, 852, says: "If the captain should not comply with the
provisions contained in the foregoing article, the shipowner or agent or the freighters shall demand
the liquidation, without prejudice to the action they may bring to demand indemnity from him."

It is therefore beyond question that the action of the plaintiff to recover indemnity for the damage
which it claims to have suffered by reason of the failure of the captain of the vessel Batangueño to
proceed with the liquidation and distribution of the gross average in which it was a contributor, and
by reason of his act in delivering to the other shippers their respective goods, without first requiring
them to give bond, should have been brought not against the shipowner or agent, who is the
defendant in this case, but against the captain himself of the vessel Batangueño.

Although in the preceding decision it is clearly recognized that the captain should have begun the
proceedings for the adjustment, liquidation, and distribution of the gross average in question, and
that it was his duty to take the proper steps to protect any ship whose goods may have been
jettisoned for the common security, it is also stated that in ordinary practice this is supposed to be
complied with by requiring the consignees of the other cargoes, as a condition precedent to the
delivery thereof, to give a sufficient bond to answer proportionally for the gross average, and, lastly,
that the failure of the captain to take the necessary steps to effect the adjustment, liquidation, and
distribution of said average gave rise to the responsibility which should be enforced against the
defendant shipowner, against whom the shipper may immediately institute his action, the former
having in turn, if he so desires, the right to bring suit against the captain. The majority opinion
attempts to support the last proposition and invokes articles 586, 587, and 588.

First of all, according to articles 866, 867, and 888 of the same Code, a bond should be required of
the shippers by the captain after the liquidation is already approved, if the contributors should fail to
pay the amount of the quota by the third day after having been required to do so, and before
delivering to them the goods saved. — the captain having the right, upon failure to give the bond, to
delay the delivery of the goods until the shippers pay their part of the gross average corresponding
to each of them — and not before proceeding with the liquidation, for the simple reason that the
amount of the bond may only be fixed after the determination of the amount which each of the
shippers may be obliged to contribute to the payment of the average, and this is so clear and evident
that in article 867 the captain is authorized to attach the goods saved until the shippers should pay
the amount, if they should fail to do so by the third day after demand upon them. And since the
captain may require bond, he may delay the delivery of the goods saved to the shippers until they
make the payment. In the case at bar, no step having as yet been taken for the adjustment and
liquidation of the gross average in question, the fact that the captain of the Batangueño delivered the
respective cargoes of the other shippers without previously requiring a bond, can not constitute the
basis for making the captain responsible, much less the owner of the vessel, as the trial court has
erroneously held in the judgment appealed from and as this court is given to understand in referring
to said filing of the bond as a prerequisite to the delivery of the cargo. This is because the time was
not opportune when the captain should and could exact the bond and the law neither requires such
bond to be filed before proceeding with the liquidation, inasmuch as the shipowner or agent, as well
as the shippers, being interested in proceeding with the liquidation, the Code authorizes them, first,
to demand it from the captain and later to institute the action corresponding to them against him to
recover indemnity if he should not comply with the provisions upon the subject, that is, if he should
fail to effect the liquidation, or if, in lieu thereof, he should deliver the respective cargoes to the
shippers or permit them to dispose of the same, in which case the responsibility may be fixed upon
the captain and not upon the agent upon this ground, and for not requiring the shippers to give said
bond.

In the second place, although it is true that the captain is, as stated in the decision, primarily the
representative of the shipowner or agent, it cannot in all cases, as the decision gives us to
understand, be deduced that the shipowner must be civilly responsible for all the acts of the captain.

The Code of Commerce clearly and positively specifies the cases in which such responsibility in
demandable from the agent or shipowner, and the cases in which he is not responsible, the
responsible attaching only to the captain. These cases can not be confused in view of the clear and
positive provisions of said Code, in relation to the method adopted in the exposition thereof and
following the order of the subjects contained in this law.
Articles 586, 587, and 588, invoked in the decision in question in order to maintain that theory, are
found in title 2 of Book 3 of said Code which treats of the persons who intervene in maritime
commerce, that is, as may be seen in sections 1, 2, and 3 thereof, the shipowners and agents, the
captains and masters of vessels and the officers and crew thereof, respectively. Articles 806 to 818
and 846 to 849, and consequently, article 852, invoked in said decision and which refer to the gross
or general average and to the simple or particular average, are found in titles 4 and 5 of the same
Book 3 which, respectively, deal with the risks, damages, and accidents of maritime commerce and
with the proof and liquidation of the averages; and they contain all the provisions of the law relative
to said subjects and to the rights and obligations which arise from the averages.

There is no relation whatever between said articles 586, 587, and 588, invoked in the decision, and
those which treat of averages. The first of said articles establishes the civil responsibility of the
shipowner and agent for the acts of the captain and the obligations incurred by the latter for the
repair, equipment, and provisioning of the vessel. The second, that is, article 587, establishes the
same responsibility of the agent for indemnities, in favor of third persons, which may arise from the
conduct of the captain in the care of the goods which the vessel may carry, from which he may
exempt himself by abandoning the vessel with all her equipment and the freight he may have earned
during the voyage. In the present case it is not the conduct of the captain in the care of the goods
which has given rise to the right to exact the corresponding civil responsibility, but, according to
article 862, the failure of the captain to comply with the provisions of article 851, with respect to the
adjustment, liquidation, and distribution of the gross average and the failure to attend to the claims
which the agent or the shippers may or should have made, inasmuch as said article 852 clearly so
declares, in referring to the agent or the shippers in the following words: "Without prejudice to the
action they may bring to demand indemnity from him." The care of the goods to which article 857
refers consists in the placing of the goods in the proper and adequate place for their transportation
and due preservation during the voyage, in such manner that they may not suffer damages or
deterioration nor be taken away, for, according to article 618, which bears some relation to said
article 587, the captain is civilly responsible to the agent and the latter to third persons, who may
have occurred to the vessel and the cargoes due to lack of skill or to negligence on his part and for
the subtraction of theft committed by the crew, reserving this right to proceed against the guilty
parties; and, according to article 619, he shall be liable for the cargo from the time it is turned over to
him at the deck or afloat alongside the vessel at the port of loading until he delivers it on the shore or
on the discharging wharp of the port of unloading, unless the contrary has been expressly agreed
upon; and, finally, according to No. 5 of the same article 618, he shall be liable for those damages
arising from an undue use of the powers and nonfulfillment of the obligations which are his in
accordance with the articles 610 and 612, one of which, the fifth mentioned in the last article, is to
remain constantly on board the vessel during the time the freight is taken on board and carefully
watch the stowage thereof, which acts, as is well-known, constitute the means for the effective
custody of the goods which may be shipped on board.

In the present case, if the consignees or owners of the cargo on board the vessel Batangueño took
away with them their respective cargoes or disposed of them upon arriving at port, after part thereof,
which included the petroleum boxes belonging to the plaintiff, had been jettisoned, it was not
because the captain of said vessel had not fulfilled his duty with respect to the care of the cargo, but
because he did not proceed in accordance with the provision of article 851 already cited, in the
adjustment, liquidation, and distribution of the gross average caused by that accident. and did not,
as he should have done, according to article 852, require the liquidation either of the agent or the
shippers. Therefore to them alone, including the plaintiff, and not to the conduct of the captain in the
custody of the cargo, is the fact attributable that the shippers were able to carry away the dispose of
the cargo saved upon the arrival of the vessel at port.

The third or said articles, that is, 588, cited also in the same decision, far from making the shipowner
or the agent responsible for the obligations incurred by the captain, exempts them from all
responsibility, if the captain should have exceeded the powers and privileges which are his by
reason of his position or have been conferred upon him by the former, excepting the case, which
bears no relation whatever to that in question, in which the amounts claimed were made use of for
the benefit of the vessel.

Lastly, although this point has not been touched at all in the decision now under discussion,
according to article 618. No. 5, the captain shall be civilly liable to the agent, and the latter to third
persons with whom he may have contracted, for the damages arising from an undue use of his
powers and the nonfulfillment of his obligations, but it adds that such liability shall be "in accordance
with articles 610 and 612." These articles, as may be seen, refer to the powers and obligations
inherent in the position of captain with respect to the appointment, contract, and command of the
crew, direction of the vessel to the port of destination, the imposition of punishments for crimes
committed on board, contracts for the charter of the vessel, its preservation and repair, the supplying
of books of navigation, and others, which are mentioned in said last article, the equipping of the
vessel and the receiving of the cargo, etc., among which obligations there is none which bears the
slightest relation to those which the same Code imposes upon the captain with respect to the
adjustment, liquidation, and distribution of the gross average.

On the other hand, in the various sections of title 4 of Book 3, and in section 1 of title 5, the Code, in
treating of the risks, damages, and accidents of maritime commerce, specifically indicates the cases
in which the responsibility of the captain is enforcible, those in which that of the agent or shipowner
is demandable and those in which that responsibility is joint among them, as well as those cases in
which no responsibility may be demanded of the agent or shipowner but only of the captain.

In effect, article 841 of section 3 of said title 4 provides that if the wreck or stranding should arise
through the malice, or lack or skill of the captain, or because the vessel put to sea insufficiently
repaired and prepared, the captain shall be responsible for the indemnification of damages caused
to the vessel or the cargo by the accident, which liability may be demanded by the agent or the
shippers; but there is in said section no provision whatever by which the agent or shipowner is made
responsible.

In article 826 of section 3 of the same title, which deals with collisions, it is provided that the agent of
the vessel at fault shall indemnify the losses and damages suffered, after an expert appraisal, if a
vessel should collide with another through the fault, negligence, or lack of skill of the captain, sailing
mate, or any other member of the complement, and, according to article 831, if a vessel should be
forced to collide with another by a third vessel, the agent of the third vessel shall indemnify for the
losses and damages caused, the captain being civilly liable to said agent, this liability being
understood to be limited to the value of the vessel with all equipment and freight earned.

In treating of arrivals under stress, section 2 of the same title, in article 821, declares that when such
arrival is not legitimate, the agent and the captain shall be jointly liable for the expense incurred.

In treating averages, article 809, No. 8, in section 1 of the same title, which includes, in simple
averages, the damage suffered by the vessel or cargo by reason of an impact or collision with
another, declares that if the accident occurred through the fault or negligence of the captain, he shall
be responsible for all the damages caused, and in No. 9 of the same article, that the owner of the
cargo who is injured as a result of the fault, negligence, or barratry of the captain or the crew may
demand indemnity from the captain or the crew may demand indemnity from the captain, the vessel
and freight, a rule which is based upon No. 1 of article 618 , already mentioned, according to which
the captain shall be civilly responsible to the agent and the latter to the third persons, for all
damages suffered by the vessel and its cargo by reason of the want of skill or negligence on his part,
a provision which, as is well known, cannot refer to the case in which the owners of the cargo,
having the right to demand the adjustment, liquidation, and distribution of the gross average, upon
the arrival of the vessel at port, should dispose of the cargo saved. Such case, as already stated, is
the subject of the express and positive provisions of articles 851 and 852, in relation to articles 866,
867, and 868, included in section 2 of the same title, as is shown by the fact that the first of said
articles declares that the captain is responsible to the owners of the goods averaged for the losses
they may have suffered through his delay or negligence in collecting the amount of the contribution
after the liquidation is approved, and by the fact that the last of said articles, that is, 868, declares
that the captain may exact from the shippers a bond sufficient to answer for the amount of
corresponding to the gross average for the purpose of delaying the delivery to them of the goods
saved until they pay said amount.

It is by these special provisions and not by the general provisions contained in sections 1, 2, and 3,
of title 2, of Book 3 of said Code, that we must be governed when dealing with the risks, damages,
and accidents the maritime commerce; and gross average being among them, then, for the failure of
the captain of the vessel Batangueño to comply with the provisions relating to the adjustment,
liquidation, and distribution, the defendant owner of the vessel can not and should not be made
liable, but only the captain, for article 852, already cited, is clear and positive to the effect that in said
case the agent or the shippers shall demand of the captain the liquidation and may exercise against
him the action to recover the proper indemnity, a provision which excludes in such case all
responsibility of the agent or owner of the vessel, for the reason that, the latter being, according to
the same article, one of those who, jointly with the shippers, may ask the captain for the liquidation
and institute against him the corresponding action for indemnification, it would be absurb to pretend
and maintain that the shippers may also institute the same action against the agent or owner of the
vessel, in this manner converting him from plaintiff into defendant.

But, as if it is still possible to put under discussion and interpret so clear and positive a provision as
that of said article 852, and those related to it which, as has already been mentioned, are also of the
same character, it is argued in the decision of this court that as "the owner of the ship ordinarily has
vastly more capital embarked upon a voyage than has any individual shipper of cargo, and
moreover, as the owner of the ship, in the person of the captain, has complete and exclusive control
of the crew and of the navigation of the ship, as well as of the disposition of the cargo at the end of
the voyage, the evident intention of the Code, taken in all of its provisions, is to place the primary
liability upon . . . the owner of the ship, leaving him to obtain recourse, as it is very easy to do, from
other individuals who have been drawn into the venture as shippers, for, to adopt another
interpretation of the law would place the shipowner in a position to escape all responsibility for a
general average of this character by means of the delinquency of his own captain. And it is therefore
proper that any person whose property may have been cast overboard by order of the captain
should have a right of action directly against the ship's owner for the breach of any duty which the
law may have imposed on the captain with respect to such cargo."

Such reasoning, however, is not convincing. In the first place, it is not true that the average in
question was occasioned by the fault of the captain of the vessel Batangueño, for on this point there
is no evidence in the record, but because of the necessity of throwing overboard part of the cargo of
said vessel to save it from the danger then threatening it; secondly, the purpose of the adjustment
and liquidation of the gross average is to secure contribution from the parties interested in the vessel
and cargo existing at the time of the occurrence thereof in order to pay the amount of such average
(art. 812, Code of Commerce), for which purpose article 858 defines the procedure for the
distribution of the value of the average, stating that there must be taken into consideration, as
already stated by us, when we were discussing this article, the contributing capital determined by the
value of the cargo, that of the vessel in her actual condition and the percentage of the amount of the
freight reduced by 50 per cent for wages and maintenance of the crew, and further declaring that
after the determination of the amount of the average, it shall be distributed pro rata among the
contributing values and then paid to the proper parties, after the persons interested therein, that is,
the agent or owner of the vessel and the shippers have consented thereto, or in default thereof, after
the liquidation is duly approved; and, lastly, as repeatedly stated by us, accordingly to the same
articles, the owner of the vessel, or the agent, is also one of the interested parties and coparticipants
in the adjudication of the average and its pro rata distribution among the contributing values. From
what has just been said it results that no purpose is served by considering whether or not he has put
in the voyage or undertaking a capital greater than that of any individual shipper for the purpose of
making him principally liable, that is compelling him to pay to the shippers what each of the latter as
well as he himself has the right to be paid for in proportion to the amount of the respective capital
fixed according to the rules already stated in the distribution of the average. This is because,
however great the value of the vessel may be, there cannot be conceded to the shippers in the
adjudication a greater value than that corresponding to them in the adjudication and distribution of
the average, according to the capital determined by the value of the cargo at each, in conformity with
the rules established in article 854 for the assessment of the same cargo and of the goods which
have to contribute to said average, nor can there be conceded to the owner of the vessel a value
greater than that which may correspond to him in said adjudication and distribution, based upon the
value of the vessel in its actual condition, according to a statement of experts and the rules for
assessment thereof found in Nos. 6 and 7 of said article 854, from which it is necessarily inferred
that it is notoriously unjust, — because the law does not authorize it and it would be a violation of its
positive provisions — to compel the owner of the vessel, by the mere fact of having put a greater
capital in the undertaking, to pay to the shippers the quota which corresponds to each of them
which, in this case, according to the majority opinion, is that which should correspond, without a
previous liquidation, to the plaintiff, Standard Oil Company, saving to him, however, the right
afterwards to bring action or proceed against the other shippers, as expressed in the same decision.
In short, it would amount to absolutely ignoring the provisions of the law, which are so clear,
express, and positive with respect not only to the adjustment, liquidation, and distribution of the
gross average, but also to the procedure for effecting the same and the rights and obligations of
those who should contribute to the average. And it is very clear that error has been committed,
because in the same decision, two paragraphs before that in which the theory already discussed is
made, it is stated that there has been "a misconception of the true import of the provisions relating to
the adjustment and liquidation of general average," in arguing that the right of action should be
"against the captain, who has been delinquent in performing the duty which the law imposes on him,"
for "clearly," says the same decision, "those provisions are intended to supply the shipowner, acting
to court in the person of the captain, with a means whereby he may escape bearing the entire
burden of the loss and may distribute it among all the persons who ought to participate in sharing it;
but the making of the liquidation is not a condition precedent to the liability of the shipowner to the
shipper whose property has been jettisoned."

As is clearly seen, what has just been stated gives us to understand that the owner of the vessel
must suffer all the loss in case of gross average, and that the provisions relating to the adjustment,
liquidation, and distribution thereof are for the purpose of furnishing him the means for evading and
enabling himself to distribute it between the persons who should participate in the average. This is
erroneous, because these provisions, which intentionally are extensively mentioned in this opinion,
do not have that object, for the reason that the shipowner is not the person who should suffer all the
loss in case of gross average, but it should be partitioned and distributed between the shipowner or
agent and the shippers, in proportion to their interests and the respective value of the cargo and
vessel, which should be fixed according to article 850 and the rules for their assessment, stated in
article 854 previously cited, after the liquidation and approval thereof, and after hearing the
interested parties or their representatives; and all of these proceedings would surely be useless and
unnecessary if the shipowner or the agent should have to suffer all loss but may afterwards
distribute it among those participants therein, or, what is the same thing, if he should be compelled
by law to pay the total value of the average and then partition it among the shippers or owners of the
cargo, as is maintained in said decision. And there is no doubt that this is what is maintained in the
decision, as the basis of the pronouncements made therein, because, as already stated, in the
paragraph now under discussion, it is clearly stated that the liquidation is not a condition precedent
to the enforcement of the liability of the shipowner to the shipper, whose goods may have been
jettisoned. And this is not what the law says just as it does not say that the shipowner shall be liable
to the shipper or owner of the goods, but that, on the contrary, it says that the shipowner or agent as
well as the shippers may demand liquidation from the captain and institute against him the
corresponding action to recover indemnity, that is, that he has the same right as the shippers to
demand liquidation from the captain and, in default thereof, to recover indemnification, from which it
is clearly inferred that the liquidation is a condition precedent, not to the liability of the shipowner to
the shipper whose goods may have been jettisoned, as stated in the decision in question, but to the
partition which must be made between the agent or shipowner and the shippers of the respective
amount of the average. This partition, and not that the shipowner should suffer all loss but may
afterwards evade and distribute it among all persons who should share in the average, is the real
interpretation of the provisions to which reference is made in the same decision.

Neither is it true that, as stated in said decision, the shipowner has, through the captain, the
complete and exclusive control of the crew and the sailing of the vessels, as well as of the
destination of the cargo at the end of the voyage, and that, for this reason, the principal liability for
the payment of the gross average must fall upon the shipowner.

That he does not have the complete and exclusive control of the crew is shown, among other
provisions of the same Code of Commerce, by the following articles: First, article 610, according to
which, among others, it is an inherent power in the captain to appoint or make contracts with the
crew in the absence of the agent and to propose said crew if said agent be present, but without any
right on the part of the latter to employ any individual against the captain's express refusal. This
provision necessarily implies the absolute power of the captain to take on the contract the crew, and
article 634 confirms it, according to which the captain may make up his crew with the number he
may consider advisable, taking on resident foreigners, in the absence of nationals, their number not
to exceed one-fifth of the total crew, and may even, with the consent of the consul or marine
authorities, complete his crew with foreigners in foreign ports if he should not find sufficient number
of nationals, the captain being obliged to execute the contract with said members of the crew and
others who compose the complement of the vessel; and finally, article 637 which empowers the
captain, for sufficient cause, to discharge a sailor during the time of his contract and to refuse, before
setting out on a voyage without giving any reason whatever, to permit a sailor he may have engaged
from going on board, in which case he will be obliged to pay him his wages as if he had rendered
services, this indemnity to be paid from the funds of the vessel only if the captain had acted for
reasons of prudence and in the interests of safety and good service of the vessel; but, should this
not be the case, says said article, it shall be paid by the captain personally. And, if in all that has just
been stated the captain may act independently, it is obvious that the owner of the vessel or the
agent does not have, through the captain, complete and exclusive control of the crew. In short, the
captain directly exercises exclusively personal powers with respect to the crew and, for this reason,
he is personally and particularly responsible for his acts, except in the only case already mentioned,
in which he may have acted for the benefit of the vessel.

Another power inherent in the position of captain, according to article 610, is that of directing the
vessel to the port of its destination, according to the instructions he may have received from the
agent, but from this is cannot be inferred that the shipowner or agent has, through the captain,
complete and exclusive control of the navigation of the vessel, for the simple reason that the captain
may not obey said instructions and may act freely adjusting his decisions according to the
circumstances of each case, as would occur in the case of risks, damages, and accidents which we
have previously discussed, cases in which the law imposes upon the captain the obligations to which
titles 4 and 5 of Book 3 refers and indicates those cases which we have heretofore minutely
discussed, in some of which he is personally responsible, in orders the agent or shipowner, or the
latter jointly with the captain, and still in others, in which the agent is not responsible but only the
captain.

Nor is it true that the shipowner, through the captain, has the complete and exclusive control of the
destination of the cargo at the end of the voyage, for article 619 says textually that the captain shall
be liable for the cargo from the time it is turned over to him at the dock, or afloat alongside the ship,
at the port of loading, until he delivers it on the shore or on the discharging wharf, of the port of
unloading, unless the contrary has been expressly agreed upon, and that, according to article 620,
he is not liable for the damages caused to the vessel or to the cargo by reason offorce majeure, and
article 625 adds that the captain, under his personal liability, as soon as he arrives at the port of
destination, upon obtaining the necessary permission from the health and customs officers and
fulfilling the other formalities required by the regulations of the administration, shall turn over the
cargo, without any defalcation, to the consignees and, in a proper case, the vessel, rigging, and
freights to the agent. And if the captain is personally responsible, according to the clear and positive
text of said article, for the delivery of the cargo to the consignees and, of the vessel, rigging, and
freight, to the agent or shipowner, it is clear that the latter does not have complete and exclusive
control of the destination of the cargo at the end of the voyage, because the obligation to deliver is a
personal obligation of the captain, and the agent or shipowner, just as any of the consignees, may
demand said liability with respect to the vessel, rigging, and freight from the captain. And that
responsibility of the captain cannot be confused with the provision contained in article 618 of the
same Code in favor of the agent, and that of the latter in favor of third persons who may have
contracted with him, because in said article 618 are specifically mentioned the cases of responsibility
to which the same article refers, and the responsibility of the captain from the moment the cargo is
delivered to him until its unloading is specially declared in article 619 and even more particularly in
article 625 which says that said responsibility is a personal responsibility of the captain.

It cannot, therefore, be inferred from all the provisions of the Code, that the evident intention thereof
is to impose the principal responsibility upon the shipowner, as stated in the decision of the majority;
and, if the law is to be complied with, it is useless effort to show its truth, by invoking the general
provisions of the Code of Commerce, which govern the relations between the captain and the
shipowner or the agent and those of one or the other or both with third persons who may have
contracted with either of them, or by invoking those which deal with gross averages, as one of the
damages and accidents and maritime commerce, because, in the first, there is no declaration
expressly made upon the subject, and, in the second, what is established and declared is precisely
the contrary, for the shipowner or agent has, just as the shippers, the right of action against the
captain to enforce his responsibility and to be indemnified by him for the damages occasioned to
them by reason of the failure of the captain to comply with the obligations imposed upon him by law
with respect to the adjustment, liquidation, and distribution of the average, and with respect to the
disposition and delivery of the goods saved to the shippers, before the payment by the latter of their
aliquot part in the partition of the average, or without their having filed a sufficient bond to answer for
the cargo, for the reason that, according to article 619, he is responsible for the cargo from the
moment he takes charge thereof at the port of loading until its delivery at the port of unloading and,
according to article 625, he is, under his personal liability, obliged to deliver the cargo, without
defalcation, to the consignees or shippers and, in the proper case, the vessel, rigging, and freight to
the agent upon the arrival at the port of destination. This shows, in relation to the provisions of
articles 866 and 868, already cited, that the captain of the vessel should be personally liable to the
owners of the goods averaged for the damages which were incurred by them, by reason of his delay
or negligence in requiring a goods of the shippers before delivery to them of the goods saved, — this
supposing that they are obliged to do so, — instead of proceeding to the adjustment, liquidation, and
distribution of the gross average, inasmuch as the purpose of the law is to exact said personal
responsibility for the due delivery to the consignees or shippers of the cargo.
The plaintiff, therefore, should have brought said action, if he had any, for the recovery of the
amount claimed in the complaint, not against the defendant, owner of the vessel Batangueño, but
against the captain thereof, and said defendant cannot and should not be sentenced to pay to the
plaintiff the sum stated in the decision of this court which, with some modification as to the amount
thereof, affirms the judgment of the trial court; and there is more reason for this assertion because
that sum is, according to said decision, what the plaintiff should receive in the partition and
distribution of the gross average in question and, yet, it does not appear that the corresponding
liquidation, and, consequently, the division and distribution of said average, has already been made,
as required by the provisions of the Code of Commerce in the articles mentioned at the beginning.

Regretting that I have to dissent from the respectable opinion of the majority, I am of the opinion, for
the reasons above stated, that the judgment appealed from should be reversed and the defendant
should be absolved from the complaint.

.R. No. 10195. December 29, 1916. ]

YU CON,

Plaintiff-Appellee , v. GLICERIO IPIL, NARCISO LAURON, and JUSTO SOLAMO,

Defendants-Appellants

AUTHOR

: NOTES: (if applicable)

FACTS: (chronological order)

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. 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. 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 586, 587, and 618 of the Code of Commerce,
the plaintiff therefore being entitled to recover the amount lost.

ISSUE(S) Are defendants liable for the loss of the plaintiff? Is Lauron, shipowner, liable for the
negligence of his crew and captain?

HELD : Yes

RATIO : 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

Yangco vs. Laserna Case Digest

Yangco vs. Laserna
(73 Phil 330)

Facts: On the afternoon of May 26, 1927, the steamer SS Negros left the port of Romblon on its
return trip to Manila. Typhoon signal no. 2 was then up and in fact, the passengers duly advised the
captain before sailing. The boat was overloaded. After 2 hours of sailing, the boat encountered
strong winds and rough seas between the islands of Banton and Simara. While in the act of
maneuvering, the vessel was caught sidewise by a big wave which caused it to capsize and sink.
Many of the passengers died on the mishap. Civil actions were instituted in the CFI of Capiz, the
petitioner sought to abandon the vessel to the plaintiffs in three cases.

Issue: Whether the shipowner or agent is liable for damages for the consequent death of its
passengers notwithstanding the total loss of the vessel?

Held: The petitioner is absolved from all complaints.

Under Article 587 – “the ship agent shall also be civilly liable for indemnities in favor of third persons
which arise from the conduct of the captain in the vigilance over the goods which the vessels 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.”

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

“NO VESSEL, NO LIABILITY.”

[G.R. No. 74811. December 14, 1988.]

CHUA YEK HONG, Petitioner, v. INTERMEDIATE APPELLATE COURT, MARIANO GUNO, and
DOMINADOR OLIT, Respondents.

Francisco D. Estrada for Petitioner.

Purita Hontanosas-Cortes for Private Respondents.

SYLLABUS

1. COMMERCIAL LAW; TRANSPORTATION; LIMITED LIABILITY RULE; EXCEPTION. — The Appellate Court
Decision, mentions only the ship captain as having been negligent in the performance of his duties. This is a
factual finding binding on this Court. For the exception to the limited liability rule (Article 587, Code of
Commerce) to apply, the loss must be due to the fault of the shipowner, or to the concurring negligence of
the shipowner and the captain. As we held, there is nothing in the records showing such negligence.

2. ID.; CODE OF COMMERCE; REGULATES LIABILITY OF SHIPOWNERS OR AGENTS IN CASE OF TOTAL LOSS
OR DESTRUCTION. — The invocation by petitioners of Articles 1733 and 1735 of the Civil Code is misplaced.
As was stated in the Decision sought to be reconsidered, while the primary law governing the instant case is
the Civil Code, in all matters not regulated by said Code, the Code of Commerce and other special laws shall
govern. Since the Civil Code contains no provisions regulating liability of shipowners or agents in the event
of total loss or destruction of the vessel, it is the provisions of the Code of Commerce, particularly Article
587, that governs.

RESOLUTION
 MELENCIO-HERRERA, J.:

Before us is a Motion for Reconsideration of our Decision dated 30 September 1988 affirming the judgment
of the Court of Appeals dismissing the complaint against private respondents and absolving them from any
and all liability arising from the loss of 1000 sacks of copra shipped by petitioner aboard private
respondents’ vessel. Private respondents filed an opposition thereto. chan roble svirtualawl ibra ry

Petitioner argues that this Court failed to consider the Trial Court’s finding that the loss of the vessel with its
cargo was due to the fault of the shipowner or to the concurring negligence of the shipowner and the
captain.

The Appellate Court Decision, however, mentions only the ship captain as having been negligent in the
performance of his duties (p. 3, Court of Appeals Decision, p. 15, Rollo). This is a factual finding binding on
this Court. For the exception to the limited liability rule (Article 587, Code of Commerce) to apply, the loss
must be due to the fault of the shipowner, or to the concurring negligence of the shipowner and the captain.
As we held, there is nothing in the records showing such negligence (p. 6, Decision.).

The invocation by petitioners of Articles 1733 and 1735 of the Civil Code is misplaced. As was stated in the
Decision sought to be reconsidered, while the primary law governing the instant case is the Civil Code, in all
matters not regulated by said Code, the Code of Commerce and other special laws shall govern. Since the
Civil Code contains no provisions regulating liability of shipowners or agents in the event of total loss or
destruction of the vessel, it is the provisions of the Code of Commerce, particularly Article 587, that
governs.

Petitioner further contends that the ruling laid down in Eastern Shipping Lines v. IAC, Et. Al. (150 SCRA 464
[1987]) should be made to apply in the instant case. That case, however, involved foreign maritime trade
while the present case involves local inter-island shipping. The environmental set-up in the two cases,
therefore, is not on all fours.
chanrob les.co m.ph : vi rtual law lib rary

ACCORDINGLY, petitioner’s Motion for Reconsideration is hereby DENIED and this denial is FINAL.

SO ORDERED.

G.R. No. L-51165 June 21, 1990

HEIRS OF AMPARO DE LOS SANTOS, HEIRS OF ERNANIE DELOS SANTOS, HEIRS OF

AMABELLA DELOS SANTOS, HEIRS OF LENNY DELOS SANTOS, HEIRS OF MELANY DELOS
SANTOS, HEIRS OF TERESA PAMATIAN, HEIRS OF DIEGO SALEM, AND RUBEN
REYES, petitioners,
vs.
HONORABLE COURT OF APPEALS AND COMPANIA MARITIMA, respondents.

Severino Z. Macavinta, Jr. for petitioners.

Dinglasan Law Office for private respondent.

MEDIALDEA. J.:

This petition for review on certiorari seeks to set aside the decision of the Court of Appeals in CA-G.R. No. 58118-R affirming the decision in
Civil Case No. 74593 of the then Court of First Instance (now Regional Trial Court), Branch XI, Manila which dismissed the petitioners' claim
for damages against Compania Maritima for the injury to and death of the victims as a result of the sinking of M/V Mindoro on November 4,
1967.

The trial court found the antecedent facts to be as follows:

This is a complaint originally filed on October 21, 1968 (p. 1, rec.) and amended on
October 24, 1968 (p. 16 rec.) by the heirs of Delos Santos and others as pauper
litigants against the Compania Maritima, for damages due to the death of several
passengers as a result of the sinking of the vessel of defendant, the M/V 'Mindoro',
on November 4, 1967.

There is no dispute in the record that the M/V 'Mindoro' sailed from pier 8 North
Harbor, Manila, on November 2,1967 at about 2:00 (should have been 6:00 p.m.) in
the afternoon bound for New Washington, Aklan, with many passengers aboard. It
appears that said vessel met typhoon 'Welming' on the Sibuyan Sea, Aklan, at about
5:00 in the morning of November 4, 1967 causing the death of many of its
passengers, although about 136 survived.

Mauricio delos Santos declared that on November 2, 1967 he accompanied his

common-law wife, Amparo delos Santos, and children, namely: Romeo, Josie,
Hernani, who was 10 years old, Abella, 7 years old, Maria Lemia, 5 years old and
Melany, 5 months old, to pier 8, North Harbor, Manila, to board the M/V Mindoro
'bound for Aklan. It appears that Amparo delos Santos and the aforesaid children
brought all their belongings, including household utensils valued at P 1,000.00, with
the intention of living in Aklan permanently.

As already stated, the boat met typhoon 'Welming' and due to the strong waves it
sank causing the drowning of many passengers among whom were Amparo delos
Santos and all the aforesaid children. It appears also that Teresa Pamatian and
Diego Salim, who were also passengers also drowned. Plaintiff Ruben Reyes was
one of the survivors. 'The plaintiffs presented the birth and death certificates of
Amparo delos Santos and the children (Exhs. 1, I-1, J, J-1, K, K-1, L, L-1, 0 to S, pp.
180 to 194 rec.). They also presented copies of the manifest of passengers of the
M/V 'Mindoro' on November 2,1967 (Exhs. B & C, pp. 163 to 161 rec.).

Eliadora Crisostomo de Justo, one of the survivors, corroborated the testimony of

Mauricio delos Santos that he accompanied Amparo delos Santos and her children
to the port to board the M/V Mindoro. She is a cousin of Amparo delos Santos'
husband. According to her, when she boarded the second deck of the vessel, she
saw about 200 persons therein. She tried to see whether she could be
accommodated in the third deck or first deck because the second deck was very
crowded. She admitted that she was not included in the manifest because she
boarded the boat without a ticket, but she purchased one in the vessel. She testified
further that the boat was not able to reach its destination due to its sinking. During
the typhoon before the vessel sunk, she was able to board a 'balsa'.
Ruben Reyes, the other survivor, declared that he paid for his ticket before boarding
the M/V Mindoro. At that time he had with him personal belongings and cash all in
the amount of P2,900.00. It appears that Felix Reyes Jakusalem, Teresa Pamatian
and Amparo delos Santos drowned during the sinking of the vessel. He was able to
swim on (sic) an island and was with the others, rescued later on and brought to the
hospital. The survivors were then taken ashore (Exh. M, p. 188, rec.).

Dominador Salim declared that Teresa Pamatian, his aunt and Diego Salim, his
father, drowned along with the sinking of the M/V Mindoro. Tins witness declared that
he accompanied both his father and his aunt to the pier to board the boat and at the
time Teresa Pamatian was bringing cash and personal belongings of about P250.00
worth. His father brought with him P200.00 in cash plus some belongings. He
admitted that when his father boarded the vessel he did not have yet a ticket.

The plaintiffs further submitted in evidence a copy of a Radiogram stating among

other things that the MN Mindoro was loaded also with 3,000 cases of beer, one
dump truck and 292 various goods (Exhs. D and D-1, p. 162 rec).

In alleging negligence on the part of the vessel, plaintiffs introduced in evidence a

letter sent to the Department of Social Welfare concerning the resurvey of the M/V
Mindoro victims (Exh. F, p. 169 rec.) and a telegram to the Social Welfare
Administration (Exh. G, p. 170 rec.), a resurvey of the M/V 'Mindoro' victims (Exh. H,
p. 171 rec.), a complete list of the M/V 'Mindoro' victims (Exhs. H-1 to H-8, pp.
172179 rec.), a certified true copy of the Special Permit to the Compania Maritima
issued by the Bureau of Customs limiting the vessel to only 193 passengers (Exh. X,
p. 318 rec.).

It appears that in a decision of the Board of Marine Inquiry, dated February 2, 1970, it
was found that the captain and some officers of the crew were negligent in operating
the vessel and imposed upon them a suspension and/or revocation of their license
certificates. It appears, however, that this decision cannot be executed against the
captain who perished with the vessel (Exhs. E, E-1, E-1-A, E-2 to E-9, pp. 163- 168
rec.).

Upon agreement of the parties, the plaintiffs also introduced in evidence the
transcript of stenographic notes of the testimony of Boanerjes Prado before Branch I
of this Court (Exh. U, pp. 203-220) and that of Felimon Rebano in the same branch
(Exh. V, pp. 225-260 rec.).

The defendant alleges that no negligence was ever established and, in fact, the
shipowners and their officers took all the necessary precautions in operating the
vessel. Furthermore, the loss of lives as a result of the drowning of some
passengers, including the relatives of the herein plaintiff, was due to force majeure
because of the strong typhoon 'Welming.' It appears also that there was a note of
marine protest in connection with the sinking of the vessel as substantiated by
affidavits (Exhs. 3, 3-A, 3-B, 3-C, 3-D, 3-E, 3-F and 3-G rec.). On this score Emer
Saul, member of the PC Judge Advocate General's Office, brought to Court records
of this case which were referred to their office by the Board of Marine Inquiry.
According to him the decision referred to by the plaintiffs was appealed to the
Department of National Defense, although he did not know the result of the appeal.
At any rate, he knew that the Department of National Defense remanded the case to
the Board of Marine Inquiry for further investigation. In the second indorsement
 signed by Efren I. Plana, Undersecretary of National Defense, it is stated, among
other things, that the hearings of the Board of Marine Inquiry wherein the Philippine
Coast Guard made the decision lacked the necessary quorum as required by Section
827 of the Tariff and Customs Code. Moreover, the decision of the Commandant of
the Philippine Coast Guard relied principally on the findings reached by the Board of
Officers after an ex-parte investigation especially in those aspects unfavorable to the
captain (Exh. 1, folder of exhibits).

It appears also that there were findings and recommendations made by the Board of
Marine Inquiry, dated March 5, 1968, recommending among other things that the
captain of the M/V 'Mindoro,' Felicito Irineo, should be exonerated. Moreover,
Captain Irineo went down with the vessel and his lips are forever sealed and could
no longer defend himself. This body also found that the ship's compliment (sic) and
crew were all complete and the vessel was in seaworthy condition. If the M/V
Mindoro' sank, it was through force majeure (Exhs. 2 & 2-A, folder of exhibits).

Defendant also introduced in evidence the transcripts of stenographic notes of the

testimony of Francisco Punzalan, marine officer, as well as of Abelardo F. Garcia,
Harbor Pilot in Zamboanga City, in Civil Case No. Q-12473 of Branch XXVIII, Court
of First Instance of Rizal, Quezon City Branch (Exhs. 3-H & 10-H, folder of exhibits),
and of Arturo Ilagan, boat captain, in Civil Case No. Q-1 5962 of Branch V, of the
same Court (Exh. 9 folder of exhibits).

It appears that five other vessels left the pier at Manila on November 2, 1967, aside
from the M/V Mindoro' (Exhs 4 & 4-A). A certification of the Weather Bureau
indicated the place of typhoon 'Welming' on November 2, 1967 (Exh. 6). A
certification of the shipyard named El Varadero de Manila stated among other things
that the M/V 'Mindoro' was dry-docked from August 25 to September 6, 1967 and
was found to be in a seaworthy condition (Exh. 5), and that the said M/V 'Mindoro'
was duly inspected by the Bureau of Customs (Exhs. 7, 7-A & 7-B). Another
certification was introduced stating among other things that the Bureau of Customs
gave a clearance to the M/V 'Mindoro' after inspection (Exh. 8 folder of exhibits). (CFI
Decision, Records, pp. 468-471)

On the basis of these facts, the trial court sustained the position of private respondent Compania
Maritima (Maritima, for short) and issued a decision on March 27, 1974, to wit:

WHEREFORE, the Court finds that in view of lack of sufficient evidence, the case be,
as it is hereby DISMISSED.

For lack of evidence, the counterclaim is also hereby DISMISSED.

IT IS SO ORDERED. (Records, p. 474)

Forthwith, the petitioners' heirs and Reyes brought an appeal to the Court of Appeals. As earlier
mentioned, the appellate court affirmed the decision on appeal. While it found that there was
concurring negligence on the part of the captain which must be imputable to Maritima, the Court of
Appeals ruled that Maritima cannot be held liable in damages based on the principle of limited
liability of the shipowner or ship agent under Article 587 of the Code of Commerce.

The heirs and Reyes now come to Us with the following assignment of errors:
 ERROR I

THE HONORABLE RESPONDENT COURT OF APPEALS ERRED IN NOT

CONCENTRATING TO (sic) THE PROVISION OF LAW IN THE NEW CIVIL CODE
AS EXPRESSED) IN, —

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.

ERROR II

RESPONDENT COURT OF APPEALS ERRED IN NOT REVERSING THE

DECISION OF THE LOWER COURT OF ORIGIN AFTER FINDING A SERIES OF
FAULTS AND NEGLIGENCE AND IN NOT ORDERING ITS CO-RESPONDENT
COMPANIA MARITIMA TO PAY THE DAMAGES IN ACCORDANCE WITH THE
LAW.

ERROR III

THE HONORABLE RESPONDENT COURT OF APPEALS ERRED TO NOTE,

OBSERVE AND COMPREHEND THAT ART. 587 OF THE CODE OF COMMERCE
IS ONLY FOR THE GOODS WHICH THE VESSEL CARRIED AND DO NOT
INCLUDE PERSONS. (Rollo, p. 8)

The petition has merit. At the outset, We note that there is no dispute as to the finding of the
captain's negligence in the mishap. The present controversy centers on the questions of Maritima's
negligence and of the application of Article 587 of the Code of Commerce. The said article provides:

Art. 587. The ship agent shall also be civilly liable for 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.

Under this provision, a shipowner or agent has 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" (Yangco v. Laserna, et al.,
73 Phil. 330, 332). Notwithstanding the passage of the New Civil Code, Article 587 of the Code of
Commerce is still good law. The reason lies in the peculiar nature of maritime law which is 94
exclusively real and hypothecary that operates to limit such liability to the value of the vessel, or to
the insurance thereon, if any (Yangco v. Laserna, Ibid). As correctly stated by the appellate court,
"(t)his rule is found necessary to offset against the innumerable hazards and perils of a sea voyage
and to encourage shipbuilding and marine commerce. (Decision, Rollo, p. 29). Contrary to the
petitioners' supposition, the limited liability doctrine applies not only to the goods but also in all cases
like death or injury to passengers wherein the shipowner or agent may properly be held liable for the
negligent or illicit acts of the captain (Yangco v. Laserna, Ibid). It must be stressed at this point that
Article 587 speaks only of situations where the fault or negligence is committed solely by the captain.
In cases where the shipowner is likewise to be blamed, Article 587 does not apply (see Manila
Steamship Co., Inc. v. Abdulhanan, et al., 100 Phil. 32, 38). Such a situation will be covered by the
provisions of the New Civil Code on Common Carriers. Owing to the nature of their business and for
reasons of public policy, common carriers are tasked to observe extraordinary diligence in the
vigilance over the goods and for the safety of its passengers (Article 1733, New Civil Code). Further,
they are bound to carry the passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with a due regard for all the circumstances (Article
1755, New Civil Code). Whenever death or injury to a passenger occurs, common carriers are
presumed to have been at fault or to have acted negligently unless they prove that they observed
extraordinary diligence as prescribed by Articles 1733 and 1755 (Article 1756, New Civil Code).

Guided by the above legal provisions, We painstakingly reviewed the records of the case and found
imprints of Maritima's negligence which compel Us to reverse the conclusion of the appellate court.

Maritima claims that it did not have any information about typhoon 'Welming' until after the boat was
already at sea. Modem technology belie such contention. The Weather Bureau is now equipped with
modern apparatus which enables it to detect any incoming atmospheric disturbances. In his
summary report on tropical cyclone 'Welming' which occurred within the Philippine Area of
Responsibility, Dr. Roman L. Kintanar, Weather Bureau Director, stated that during the periods of
November 15, 1967, the Bureau issued a total of seventeen (17) warnings or advisories of typhoon
'Welming' to shipping companies. Additionally, he reported that:

By 11:15 a.m. of November lst, or in less than twenty four hours, the storm intensified
into a typhoon. It was by then located at 8.7 N 137.3 E with sea level pressure of 978
millibars, an eye diameter of about 18.53 kilometers and a maximum surface wind of
139 kilometers per hour. "As it moved along in the open sea, it intensified further and
by 11.07 a.m. of November 2, when its center was at 103 N 131.4 E, it had attained
surface winds of about 240 kilometers per hour. ... (Exh. Z, p. 131, Index of Exhibits,
p. 11 5, Emphasis supplied).

Considering the above report and the evidence on record showing the late departure of the ship at
6:00 p.m. (instead of the scheduled 2:00 p.m. departure) on November 2, 1967, We find it highly
improbable that the Weather Bureau had not yet issued any typhoon bulletin at any time during the
day to the shipping companies. Maritima submitted no convincing evidence to show this omission.
It's evidence showing the Weather Bureau's forecast of November 3, 1967 is not persuasive. It
merely indicated the weather bulletin of that day. Nowhere could We find any statement therein from
the Weather Bureau that it had not issued any forecast on November I and 2, 1967 (Exh. 6,
Records, p. 257). Significantly, the appellate court found that the ship's captain through his action
showed prior knowledge of the typhoon. The court said:

... It cannot be true that he was apprised of the typhoon only at about 11:00 o'clock
the following morning on November 3, 1967 when the Weather report was
transmitted to him from the Weather Bureau at which time he plotted its position. For
in his radiogram sent to defendant-appellee's office in Manila as early as 8:07 in the
morning of November 3, 1967 (Exh. D) he states in the concluding portion 'still
observing weather condition.' thereby implicitly suggesting that he had known even
before departure of the unusual weather condition. ... (Decision, Rollo, p. 26)

If the captain knew of the typhoon beforehand, it is inconceivable for Maritima to be totally in the
dark of 'Welming.' In allowing the ship to depart late from Manila despite the typhoon advisories,
Maritima displayed lack of foresight and minimum concern for the safety of its passengers taking into
account the surrounding circumstances of the case.

While We agree with the appellate court that the captain was negligent for overloading the ship, We,
however, rule that Maritima shares equally in his negligence. We find that while M/V Mindoro was
already cleared by the Bureau of Customs and the Coast Guard for departure at 2:00 p.m. the ship's
departure was, however, delayed for four hours. Maritima could not account for the delay because it
neither checked from the captain the reasons behind the delay nor sent its representative to inquire
into the cause of such delay. It was due to this interim that the appellate court noted that "(i)ndeed
there is a great probability that unmanifested cargo (such as dump truck, 3 toyota cars, steel bars,
and 6,000 beer cases) and passengers (about 241 more than the authorized 193 passengers) were
loaded during the four (4) hour interval" (Decision, p. 13, Rollo, p. 26). Perchance, a closer
supervision could have prevented the overloading of the ship. Maritima could have directed the
ship's captain to immediately depart in view of the fact that as of 11:07 in the morning of November
2, 1967, the typhoon had already attained surface winds of about 240 kilometers per hour. As the
appellate court stated, '(v)erily, if it were not for have reached (its) destination and this delay, the
vessel could thereby have avoided the effects of the storm" (Decision, Rollo p. 26). This conclusion
was buttressed by evidence that another ship, M/V Mangaren, an interisland vessel, sailed for New
Washington, Aklan on November 2, 1967, ahead of M/V Mindoro and took the same route as the
latter but it arrived safely (Exh. BB-2, Index of Exhibits, pp. 143-144 and Exh. 4-A, Ibid, p. 254).

Maritima presents evidence of the seaworthy condition of the ship prior to its departure to prove that
it exercised extraordinary diligence in this case. M/V Mindoro was drydocked for about a month.
Necessary repairs were made on the ship. Life saving equipment and navigational instruments were
installed.

While indeed it is true that all these things were done on the vessel, Maritima, however, could not
present evidence that it specifically installed a radar which could have allowed the vessel to navigate
safely for shelter during a storm. Consequently, the vessel was left at the mercy of ''Welming' in the
open sea because although it was already in the vicinity of the Aklan river, it was unable to enter the
mouth of Aklan River to get into New Washington, Aklan due to darkness and the Floripon
Lighthouse at the entrance of the Aklan River was not functioning or could not be seen at all (Exh. 3-
H, Index of Exhibits, p. 192-195; see also Exh. 2-A, Ibid, p. 160). Storms and typhoons are not
strange occurrences. In 1967 alone before 'Welming,' there were about 17 typhoons that hit the
country (Exh. M, Index of Exhibits, p. 115), the latest of which was typhoon Uring which occurred on
October 20-25, which cost so much damage to lives and properties. With the impending threat of
'Welming,' an important device such as the radar could have enabled the ship to pass through the
river and to safety.

The foregoing clearly demonstrates that Maritima's lack of extraordinary diligence coupled with the
negligence of the captain as found by the appellate court were the proximate causes of the sinking
of M/V Mindoro.

Hence, Maritima is liable for the deaths and injury of the victims. amount of With the above finding,
We now come to the damages due to the petitioners. Ordinarily, We would remand the case to the
trial court for the reception of evidence. Considering however, that this case has been pending for
almost twenty-three (23) years now and that since all the evidence had already been presented by
both parties and received by the trial court, We resolve to decide the corresponding damages due to
petitioners (see Samal v. Court of Appeals, 99 Phil. 230; Del Castillo v. Jaymalin, L-28256, March
17, 1982, 112 SCRA 629).

In their complaint filed with the Court of First Instance, petitioners prayed for moral, actual and
exemplary damages, as well as for attorney's fees plus costs.

Under Article 1764 in relation to Article 2206 of the New Civil Code, the amount of damages for the
death of a passenger caused by the breach of contract by a common carrier is at least three
thousand pesos (P3,000.00). The prevailing jurisprudence has increased the amount of P3,000.00 to
P30,000.00 (De Lima v. Laguna Tayabas Co., L-35697-99, April 15, 1988, 160 SCRA 70).
Consequently, Maritima should pay the civil indemnity of P30,000.00 to the heirs of each of the
victims. For mental anguish suffered due to the deaths of their relatives, Maritima should also pay to
the heirs the sum of P10,000.00 each as moral damages.

In addition, it was proven at the trial that at the time of death, (1) Amparo delos Santos had with her
cash in the sum of P1,000.00 and personal belongings valued at P500.00; (2) Teresa Pamatian,
cash in the sum of P250.00 and personal belongings worth P200.00; and (3) Diego Salem, cash in
the sum of P200.00 and personal belongings valued at P100.00. Likewise, it was established that
the heirs of Amparo delos Santos and her deceased children incurred transportation and incidental
expenses in connection with the trial of this case in the amount of P500.00 while Dominador Salem,
son of victim Diego Salem and nephew of victim Teresa Pamatian spent about P100.00 for
expenses at the trial. With respect to petitioner Reyes, the evidence shows that at the time of the
disaster, he had in his possession cash in the sum of P2,900.00 and personal belongings worth
P100.00. Further, due to the disaster, Reyes was unable to work for three months due to shock and
he was earning P9.50 a day or in a total sum of P855.00. Also, he spent about P100.00 for court
expenses. For such losses and incidental expenses at the trial of this case, Maritima should pay the
aforestated amounts to the petitioners as actual damages.

Reyes' claim for moral damages cannot be granted inasmuch as the same is not recoverable in
damage action based on the breach of contract of transportation under Articles 2219 and 2220 of the
New Civil Code except (1) where the mishap resulted in the death of a passenger and (2) where it is
proved that the carrier was guilty of fraud or bad faith, even if death does not result (Rex Taxicab
Co., Inc. v. Bautista, 109 Phil. 712). The exceptions do not apply in this case since Reyes survived
the incident and no evidence was presented to show that Maritima was guilty of bad faith. Mere
carelessness of the carrier does not per se constitute or justify an inference of malice or bad faith on
its part (Rex Taxicab Co., Inc. v. Bautista, supra).

Anent the claim for exemplary damages, We are not inclined to grant the same in the absence of
gross or reckless negligence in this case.

As regards the claim for attorney's fees, the records reveal that the petitioners engaged the services
of a lawyer and agreed to pay the sum of P 3,000.00 each on a contingent basis (see TSN'S, July
21, 1971, p. 24; November 3, 1971, pp. 18 and 29). In view hereof, We find the sum of P 10,000.00
as a reasonable compensation for the legal services rendered.

ACCORDINGLY, the appealed decision is hereby REVERSED and judgment is hereby rendered
sentencing the private respondent to pay the following: (1) P30,000.00 as indemnity for death to the
heirs of each of the victims; (2) P10,000.00 as moral damages to the heirs of each of the victims; (3)
P6,805.00 as actual damages divided among the petitioners as follows: heirs of Amparo Delos
Santos and her deceased children, P2,000.00; heirs of Teresa Pamatian, P450.00; heirs of Diego
Salem, P400.00; and Ruben Reyes, P2,955.00; (4) P10,000.00 as attorney's fees; and (5) the costs.

SO ORDERED.
ABOITIZ SHIPPING CORP VS GENERAL FIRE AND LIFE ASSURANCE CORPFACTS: Aboitiz Shipping is the
owner of M/V P. Aboitiz, a vessel w/c sank on a voyage from Hongkong to the Philippines. This sinking of
the vessel gave rise to the filing of several suits for recovery of the lost cargo either by the shippers their
successors-in-interest, or the cargo insurers like General Accident (GAFLAC).Board of Marine Inquiry
(BMI), on its initial investigation found that such sinking was due to force majeure and that subject
vessel, at the time of the sinking was seaworthy. The trial court rules against the carrier on the ground
that the loss did not occur as a result of force majeure. This was affirmed by the CA and ordered the
immediate execution of the full judgment award. However, other cases have resulted in the finding that
vessel was seaworthy at the time of the sinking, and that such sinking was due to force majeure

.Due to these different rulings, Aboitiz 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. Aboitiz argued that the
Limited Liability Rule warrants immediate stay of execution of judgment to prevent impairment of other
creditors' shares.

ISSUE: Whether the Limited Liability Rule arising out of the real and hypothecary nature of maritime law
should apply in this and related cases.

RULING: The SC ruled in the affirmative. 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. 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 quotedin toto

: Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which
mayarise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he
mayexempt himself therefrom by abandoning the vessel with all her equipment and the freight it may
haveearned during the voyage. Art. 590. The co-owners of a vessel shall be civilly liable in the proportion
of their interests in the commonfund 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 .The only time the Limited Liability Rule
does not apply is when there is an actual finding of negligence on the part of thevessel owner or agent.

ISSUE 2: Whether there is a finding of such negligence on the part of the owner in this case.

RULING 2: The SC ruled in the negative.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 werenot lost due to
fortuitous event or force majeure.

G..R. No. 156978 May 2, 2006

ABOITIZ SHIPPING CORPORATION, Petitioner,

vs.
NEW INDIA ASSURANCE COMPANY, LTD., Respondent.

DECISION

QUISUMBING, J.:

For review on certiorari are the Decision1 dated August 29, 2002 of the Court of Appeals in CA-G.R.
CV No. 28770 and its Resolution2 dated January 23, 2003 denying reconsideration. The Court of
Appeals affirmed the Decision3dated November 20, 1989 of the Regional Trial Court of Manila in
Civil Case No. 82-1475, in favor of respondent New India Assurance Company, Ltd.

This petition stemmed from the action for damages against petitioner, Aboitiz Shipping Corporation,
arising from the sinking of its vessel, M/V P. Aboitiz, on October 31, 1980.

The pertinent facts are as follows:

Societe Francaise Des Colloides loaded a cargo of textiles and auxiliary chemicals from France on
board a vessel owned by Franco-Belgian Services, Inc. The cargo was consigned to General Textile,
Inc., in Manila and insured by respondent New India Assurance Company, Ltd. While in Hongkong,
the cargo was transferred to M/V P. Aboitiz for transshipment to Manila.4

Before departing, the vessel was advised by the Japanese Meteorological Center that it was safe to
travel to its destination.5 But while at sea, the vessel received a report of a typhoon moving within its
general path. To avoid the typhoon, the vessel changed its course. However, it was still at the fringe
of the typhoon when its hull leaked. On October 31, 1980, the vessel sank, but the captain and his
crew were saved.

On November 3, 1980, the captain of M/V P. Aboitiz filed his "Marine Protest", stating that the wind
force was at 10 to 15 knots at the time the ship foundered and described the weather as "moderate
breeze, small waves, becoming longer, fairly frequent white horses."6

Thereafter, petitioner notified7 the consignee, General Textile, of the total loss of the vessel and all of
its cargoes. General Textile, lodged a claim with respondent for the amount of its loss. Respondent
paid General Textile and was subrogated to the rights of the latter.8
Respondent hired a surveyor, Perfect, Lambert and Company, to investigate the cause of the
sinking. In its report,9the surveyor concluded that the cause was the flooding of the holds brought
about by the vessel’s questionable seaworthiness. Consequently, respondent filed a complaint for
damages against petitioner Aboitiz, Franco-Belgian Services and the latter’s local agent, F.E.
Zuellig, Inc. (Zuellig). Respondent alleged that the proximate cause of the loss of the shipment was
the fault or negligence of the master and crew of the vessel, its unseaworthiness, and the failure of
defendants therein to exercise extraordinary diligence in the transport of the goods. Hence,
respondent added, defendants therein breached their contract of carriage.10 1avv phil.net

Franco-Belgian Services and Zuellig responded, claiming that they exercised extraordinary diligence
in handling the shipment while it was in their possession; its vessel was seaworthy; and the
proximate cause of the loss of cargo was a fortuitous event. They also filed a cross-claim against
petitioner alleging that the loss occurred during the transshipment with petitioner and so liability
should rest with petitioner.

For its part, petitioner also raised the same defense that the ship was seaworthy. It alleged that the
sinking of M/V P. Aboitiz was due to an unforeseen event and without fault or negligence on its part.
It also alleged that in accordance with the real and hypothecary nature of maritime law, the sinking
of M/V P. Aboitiz extinguished its liability on the loss of the cargoes.11

Meanwhile, the Board of Marine Inquiry (BMI) conducted its own investigation to determine whether
the captain and crew were administratively liable. However, petitioner neither informed respondent
nor the trial court of the investigation. The BMI exonerated the captain and crew of any
administrative liability; and declared the vessel seaworthy and concluded that the sinking was due to
the vessel’s exposure to the approaching typhoon.

On November 20, 1989, the trial court, citing the Court of Appeals decision in General Accident Fire
and Life Assurance Corporation v. Aboitiz Shipping Corporation12 involving the same incident, ruled
in favor of respondent. It held petitioner liable for the total value of the lost cargo plus legal interest,
thus:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of New India and
against Aboitiz ordering the latter to pay unto the former the amount of P142,401.60, plus legal
interest thereon until the same is fully paid, attorney’s fees equivalent to fifteen [percent] (15%) of
the total amount due and the costs of suit.

The complaint with respect to Franco and Zuellig is dismissed and their counterclaim against New
India is likewise dismissed

SO ORDERED.13 1avvphil.net

Petitioner elevated the case to the Court of Appeals and presented the findings of the BMI. However,
on August 29, 2002, the appellate court affirmed in toto the trial court’s decision. It held that the
proceedings before the BMI was only for the administrative liability of the captain and crew, and was
unilateral in nature, hence not binding on the courts. Petitioner moved for reconsideration but the
same was denied on January 23, 2003.

Hence, this petition for review, alleging that the Court of Appeals gravely erred in:

I.
x x x DISREGARDING THE RULINGS OF THE HONORABLE SUPREME COURT ON THE
APPLICATION OF THE RULE ON LIMITED LIABILITY UNDER ARTICLE 587, 590 AND 837 OF
THE CODE OF COMMERCE TO CASES INVOLVING THE SINKING OF THE M/V "P. ABOITIZ;

A.

x x x NOT APPLYING THE RULINGS IN THE CASES OF MONARCH INSURANCE CO., INC. ET
AL. V. COURT OF APPEALS ET AL. AND ABOITIZ SHIPPING CORPORATION V. GENERAL
ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, LTD.;

B.

x x x RULING THAT THE ISSUE ON THE APPLICATION OF THE RULE ON LIMITED LIABILITY
UNDER ARTICLES 587, 590 AND 837 OF THE CODE OF COMMERCE HAD BEEN CONSIDERED
AND PASSED UPON IN ITS DECISION;

II.

x x x NOT LIMITING THE AWARD OF DAMAGES TO RESPONDENT TO ITS PRO-RATA SHARES

IN THE INSURANCE PROCEEDS FROM THE SINKING OF THE M/V "P. ABOITIZ".14

Stated simply, we are asked to resolve whether the limited liability doctrine, which limits
respondent’s award of damages to its pro-rata share in the insurance proceeds, applies in this case.

Petitioner, citing Monarch Insurance Co. Inc. v. Court of Appeals, 15 contends that respondent’s claim
for damages should only be against the insurance proceeds and limited to its pro-rata share in view
of the doctrine of limited liability.

Respondent counters that the doctrine of real and hypothecary nature of maritime law is not
applicable in the present case because petitioner was found to have been negligent. Hence,
according to respondent, petitioner should be held liable for the total value of the lost cargo.

It bears stressing that this Court has variedly applied the doctrine of limited liability to the same
incident – the sinking of M/V P. Aboitiz on October 31, 1980. Monarch, the latest ruling, tried to settle
the conflicting pronouncements of this Court relative to the sinking of M/V P. Aboitiz. In Monarch, we
said that the sinking of the vessel was not due to force majeure, but to its unseaworthy
condition.16 Therein, we found petitioner concurrently negligent with the captain and crew.17 But the
Court stressed that the circumstances therein still made the doctrine of limited liability applicable.18

Our ruling in Monarch may appear inconsistent with the exception of the limited liability doctrine, as
explicitly stated in the earlier part of the Monarch decision. An exception to the limited liability
doctrine is when the damage is due to the fault of the shipowner or to the concurrent negligence of
the shipowner and the captain. In which case, the shipowner shall be liable to the full-extent of the
damage.19 We thus find it necessary to clarify now the applicability here of the decision in Monarch.

From the nature of their business and for reasons of public policy, common carriers are bound to
observe extraordinary diligence over the goods they transport according to all the circumstances of
each case.20 In the event of loss, destruction or deterioration of the insured goods, common carriers
are responsible, unless they can prove that the loss, destruction or deterioration was brought about
by the causes specified in Article 1734 of the Civil Code.21 In all other cases, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence.22 Moreover, where the vessel is found unseaworthy, the shipowner is also
presumed to be negligent since it is tasked with the maintenance of its vessel. Though this duty can
be delegated, still, the shipowner must exercise close supervision over its men.23

In the present case, petitioner has the burden of showing that it exercised extraordinary diligence in
the transport of the goods it had on board in order to invoke the limited liability doctrine. Differently
put, to limit its liability to the amount of the insurance proceeds, petitioner has the burden of proving
that the unseaworthiness of its vessel was not due to its fault or negligence. Considering the
evidence presented and the circumstances obtaining in this case, we find that petitioner failed to
discharge this burden. It initially attributed the sinking to the typhoon and relied on the BMI findings
that it was not at fault. However, both the trial and the appellate courts, in this case, found that the
sinking was not due to the typhoon but to its unseaworthiness. Evidence on record showed that the
weather was moderate when the vessel sank. These factual findings of the Court of Appeals,
affirming those of the trial court are not to be disturbed on appeal, but must be accorded great
weight. These findings are conclusive not only on the parties but on this Court as well.24

In contrast, the findings of the BMI are not deemed always binding on the courts.25 Besides,
exoneration of the vessel’s officers and crew by the BMI merely concerns their respective
administrative liabilities.26 It does not in any way operate to absolve the common carrier from its civil
liabilities arising from its failure to exercise extraordinary diligence, the determination of which
properly belongs to the courts.27

Where the shipowner fails to overcome the presumption of negligence, the doctrine of limited liability
cannot be applied.28 Therefore, we agree with the appellate court in sustaining the trial court’s ruling
that petitioner is liable for the total value of the lost cargo.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated August 29, 2002 and
Resolution dated January 23, 2003 of the Court of Appeals in CA-G.R. CV No. 28770
are AFFIRMED.

Costs against petitioner.

SO ORDERED.

G.R. No. 181375, July 13, 2016

PHIL-NIPPON KYOEI, CORP., Petitioner, v. ROSALIA T. GUDELOSAO, ON HER BEHALF AND IN

BEHALF OF MINOR CHILDREN CHRISTY MAE T. GUDELOSAO AND ROSE ELDEN T. GUDELOSAO,
CARMEN TANCONTIAN, ON HER BEHALF AND IN BEHALF OF THE CHILDREN CAMELA B.
TANCONTIAN, BEVERLY B. TANCONTIAN, AND ACE B. TANCONTIAN, Respondents.

DECISION

JARDELEZA, J.:
This is a petition for review on certiorari1 under Rule 45 of the Revised Rules of Court filed by Phil-Nippon
Kyoei, Corp. (Petitioner) from the Decision2 of the Court of Appeals (CA) dated October 4, 2007 (CA
Decision) and its Resolution3 dated January 11, 2008 in CA-G.R. SP No. 95456. The CA reinstated the Labor
Arbiter's Decision4 dated August 5, 2004 (LA Decision) with the modification, among others, that petitioner
is liable to respondents under the insurance cover it procured from South Sea Surety & Insurance Co., Inc.
(SSSICI). The CA ruled that petitioner's liability would be extinguished only upon payment by SSSICI of the
insurance proceeds to respondents.5 chanrob leslaw

Facts

Petitioner, a domestic shipping corporation, purchased a "Ro-Ro" passenger/cargo vessel "MV Mahlia" in
Japan in February 2003.6 For the vessel's one month conduction voyage from Japan to the Philippines,
petitioner, as local principal, and Top Ever Marine Management Maritime Co., Ltd. (TMCL), as foreign
principal, hired Edwin C. Gudelosao, Virgilio A. Tancontian, and six other crewmembers. They were hired
through the local manning agency of TMCL, Top Ever Marine Management Philippine Corporation (TEMMPC).
TEMMPC, through their president and general manager, Capt. Oscar Orbeta (Capt. Orbeta), and the eight
crewmembers signed separate contracts of employment. Petitioner secured a Marine Insurance Policy
(Maritime Policy No. 00001) from SSSICI over the vessel for P10,800,000.00 against loss, damage, and
third party liability or expense, arising from the occurrence of the perils of the sea for the voyage of the
vessel from Onomichi, Japan to Batangas, Philippines. This Marine Insurance Policy included Personal
Accident Policies for the eight crewmembers for P3,240,000.00 each in case of accidental death or injury.7 chanrobles law

On February 24, 2003, while still within Japanese waters, the vessel sank due to extreme bad weather
condition. Only Chief Engineer Nilo Macasling survived the incident while the rest of the crewmembers,
including Gudelosao and Tancontian, perished.8 chanro bles law

Respondents, as heirs and beneficiaries of Gudelosao and Tancontian, filed separate complaints for death
benefits and other damages against petitioner, TEMMPC, Capt. Orbeta, TMCL, and SSSICI, with the
Arbitration Branch of the National Labor Relations Commission (NLRC).9 chanrob leslaw

On August 5, 2004, Labor Arbiter (LA) Pablo S. Magat rendered a Decision10 finding solidary liability among
petitioner, TEMMPC, TMCL and Capt. Orbeta. The LA also found SSSICI liable to the respondents for the
proceeds of the Personal Accident Policies and attorney's fees. The LA, however, ruled that the liability of
petitioner shall be deemed extinguished only upon SSSICI's payment of the insurance proceeds. The
dispositive portion of the LA Decision reads: ChanRobles Vi rtua lawlib rary

WHEREFORE, premises considered, CAPT. OSCAR ORBETA, [TEMMPC], [TMCL], and PHIL-NIPPON
KYOEI CORPORATION are hereby directed to pay solidarily the complainants as follows:
chanRoble svirtual Lawlib ra ry

Death Burial 10% atty's

Benefits Expenses [fees]

1. ROSALIA T.
US$50,000 US$1,000 US$5,100
GUDELOSAO:

2. CARMEN B.
US$50,000 US$1,000 US$5,100
TANCONTIAN:

3. CARMELA B.
US$7,000 US$700
TANCONTIAN:

4. BEVERLY B.
US$7,000 US$700
TANCONTIAN:

5. ACE B. TANCONTIAN: US$7,000 US$700

Further, respondent SOUTH SEA SURETY & INSURANCE CO., INC. is hereby directed to pay as
beneficiaries complainants ROSALIA T. GUDELOSAO and CARMEN B. TANCONTIAN [P]3,240,000.00
each for the proceeds of the Personal Accident Policy Cover it issued for each of the deceased seafarers
EDWIN C. GUDELOSAO and VIRGILIO A. TANCONTIAN plus 10% attorney's fees thereof at [P]324,000.00
each thereof or a total of [P]648,000.00.

Nevertheless, upon payment of said proceeds to said widows by respondent SOUTH SEA SURETY &
INSURANCE CO., INC., respondent PHIL-NIPPON CORPORATION'S liability to all the complainants is
deemed extinguished.

Any other claim is hereby dismissed for lack of merit.

SO ORDERED.11 chanroblesv irt uallawl ibra ry

On appeal, the NLRC modified the LA Decision in a Resolution12 dated February 28, 2006, the dispositive
portion of which reads: ChanRobles Vi rtua lawlib rary

WHEREFORE, premises considered, the Appeals of Complainants and PNKC are GRANTED but only partially
in the case of Complainants' Appeal, and the Appeal of [SSSICI] is DISMISSED for lack of merit.
Accordingly, the Decision is SUSTAINED subject to the modification that [SSSICI] is DIRECTED to pay
Complainants in addition to their awarded claims, in the appealed decision, additional death benefits of
US$7,000 each to the minor children of Complainant Gudelosao, namely, Christy Mae T. Gudelosao and
Rose Elden T. Gudelosao.

As regards the other issues, the appealed Decision is SUSTAINED.

SO ORDERED.13 chanroblesv irtuallawl ib rary

The NLRC absolved petitioner, TEMMPC and TMCL and Capt. Orbeta from any liability based on the limited
liability rule.14 It, however, affirmed SSSICI's liability after finding that the Personal Accident Policies answer
for the death benefit claims under the Philippine Overseas Employment Administration Standard
Employment Contract (POEA-SEC).15 Respondents filed a Partial Motion for Reconsideration which the NLRC
denied in a Resolution dated May 5, 2006.16 chanrobleslaw

Respondents filed a petition for certiorari17 before the CA where they argued that the NLRC gravely abused
its discretion in ruling that TEMMPC, TMCL, and Capt. Orbeta are absolved from the terms and conditions of
the POEA-SEC by virtue of the limited liability rule. Respondents also argued that the NLRC gravely abused
its discretion in ruling that the obligation to pay the surviving heirs rests solely on SSSICI. The CA granted
the petition, the dispositive portion thereof reads: ChanRob les Virtualawl ibra ry

WHEREFORE for being impressed with merit the petition is hereby GRANTED. Accordingly, the Resolution
dated February 28, 2006, and Resolution, dated May 5, 2006, of the public respondent NLRC are
hereby SET ASIDE. The Decision of the Labor Arbiter dated [August 5, 2004] is REINSTATED, subject to
the following modifications:

(1) [Respondents CAPT. OSCAR ORBETA, [TEMMPC] and [TMCL] (the manning agency), are hereby
chanRoble svirtual Lawlib ra ry

directed to pay solidarily the complainants as follows:

chanRoble svirtual Lawlib ra ry

Death Burial 10% atty's

Benefits Expenses [fees]

ROSALIA T.
US$50,000 US$1,000 US$5,100
GUDELOSAO:

CARMEN B.
US$50,000 US$1,000 US$5,100
TANCONTIAN:

CARMELA B.
US$7,000 US$700
TANCONTIAN:

BEVERLY B. US$7,000 US$700

TANCONTIAN:

ACE B. TANCONTIAN: US$7,000 US$700

Further, [respondents] CAPT. OSCAR ORBETA, [TEMMPC] and [TMCL] (the manning agency) are hereby
directed to pay solidarity the complainants in addition to their awarded claims, additional death benefits of
US$7,000 each to the minor children of petitioner Rosalia T. Gudelosao, namely, Christy Mae T. Gudelosao
and Rose Elden T. Gudelosao.

Respondent SOUTH SEA SURETY & INSURANCE CO., INC. is hereby directed to pay as beneficiaries
complainants ROSALIA T. GUDELOSAO and CARMEN B. TANCONTIAN [P]3,240,000.00 each for the proceeds
of the Personal Accident Policy Cover it issued for each of the deceased seafarers EDWIN C. GUDELOSAO
and VIRGILIO A. TANCONTIAN plus 10% attorney's fees thereof at [P]324,000.00 each thereof or a total of
[P]648,000.00.

Nevertheless, upon payment of said proceeds to said widows by respondent SOUTH SEA SURETY &
INSURANCE CO., INC. respondent PHIL-NIPPON CORPORATION'S liability to all the complainants is deemed
extinguished.

SO ORDERED.18 chanroblesv irtuallawl ib rary

The CA found that the NLRC erred when it ruled that the obligation of petitioner, TEMMPC and TMCL for the
payment of death benefits under the POEA-SEC was ipso facto transferred to SSSICI upon the death of the
seafarers. TEMMPC and TMCL cannot raise the defense of the total loss of the ship because its liability under
POEA-SEC is separate and distinct from the liability of the shipowner.19 To disregard the contract, which has
the force of law between the parties, would defeat the purpose of the Labor Code and the rules and
regulations issued by the Department of Labor and Employment (DOLE) in setting the minimum terms and
conditions of employment for the protection of Filipino seamen.20 The CA noted that the benefits being
claimed are not dependent upon whether there is total loss of the vessel, because the liability attaches even
if the vessel did not sink.21 Thus, it was error for the NLRC to absolve TEMMPC and TMCL on the basis of the
limited liability rule.

Significantly though, the CA ruled that petitioner is not liable under the POEA-SEC, but by virtue of its being
a shipowner.22 Thus, petitioner is liable for the injuries to passengers even without a determination of its
fault or negligence. It is for this reason that petitioner obtained insurance from SSSICI - to protect itself
against the consequences of a total loss of the vessel caused by the perils of the sea. Consequently,
SSSICI's liability as petitioner's insurer directly arose from the contract of insurance against liability (i.e.,
Personal Accident Policy).23 The CA then ordered that petitioner's liability will only be extinguished upon
payment by SSSICI of the insurance proceeds.24 chanro bles law

Petitioner filed a Motion for Reconsideration25 dated November 5, 2007 but this was denied by the CA in its
c ralaw red

Resolution26 dated January 11, 2008. On the other hand, since SSSICI did not file a motion for
reconsideration of the CA Decision, the CA issued a Partial Entry of Judgment27 stating that the decision
became final and executory as to SSSICI on October 27, 2007.

Hence, this petition where petitioner claims that the CA erred in ignoring the fundamental rule in Maritime
Law that the shipowner may exempt itself from liability by abandoning the vessel and freight it may have
earned during the voyage, and the proceeds of the insurance if any. Since the liability of the shipowner is
limited to the value of the vessel unless there is insurance, any claim against petitioner is limited to the
proceeds arising from the insurance policies procured from SSSICI. Thus, there is no reason in making
petitioner's exoneration from liability conditional on SSSICI's payment of the insurance proceeds.

On December 8, 2008, TEMMPC filed its Manifestation28 informing us of TEMMPC and TMCL's Joint Motion to
Dismiss the Petition and the CA's Resolution29 dated January 11, 2008 granting it. The dismissal is based on
the execution of the Release of All Rights and Full Satisfaction Claim30 (Release and Quitclaim) on December
14, 2007 between respondents and TEMMPC, TMCL, and Capt. Orbeta. In a Resolution31 dated January 28,
2009, we noted that TEMMPC, TMCL, and Capt. Orbeta will no longer comment on the Petition.

On the other hand, SSSICI filed its Comment32 to the petition dated September 3, 2010. It alleged that the
NLRC has no jurisdiction over the insurance claim because claims on the Personal Accident Policies did not
arise from employer-employee relations. It also alleged that petitioner filed a complaint for sum of
money33 in the Regional Trial Court (RTC) of Manila, Branch 46, where it prays for the payment of the
insurance proceeds on the individual Marine Insurance Policy with a Personal Accident Policy covering the
crewmembers of MV Mahlia. This case was eventually dismissed and is now subject of an appeal34before the
CA. SSSICI prays that this matter be considered in resolving the present case.35
Issues

I. Whether the doctrine of real and hypothecary nature of maritime law

(also known as the limited liability rule) applies in favor of petitioner.

II. Whether the CA erred in ruling that the liability of petitioner is

extinguished only upon SSSICI's payment of insurance proceeds.
Discussion

I. Liability under the POEA Standard Employment Contract.

At the outset, the CA erred in absolving petitioner from the liabilities under the POEA-SEC. Petitioner was
the local principal of the deceased seafarers for the conduction trip of MV Mahlia. Petitioner hired them
through TMCL, which also acted through its agent, TEMMPC. Petitioner admitted its role as a principal of its
agents TMCL, TEMMPC and Capt. Orbeta in their Joint Partial Appeal36 before the NLRC.37As such, it is
solidarily liable with TEMMPC and TMCL for the benefits under the POEA-SEC.

Doctrine of limited liability is not applicable to claims under POEA-SEC.

In this jurisdiction, the limited liability rule is embodied in Articles 587, 590 and 837 under Book III of the
Code of Commerce, viz: ChanRoblesVirt ualawli bra ry

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 care of the goods which the vessel carried; but he may exempt
himself therefrom by abandoning the vessel with all her equipment and the freightage he may have earned
during the voyage.

Art. 590. The co-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 Art. 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.

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 its appurtenances and freightage earned during the
voyage.
Article 837 applies the limited liability rule in cases of collision. Meanwhile, Articles 587 and 590 embody the
universal principle of limited liability in all cases wherein the shipowner or agent may be properly held liable
for the negligent or illicit acts of the captain.38 These articles precisely intend to limit the liability of the
shipowner or agent to the value of the vessel, its appurtenances and freightage earned in the voyage,
provided that the owner or agent abandons the vessel.39 When the vessel is totally lost, in which case
abandonment is not required because there is no vessel to abandon, the liability of the shipowner or agent
for damages is extinguished.40 Nonetheless, the limited liability rule is not absolute and is without
exceptions. It does not apply in cases: (1) where the injury or death to a passenger is due either to the fault
of the shipowner, or to the concurring negligence of the shipowner and the captain; (2) where the vessel is
insured; and (3) in workmen's compensation claims.41 chan robles law

In Abueg v. San Diego,42 we ruled that the limited liability rule found in the Code of Commerce is
inapplicable in a liability created by statute to compensate employees and laborers, or the heirs and
dependents, in cases of injury received by or inflicted upon them while engaged in the performance of their
work or employment, to wit: ChanRobles Vi rtua lawlib rary

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.43 (Underscoring supplied.)
We see no reason why the above doctrine should not apply here.

Act No. 3428, otherwise known as The Workmen's Compensation Act44 is the first law on workmen's
compensation in the Philippines for work-related injury, illness, or death. This was repealed on November 1,
1974 by the Labor Code,45 and was further amended on December 27, 1974 by Presidential Decree No.
626.46 The pertinent provisions are now found in Title II, Book IV of the Labor Code on Employees
Compensation and State Insurance Fund.

The death benefits granted under Title II, Book IV of the Labor Code are similar to the death benefits
granted under the POEA-SEC.47 Specifically, its Section 20(A)(l) and (4)(c) provides that: ChanRoblesVi rtua lawlib rary

1. In case of work-related death of the seafarer, during the term of his contract the employer shall pay
his beneficiaries the Philippine Currency equivalent to the amount of Fifty Thousand US dollars
(US$50,000) and an additional amount of Seven Thousand US dollars (US$7,000) to each child
under the age of twenty-one (21) but not exceeding four (4) children, at the exchange rate
prevailing during the time of payment.

xxx

4. The other liabilities of the employer when the seafarer dies as a result of work-related injury or
illness during the term of employment are as follows:

xxx

c. The employer shall pay the beneficiaries of the seafarer the [Philippine]
currency equivalent to the amount of One Thousand US dollars
(US$1,000) for burial expenses at the exchange rate prevailing during
the time of payment.
Akin to the death benefits under the Labor Code, these benefits under the POEA-SEC are given when the
employee dies due to a work-related cause during the term of his contract.48 The liability of the shipowner or
agent under the POEA-SEC has likewise nothing to do with the provisions of the Code of Commerce
regarding maritime commerce. The death benefits granted under the POEA-SEC is not due to the death of a
passenger by or through the misconduct of the captain or master of the ship; nor is it the liability for the
loss of the ship as result of collision; nor the liability for wages of the crew. It is a liability created by
contract between the seafarers and their employers, but secured through the State's intervention as a
matter of constitutional and statutory duty to protect Filipino overseas workers and to secure for them the
best terms and conditions possible, in order to compensate the seafarers' heirs and dependents in the event
of death while engaged in the performance of their work or employment. The POEA-SEC prescribes the set
of standard provisions established and implemented by the POEA containing the minimum requirements
prescribed by the government for the employment of Filipino seafarers. While it is contractual in nature, the
POEA-SEC is designed primarily for the protection and benefit of Filipino seamen in the pursuit of their
employment on board ocean-going vessels.49 As such, it is deemed incorporated in every Filipino seafarers'
contract of employment.50 It is established pursuant to POEA's power "to secure the best terms and
conditions of employment of Filipino contract workers and ensure compliance therewith" and "to protect the
well-being of Filipino workers overseas"51pursuant to Article 17 of the Labor Code as amended by Executive
Order (EO) Nos. 79752 and 247.53 chan robles law

But while the nature of death benefits under the Labor Code and the POEA-SEC are similar, the death
benefits under the POEA-SEC are intended to be separate and distinct from, and in addition to, whatever
benefits the seafarer is entitled to under Philippine laws, including those benefits which may be claimed from
the State Insurance Fund.54 chanro bleslaw

Thus, the claim for death benefits under the POEA-SEC is the same species as the workmen's compensation
claims under the Labor Code - both of which belong to a different realm from that of Maritime Law.
Therefore, the limited liability rule does not apply to petitioner's liability under the POEA-SEC.

Nevertheless, the Release and Quitclaim benefit petitioner as a solidary debtor.

All the same, the Release and Quitclaim executed between TEMMPC, TMCL and Capt. Oscar Orbeta, and
respondents redounded to the benefit of petitioner as a solidary debtor.

Petitioner is solidarity liable with TEMMPC and TMCL for the death benefits under the POEA-SEC. The basis of
the solidary liability of the principal with the local manning agent is found in the second paragraph of Section
10 of the Migrant Workers and Overseas Filipino Act of 1995,55 which, in part, provides: "[t]he liability of the
principal/employer and the recruitment/placement agency for any and all claims under this section shall be
joint and several." This provision, is in turn, implemented by Section 1 (e)(8), Rule 2, Part II of the POEA
Rules and Regulations Governing the Recruitment and Employment of Seafarers, which requires the
undertaking of the manning agency to "[a]ssume joint and solidary liability with the employer for all claims
and liabilities which may arise in connection with the implementation of the employment contract [and
POEA-SEC]."

We have consistently applied the Civil Code provisions on solidary obligations, specifically Articles
121756 and 1222,57 to labor cases.58 We explained in Varorient Shipping Co., Inc. v. NLRC59 the nature of the
solidary liability in labor cases, to wit: ChanRobles Vi rtualaw lib rary

x x x The POEA Rules holds her, as a corporate officer, solidarily liable with the local licensed manning
agency. Her liability is inseparable from those of Varorient and Lagoa. If anyone of them is held liable then
all of them would be liable for the same obligation. Each of the solidary debtors, insofar as the
creditor/s is/are concerned, is the debtor of the entire amount; it is only with respect to his co-
debtors that he/she is liable to the extent of his/her share in the obligation. Such being the case,
the Civil Code allows each solidary debtor, in actions filed by the creditor/s, to avail himself of all
defenses which are derived from the nature of the obligation and of those which are personal to
him, or pertaining to his share. He may also avail of those defenses personally belonging to his co-
debtors, but only to the extent of their share in the debt. Thus, Varorient may set up all the defenses
pertaining to Colarina and Lagoa; whereas Colarina and Lagoa are liable only to the extent to which
Varorient may be found liable by the court. The complaint against Varorient, Lagoa and Colarina is founded
on a common cause of action; hence, the defense or the appeal by anyone of these solidary debtors would
redound to the benefit of the others.

xxx

x x x If Varorient were to be found liable and made to pay pursuant thereto, the entire obligation would
already be extinguished even if no attempt was made to enforce the judgment against Colarina.
Because there existed a common cause of action against the three solidary obligors, as the acts
and omissions imputed against them are one and the same, an ultimate finding that Varorient
was not liable would, under these circumstances, logically imply a similar exoneration from
liability for Colarina and Lagoa, whether or not they interposed any defense.60 (Emphasis supplied.)
Thus, the rule is that the release of one solidary debtor redounds to the benefit of the others.61Considering
that petitioner is solidarily liable with TEMMPC and TMCL, we hold that the Release and Quitclaim executed
by respondents in favor of TEMMPC and TMCL redounded to petitioner's benefit. Accordingly, the liabilities of
petitioner under Section 20(A)(l) and (4)(c) of the POEA-SEC to respondents are now deemed extinguished.
We emphasize, however, that this pronouncement does not foreclose the right of reimbursement of the
solidary debtors who paid (i.e., TEMMPC and TMCL) from petitioner as their co-debtor.

II. Liability under the Personal Accident Policies.

The NLRC has jurisdiction over the claim on the Personal Accident Policies.
We find that the CA correctly upheld the NLRC's jurisdiction to order SSSICI to pay respondents the value of
the proceeds of the Personal Accident Policies.

The Migrant Workers and Overseas Filipinos Act of 1995 gives the Labor Arbiters of the NLRC the original
and exclusive jurisdiction over claims arising out of an employer-employee relationship or by virtue of any
law or contract involving Filipino workers for overseas deployment, including claims for actual, moral,
exemplary and other forms of damage. It further creates a joint and several liability among the principal or
employer, and the recruitment/placement agency, for any and all claims involving Filipino workers, viz: ChanRo bles Vi rtua lawlib rary

SEC. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters
of the National Labor Relations Commission (NLRC) shall have the original and exclusive
jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the complaint, the
claims arising out of an employer-employee relationship or by virtue of any law or contract involving
Filipino workers for overseas deployment including claims for actual, moral, exemplary and other forms
of damages. Consistent with this mandate, the NLRC shall endeavor to update and keep abreast with the
developments in the global services industry.

The liability of the principal/employer and the recruitment/placement agency for any and all claims under
this section shall be joint and several. This provision shall be incorporated in the contract for overseas
employment and shall be a condition precedent for its approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be answerable for all money claims or damages
that may be awarded to the workers. If the recruitment/placement agency is a juridical being, the corporate
officers and directors and partners as the case may be, shall themselves be jointly and solidarily liable with
the corporation or partnership for the aforesaid claims and damages. x x x (Emphasis supplied.)
In Finman General Assurance Corp. v. Inocencio,62 we upheld the jurisdiction of the POEA to determine a
surety's liability under its bond. We ruled that the adjudicatory power to do so is not vested with the
Insurance Commission exclusively. The POEA (now the NLRC) is vested with quasi-judicial powers over all
cases, including money claims, involving employer-employee relations arising out of or by virtue of any law
or contract involving Filipino workers for overseas employment.63 Here, the award of the insurance proceeds
arose out of the personal accident insurance procured by petitioner as the local principal over the deceased
seafarers who were Filipino overseas workers. The premiums paid by petitioner were, in actuality, part of
the total compensation paid for the services of the crewmembers.64Put differently, the labor of the
employees is the true source of the benefits which are a form of additional compensation to them.
Undeniably, such claim on the personal accident cover is a claim under an insurance contract involving
Filipino workers for overseas deployment within the jurisdiction of the NLRC.

It must also be noted that the amendment under Section 37-A of the Migrant Workers and Overseas
Filipinos Act of 1995 on Compulsory Insurance Coverage does not apply. The amendment requires the
claimant to bring any question or dispute in the enforcement of any insurance policy before the Insurance
Commission for mediation or adjudication. The amendment, however, took effect on May 8, 2010 long after
the Personal Accident Policies in this case were procured in 2003. Accordingly, the NLRC has jurisdiction
over the claim for proceeds under the Personal Accident Policies.

In any event, SSSICI can no longer assail its liability under the Personal Accident Policies. SSSICI failed to
file a motion for reconsideration on the CA Decision. In a Resolution dated April 24, 2008, the CA certified in
a Partial Entry of Judgment that the CA Decision with respect to SSSICI has become final and executory and
is recorded in the Book of Entries of Judgments.65 A decision that has acquired finality becomes immutable
and unalterable. This quality of immutability precludes the modification of a final judgment, even if the
modification is meant to correct erroneous conclusions of fact and law. This holds true whether the
modification is made by the court that rendered it or by the highest court in the land. Thus, SSSICI's liability
on the Personal Accident Policies can no longer be disturbed in this petition.

SSSICI's liability as insurer under the Personal Accident Policies is direct.

We, however, find that the CA erred in ruling that "upon payment of [the insurance] proceeds to said
widows by respondent SOUTH SEA SURETY & INSURANCE CO., INC., respondent PHIL-NIPPON
CORPORATION'S liability to all the complainants is deemed extinguished."66 chan rob leslaw

This ruling makes petitioner's liability conditional upon SSSICI's payment of the insurance proceeds. In
doing so, the CA determined that the Personal Accident Policies are casualty insurance, specifically one of
liability insurance. The CA determined that petitioner, as insured, procured from SSSICI the Personal
Accident Policies in order to protect itself from the consequences of the total loss of the vessel caused by the
perils of the sea. The CA found that the liabilities insured against are all monetary claims, excluding the
benefits under the POEA-SEC, of respondents in connection with the sinking of the vessel.

We rule that while the Personal Accident Policies are casualty insurance, they do not answer for petitioner's
liabilities arising from the sinking of the vessel. It is an indemnity insurance procured by petitioner for the
benefit of the seafarers. As a result, petitioner is not directly liable to pay under the policies because it is
merely the policyholder of the Personal Accident Policies.

Section 176 (formerly Sec. 174) of The Insurance Code67 defines casualty insurance as follows: ChanRobles Vi rtualaw lib rary

SEC. 174. Casualty insurance is insurance covering loss or liability arising from accident or
mishap, excluding certain types of loss which by law or custom are considered as falling
exclusively within the scope of other types of insurance such as fire or marine. It includes, but is
not limited to, employer's liability insurance, motor vehicle liability insurance, plate glass insurance, burglary
and theft insurance, personal accident and health insurance as written by non-life insurance
companies, and other substantially similar kinds of insurance. (Emphasis supplied.)
Based on Section 176, casualty insurance may cover liability or loss arising from accident or mishap. In a
liability insurance, the insurer assumes the obligation to pay third party in whose favor the liability of the
insured arises.68 On the other hand, personal accident insurance refers to insurance against death or injury
by accident or accidental means.69 In an accidental death policy, the accident causing the death is the thing
insured against.70 chanro bleslaw

Notably, the parties did not submit the Personal Accident Policies with the NLRC or the CA. However, based
on the pleadings submitted by the parties, SSSICI admitted that the crewmembers of MV Mahlia are insured
for the amount of P3,240,000.00, payable upon the accidental death of the crewmembers.71It further
admitted that the insured risk is the loss of life or bodily injury brought about by the violent external event
or accidental means.72 Based on the foregoing, the insurer itself admits that what is being insured against is
not the liability of the shipowner for death or injuries to passengers but the death of the seafarers arising
from accident.

The liability of SSSICI to the beneficiaries is direct under the insurance contract.73 Under the contract,
petitioner is the policyholder, with SSSICI as the insurer, the crewmembers as the cestui que vie or the
person whose life is being insured with another as beneficiary of the proceeds,74 and the latter's heirs as
beneficiaries of the policies. Upon petitioner's payment of the premiums intended as additional
compensation to the crewmembers, SSSICI as insurer undertook to indemnify the crewmembers'
beneficiaries from an unknown or contingent event.75 Thus, when the CA conditioned the extinguishment of
petitioner's liability on SSSICI's payment of the Personal Accident Policies' proceeds, it made a finding that
petitioner is subsidiarily liable for the face value of the policies. To reiterate, however, there is no basis for
such finding; there is no obligation on the part of petitioner to pay the insurance proceeds because
petitioner is, in fact, the obligee or policyholder in the Personal Accident Policies. Since petitioner is not the
party liable for the value of the insurance proceeds, it follows that the limited liability rule does not apply as
well.

One final note. Petitioner's claim that the limited liability rule and its corresponding exception (i.e., where
the vessel is insured) apply here is irrelevant because petitioner was not found liable under tort or quasi-
delict. Moreover, the insurance proceeds contemplated under the exception in the case of a lost vessel are
the insurance over the vessel and pending freightage for the particular voyage.76 It is not the insurance in
favor of the seafarers, the proceeds of which are intended for their beneficiaries. Thus, if ever petitioner is
liable for the value of the insurance proceeds under tort or quasi-delict, it would be from the Marine
Insurance Policy over the vessel and not from the Personal Accident Policies over the seafarers.

WHEREFORE, the petition is PARTLY GRANTED. The CA Decision dated October 4, 2007 and the
Resolution dated January 11, 2008 of the Court of Appeals are AFFIRMED WITH THE FOLLOWING
MODIFICATIONS:
chanRoble svirtual Lawlib ra ry

(1) The death benefits are limited to the amount granted under the Release
of All Rights and Full Satisfaction of Claim dated December 14, 2007
executed between respondents and Top Ever Marine Management
Company Ltd., Top Ever Marine Management Philippine Corporation,
and Captain Oscar Orbeta;
(2) As a solidary co-debtor, petitioner's liability to respondents under the
POEA-SEC is also extinguished by virtue of the Release of All Rights and
Full Satisfaction of Claim dated December 14, 2007; and

(3) The last paragraph of the dispositive portion of the CA Decision dated
October 4, 2007 stating: "Nevertheless, upon payment of said proceeds
to said widows by respondent SOUTH SEA SURETY & INSURANCE CO.,
INC., respondent PHIL-NIPPON CORPORATION'S liability to all the
complainants is deemed extinguished..." is DELETED.

SO ORDERED. chanRoblesvirt ual Lawlib rary

GUSTIN P. DELA TORRE, G.R. No. 160088

Petitioner,

- versus -

THE HONORABLE COURT OF

APPEALS, CRISOSTOMO G.
CONCEPCION, RAMON BOY
LARRAZABAL, PHILIPPINE
TRIGON SHIPYARD
CORPORATION, and ROLAND
G. DELA TORRE,
Respondents.
x--------------------------------------x
PHILIPPINE TRIGON G.R. No. 160565
SHIPYARD CORPORATION
and ROLAND G. DELA TORRE, Present:
Petitioners,
CARPIO, J.
VELASCO, JR., Chairperson,
- versus - ABAD,
MENDOZA, and
SERENO,  JJ.
CRISOSTOMO G.
CONCEPCION, AGUSTIN
DELA TORRE and RAMON Promulgated:
BOY LARRAZABAL,
Respondents. July 13, 2011

X ---------------------------------------------------------------------------------------X
DECISION

MENDOZA, J.:

These consolidated petitions[1] for review on certiorari seek to reverse and

set aside the September 30, 2002 Decision[2] and September 18, 2003
Resolution[3] of the Court of Appeals (CA) in CA-G.R. CV No. 36035, affirming in
toto the July 10, 1991 Decision[4] of the Regional Trial Court, Branch 60, Angeles
City (RTC). The RTC Decision in Civil Case No. 4609, an action for Sum of
Money and Damages, ordered the defendants, jointly and severally, to pay various
damages to the plaintiff.

The Facts:

Respondent Crisostomo G. Concepcion (Concepcion) owned LCT-

Josephine, a vessel registered with the Philippine Coast Guard. On February 1,
1984, Concepcion entered into a Preliminary Agreement[5] with Roland de la
Torre (Roland) for the dry-docking and repairs of the said vessel as well as for its
charter afterwards.[6] Under this agreement, Concepcion agreed that after the dry-
docking and repair of LCT-Josephine, it should be chartered for ₱10,000.00 per
month with the following conditions:

1. The CHARTERER will be the one to pay the insurance premium

of the vessel

2. The vessel will be used once every three (3) months for a
maximum period of two (2) weeks
 3. The SECOND PARTY (referring to Concepcion) agreed that
LCT-Josephine should be used by the FIRST PARTY (referring
to Roland) for the maximum period of two (2) years

4. The FIRST PARTY (Roland) will take charge[x] of maintenance

cost of the said vessel. [Underscoring Supplied]

On June 20, 1984, Concepcion and the Philippine Trigon Shipyard

Corporation[7] (PTSC), represented by Roland, entered into a Contract of
Agreement,[8] wherein the latter would charter LCT-Josephine retroactive to May
1, 1984, under the following conditions:

a. Chartered amount of the vessel ₱20,000.00 per month effective

May 1, 1984;

j. The owner (Concepcion) shall pay 50% downpayment for the

dry-docking and repair of the vessel and the balance shall be
paid every month in the amount of ₱10,000.00, to be deducted
from the rental amount of the vessel;

k. In the event that a THIRD PARTY is interested to purchase the

said vessel, the SECOND PARTY (PTSC/ Roland) has the
option for first priority to purchase the vessel. If the SECOND
PARTY (PTSC/Roland) refuses the offer of the FIRST PARTY
(Concepcion), shall give the SECOND PARTY (PTSC/Roland)
enough time to turn over the vessel so as not to disrupt
previous commitments;

l. That the SECOND PARTY (PTSC/Roland) has the option to

terminate the contract in the event of the SECOND PARTY
(PTSC/Roland) decide to stop operating;

m. The SECOND PARTY (PTSC/Roland) shall give 90 days notice

of such termination of contract;

n. Next x x year of dry-docking and repair of vessel shall be

shouldered by the SECOND PARTY (PTSC/Roland);
(Underscoring Supplied]
 On August 1, 1984, PTSC/Roland sub-chartered LCT-Josephine to Trigon
Shipping Lines (TSL), a single proprietorship owned by Rolands father, Agustin de
la Torre (Agustin).[9] The following are the terms and conditions of that Contract of
Agreement:[10]

a. Chartered amount of the vessel ₱30,000.00 per month effective

August, 1984;

b. Downpayment of the 50% upon signing of the contract and the

balance every end of the month;

c. Any cost for the additional equipment to be installed on the

vessel will be borne by the FIRST PARTY (PTSC/ Roland) and
the cost of the equipment will be deductible from the monthly
rental of the vessel;

d. In the event the vessel is grounded or other [force majeure] that

will make the vessel non-opera[xx]ble, the rental of the vessel
shall be suspended from the start until the vessel will be
considered operational;

e. The cost for the dry-docking and/or repair of vessel shall not
exceed ₱200,000.00, any excess shall be borne by the
SECOND PARTY (TSL/Agustin);

f. The SECOND PARTY (TSL/Agustin) undertakes to shoulder the

maintenance cost for the duration of the usage;

g. All cost for the necessary repair of the vessel shall be on the
account of the SECOND PARTY (TSL/Agustin);

h. That the SECOND PARTY (TSL/Agustin) has the option to

terminate the contract in the event the SECOND PARTY
(TSL/Agustin) decides to stop operating;

j. The FIRST PARTY (PTSC/Roland) will terminate the services of

all vessels crew and the SECOND PARTY (TSL/Agustin) shall
have the right to replace and rehire the crew of the vessel.
 k. Insurance premium of the vessel will be divided equally
between the FIRST PARTY (PTSC/Rolando) and the SECOND
PARTY (TSL/ Agustin). [Underscoring supplied]

On November 22, 1984, TSL, this time represented by Roland per Agustins
Special Power of Attorney,[11] sub-chartered LCT-Josephine to Ramon
Larrazabal (Larrazabal) for the transport of cargo consisting of sand and gravel to
Leyte. The following were agreed upon in that contract,[12] to wit:

1. That the FIRST PARTY (TSL by Roland) agreed that LCT-

Josephine shall be used by the SECOND PARTY (Larrazabal)
for and in consideration on the sum of FIVE THOUSAND FIVE
HUNDRED (₱5,500.00) PESOS, Philippine currency per day
charter with the following terms and conditions.

2. That the CHARTERER should pay ₱2,000.00 as standby pay

even that will made (sic) the vessel non-opera[xx]ble cause[d]
by natur[al] circumstances.

3. That the CHARTERER will supply the consumed crude oil and
lube oil per charter day.

4. That the SECOND PARTY (Larrazabal) is the one responsible to

supervise in loading and unloading of cargo load on the vessel.

5. That the SECOND PARTY (Larrazabal) shall give one

week notice for such termination of contract.

6. TERMS OF PAYMENTS that the SECOND PARTY (Larrazabal)

agreed to pay 15 days in advance and the balance should be
paid weekly. [Underscoring Supplied]

On November 23, 1984, the LCT-Josephine with its cargo of sand and gravel
arrived at Philpos, Isabel, Leyte. The vessel was beached near the NDC Wharf.
With the vessels ramp already lowered, the unloading of the vessels cargo began
with the use of Larrazabals payloader. While the payloader was on the deck of
the LCT-Josephinescooping a load of the cargo, the vessels ramp started to move
downward, the vessel tilted and sea water rushed in. Shortly thereafter, LCT-
Josephine sank.[13]
 Concepcion demanded that PTSC/ Roland refloat LCT-Josephine. The latter
assured Concepcion that negotiations were underway for the refloating of his
vessel.[14]Unfortunately, this did not materialize.

For this reason, Concepcion was constrained to institute a complaint for Sum
of Money and Damages against PTSC and Roland before the RTC. PTSC and
Roland filed their answer together with a third-party complaint against Agustin.
Agustin, in turn, filed his answer plus a fourth-party complaint against Larrazabal.
The latter filed his answer and counterclaim but was subsequently declared in
default by the RTC.[15] Eventually, the fourth-party complaint against Larrazabal
was dismissed when the RTC rendered its decision in favor of Concepcion on July
10, 1991.[16] In said RTC decision, the following observations were written:

The testimonies of Roland de la Torre and Hubart Sungayan

quoted above, show: (1) that the payloader was used to unload the
cargo of sand and gravel; (2) that the payloader had to go inside
the vessel and scoop up a load; (3) that the ramp according to
Roland de la Torre, was not properly put into peak (sic) such that
the front line will touch the bottom, particularly will touch the sea
x x x; (4) that the tires (of the payloader) will be submerged to
(sic) the sea; (5) that according to Sungayan the ramp of the vessel
was moving down; (6) that the payloader had to be maneuvered
by its operator who dumped the load at the side of the vessel; (7)
that the dumping of the load changed the stability of the vessel
and tilted it to the starboard side; and (8) that the tilting caused
the sliding of the cargo toward that side and opened the manhole
through which seawater rushed in.[17]
Hubart Sungayan, who was the chiefmate of LCT-Josephine and under the
employ of TSL/Agustin, also admitted at the trial that it was TSL/Agustin, through
its crew, who was in-charge of LCT-Josephines operations although the
responsibility of loading and unloading the cargo was under Larrazabal. Thus, the
RTC declared that the efficient cause of the sinking of the LCT-JOSEPHINE was
the improper lowering or positioning of the ramp, which was well within the
charge or responsibility of the captain and crew of the vessel.[18] The fallo of the
RTC Decision reads:
 WHEREFORE, in view of all the foregoing, judgment is
hereby rendered as follows:

1. The defendants, Philippine Trigon Shipping

Corporation and Roland de la Torre, and the third-
party defendant, Agustin de la Torre, shall pay the
plaintiff, jointly and severally, the sum of EIGHT
HUNDRED FORTY-ONE THOUSAND THREE
HUNDRED EIGHTY SIX PESOS AND EIGHTY
SIX CENTAVOS (₱841,386.86) as the value of the
LCT JOSEPHINE with interest thereon at the legal
rate of 6% per annum from the date of demand,
that is from March 14, 1985, the date when counsel
for the defendant Philippine Trigon Shipyard
Corporation answered the demand of the plaintiff,
until fully paid;

2. The defendants, Philippine Trigon Shipyard

Corporation and Roland de la Torre, shall pay to
the plaintiff the sum of NINETY THOUSAND
PESOS (₱90,000.00) as unpaid rentals for the
period from May 1, 1984, to November, 1984, and
the sum of ONE HUNDRED SEVENTY
THOUSAND PESOS (₱170,000.00) as lost rentals
from December, 1984, to April 30, 1986, with
interest on both amounts at the rate of 6% per
annum also from demand on March 14, 1985, until
fully paid;

3. The defendants and the third-party defendant shall

likewise pay to the plaintiff jointly and severally the
sum of TWENTY-FIVE THOUSAND PESOS
(₱25,000.00) as professional fee of plaintiffs
counsel plus FIVE HUNDRED PESOS (₱500.00)
per appearance of said counsel in connection with
actual trial of this case, the number of such
appearances to be determined from the records of
this case;

4. The defendants counterclaim for the unpaid balance

of plaintiffs obligation for the dry-docking and
repair of the vessel LCT JOSEPHINE in the
 amount of TWENTY-FOUR THOUSAND THREE
HUNDRED FOUR PESOS AND THIRTY-FIVE
CENTAVOS (₱24,304.35), being valid, shall be
deducted from the unpaid rentals, with interest on
the said unpaid balance at the rate of 6% per
annum from the date of the filing of the counter-
claim on March 31, 1986;

5. The counter-claim of the defendants in all other

respects, for lack of merit, is hereby DISMISSED;

6. The fourth-party complaint against the fourth-party

defendant, Ramon Larrazabal, being without basis,
is likewise DISMISSED; and

7. The defendants and third-party defendant shall pay

the costs.

SO ORDERED.[19]

Agustin, PTSC and Roland went to the CA on appeal. The appellate court, in
agreement with the findings of the RTC, affirmed its decision in toto.

Still not in conformity with the CA findings against them, Agustin, PTSC
and Roland came to this Court through these petitions for review. In G.R. No.
160088, petitioner Agustin raises the following issues:

AGUSTINS STATEMENT OF THE ISSUES

THE COURT OF APPEALS ERRED IN HOLDING THAT THE

PROXIMATE CAUSE OF THE SINKING OF LCT JOSEPHINE
IS THE NEGLIGENCE OF THE PETITIONER (Agustin) AND
THE RESPONDENTS TRIGON (PTSC) AND DE LA TORRE
(Roland).

II
THE COURT OF APPEALS ERRED IN NOT HOLDING
RESPONDENT RAMON LARRAZABAL AS SOLELY LIABLE
FOR THE LOSS AND SINKING OF LCT JOSEPHINE.

III

THE TRIAL COURT AND THE COURT OF APPEALS

GRAVELY ERRED IN TAKING JUDICIAL NOTICE OF THE
CHARACTERISTICS OF THE LCT JOSEPHINE AND
PAYLOADER WITHOUT INFORMING THE PARTIES OF
THEIR INTENTION.

IV

THE COURT OF APPEALS ERRED IN HOLDING

PETITIONER DIRECTLY AND SOLIDARILY LIABLE WITH
THE RESPONDENTS TRIGON AND DE LA TORRE DESPITE
THE FACT THAT SUCH KIND OF LIABILITY IS NOT DULY
ALLEGED IN THE COMPLAINT OF RESPONDENT
CONCEPCION AND NOT ONE OF THE ISSUES TRIED BY
THE PARTIES.

THE COURT OF APPEALS ERRED IN HOLDING THAT

PETITIONER IS LIABLE BASED ON CULPA CONTRACTUAL.

VI

THE COURT OF APPEALS ERRED IN NOT EXCULPATING

PETITIONER FROM LIABILITY BASED ON THE LIMITED
LIABILITY RULE.

VII
 THE COURT OF APPEALS ERRED IN NOT APPLYING THE
PROVISIONS OF THE CODE OF COMMERCE ON THE
LIABILITY OF THE SHIP CAPTAIN.[20]
On the other hand, in G.R. No. 160565, PTSC and Roland submit the
following issues:

PTSC and ROLANDS STATEMENT OF THE ISSUES

I.

DID THE HONORABLE COURT OF APPEALS ERRxx IN

APPLYING THE PROVISIONS OF THE CIVIL CODE OF THE
PHILIPPINES PARTICULARLY ON CONTRACTS, LEASE,
QUASI-DELICT AND DAMAGES INSTEAD OF THE
PROVISIONS OF THE CODE OF COMMERCE ON MARITIME
COMMERCE IN ADJUDGING PETITIONERS LIABLE TO
PRIVATE RESPONDENT CONCEPCION.

II.

DID THE HONORABLE COURT OF APPEALS ERRxx IN

UPHOLDING THE FINDINGS OF FACT OF THE TRIAL
COURT.

III.

DID THE HONORABLE COURT OF APPEALS COMMITxx

GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
IN EXCESS OF ITS JURISDICTION IN APPRECIATING THE
FACTS OF THE CASE.

IV.

DID THE HONORABLE COURT OF APPEALS, IN ADJUDGING

PETITIONERS JOINTLY AND SEVERALLY LIABLE WITH
RESPONDENT AGUSTIN DE LA TORRE, ERRxx WHEN IT
MADE FINDINGS OF FACT AND CONCLUSIONS OF LAW
WHICH ARE BEYOND THE ISSUES SET FORTH AND
CONTEMPLATED IN THE ORIGINAL PLEADINGS OF THE
PARTIES.[21]
 From the foregoing, the issues raised in the two petitions can be categorized
as: (1) those referring to the factual milieu of the case; (2) those concerning the
applicability of the Code of Commerce, more specifically, the Limited Liability
Rule; and (3) the question on the solidary liability of the petitioners.

As regards the issues requiring a review of the factual findings of the trial
court, the Court finds no compelling reason to deviate from the rule that findings of
fact of a trial judge, especially when affirmed by the appellate court, are binding
before this Court.[22] The CA, in reviewing the findings of the RTC, made these
observations:

We are not persuaded that the trial Court finding should be

set aside. The Court a quo sifted through the records and arrived
at the fact that clearly, there was improper lowering or positioning
of the ramp, which was not at peak, according to de la Torre and
moving down according to Sungayan when the payloader entered
and scooped up a load of sand and gravel. Because of this, the
payloader was in danger of being lost (submerged) and caused
Larrazabal to order the operator to go back into the vessel,
according to de la Torres version, or back off to the shore, per
Sungayan. Whichever it was, the fact remains that the ramp was
unsteady (moving) and compelled action to save the payloader
from submerging, especially because of the conformation of the
sea and the shore. x x x.

xxx

The contract executed on June 20, 1984, between plaintiff-

appellee and defendants-appellants showed that the services of
the crew of the owner of the vessel were terminated. This allowed
the charterer, defendants-appellants, to employ their own. The
sub-charter contract between defendants-appellants Philippine
Trigon Shipyard Corp. and third-party defendant-appellant
Trigon Shipping Lines showed similar provision where the crew of
Philippine Trigon had to be terminated or rehired by Trigon
Shipping Lines. As to the agreement with fourth-party Larrazabal,
it is silent on who would hire the crew of the vessel. Clearly, the
crew manning the vessel when it sunk belonged to third-party
 defendant-appellant. Hubart Sungayan, the acting Chief Mate,
testified that he was hired by Agustin de la Torre, who in turn
admitted to hiring the crew. The actions of fourth-party
defendant, Larrazabal and his payloader operator did not include
the operation of docking where the problem
arose. [Underscoring supplied]
[23]

Similarly, the Court has examined the records at hand and completely agree
with the CA that the factual findings of the RTC are in order.

With respect to petitioners position that the Limited Liability Rule under the
Code of Commerce should be applied to them, the argument is misplaced. The said
rule has been explained to be that of the real and hypothecary doctrine in maritime
law where the shipowner or ship agents liability is held as merely co-extensive
with his interest in the vessel such that a total loss thereof results in its
extinction.[24] In this jurisdiction, this rule is provided in three articles of the Code
of Commerce. These are:

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

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

Each co-owner may exempt himself from this liability by the

abandonment, before a notary, of the part of the vessel belonging
to him.

---

Art. 837. The civil liability incurred by shipowners in the

case prescribed in this section, shall be understood as limited to
the value of the vessel with all its appurtenances and freightage
served during the voyage.
 Article 837 specifically applies to cases involving collision which is a
necessary consequence of the right to abandon the vessel given to the shipowner or
ship agent under the first provision Article 587. Similarly, Article 590 is a
reiteration of Article 587, only this time the situation is that the vessel is co-owned
by several persons.[25] Obviously, the forerunner of the Limited Liability Rule
under the Code of Commerce is Article 587. Now, the latter is quite clear on which
indemnities may be confined or restricted to the value of the vessel pursuant to the
said Rule, and these are 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. Thus, what is contemplated is the liability to third persons who may have
dealt with the shipowner, the agent or even the charterer in case of demise or
bareboat charter.

The only person who could avail of this is the shipowner, Concepcion. He is
the very person whom the Limited Liability Rule has been conceived to
protect. The petitioners cannot invoke this as a defense. In Yangco v.
Laserna,[26] this Court, through Justice Moran, wrote:

The policy which the rule is designed to promote is the

encouragement of shipbuilding and investment in maritime
commerce.

x x x.

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, x x x.[27]

Later, in the case of Monarch Insurance Co., Inc. v. CA,[28] this Court, this
time through Justice Sabino R. De Leon, Jr., again explained:

No vessel, no liability, expresses in a nutshell the limited

liability rule. The shipowners or agents liability is merely
coextensive with his interest in the vessel such that a total loss
 thereof results in its extinction. The total destruction of the vessel
extinguishes maritime liens because there is no longer any res to
which it can attach. This doctrine is based on the real and
hypothecary nature of maritime law which has its origin in the
prevailing conditions of the maritime trade and sea voyages
during the medieval ages, attended by innumerable hazards and
perils. To offset against these adverse conditions and to encourage
shipbuilding and maritime commerce, it was deemed necessary to
confine the liability of the owner or agent arising from the
operation of a ship to the vessel, equipment, and freight, or
insurance, if any.[29]

In view of the foregoing, Concepcion as the real shipowner is the one who is
supposed to be supported and encouraged to pursue maritime commerce. Thus, it
would be absurd to apply the Limited Liability Rule against him who, in the first
place, should be the one benefitting from the said rule. In distinguishing the rights
between the charterer and the shipowner, the case of Yueng Sheng Exchange and
Trading Co. v. Urrutia & Co.[30] is most enlightening. In that case, no less than
Chief Justice Arellano wrote:

The whole ground of this assignment of errors rests on the

proposition advanced by the appellant company that the charterer
of a vessel, under the conditions stipulated in the charter party in
question, is the owner pro hac vice of the ship and takes upon
himself the responsibilities of the owner.
xxx

If G. Urrutia & Co., by virtue of the above-mentioned

contract, became the agents of the Cebu, then they must respond
for the damages claimed, because the owner and the agent are
civilly responsible for the acts of the captain.

But G. Urrutia & Co. could not in any way exercise the
powers or rights of an agent. They could not represent the
ownership of the vessel, nor could they, in their own name and in
such capacity, take judicial or extrajudicial steps in all that relates
to commerce; thus if the Cebu were attached, they would have no
legal capacity to proceed to secure its release; speaking generally,
not even the fines could or ought to be paid by them, unless such
fines were occasioned by their orders. x x x.
 The contract executed by Smith, Bell & Co., as agents for the
Cebu, and G. Urrutia & Co., as charterers of the vessel, did not put
the latter in the place of the former, nor make them agents of the
owner or owners of the vessel. With relation to those agents, they
retained opposing rights derived from the charter party of the
vessel, and at no time could they be regarded by the third parties,
or by the authorities, or by the courts, as being in the place of the
owners or the agents in matters relating to the responsibilities
pertaining to the ownership and possession of the vessel. x x x.[31]

In Yueng Sheng, it was further stressed that the charterer does not completely
and absolutely step into the shoes of the shipowner or even the ship agent because
there remains conflicting rights between the former and the real shipowner as
derived from their charter agreement. The Court again quotes Chief Justice
Arellano:

Their (the charterers) possession was, therefore, the

uncertain title of lease, not a possession of the owner, such as is
that of the agent, who is fully subrogated to the place of the owner
in regard to the dominion, possession, free administration, and
navigation of the vessel.[32]
Therefore, even if the contract is for a bareboat or demise charter where
possession, free administration and even navigation are temporarily surrendered to
the charterer, dominion over the vessel remains with the shipowner. Ergo, the
charterer or the sub-charterer, whose rights cannot rise above that of the former,
can never set up the Limited Liability Rule against the very owner of the vessel.
Borrowing the words of Chief Justice Artemio V. Panganiban, Indeed, where the
reason for the rule ceases, the rule itself does not apply.[33]

The Court now comes to the issue of the liability of the charterer and the
sub-charterer.

In the present case, the charterer and the sub-charterer through their
respective contracts of agreement/charter parties, obtained the use and service of
the entire LCT-Josephine. The vessel was likewise manned by the charterer and
later by the sub-charterers people. With the complete and exclusive relinquishment
of possession, command and navigation of the vessel, the charterer and later the
sub-charterer became the vessels owner pro hac vice. Now, and in the absence of
any showing that the vessel or any part thereof was commercially offered for use to
the public, the above agreements/charter parties are that of a private carriage where
the rights of the contracting parties are primarily defined and governed by the
stipulations in their contract.[34]

Although certain statutory rights and obligations of charter parties are found
in the Code of Commerce, these provisions as correctly pointed out by the RTC,
are not applicable in the present case. Indeed, none of the provisions found in the
Code of Commerce deals with the specific rights and obligations between the real
shipowner and the charterer obtaining in this case. Necessarily, the Court looks to
the New Civil Code to supply the deficiency.[35] Thus, the RTC and the CA were
both correct in applying the statutory provisions of the New Civil Code in order to
define the respective rights and obligations of the opposing parties.

Thus, Roland, who, in his personal capacity, entered into the Preliminary
Agreement with Concepcion for the dry-docking and repair of LCT-Josephine, is
liable under Article 1189[36] of the New Civil Code. There is no denying that the
vessel was not returned to Concepcion after the repairs because of the provision in
the Preliminary Agreement that the same should be used by Roland for the first
two years. Before the vessel could be returned, it was lost due to the negligence of
Agustin to whom Roland chose to sub-charter or sublet the vessel.

PTSC is liable to Concepcion under Articles 1665[37] and 1667[38] of the New
Civil Code. As the charterer or lessee under the Contract of Agreement dated June
20, 1984, PTSC was contract-bound to return the thing leased and it was liable for
the deterioration or loss of the same.

Agustin, on the other hand, who was the sub-charterer or sub-lessee of LCT-
Josephine, is liable under Article 1651 of the New Civil Code.[39] Although he was
never privy to the contract between PTSC and Concepcion, he remained bound to
preserve the chartered vessel for the latter. Despite his non-inclusion in the
complaint of Concepcion, it was deemed amended so as to include him because,
despite or in the absence of that formality of amending the complaint to include
him, he still had his day in court[40] as he was in fact impleaded as a third-party
defendant by his own son, Roland the very same person who represented him in
the Contract of Agreement with Larrazabal.

(S)ince the purpose of formally impleading a party is to

assure him a day in court, once the protective mantle of due
process of law has in fact been accorded a litigant, whatever the
imperfection in form, the real litigant may be held liable as a
party.[41]

In any case, all three petitioners are liable under Article 1170 of the New
Civil Code.[42] The necessity of insuring the LCT-Josephine, regardless of who will
share in the payment of the premium, is very clear under the Preliminary
Agreement and the subsequent Contracts of Agreement dated June 20, 1984 and
August 1, 1984, respectively. The August 17, 1984 letter of Concepcions
representative, Rogelio L. Martinez, addressed to Roland in his capacity as the
president of PTSC inquiring about the insurance of the LCT-Josephine as well as
reiterating the importance of insuring the said vessel is quite telling.

August 17, 1984

Mr. Roland de la Torre
President
Phil. Trigon Shipyard Corp.
Cebu City

Dear Sir:

In connection with your chartering of LCT JOSEPHINE

effect[ive] May 1, 1984, I wish to inquire regarding the insurance
of said vessel to wit:

1. Name of Insurance Company

2. Policy No.
3. Amount of Premiums
4. Duration of coverage already paid

Please send a Xerox copy of policy to the undersigned as

soon as possible.

In no case shall LCT JOSEPHINE sail without any

insurance coverage.
 Hoping for your (prompt) action on this regard.

Truly yours,
(sgd)ROGELIO L. MARTINEZ
Owners representative[43]

Clearly, the petitioners, to whom the possession of LCT Josephine had been
entrusted as early as the time when it was dry-docked for repairs, were obliged to
insure the same. Unfortunately, they failed to do so in clear contravention of their
respective agreements. Certainly, they should now all answer for the loss of the
vessel.

WHEREFORE, the petitions are DENIED.

SO ORDERED.

Lopez vs. Duruelo Case Digest

Lopez vs. Duruelo
52 Phil 229

Facts: On February 10, 1927, plaintiff Augusto Lopez was desirous of embarking upon the
interisland steamer San Jacinto in order to go to Cebu, the plaintiff embarked at the landing in the
motorboat Jison which was engaged in conveying passengers and luggage back and forth from the
landing to the boats at anchor.

As the motorboat approached San Jacinto in a perfectly quiet sea, it came too near to the stern of
the ship, and as the propeller of the ship had not yet ceased to turn, the blades of the propeller
strucked the motorboat and sank it at once. As it sank, the plaintiff was thrown into the water against
the propeller, and the revolving blades inflicted various injuries upon him. The plaintiff was
hospitalized. He filed a complaint seeking to recover damages from the defendant. The defendant
however alleged that the complaint does not have a right of action, a demurrer was submitted
directed to the fact that the complaint does not allege that the protest had been presented by the
plaintiff, within twenty-four hours after the occurrence to the competent authority at the port where
the accident occurred as provided for Article 835 of the Code of Commerce.

Issue: Whether the motorboat Jison is a vessel provided for by Article 835 of the Code of
Commerce?
Held: The word vessel as used in the third section of tile IV, Book III of the Code of Commerce,
dealing with collisions, does not include all ships, craft or floating structures of any kind without
limitation. The said section does not apply to minor craft engaged in a river and bay traffic.Therefore,
a passenger on boat like the Jison, is not required to make protest as a condition precedent to his
right of action for the injury suffered by him in the collision described in the complaint.Article 835 of
the Code of Commerce does not apply.

RUBISO V. RIVERA
37 PHIL 72

FACTS:
Rubiso filed a complaint against Rivera for the recovery of a pilot boat. He alleged that he is the
rightful owner of a pilot boat, which was stranded and recovered by Rivera. The latter refused
to return the said boat as he alleged too that he was the owner thereof. It was known that the
original
owners of the boat had secretly sold the pilot boat to Rivera on an earlier date than the sale in a
public auction to Rubiso. Nonetheless, material is the fact that the entry into the customs registry of
the sale of the boat was later than the recording of the sale to Rubiso.

HELD:
The requisite of registration in the registry, of the purchase of the vessel, is necessary and
indispensable in order that the purchaser’s rights may be maintained against a third
person. Such registration is required both by the Code of Commerce and Act 1900. It is
undeniable, ergo, that Rivera doesn’t have a better right than Rubiso over the pilot boat.

Ships and vessels, whether moved by steam or by sail, partake, to a certain extent of the
nature and conditions of real property, on account of their value and importance in world commerce;
and for this, the provisions of the Code of Commerce are nearly identical with Article 1473 of the CC.
G.R. No. L-15260 August 18, 1920

FAUSTO RUBISO, plaintiff-appellant,

vs.
FLORENTINO RIVERA, ET AL., defendants-appellees.

Canillas and Cardenas for appellant.

M. P. Leuterio for appellees.

VILLAMOR, J.:

About April, 1915, Fausto Rubiso and Florentino Rivera had a litigation concerning the ownership of
the pilot boat Valentina. Rivera acquired it on January 4, 1915, from its original owner the Chinaman
Sy Qui, but did not inscribe his title in the mercantile registry according to article 573 of the Code of
Commerce in relation to article 2 of Act No. 1900. Subsequently Rubiso bought said pilot boat in a
sale at public auction for the sum of P55.45 on January 23, 1915, and inscribed his title in the
mercantile registry on March 4th of the same year. The suit was decided by the Court of First
Instance of Manila in favor of the plaintiff Rubiso on September 6, 1915. On the 11th day of said
month the court issued a writ of execution, upon the petition of the plaintiff, in order to proceed, as
said plaintiff alleged, to the salvage of the pilot boat which at that time was stranded in the sitio of
Tingloy, Batangas. The order of execution was stayed upon the filing of a bond for P1,800 by the
defendant Rivera who alleged in support of his objection, that the pilot boat was already salvaged
and had been taken to Maricaban, Batangas. The judgment having been brought to this court by
appeal it was affirmed in a judgment rendered on October 30, 1917 (R.G. N. 11407).1 The cause
having been sent to the Court of First Instance for the execution of judgment the sheriff of Batangas
who undertook to enforce the writ of execution was able to deliver to the plaintiff Rubiso nothing but
the pilot boat itself in a seriously damaged condition and two useless sails.

Such are the facts which gave rise to the present action for the recovery of the damages in the sum
of P1,200 which the plaintiff and appellant Fausto Rubiso alleges he has suffered by the destruction
and loss of the pilot boat Valentina and its equipment which were caused, according to the
complaint, by the fault and negligence of the defendants Florentino Rivera and others.

The answer having been filed and the trial having taken place, the court rendered judgment in favor
of the defendants without any special pronouncement as to costs. From this judgment the plaintiff
appealed. The motion for new trial having been overruled, the appellant presented the
corresponding bill of exceptions assigning in his brief the following a errors: (a) The finding that there
was not sufficient evidence to establish the amount of the expenses sought to be recovered; (b) the
finding that the pilot boat Valentina had no legal value in August, 1915; (c) in rendering judgment
absolving the defendants in this case; and (d) in overruling the motion for new trial presented by the
plaintiff on the ground that the judgment is against the weight of the evidence.

In a series of uninterrupted decision before and after the promulgation of the Civil Code, the doctrine
has been established that all judgment for damages whether arising from a breach of contract or
resulting from some provision of law, must be based upon satisfactory evidence of the real existence
of the damages alleged to have been suffered. (Sanz vs. Lavin and Bros., 6 Phil., 299.)

Has the existence of the damages sought to be recovered in this case been satisfactorily
established? The court below decided this question of fact adversely to the plaintiff and we are of the
opinion that this findings is sustained by the evidence. Plaintiff declares that in February, 1915, he
visited and examined the pilot boat Valentina in the barrio of Tingloy and that on said day he found it
in good condition, and that he saw all of its tackle and rigging; but on cross-examination by the
attorney for the defendants he admitted that on said date he was unable to take possession of the
vessel because the person in charge of it would not permit him even to approach. Estanislao Jili who
accompanied Fausto Rubiso in order to see the pilot boat Valentina in February, 1915, affirms that
they did not go on board the vessel because the person in charge of it would not permit them to do
so. This same witness and Jose Soriano as a witness of the plaintiff state that at that time the boat
was not in a seaworthy condition, because its bottom was damaged and it had no equipments.

If what has been said is not yet sufficient to find that the pretense of the appellant as to his first
assignment of error is unsustainable, we still have the uncontradicted testimony of Juan Velino,
Irineo Martinez and Mariano Villas, witnesses for the defendants, who declared on the seriously
damaged condition of the pilot boat long before its acquisition by the appellant.

Juan Velino declared that in August, 1914, the boat was aground in Dayhagan, Mindoro; it was
somewhat repaired and about November of the same year it sailed from that place and suffered on
the way such damages and troubles that it had to be taken to Tingloy for new repair, some vessels'
tools and equipments having been borrowed from another boat because those of the Valentina had
been destroyed; and the storm destroyed the vessel so much that it could not be taken to the Island
of Maricaban except by means of rafts. To the same effect is the testimony of Irineo Martinez.
Mariano Villas testified that in December, 1914, the Valentina anchored in Tingloy alongside his
vessel and as he was interested in the purchase of this pilot boat, the sale of which was advertised
in Manila, he examined it and then saw that he would not buy it even for P400, because it was
completely destroyed. There can be no doubt as to the competency of this witness to testify on the
question of the price of the pilot boat Valentina because according to him he had ordered the
construction of boats of the same size and condition during that period. The lower court declares in
its judgment that this witness appears to it as sufficiently trustworthy, and we find no basis whatever
on the record to doubt the correctness of the finding of the trial judge who saw and observed him
while he was testifying.

We, therefore, are of the opinion that the finding of the court that there was not sufficient proof to
establish the amount of the defendants' claim is in accordance with the merits of the case.

As to the second error assigned by the appellant it should be noted that, as appears in the record
the pilot boat Valentina was stranded in Tingloy since the month of November, 1914, that is, two
months before it had been acquired by the plaintiff at public auction and ten months before the
judgment declaring him to be the owner thereof, was rendered. The appellant, in his first complaint
of April 10, 1915, for the recovery of the pilot boat Valentina, affirms that the boat was then in the
same worthless condition in which it was in 1914, and the evidence we have examined in this case
show that in fact in August or September, 1915, it was in the worse of conditions and was utterly
worthless. Without attempting to determine the durability of a boat made of wood stranded for a
period of ten months, as is the case with the boat in question, we are of the opinion, and so declare,
that according to the proofs adduced in this case, the court did not err in declaring in its judgment
that the pilot boat Valentina did not have any legal value in August, 1915.

The defendant in his brief interposes the defense of res judicata based upon the judgment of this
court in the action between Fausto Rubiso et al. and Florentino Rivera who are the parties in the
present case.

In that case it was held:

With respect to the indemnification for damages claimed by the plaintiff, besides the fact [that
according to the proceedings taken subsequently to the date on which the judgment
appealed from was rendered, it appears that the pilot boat has already left in good condition
 the place where it had been stranded and is at present found anchored in the port of
Maricaban,] the truth is that the record does not offer positive proof of the amount of the
damages caused, and on the other hand it cannot be declared that the defendant had acted
in bad faith for he acquired the vessel previous to its acquisition at public auction by the
plaintiff Rubiso who, for the reason already given, is the true and sole owner of said pilot
boat. (Decision of October 30, 1917, R. G. No. 11407 [Rubiso and Gelito vs. Rivera, 37 Phil.,
72].)

It having been declared in a previous action that the defendant Rivera did not act in bad faith and
that therefore he was not liable for damages, it would be necessary to show in the present case that
the destruction of the boat and the loss of its equipments took place after the final judgment was
rendered in that case and by reason of the fault and negligence of the defendants, which is not the
case here. What appears from the evidence presented by the defendant and uncontradicted by that
presented by the adverse parties, is that from September, 1915, to March 7, 1918, which was the
date of the execution of the judgment of this court affirming that of the lower court, the boat
continued aground in the Island of Maricaban awaiting the final judgment in the action with respect to
ownership and naturally exposed to the action of sea water and the inclemencies of the weather,
things which were beyond the control of the defendant Rivera.

It thus now appears that the damages claimed by the plaintiff are the same damages that he claimed
in the first action. To speak more accurately, the appellant first sued for the recovery of the vessel
and damages in the sum of P1,750. Judgment was rendered as to the first in his favor but against
him as to the second. And now he comes back again claiming damages.

The case now under consideration is analogous to that of Palanca Tanguinlay vs. Quiros (10 Phil.,
360). In that case the question was extensively discussed whether a previous judgment constitutes
an adjudication of the subject-matter of a new suit between the same parties to such extent that it
can not again be tried anew. It was held that according to articles 306 and 307 of the Code of Civil
Procedure, a judgment rendered in an action for the recovery damages for property lost is a bar to
any other action between the same parties for the recovery of the same property or its value. In the
course of the decision the court held:

The American books are full of similar cases, an instance being Hatch vs. Coddington (32
Minn., 92), in which it was held that a former action between the same parties to recover
damages for a wrongful conversion of personal property was a bar to a subsequent suit to
recover possession of the specific property itself, notwithstanding the difference of form and
that the relief sought and the subject-matter of the cause of action were regarded as the
same. Nor is it altogether clear that the law of Spain was different. Señor Manresa, in his
commentary on article 1252 of the Civil Code, cites a decision of the supreme court of 25th
of April, 1900 (vol. 8, p. 555), holding that in a real action a judgment in a former personal
suit between the same parties for indemnity for the use of the same property operated
as cosa juzgada.

From what has been said the judgment appealed from should be, and is hereby, affirmed, with costs
against the appellant. So ordered.