G.R. No.

149547 July 4, 2008

PHILIPPINE AIRLINES, INC., petitioner,

vs.
HON. ADRIANO SAVILLO, Presiding Judge of RTC Branch 30 , Iloilo City, and SIMPLICIO GRIÑO,respondents.

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision1 dated 17 August 2001, rendered
by the Court of Appeals in CA-G.R. SP No. 48664, affirming in toto the Order2 dated 9 June 1998, of Branch 30 of the Regional Trial
Court (RTC) of Iloilo City, dismissing the Motion to Dismiss filed by petitioner Philippine Airlines Inc. (PAL) in the case entitled, Simplicio
Griño v. Philippine Airlines, Inc. and Singapore Airlines, docketed as Civil Case No. 23773.

PAL is a corporation duly organized under Philippine law, engaged in the business of providing air carriage for passengers, baggage
and cargo.3

Public respondent Hon. Adriano Savillo is the presiding judge of Branch 30 of the Iloilo RTC, where Civil Case No. 23773 was filed;
while private respondent Simplicio Griño is the plaintiff in the aforementioned case.

The facts are undisputed.

Private respondent was invited to participate in the 1993 ASEAN Seniors Annual Golf Tournament held in Jakarta, Indonesia. He and
several companions decided to purchase their respective passenger tickets from PAL with the following points of passage: MANILA-
SINGAPORE-JAKARTA-SINGAPORE-MANILA. Private respondent and his companions were made to understand by PAL that its
plane would take them from Manila to Singapore, while Singapore Airlines would take them from Singapore to Jakarta. 4

On 3 October 1993, private respondent and his companions took the PAL flight to Singapore and arrived at about 6:00 o’clock in the
evening. Upon their arrival, they proceeded to the Singapore Airlines office to check-in for their flight to Jakarta scheduled at 8:00
o’clock in the same evening. Singapore Airlines rejected the tickets of private respondent and his group because they were not
endorsed by PAL. It was explained to private respondent and his group that if Singapore Airlines honored the tickets without PAL’s
endorsement, PAL would not pay Singapore Airlines for their passage. Private respondent tried to contact PAL’s office at the airport,
only to find out that it was closed.5

Stranded at the airport in Singapore and left with no recourse, private respondent was in panic and at a loss where to go; and was
subjected to humiliation, embarrassment, mental anguish, serious anxiety, fear and distress. Eventually, private respondent and his
companions were forced to purchase tickets from Garuda Airlines and board its last flight bound for Jakarta. When they arrived in
Jakarta at about 12:00 o’clock midnight, the party who was supposed to fetch them from the airport had already left and they had to
arrange for their transportation to the hotel at a very late hour. After the series of nerve-wracking experiences, private respondent
became ill and was unable to participate in the tournament. 6

Upon his return to the Philippines, private respondent brought the matter to the attention of PAL. He sent a demand letter to PAL on
20 December 1993 and another to Singapore Airlines on 21 March 1994. However, both airlines disowned liability and blamed each
other for the fiasco. On 15 August 1997, private respondent filed a Complaint for Damages before the RTC docketed as Civil Case
No. 23773, seeking compensation for moral damages in the amount of P1,000,000.00 and attorney’s fees.7

Instead of filing an answer to private respondent’s Complaint, PAL filed a Motion to Dismiss 8 dated 18 September 1998 on the ground
that the said complaint was barred on the ground of prescription under Section 1(f) of Rule 16 of the Rules of Court. 9 PAL argued that
the Warsaw Convention,10 particularly Article 29 thereof,11 governed this case, as it provides that any claim for damages in connection
with the international transportation of persons is subject to the prescription period of two years. Since the Complaint was filed on 15
August 1997, more than three years after PAL received the demand letter on 25 January 1994, it was already barred by prescription.

On 9 June 1998, the RTC issued an Order12 denying the Motion to Dismiss. It maintained that the provisions of the Civil Code and
other pertinent laws of the Philippines, not the Warsaw Convention, were applicable to the present case.

The Court of Appeals, in its assailed Decision dated 17 August 2001, likewise dismissed the Petition for Certiorari filed by PAL and
affirmed the 9 June 1998 Order of the RTC. It pronounced that the application of the Warsaw Convention must not be construed to
preclude the application of the Civil Code and other pertinent laws. By applying Article 1144 of the Civil Code, 13 which allowed for a
ten-year prescription period, the appellate court declared that the Complaint filed by private respondent should not be dismissed. 14

Hence, the present Petition, in which petitioner raises the following issues:
 I

THE COURT OF APPEALS ERRED IN NOT GIVING DUE COURSE TO THE PETITION AS RESPONDENT JUDGE
COMMITED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURSIDICTION IN DENYING PAL’S
MOTION TO DISMISS.

II

THE COURT OF APPEALS ERRED IN NOT APPLYING THE PROVISIONS OF THE WARSAW CONVENTION
DESPITE THE FACT THAT GRIÑO’S CAUSE OF ACTION AROSE FROM A BREACH OF CONTRACT FOR
INTERNATIONAL AIR TRANSPORT.

III

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE COMPLAINT FILED BY GRIÑO BEYOND THE TWO
(2)-YEAR PERIOD PROVIDED UNDER THE WARSAW CONVENTION IS ALREADY BARRED BY PRESCRIPTION. 15

The petition is without merit.

In determining whether PAL’s Motion to Dismiss should have been granted by the trial court, it must be ascertained if all the claims
made by the private respondent in his Complaint are covered by the Warsaw Convention, which effectively bars all claims made
outside the two-year prescription period provided under Article 29 thereof. If the Warsaw Convention covers all of private respondent’s
claims, then Civil Case No. 23773 has already prescribed and should therefore be dismissed. On the other hand, if some, if not all, of
respondent’s claims are outside the coverage of the Warsaw Convention, the RTC may still proceed to hear the case.

The Warsaw Convention applies to "all international transportation of persons, baggage or goods performed by any aircraft for hire."
It seeks to accommodate or balance the interests of passengers seeking recovery for personal injuries and the interests of air carriers
seeking to limit potential liability. It employs a scheme of strict liability favoring passengers and imposing damage caps to benefit air
carriers.16 The cardinal purpose of the Warsaw Convention is to provide uniformity of rules governing claims arising from international
air travel; thus, it precludes a passenger from maintaining an action for personal injury damages under local law when his or her claim
does not satisfy the conditions of liability under the Convention. 17

Article 19 of the Warsaw Convention provides for liability on the part of a carrier for "damages occasioned by delay in the transportation
by air of passengers, baggage or goods." Article 24 excludes other remedies by further providing that "(1) in the cases covered by
articles 18 and 19, any action for damages, however founded, can only be brought subject to the conditions and limits set out in this
convention." Therefore, a claim covered by the Warsaw Convention can no longer be recovered under local law, if the statute of
limitations of two years has already lapsed.

Nevertheless, this Court notes that jurisprudence in the Philippines and the United States also recognizes that the Warsaw Convention
does not "exclusively regulate" the relationship between passenger and carrier on an international flight. This Court finds that the
present case is substantially similar to cases in which the damages sought were considered to be outside the coverage of the Warsaw
Convention.

In United Airlines v. Uy,18 this Court distinguished between the (1) damage to the passenger’s baggage and (2) humiliation he suffered
at the hands of the airline’s employees. The first cause of action was covered by the Warsaw Convention which prescribes in two
years, while the second was covered by the provisions of the Civil Code on torts, which prescribes in four years.

Similar distinctions were made in American jurisprudence. In Mahaney v. Air France,19 a passenger was denied access to an airline
flight between New York and Mexico, despite the fact that she held a confirmed reservation. The court therein ruled that if the plaintiff
were to claim damages based solely on the delay she experienced – for instance, the costs of renting a van, which she had to arrange
on her own as a consequence of the delay – the complaint would be barred by the two-year statute of limitations. However, where the
plaintiff alleged that the airlines subjected her to unjust discrimination or undue or unreasonable preference or disadvantage, an act
punishable under the United States laws, then the plaintiff may claim purely nominal compensatory damages for humiliation and hurt
feelings, which are not provided for by the Warsaw Convention. In another case, Wolgel v. Mexicana Airlines,20the court pronounced
that actions for damages for the "bumping off" itself, rather than the incidental damages due to the delay, fall outside the Warsaw
Convention and do not prescribe in two years.

In the Petition at bar, private respondent’s Complaint alleged that both PAL and Singapore Airlines were guilty of gross negligence,
which resulted in his being subjected to "humiliation, embarrassment, mental anguish, serious anxiety, fear and distress." 21 The
emotional harm suffered by the private respondent as a result of having been unreasonably and unjustly prevented from boarding the
plane should be distinguished from the actual damages which resulted from the same incident. Under the Civil Code provisions on
tort,22 such emotional harm gives rise to compensation where gross negligence or malice is proven.
The instant case is comparable to the case of Lathigra v. British Airways.23

In Lathigra, it was held that the airlines’ negligent act of reconfirming the passenger’s reservation days before departure and failing to
inform the latter that the flight had already been discontinued is not among the acts covered by the Warsaw Convention, since the
alleged negligence did not occur during the performance of the contract of carriage but, rather, days before the scheduled flight.

In the case at hand, Singapore Airlines barred private respondent from boarding the Singapore Airlines flight because PAL allegedly
failed to endorse the tickets of private respondent and his companions, despite PAL’s assurances to respondent that Singapore
Airlines had already confirmed their passage. While this fact still needs to be heard and established by adequate proof before the
RTC, an action based on these allegations will not fall under the Warsaw Convention, since the purported negligence on the part of
PAL did not occur during the performance of the contract of carriage but days before the scheduled flight. Thus, the present action
cannot be dismissed based on the statute of limitations provided under Article 29 of the Warsaw Convention.

Had the present case merely consisted of claims incidental to the airlines’ delay in transporting their passengers, the private
respondent’s Complaint would have been time-barred under Article 29 of the Warsaw Convention. However, the present case involves
a special species of injury resulting from the failure of PAL and/or Singapore Airlines to transport private respondent from Singapore
to Jakarta – the profound distress, fear, anxiety and humiliation that private respondent experienced when, despite PAL’s earlier
assurance that Singapore Airlines confirmed his passage, he was prevented from boarding the plane and he faced the daunting
possibility that he would be stranded in Singapore Airport because the PAL office was already closed.

These claims are covered by the Civil Code provisions on tort, and not within the purview of the Warsaw Convention. Hence, the
applicable prescription period is that provided under Article 1146 of the Civil Code:

Art. 1146. The following actions must be instituted within four years:

(1) Upon an injury to the rights of the plaintiff;

(2) Upon a quasi-delict.

Private respondent’s Complaint was filed with the RTC on 15 August 1997, which was less than four years since PAL received his
extrajudicial demand on 25 January 1994. Thus, private respondent’s claims have not yet prescribed and PAL’s Motion to Dismiss
must be denied.

Moreover, should there be any doubt as to the prescription of private respondent’s Complaint, the more prudent action is for the RTC
to continue hearing the same and deny the Motion to Dismiss. Where it cannot be determined with certainty whether the action has
already prescribed or not, the defense of prescription cannot be sustained on a mere motion to dismiss based on what appears to be
on the face of the complaint.24 And where the ground on which prescription is based does not appear to be indubitable, the court may
do well to defer action on the motion to dismiss until after trial on the merits. 25

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision of the Court of Appeals in CA-G.R. SP No.
48664, promulgated on 17 August 2001 is AFFIRMED. Costs against the petitioner.

SO ORDERED.
 G.R. No. 100446 January 21, 1993

ABOITIZ SHIPPING CORPORATION, petitioner,

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

MELO, J.

This refers to a petition for review which seeks to annul and set aside the decision of the Court of Appeals dated June 21, 1991, in
CA G.R. SP No. 24918. The appellate court dismissed the petition for certiorari filed by herein petitioner, Aboitiz Shipping Corporation,
questioning the Order of April 30, 1991 issued by the Regional Trial Court of the National Capital Judicial Region (Manila, Branch IV)
in its Civil Case No. 144425 granting private respondent's prayer for execution for the full amount of the judgment award. The trial
court in so doing swept aside petitioner's opposition which was grounded on the real and hypothecary nature of petitioner's liability as
ship owner. The application of this established principle of maritime law would necessarily result in a probable reduction of the amount
to be recovered by private respondent, since it would have to share with a number of other parties similarly situated in the insurance
proceeds on the vessel that sank.

The basic facts are not disputed.

Petitioner is a corporation organized and operating under Philippine laws and engaged in the business of maritime trade as a carrier.
As such, it owned and operated the ill-fated "M/V P. ABOITIZ," a common carrier which sank on a voyage from Hongkong to the
Philippines on October 31, 1980. Private respondent General Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC), on the
other hand, is a foreign insurance company pursuing its remedies as a subrogee of several cargo consignees whose respective cargo
sank with the said vessel and for which it has priorly paid.

The incident of said vessel's sinking gave rise to the filing of suits for recovery of lost cargo either by the shippers, their successor-in-
interest, or the cargo insurers like GAFLAC as subrogees. The sinking was initially investigated by the Board of Marine Inquiry (BMI
Case No. 466, December 26, 1984), which found that such sinking was due toforce majeure and that subject vessel, at the time of
the sinking was seaworthy. This administrative finding notwithstanding, the trial court in said Civil Case No. 144425 found against the
carrier on the basis that the loss subject matter therein did not occur as a result of force majeure. Thus, in said case, plaintiff GAFLAC
was allowed to prove, and. was later awarded, its claim. This decision in favor of GAFLAC was elevated all the way up to this Court
in G.R. No. 89757 (Aboitiz v. Court of Appeals, 188 SCRA 387 [1990]), with Aboitiz, like its ill-fated vessel, encountering rough sailing.
The attempted execution of the judgment award in said case in the amount of P1,072,611.20 plus legal interest has given rise to the
instant petition.

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

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

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

1. The Limited Liability Rule warrants immediate stay of execution of judgment to prevent impairment of other
creditors' shares;

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

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

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

1. There is no limited liability to speak of or applicable real and hypothecary rule under Article 587, 590, and 837
of the Code of Commerce in the face of the facts found by the lower court (Civil Case No. 144425), upheld by the
Appellate Court (CA G.R. No. 10609), and affirmed in toto by the Supreme Court in G.R. No. 89757 which cited
G.R. No. 88159 as the Law of the Case; and
 2. Under the doctrine of the Law of the Case, cases involving the same incident, parties similarly situated and the
same issues litigated should be decided in conformity therewith following the maxim stare decisis et non quieta
movere. (pp. 225 to 279, Rollo.)

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

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

It should be pointed out, however, that the limited liability discussed in said case is not the same one now in issue at bar, but an
altogether different aspect. The limited liability settled in G.R. No. 88159 is that which attaches to cargo by virtue of stipulations in the
Bill of Lading, popularly known as package limitation clauses, which in that case was contained in Section 8 of the Bill of Lading and
which limited the carrier's liability to US$500.00 for the cargo whose value was therein sought to be recovered. Said resolution did not
tackle the matter of the Limited Liability Rule arising out of the real and hypothecary nature of maritime law, which was not raised
therein, and which is the principal bone of contention in this case. While the matters threshed out in G.R. No. 88159, particularly those
dealing with the issues on primary administrative jurisdiction and the package liability limitation provided in the Bill of Lading are now
settled and should no longer be touched, the instant case raises a completely different issue. It appears, therefore, that the resolution
in G.R. 88159 adverted to has no bearing other than factual to the instant case.

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

We shall tackle the latter issue first. This Court has always been consistent in its stand that the very purpose for its existence is to see
to the accomplishment of the ends of justice. Consistent with this view, a number of decisions have originated herefrom, the tenor of
which is that no procedural consideration is sacrosanct if such shall result in the subverting of substantial justice. The right to an
execution after finality of a decision is certainly no exception to this. Thus, in Cabrias v. Adil (135 SCRA 355 [1985]), this Court ruled
that:

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

. . . every court having jurisdiction to render a particular judgment has inherent power to
enforce it, and to exercise equitable control over such enforcement. The court has authority
to inquire whether its judgment has been executed, and will remove obstructions to the
enforcement thereof. Such authority extends not only to such orders and such writs as may
be necessary to carry out the judgment into effect and render it binding and operative, but
also to such orders and such writs as may be necessary to prevent an improper enforcement
of the judgment. If a judgment is sought to be perverted and made a medium of
consummating a wrong the court on proper application can prevent it. (at p. 359)

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

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

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

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

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

It might be noteworthy to add in passing that despite the modernization of the shipping industry and the development of high-
technology safety devices designed to reduce the risks therein, the limitation has not only persisted, but is even practically absolute
in well-developed maritime countries such as the United States and England where it covers almost all maritime casualties. Philippine
maritime law is of Anglo-American extraction, and is governed by adherence to both international maritime conventions and generally
accepted practices relative to maritime trade and travel. This is highlighted by the following excerpts on the limited liability of vessel
owners and/or agents;

Sec. 183. The liability of the owner of any vessel, whether American or foreign, for any embezzlement, loss, or
destruction by any person of any person or any property, goods, or merchandise shipped or put on board such
vessel, or for any loss, damage, or forfeiture, done, occasioned, or incurred, without the privity or knowledge of
such owner or owners shall not exceed the amount or value of the interest of such owner in such vessel, and
her freight then pending. (Section 183 of the US Federal Limitation of Liability Act).

—and—

1. The owner of a sea-going ship may limit his liability in accordance with Article 3 of this Convention in respect
of claims arising, from any of the following occurrences, unless the occurrence giving rise to the claim resulted
from the actual fault or privity of the owner;

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

(b) loss of life of, or personal injury to, any other person, whether on land or on water, loss of or damage to any
other property or infringement of any rights caused by the act, neglect or default the owner is responsible for, or
any person not on board the ship for whose act, neglect or default the owner is responsible: Provided, however,
that in regard to the act, neglect or default of this last class of person, the owner shall only be entitled to limit his
liability when the act, neglect or default is one which occurs in the navigation or the management of the ship or
in the loading, carriage or discharge of its cargo or in the embarkation, carriage or disembarkation of its
passengers.

(c) any obligation or liability imposed by any law relating to the removal of wreck and arising from or in
connection with the raising, removal or destruction of any ship which is sunk, stranded or abandoned (including
anything which may be on board such ship) and any obligation or liability arising out of damage caused to
harbor works, basins and navigable waterways. (Section 1, Article I of the Brussels International Convention of
1957)

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

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

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

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

Taken together with related articles, the foregoing cover only liability for injuries to third parties (Art. 587), acts of the captain (Art. 590)
and collisions (Art. 837).

In view of the foregoing, this Court shall not take the application of such limited liability rule, which is a matter of near absolute
application in other jurisdictions, so lightly as to merely "imply" its inapplicability, because as could be seen, the reasons for its being
are still apparently much in existence and highly regarded.

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

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

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

The same is true of the decision of this Court in G.R. No. 89757 (pp. 71-86, Rollo) affirming the decision of the Court of Appeals in
CA-G.R. CV No. 10609 (pp. 34-50, Rollo) since both decisions did not make any new and additional finding of fact. Both merely
affirmed the factual findings of the trial court, adding that the cause of the sinking of the vessel was because of unseaworthiness due
to the failure of the crew and the master to exercise extraordinary diligence. Indeed, there appears to have been no evidence presented
sufficient to form a conclusion that petitioner shipowner itself was negligent, and no tribunal, including this Court will add or subtract
to such evidence to justify a conclusion to the contrary.

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

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

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

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

In the instant case, the stay of execution of judgment is warranted by the fact that the respondent bank was placed
under receivership. To execute the judgment would unduly deplete the assets of respondent bank to the obvious
 prejudice of other depositors and creditors, since, as aptly stated in Central Bank v. Morfe (63 SCRA 114), after
the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations, the Board
becomes the trustee of its assets for the equal benefit of all creditors, and after its insolvency, one cannot obtain
an advantage or preference over another by an attachment, execution or otherwise. (at p. 261).

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

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

Finally, the Court notes that petitioner has provided this Court with a list of all pending cases (pp. 175 to 183, Rollo), together with the
corresponding claims and the pro-rated share of each. We likewise note that some of these cases are still with the Court of Appeals,
and some still with the trial courts and which probably are still undergoing trial. It would not, therefore, be entirely correct to preclude
the trial courts from making their own findings of fact in those cases and deciding the same by allotting shares for these claims, some
of which, after all, might not prevail, depending on the evidence presented in each. We, therefore, rule that the pro-rated share of each
claim can only be found after all the cases shall have been decided.

In fairness to the claimants, and as a matter of equity, the total proceeds of the insurance and pending freightage should now be
deposited in trust. Moreover, petitioner should institute the necessary limitation and distribution action before the proper admiralty
court within 15 days from the finality of this decision, and thereafter deposit with it the proceeds from the insurance company and
pending freightage in order to safeguard the same pending final resolution of all incidents, for final pro-rating and settlement thereof.

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

SO ORDERED.