MANILA PRINCE HOTEL VS.

GSIS Case Digest

MANILA PRINCE HOTEL VS. GSIS [267 SCRA 408; G.R. No. 122156; 3 Feb 1997] Facts: The controversy arose when respondent Government Service InsuranceSystem (GSIS), pursuant to the privatization program of the Philippine Government under Proclamation No. 50 dated 8 December 1986, decided to sell through public bidding 30% to 51% of the issued and outstanding shares of respondent Manila Hotel Corporation. In a close bidding held on 18 September 1995 only two (2) bidders participated: petitioner Manila Prince Hotel Corporation, a Filipino corporation, which offered to buy 51% of the MHC or 15,300,000 shares at P41.58 per share, and Renong Berhad, a Malaysian firm, with ITT-Sheraton as its hotel operator, which bid for the same number of shares at P44.00 per share, or P2.42 more than the bid of petitioner.

Pending the declaration of Renong Berhad as the winning bidder/strategic partner and the execution of the necessary contracts, matched the bid price of P44.00 per share tendered by Renong Berhad. On 17 October 1995, perhaps apprehensive that respondent GSIS has disregarded the tender of the matching bid and that the sale of 51% of the MHC may be hastened by respondent GSIS and consummated with Renong Berhad, petitioner came to this Court on prohibition and mandamus. In the main, petitioner invokes Sec. 10, second par., Art. XII, of the 1987Constitution and submits that the Manila Hotel has been identified with the Filipino nation and has practically become a historical monument which reflects the vibrancy of Philippine heritage and culture. It is a proud legacy of an earlier generation of Filipinos who believed in the nobility and sacredness of independence and its power and capacity to release the full potential of the Filipino people. To all intents and purposes, it has become a part of the national patrimony. 6 Petitioner also argues that since 51% of the shares of the MHC carries with it the ownership of the business of the hotel which is owned by respondent GSIS, a government-owned and controlled corporation, the hotel business of respondent GSIS being a part of the tourism industry is unquestionably a part of the national economy. Issue: Whether or Not the sale of Manila Hotel to Renong Berhad is violative of the Constitutional provision of Filipino First policy and is therefore null and void. Held: The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity to be sold to the highest bidder solely for the sake of privatization. The Manila Hotel has played and continues to play a significant role as an authentic repository of twentieth century Philippine history and culture. This is the plain and simple meaning of the Filipino First Policy provision of the Philippine Constitution. And this Court, heeding the clarion call of the Constitution and accepting the duty of

being the elderly watchman of the nation, will continue to respect and protect the sanctity of the Constitution. It was thus ordered that GSIS accepts the matching bid of petitioner MANILA PRINCE HOTEL CORPORATION to purchase the subject 51% of the shares of the Manila Hotel Corporation at P44.00 per share and thereafter to execute the necessary clearances and to do such other acts and deeds as may be necessary for purpose. The Supreme Court directed the GSIS and other respondents to cease and desist from selling the 51% shares of the MHC to the Malaysian firm Renong Berhad, and instead to accept the matching bid of the petitioner Manila Prince Hotel. According to Justice Bellosillo, ponente of the case at bar, Section 10, second paragraph, Article 11 of the 1987 Constitution is a mandatory provision, a positive command which is complete in itself and needs no further guidelines or implementing laws to enforce it. The Court En Banc emphasized that qualified Filipinos shall be preferred over foreigners, as mandated by the provision in question. The Manila Hotel had long been a landmark, therefore, making the 51% of the equity of said hotel to fall within the purview of the constitutional shelter for it emprises the majority and controlling stock. The Court also reiterated how much of national pride will vanish if the nations cultural heritage will fall on the hands of foreigners. In his dissenting opinion, Justice Puno said that the provision in question should be interpreted as pro-Filipino and, at the same time, not anti-alien in itself because it does not prohibit the State from granting rights, privileges and concessions to foreigners in the absence of qualified Filipinos. He also argued that the petitioner is estopped from assailing the winning bid of Renong Berhad because the former knew the rules of the bidding and that the foreigners are qualified, too. Petitioner: Manila Prince Hotel Respondent: Government Service Insurance System (GSIS), Manila Hotel Corporation, Committee on Privatization and Office of the Government Corporate Counsel

Facts: - The shares (31% to 50%) of Manila Hotel Corporation were sold by GSIS through public bidding.

- There were two bidders Manila Prince Hotel Corporation (Filipino firm) and Renong Berhad (Malaysian firm) - Renong Berhad bade higher than Manila Prince Hotel Corporation. - Pending the declaration of Renong Berhad as the highest bidder, MPHC sent a managers check amounting to the same bid by RB. - GSIS refused to accept offer. - Petitioner prayed for writ of mandamus and prohibition. Lower court issued a restraining order preventing GSIS and Renong Berhad from consummating the sale. - Invoked by petitioners: Section 10 of Article XII. The Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos. (Thus, any transaction involving 51% of the shares of stock of the MHC is clearly covered by the term national economy, to which Sec. 10, second par., Art. XII, 1987 Constitution, applies.) - The answer of the respondents are the following: 1. Section 10 of Article 12 is not self-executing. For the said provision to operate, there must be existing laws to lay down conditions under which business may be done. 2. Granting the provision is self-executing, the Manila Hotel Corporation is not part of national patrimony. The mandate of the Constitution is addressed to the State, not to respondent GSIS which possesses a personality of its own separate and distinct from the Philippines as a State.

3. The Constitutional provision cannot be invoked because what is sold is only 51% of the total shares of the corporation, not the building or the land where it is built. 4. Submission by petitioner of a matching bid is premature since Renong Berhad could still very well be awarded the block of shares and the condition giving rise to the exercise of the privilege to submit a matching bid had not yet taken place. 5. Submission by petitioner of a matching bid is premature since Renong Berhad could still very well be awarded the block of shares and the condition giving rise to the exercise of the privilege to submit a matching bid had not yet taken place.

Issue: Whether or not the GSIS violated Section 10, second paragraph, Article 11 of the 1987 Constitution

Held:

A constitution is a system of fundamental laws for the governance and administration of a nation. It is supreme, imperious, absolute and unalterable except by the authority from which it emanates. It has been defined as the fundamental and paramount law of the nation. It prescribes the permanent framework of a system of government, assigns to the different departments their respective powers and duties, and establishes certain fixed principles on which government is founded. The fundamental conception in other words is that it is a supreme law to which all other laws must conform and in accordance with which all private rights must be determined and all public authority administered. Under the doctrine of constitutional supremacy, if a law or contract violates any norm of the constitution that law or contract

whether promulgated by the legislative or by the executive branch or entered into by private persons for private purposes is null and void and without any force and effect. Thus, since the Constitution is the fundamental, paramount and supreme law of the nation, it is deemed written in every statute and contract.

A constitutional provision is self-executing if the nature and extent of the right conferred and the liability imposed are fixed by the constitution itself, so that they can be determined by an examination and construction of its terms, and there is no language indicating that the subject is referred to the legislature for action.

Unless it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the presumption now is that all provisions of the constitution are self-executing. If the constitutional provisions are treated as requiring legislation instead of self-executing, the legislature would have the power to ignore and practically nullify the mandate of the fundamental law.

The prevailing view is that: In case of doubt, the Constitution should be considered self-executing rather than non-self-executing. Unless the contrary is clearly intended, the provisions of the Constitution should be considered self-executing, as a contrary rule would give the legislature discretion to determine when, or whether, they shall be effective. These provisions would be subordinated to the will of the lawmaking body, which could make them entirely meaningless by simply refusing to pass the needed implementing statute.

On the other hand, Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory, positive command which is complete in itself and which needs no further guidelines or implementing laws or rules for its enforcement. From its very words the provision does not require any legislation to put it in operation. It is per se judicially enforceable. When our Constitution mandates that [i]n the grant of rights, privileges, and concessions covering national economy and patrimony, the State shall give preference to qualified Filipinos, it means just that qualified Filipinos shall be preferred. And when our Constitution declares that a right exists in certain specified circumstances an action may be maintained to enforce such right notwithstanding the absence of any legislation on the subject; consequently, if there is no statute especially enacted to enforce such constitutional right, such right enforces itself by its own inherent potency and puissance, and from which all legislations must take their bearings. Where there is a right there is a remedy. Ubi jus ibi remedium

We agree. In its plain and ordinary meaning, the term patrimony pertains to heritage.[35] When the Constitution speaks of national patrimony, it refers not only to the natural resources of the Philippines, as the Constitution could have very well used the term natural resources, but also to the cultural heritage of the Filipinos.

Manila Hotel has become a landmark a living testimonial of Philippine heritage.

For more than eight (8) decades Manila Hotel has bore mute witness to the triumphs and failures, loves and frustrations of the Filipinos; its existence is impressed with public interest; its own historicity associated with our struggle for sovereignty, independence and nationhood. Verily, Manila Hotel has

become part of our national economy and patrimony. For sure, 51% of the equity of the MHC comes within the purview of the constitutional shelter for it comprises the majority and controlling stock, so that anyone who acquires or owns the 51% will have actual control and management of the hotel.

In the granting of economic rights, privileges, and concessions, when a choice has to be made between a qualified foreigner and a qualified Filipino, the latter shall be chosen over the former.

The term qualified Filipinos as used in our Constitution also includes corporations at least 60% of which is owned by Filipinos.

Since petitioner has already matched the bid price tendered by Renong Berhad pursuant to the bidding rules, respondent GSIS is left with no alternative but to award to petitioner the block of shares of MHC and to execute the necessary agreements and documents to effect the sale in accordance not only with the bidding guidelines and procedures but with the Constitution as well.

Therefore, the respondents are ordered to cease and desist from selling 51% of MHC shares to the Malaysian firm. The Php44/shar bid of Manila Prince Hotel shall be accepted by GSIS.

Take note: Filipino First Policy

Supremacy of Constitution

Under: Fundamental Principles on Constitutional Law and the Bill of Rights Full text: http://sc.judiciary.gov.ph/jurisprudence/1997/feb1997/122156.htm

(g) Cuentas En Participacion A cuentas en participacion as a sort of an accidental partnership constituted in such a manner that its existence was only known to those who had an interest in the same, there being no mutual agreement between the partners, and without a corporate name indicating to the public in some way that there were other people besides the one who ostensibly managed and conducted the business, governed under article 239 of the Code of Commerce. Those who contract with the person under whose name the business of such partnership of cuentas en participacion is conducted, shall have only a right of action against such person and not against the other persons interested, and the latter, on the other hand, shall have no right of action against third person who contracted with the manager unless such manager formally transfers his right to them. xBourns v. Carman, 7 Phil. 117 (1906).

Republic of the Philippines SUPREME COURT Manila EN BANC December 4, 1906 G.R. No. 2880 FRANK S. BOURNS, plaintiff-appellee, vs. D. M. CARMAN, ET AL., defendants-appellants. W. A. Kincaid for appellants. J. N. Wolfson for appellee. MAPA, J.: The plaintiff in this action seeks to recover the sum of $437.50, United States currency, balance due on a contract for the sawing of lumber for the lumber yard of Lo-Chim-Lim. The contract relating to the said work was entered into by the said Lo-Chim-Lim, acting as in his own name with the plaintiff, and it appears that the said Lo-Chim-Lim

personally agreed to pay for the work himself. The plaintiff, however, has brought this action against Lo-Chim-Lim and his codefendants jointly, alleging that, at the time the contract was made, they were the joint proprietors and operators of the said lumber yard engaged in the purchase and sale of lumber under the name and style of Lo-Chim-Lim. Apparently the plaintiff tries to show by the words above italicized that the other defendants were the partners of Lo-Chim-Lim in the said lumber-yard business. The court below dismissed the action as to the defendants D. M. Carman and Fulgencio Tan-Tongco on the ground that they were not the partners of Lo-Chim-Lim, and rendered judgment against the other defendants for the amount claimed in the complaint with the costs of proceedings. Vicente Palanca and Go-Tauco only excepted to the said judgment, moved for a new trial, and have brought the case to this court by bill of exceptions. The evidence of record shows, according to the judgment of the court, That Lo-ChimLim had a certain lumber yard in Calle Lemery of the city of Manila, and that he was the manager of the same, having ordered the plaintiff to do some work for him at his sawmill in the city of Manila; and that Vicente Palanca was his partner, and had an interest in the said business as well as in the profits and losses thereof . . ., and that Go-Tuaco received part of the earnings of the lumber yard in the management of which he was interested. The court below accordingly found that Lo-Chim-Lim, Vicente Palanca, Go-Tuaco had a lumber yard in Calle Lemmery of the city of Manila in the year 1904, and participated in the profits and losses of business and that Lo-Chim-Lim was managing partner of the said lumber yard. In other words, coparticipants with the said Lo-Chim-Lim in the business in question. Although the evidence upon this point as stated by the by the however, that is plainly and manifestly in conflict with the above finding of that court. Such finding should therefore be sustained. The question thus raised is, therefore, purely one of law and reduces itself to determining the real legal nature of the participation which the appellants had in LoChim-Lims lumber yard, and consequently their liability toward the plaintiff, in connection with the transaction which gave rise to the present suit. It seems that the alleged partnership between Lo-Chim-Lim and the appellants was formed by verbal agreement only. At least there is no evidence tending to show that the said agreement was reduced to writing, or that it was ever recorded in a public instrument. Moreover, that partnership had no corporate name. The plaintiff himself alleges in his complaint that the partnership was engaged in business under the name and style of

Lo-Chim-Lim only, which according to the evidence was the name of one of the defendants. On the other hand, and this is very important, it does not appear that there was any mutual agreement, between the parties, and if there were any, it has not been shown what the agreement was. As far as the evidence shows it seems that the business was conducted by Lo-Chim-Lim in his own name, although he gave to the appellants a share was has been shown with certainty. The contracts made with the plaintiff were made by Lo-Chim-Lim individually in his own name, and there is no evidence that the partnership over contracted in any other form. Under such circumstances we find nothing upon which to consider this partnership other than as a partnership of cuentas en participacion. It may be that, as a matter of fact, it is something different, but a simple business and scant evidence introduced by the partnership We see nothing, according to the evidence, but a simple business conducted by Lo-ChimLim exclusively, in his own name, the names of other persons interested in the profits and losses of the business nowhere appearing. A partnership constituted in such a manner, the existence of which was only known to those who had an interest in the same, being no mutual agreements between the partners and without a corporate name indicating to the public in some way that there were other people besides the one who ostensibly managed and conducted the business, is exactly the accidental partnership of cuentas en participacion defined in article 239 of the Code of Commerce. Those who contract with the person under whose name the business of such partnership of cuentas en participacion is conducted, shall have only a right of action against such person and not against the other persons interested, and the latter, on the other hand, shall have no right of action against the third person who contracted with the manager unless such manager formally transfers his right to them. (Article 242 of the Code of Commerce.) It follows, therefore that the plaintiff has no right to demand from the appellants the payment of the amount claimed in the complaint, as Lo-Chim-Lim was the only one who contracted with him. the action of the plaintiff lacks, therefore, a legal foundation and should be accordingly dismissed. The judgment appealed from this hereby reversed and the appellants are absolved of the complaint without express provisions as to the costs of both instances. After the expiration of twenty days let judgment be entered in accordance herewith, and ten days thereafter the cause be remanded to the court below for execution. So ordered. Arellano, C.J., Torres, Johnson, Carson, Willard and Tracey, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-6393 vs. ANASTACIO AGAN, defendant-appellant. January 31, 1955

A. MAGSAYSAY INC., plaintiff-appellee,

Custodio A. Villava for appellant. Quijano, Alidio and Azores for appellee.

DECISION

REYES, A. J.:
The S S San Antonio, vessel owned and operated by plaintiff, left Manila on October 6, 1949, bound for Basco, Batanes, vis Aparri, Cagayan, with general cargo belonging to different shippers, among them the defendant. The vessel reached Aparri on the 10th of that month, and after a days stopover in that port, weighed anchor to proceed to Basco. But while still in port, it ran aground at the mouth of the Cagayan river, and, attempts to refloat it under its own power having failed, plaintiff have it refloated by the Luzon Stevedoring Co. at an agreed compensation. Once afloat the vessel returned to Manila to refuel and then proceeded to Basco, the port of destination. There the cargoes were delivered to their respective owners or consignees, who, with the exception of defendant, made a deposit or signed a bond to answer for their contribution to the average. On the theory that the expenses incurred in floating the vessel constitute general average to which both ship and cargo should contribute, plaintiff brought the present action in the Court of First Instance of Manila to make defendant pay his contribution, which, as determined by the average adjuster, amounts to P841.40. Defendant, in his answer, denies liability to his amount, alleging, among other things, that the stranding of the vessel was due to the fault, negligence and lack of skill of its master, that the expenses incurred in putting it afloat did not constitute general average, and that the liquidation of the average was not made in accordance with law. After trial, the lower court found for plaintiff and rendered judgment against the defendant for the amount of the claim, with legal interests. From this judgment defendant had appealed directly to this Court.

Although appellant assigns various errors, under our view of the case only the following need be considered: The trial court erred in allowing the general average for floating a vessel unintentionally stranded inside a port and at the mouth of a river during a fine weather. For the purposes of this assignment of error we may well accept the finding below that the stranding of plaintiffs vessel was due to the sudden shifting of the sandbars at the mouth of the river which the port pilot did not anticipate. The standing may, therefore, be regarded as accidental, and the question is whether the expenses incurred in floating a vessel so stranded should be considered general average and shared by the cargo owners. The law on averages is contained in the Code of Commerce. Under that law, averages are classified into simple or particular and general or gross. Generally speaking, simple or particular averages include all expenses and damages caused to the vessel or cargo which have not inured to the common benefit (Art. 809), and are, therefore, to be borne only by the owner of the property gave rise to same (Art. 810); while general or gross averages include all the damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a r eal and known risk (Art. 811). Being for the common benefit, gross averages are to be borne by the owners of the articles saved (Art. 812). In classifying averages into simple or particular and general or gross and defining each class, the Code (Art. 809 and 811) at the same time enumerates certain specific cases as coming specially under one or the other denomination. Going over the specific cases enumerated we find that, while the expenses incurred in putting plaintiffs vessel afloat may well come under number 2 of article 809-which refers to expenses suffered by the vessel by reason of an accident of the sea of the force majuere and should therefore be classified as particular average, the said expenses do not fit into any of the specific cases of general average enumerated in article 811. No. 6 of this article does mention expenses caused in order to float a vessel, but it specifically refers to a vessel intentionally stranded for the purpose of saving it and would have no application where, as in the present case, the stranding was not intentional.

Let us now see whether the expenses here in question could come within the legal concept of the general average. Tolentino, in his commentaries on the Code of Commerce, gives the following requisites for general average: First, there must be a common danger. This means, that both the ship and the cargo, after has been loaded, are subject to the same danger, whether during the voyage, or in the port of loading or unloading; that the danger arises from the accidents of the sea, dispositions of the authority, or faults of men, provided that the circumstances producing the peril should be ascertained and imminent or may rationally be said to be certain and imminent. This last requirement exclude measures undertaken against a distant peril. Second, that for the common safety part of the vessel or of the cargo or both is sacrificed deliberately. Third, that from the expenses or damages caused follows the successful saving of the vessel and cargo. Fourth, that the expenses or damages should have been incurred or inflicted after taking proper legal steps and authority. (Vol. 1, 7th ed., p. 155.) With respect to the first requisite, the evidence does not disclose that the expenses sought to be recovered from defendant were incurred to save vessel and cargo from a common danger. The vessel ran aground in fine weather inside the port at the mouth of a river, a place described as very shallow. It would thus appear that vessel and cargo were at the time in no imminent danger or a danger which might rationally be sought to be certain and imminent. It is, of course, conceivable that, if left indefinitely at the mercy of the elements, they would run the risk of being destroyed. But as stated at the above quotation, this last requirement excludes measures undertaken against a distant peril. It is the deliverance from an immediate, impending peril, by a common sacrifice, that constitutes the essence of general average. (The Columbian Insurance Company of Alexandria vs. Ashby & Stribling et al., 13 Peters 331; 10 L. Ed., 186). In the present case there is no proof that the vessel had to be put afloat to save it from imminent danger. What does appear from the testimony of plaintiffs manager is that the vessel had to be salvaged in order to enable it to proceed to its port of destination. But as was said in the case just cited it is the safety of the prop erty, and not of the voyage, which constitutes the true foundation of the general average.

As to the second requisite, we need only repeat that the expenses in question were not incurred for the common safety of vessel and cargo, since they, or at least the cargo, were not in imminent peril. The cargo could, without need of expensive salvage operation, have been unloaded by the owners if they had been required to do so. With respect to the third requisite, the salvage operation, it is true, was a success. But as the sacrifice was for the benefit of the vessel to enable it to proceed to destination and not for the purpose of saving the cargo, the cargo owners are not in law bound to contribute to the expenses. The final requisite has not been proved, for it does not appear that the expenses here in question were incurred after following the procedure laid down in article 813 et seq. In conclusion we found that plaintiff not made out a case for general average, with the result that its claim for contribution against the defendant cannot be granted. Wherefore, the decision appealed from is reversed and plaintiffs complaint ordered dismissed with costs.

Paras, C.J., Bengzon, Padilla, Montemayor, Jugo, Bautista Angelo, and Reyes, J.B.L., JJ., concur.

Magsaysay Inc. vs Anastacio Agan

on February 5, 2011

Transportation General Averages Stranding of a Vessel

In 1949, SS San Antonio, owned by AMInc, embarked on its voyage to Batanes via Aparri. It was carrying various cargoes, one of which was owned by Agan. One fine weather day, it accidentally ran aground the mouth of the Cagayan River due to the sudden shifting of the sands below. SS San Antonio then needed the services of Luzon Stevedoring Co. to tow the ship and make it afloat so that it can continue its journey. Later, AMInc required the cargo owners to pay the expenses incurred in making the ship afloat (P841.40 each). The expenses, AMInc claims, fall under the General Averages Rule under the Code of Commerce, which is to be shared by ship owner and cargo owners as well. ISSUE: Whether or not general averages exist in the case at bar.

HELD: No. General averages contemplate that the stranding of the vessel is intentionally done in order to save the vessel itself from a certain and imminent danger. Here, the stranding was accidental and it was made afloat for the purpose of saving the voyage and not the vessel. Note that this happened on a fine weather day. Also, it cannot be said that the towing was made to save the cargos, for the cargos were not in danger imminent danger.

Luzon Stevedoring Corporation vs. CA Case Digest

Luzon Stevedoring Corporation vs. Court of Appeals (156 SCRA 169) Facts: A maritime collision occurred between the tanker CAVITE owned by LSCO and MV Fernando Escano (a passenger ship) owned by Escano, as a result the passenger ship sunk. An action in admiralty was filed by Escano against Luzon. The trial court held that LSCO Cavite was solely to blame for the collision and held that Luzons claim that its liability should be limited under Article 837 of the Code of Commerce has not been established. The Court of Appeals affirmed the trial court. The SC also affirmed the CA. Upon two motions for reconsideration, the Supreme Court gave course to the petition. Issue: Whether or not in order to claim limited liability under Article 837 of the Code of Commerce, it is necessary that the owner abandon the vessel Held: Yes, abandonment is necessary to claim the limited liability wherein it shall be limited to the value of the vessel with all the appurtenances and freightage earned in the voyage. However, if the injury was due to the ship owners fault, the ship owner may not avail of his right to avail of limited liability by abandoning the vessel. The real nature of the liability of the ship owner or agent is embodied in the Code of Commerce. Articles 587, 590 and 837 are intended to limit the liability of the ship owner, provided that the owner or agent abandons the vessel. Although Article 837 does not specifically provide that in case of collision there should be abandonment, to enjoy such limited liability, said article is a mere amplification of the provisions of Articles 587 and 590 which makes it a mere superfluity. The exception to this rule in Article 837 is when the vessel is totally lost in which case there is no vessel to abandon, thus abandonment is not required. Because of such loss, the liability of the owner or agent is extinguished. However, they are still personally liable for claims under the Workmens Compensation Act and for repairs on the vessel prior to its loss.

In case of illegal or tortious acts of the captain, the liability of the owner and agent is subsidiary. In such cases, the owner or agent may avail of Article 837 by abandoning the vessel. But if the injury is caused by the owners fault as where he engages the services of an inexperienced captain or engineer, he cannot avail of the provisions of Article 837 by abandoning the vessel. He is personally liable for such damages. In this case, the Court held that the petitioner is a t fault and since he did not abandon the vessel, he cannot invoke the benefit of Article 837 to limit his liability to the value of the vessel, all appurtenances and freightage earned during the voyage.

CASE DIGEST (Transportation Law): Monarch Insurance Co., Inc. vs. CA

MONARCH INSURANCE CO., INC vs. COURT OF APPEALS and ABOITIZ SHIPPING CORPORATION G.R. No. 92735. June 8, 2000 FACTS: Monarch and Tabacalera are insurance carriers of lost cargoes. They indemnified the shippers and were consequently subrogated to their rights, interests and actions against Aboitiz, the cargo carrier. Because Aboitiz refused to compensate Monarch, it filed two complaints against Aboitiz which were consolidated and jointly tried. Aboitiz rejected responsibility for the claims on the ground that the sinking of its cargo vessel was due to force majeure or an act of God. Aboitiz was subsequently declared as in default and allowed Monarch and Tabacalera to present evidence ex-parte. ISSUE: Whether or not the doctrine of limited liability applies in the instant case. HELD: Yes. The failure of Aboitiz to present sufficient evidence to exculpate itself from fault and/or negligence in the sinking of its vessel in the face of the foregoing expert testimony constrains us to hold that Aboitiz was concurrently at fault and/or negligent with the ship captain and crew of the M/V P. Aboitiz. [This is in

accordance with the rule that in cases involving the limited liability of shipowners, the initial burden of proof of negligence or unseaworthiness rests on the claimants. However, once the vessel owner or any party asserts the right to limit its liability, the burden of proof as to lack of privity or knowledge on its part with respect to the matter of negligence or unseaworthiness is shifted to it. This burden, Aboitiz had unfortunately failed to discharge.] That Aboitiz failed to discharge the burden of proving that the unseaworthiness of its vessel was not due to its fault and/or negligence should not however mean that the limited liability rule will not be applied to the present cases. The peculiar circumstances here demand that there should be no strict adherence to procedural rules on evidence lest the just claims of shippers/insurers be frustrated. The rule on limited liability should be applied in accordance with the latest ruling in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance Corporation, Ltd.,] promulgated on January 21, 1993, that claimants be treated as "creditors in an insolvent corporation whose assets are not enough to satisfy the totality of claims against it."