TRANSPORTATION LAWS

CASE DIGESTS FIRST SET

Luque V. Villegas
JG Summit Holdings, Inc., V. CA
Kmu Labor Center V. Garcia
SULPICIO LINES CASES
Caltex V. Sulpicio Lines, Inc.
Sulpicio V. CA
Sulpicio Lines, Inc. V. First Lepanto-Taisho Insurance Corporation
Sulpicio Lines, Inc. V. Curso
ABOITIZ CASES
Aboitiz Shipping Corporation vs CA
Aboitiz Shipping Corp vs General Fire And Life Assurance Corp
Aboitiz Shipping Corporation vs New India Assurance Company, Ltd.,

LUQUE VS VILLEGAS
Facts:
Petitioners ( who are passengers from Cavite and Batangas
who ride on buses to and from their province and Manila)
and some public service operators of buses and jeeps assail
the validity of Ordinance 4986and Administrative Order 1.
Ordinance 4986 states that PUB and PUJs shall be allowed to
enter Manila only from 6:30am to 8:30pm every day except
Sundays and holidays.
Petitioners contend that since they possess a valid CPC, they
have already acquired a vested right to operate.
Administrative Order 1 issued by Commissioner of Public
Service states that all jeeps authorized to operate from
Manila to any point in Luzon, beyond the perimeter of
Greater Manila, shall carry the words "For Provincial
Operation".
Issue:
1. Whether or not the said regulations are valid.
2. Whether or not Ordinance 4986 destroys vested rights to
operate in Manila.
Held:
1. YES! Using the doctrine in Lagman vs. City of Manila,
Petitioner's Certificate of Public Convenience was issued
subject to the condition that operators shall observe and
comply with all the rules and regulations of the PSC relative
to PUB service.
The purpose of the ban is to minimize the problem in Manila
and the traffic congestion, delays and accidents resulting
from the free entry into the streets of Manila and the
operation around said streets.
Both Ordinance 4986 and AO 1 fit into the concept of
promotion and regulation of general welfare.
2. NO! A vested right is some right or interest in the
property which has become fixed and established and is no
longer open to doubt or controversy. As far as the State is
concerned, a CPC constitutes neither a franchise nor a
contract, confers no property right, and is a mere license or
privilege.
The holder does not acquire a property right in the route
covered, nor does it confer upon the holder any proprietary
right/interest/franchise in the public highways.
Neither do bus passengers have a vested right to be
transported directly to Manila. The alleged right is
dependent upon the manner public services are allowed to
operate within a given area. It is no argument that the
passengers enjoyed the privilege of having been
continuously transported even before outbreak of war.
Times have changed and vehicles have increased. Traffic
congestion has moved from worse to critical. Hence, there is
a need to regulate the operation of public services.

JG SUMMIT HOLDINGS, INC., vs. CA

November 20, 2000
FACTS:
National Investment and Development Corporation (NIDC)
and Kawasaki Heavy Industries entered into a Joint Venture
Agreement in a shipyard business named PHILSECO, with a
shareholding of 60-40 respectively. NIDCs interest was later
transferred to the National Government.
Pursuant to President Aquinos Proclamation No.5, which
established the Committee on Privatization (COP) and Asset
Privatization Trust (APT), and allowed for the disposition of
the governments non-performing assets, the latter allowed
Kawasaki Heavy Industries to choose a company to which it
has stockholdings, to top the winning bid of JG Summit
Holdings over PHILSECO. JG Summit protested alleging that
such act would effectively increase Kawasakis interest in
PHILSECOa shipyard is a public utilityand thus violative of
the Constitution.
ISSUE:
Whether or not respondents act is valid.
HELD:No.
A shipyard such as PHILSECO being a public utility as
provided by law, the following provision of the Article XII of
the Constitution applies:
Sec. 11. No franchise, certificate, or any other form of
authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to
corporations or associations organized under the laws of the
Philippines at least sixty per centum of whose capital is
owned by such citizens, nor shall such franchise, certificate,
or authorization be exclusive in character or for a longer
period than fifty years. Neither shall any such franchise or
right be granted except under the condition that it shall be
subject to amendment, alteration, or repeal by the Congress
when the common good so requires. The State shall
encourage equity participation in public utilities by the
general public. The participation of foreign investors in the
governing body of any public utility enterprise shall be
limited to their proportionate share in its capital, and all the
executive and managing officers of such corporation or
association shall be citizens of the Philippines.
Notably, paragraph 1.4 of the JVA accorded the parties the
right of first refusal under the same terms. This phrase
implies that when either party exercises the right of first
refusal under paragraph 1.4, they can only do so to the
extent allowed them by paragraphs 1.2 and 1.3 of the JVA
or under the proportion of 60%-40% of the shares of stock.
Thus, should the NIDC opt to sell its shares of stock to a
third party, Kawasaki could only exercise its right of first
refusal to the extent that its total shares of stock would not
exceed 40% of the entire shares of stock of SNS or
PHILSECO. The NIDC, on the other hand, may purchase
even beyond 60% of the total shares. As a government
corporation and necessarily a 100% Filipino-owned
corporation, there is nothing to prevent its purchase of
stocks even beyond 60% of the capitalization as the
Constitution clearly limits only foreign capitalization.

KMU LABOR CENTER V. GARCIA

DEC. 23, 1994

franchises for the operation of buses, jeepneys, and

taxicabs.

FACTS:
Department of Transportation and Communication (DOTC)
Secretary Oscar M. Orbos issued Memorandum Circular No.
90-395 to Land Transportation Franchising and Regulatory
Board (LTFRB) Chairman, Remedios A.S. Fernando that will
allow provincial bus operators to charge passengers rates
within a range of 15% above and 15% below the LTFRB
official rate for a period of one (1) year to be implemented
on August 6, 1990. The Memo read as is the liberalization
of regulations in the transport sector and to move away
gradually from regulatory policies and make progress
towards greater reliance to market forces: Chairman
Fernando informed Sec. Orbos that the Memo is not legally
feasible and recommended for further studies because (1)
under Public Service Act rates should be approved by public
service operators; there should be publication and notice
especially to affected sectors; and a public hearing be held;
(2) it was untimely due to an earthquake happened on July
16; (3) it will trigger upward adjustment in bus fares
especially in trips bound for Northern Luzon; and (4) DOTC
should consider reforms that will be uplifting after the
earthquake. On December 5, 1990 the Provincial Bus
Operators Association of the Philippines, Inc. (PBOAP) filed
an application for fare rate increase. On December 14, 1990
LTFRB released a fare schedule based on a straight
computation. On March 30, 1992 DOTC Sec. Pete Nicomedes
Prado issued Department Order No 92-587 defining the
framework on the regulation of transport services. Then on
October 8, 1992 DOTC Sec. Jose B. Garcia issued a
memorandum to LTFRB for the swift action on the adoption
of the rules and procedures to implement Department Order
No. 92-587 that laid down the deregulation and other
liberalization policies for the transport sector. LTFRB issued
on February 17, 1993

DOTC Secretary Jesus B. Garcia, Jr. and the LTFRB

asseverate that the petitioner does not have the standing to
maintain the instant suit. They further claim that it is within
DOTC and LTFRBs authority to set a fare range scheme and
establish a presumption of public need in applications for
certificates of public convenience.

On March 16, 1994. Kilusang Mayo Uno anchors its claim on

two (2) grounds. First, the authority given by respondent
LTFRB to provincial bus operators to set a fare range of plus
or minus fifteen (15%) percent, later increased to plus
twenty (20%) and minus twenty-five (-25%) percent, over
and above the existing authorized fare without having to file
a petition for the purpose, is unconstitutional, invalid and
illegal. Second, the establishment of a presumption of public
need in favor of an applicant for a proposed transport
service without having to prove public necessity is illegal for
being violative of the Public Service Act and the Rules of
Court and petitions before the LTFRB.
LTFRB dismissed because of lack of merit.
The Court, on June 20, 1994, issued a temporary restraining
order enjoining, prohibiting and preventing respondents
from implementing the bus fare rate increase as well as the
questioned orders and memorandum circulars. This meant
that provincial bus fares were rolled back to the levels duly
authorized by the LTFRB prior to March 16, 1994. A
moratorium was likewise enforced on the issuance of

ISSUE:Are the petitioners have the right to petition of this

case?
Whether or not the fare adjustment is constitutional?
HELD:
(1)
YES. KMU has a locus standi (or ability of a party to
demonstrate to the court sufficient connection to and harm
from the law or action challenged to support that partys
participation in the case) which is inherent in the Section 1
of Article VIII of the Constitution provides: Judicial power
includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable
and enforceable, and to determine whether or not there has
been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or
instrumentality of the Government.
NO. WHEREFORE, in view of the foregoing, the instant
petition is hereby GRANTED and the challenged
administrative issuances and orders, namely: DOTC
Department Order No. 92-587, LTFRB Memorandum Circular
No. 92-009, and the order dated March 24, 1994 issued by
respondent LTFRB are hereby DECLARED contrary to law
and invalid insofar as they affect provisions therein (a)
delegating to provincial bus and jeepney operators the
authority to increase or decrease the duly prescribed
transportation fares; and (b) creating a presumption of
public need for a service in favor of the applicant for a
certificate of public convenience and placing the burden of
proving that there is no need for the proposed service to the
oppositor. The Temporary Restraining Order issued on June
20, 1994 is hereby MADE PERMANENT insofar as it enjoined
the bus fare rate increase granted under the provisions of
the aforementioned administrative circulars, memoranda
and/or orders declared invalid.

SULPICIO LINES CASES

CALTEX VS. SULPICIO LINES, INC.
Facts:
On December 20, 1987, motor tanker MV Vector, carrying
petroleum products of Caltex, collided in the open sea with
passenger ship MV Doa Paz, causing the death of all but 25
of the latters passengers. Among those who died were
Sebastian Canezal and his daughter Corazon Canezal. On
March 22, 1988, the board of marine inquiry found that
Vector Shipping Corporation was at fault. On February 13,

1989, Teresita Caezal and Sotera E. Caezal, Sebastian

Caezals wife and mother respectively, filed with the
Regional Trial Court of Manila a complaint for damages
arising from breach of contract of carriage against Sulpicio
Lines. Sulpicio filed a third-party complaint against Vector
and Caltex. The trial court dismissed the complaint against
Caltex, but the Court of Appeals included the same in the
liability. Hence, Caltex filed this petition.

remunerate him. 16 MT Vector fits the definition of a

common carrier under Article 1732 of the Civil Code.

Issue:Is the charterer of a sea vessel liable for damages

resulting from a collision between the chartered vessel and a
passenger ship?

The public must of necessity rely on the care and skill of

common carriers in the vigilance over the goods and safety
of the passengers, especially because with the modern
development of science and invention, transportation has
become more rapid, more complicated and somehow more
hazardous. For these reasons, a passenger or a shipper of
goods is under no obligation to conduct an inspection of the
ship and its crew, the carrier being obliged by law to
impliedly warrant its seaworthiness.

Held:

Third: Is Caltex liable for damages under the Civil Code?

First: The charterer has no liability for damages under

Philippine Maritime laws.

Petitioner and Vector entered into a contract

affreightment, also known as a voyage charter.

of

A charter party is a contract by which an entire ship, or

some principal part thereof, is let by the owner to another
person for a specified time or use; a contract of
affreightment is one by which the owner of a ship or other
vessel lets the whole or part of her to a merchant or other
person for the conveyance of goods, on a particular voyage,
in consideration of the payment of freight. A contract of
affreightment may be either time charter, wherein the
leased vessel is leased to the charterer for a fixed period of
time, or voyage charter, wherein the ship is leased for a
single voyage. In both cases, the charter-party provides for
the hire of the vessel only, either for a determinate period of
time or for a single or consecutive voyage, the ship owner to
supply the ships store, pay for the wages of the master of
the crew, and defray the expenses for the maintenance of
the ship. If the charter is a contract of affreightment, which
leaves the general owner in possession of the ship as owner
for the voyage, the rights and the responsibilities of
ownership rest on the owner. The charterer is free from
liability to third persons in respect of the ship.

Second: MT Vector is a common carrier

The charter party agreement did not convert the common
carrier into a private carrier. The parties entered into a
voyage charter, which retains the character of the vessel as
a common carrier. It is imperative that a public carrier shall
remain as such, notwithstanding the charter of the whole or
portion of a vessel by one or more persons, provided the
charter is limited to the ship only, as in the case of a timecharter or voyage charter. It is only when the charter
includes both the vessel and its crew, as in a bareboat or
demise that a common carrier becomes private, at least
insofar as the particular voyage covering the charter-party is
concerned. Indubitably, a ship-owner in a time or voyage
charter retains possession and control of the ship, although
her holds may, for the moment, be the property of the
charterer. A common carrier is a person or corporation
whose regular business is to carry passengers or property
for all persons who may choose to employ and to

The charterer of a vessel has no obligation before

transporting its cargo to ensure that the vessel it chartered
complied with all legal requirements. The duty rests upon
the common carrier simply for being engaged in "public
service." The relationship between the parties in this case is
governed by special laws. Because of the implied warranty
of seaworthiness, shippers of goods, when transacting with
common carriers, are not expected to inquire into the
vessels seaworthiness, genuineness of its licenses and
compliance with all maritime laws. To demand more from
shippers and hold them liable in case of failure exhibits
nothing but the futility of our maritime laws insofar as the
protection of the public in general is concerned. Such a
practice would be an absurdity in a business where time is
always of the essence. Considering the nature of
transportation business, passengers and shippers alike
customarily presume that common carriers possess all the
legal requisites in its operation.

SULPICIO V. CA
July 14, 1995
Lessons Applicable: Exceptions to Contracting Parties
FACTS:
October 23, 1988: Tito Duran Tabuquilde (Tito) and his
3-year old daughter Jennifer Anne (Anne) boarded the
M/V Dona Marilyn at North Harbor, Manila, bringing
with them several pieces of luggage.
Storm Signal No. 2 had been raised by the PAG-ASA
authorities over Leyte as early as 5:30 P.M. of October
23, 1988 and which signal was raised to Signal No. 3 by
10 P.M
ship captain ordered the vessel to proceed
to Tacloban when prudence dictated that he should
have taken it to the nearest port for shelter, thus
violating his duty to exercise extraordinary diligence in
the carrying of passengers safely to their destination
October 24, 1988 morning: M/V Dona Marilyn, while in
transit, encountered inclement weather which caused
huge waves due to Typhoon Unsang.
Angelina Tabuquilde contacted the Sulpicio Office to
verify radio reports that the vessel M/V Dona Marilyn
was missing
Sulpicio Lines assured her that the ship was merely
"hiding" thereby assuaging her anxiety

October 24, 1988 2:00 P.M.: vessel capsized, throwing

Tito and Anne, along with hundreds of passengers, into
the sea.
Tito tried to keep himself and his daughter afloat but to
no avail as the waves got stronger and he was
subsequently separated from his daughter despite his
efforts.
October 25, 1988 11:00 A.M.: He found himself on
Almagro Island in Samar
He immediately searched for his daughter among the
survivors in the island, but failed
Angelina tried to seek the assistance of the Sulpicio
Lines in Manila to no avail
Angelina spent sleepless nights worrying about her
husband and daughter in view of the refusal of Sulpicio
Lines to release a verification of the sinking of the ship
October 26, 1988: Tito and other survivors in the
Almagro Island were fetched and were brought
to Tacloban Medical Center for treatment
October 31, 1988: Tito reported the loss of his daughter
and was informed that the corpse of a child with his
daughter's description had been found
Tito wrote a letter to his wife, reporting the sad fact
that Jennifer Anne was dead
Angelina suffered from shock and severe grief upon
receipt of the news
November 3, 1988: coffin bearing the corpse of Anne
was buried
November 24, 1988: Tito filed a claim for damages
against Sulpicio Lines for the death of Anne and the loss
of his belongings worth P27,580
Trial Court: in favor of Tito
actual damages, P30,000.00 for the death of Anne
P100,000.00 as moral damages
P50,000.00 as exemplary damages
P50,000.00 as attorney's fees, and costs

ISSUE: W/N Tito has a right to recover damage for his lost
belongings
HELD: NO. Court of Appeals is AFFIRMED with the
MODIFICATION that the award of P27,580.00 as actual
damages for the loss of the contents of the pieces of
baggage is deleted and that the award of P30,000.00 under
Article 2206 in relation Article 1764 is increased to
P50,000.00.
There is no showing that the value of the contents of
the lost pieces of baggage was based on the bill of
lading or was previously declared by Tito before he
boarded the ship
Article 2206 of the Civil Code of the Philippines:
only deaths caused by a crime as quasi delict are entitled to
actual and compensatory damages without the need of proof
of the said damages
The amount of damages for death caused by a crime
or quasi delict shall be at least Three Thousand Pesos, even
though there may have been mitigating circumstances. . . .
Deducing alone from said provision, one can conclude
that damages arising from culpa contractual are not
compensable without proof of special damages
sustained by the heirs of the victim.

With respect to the award of moral damages, the

general rule is that said damages are not recoverable
in culpa contractual except when the presence of bad
faith was proven
in breach of contract of carriage, moral damages may
be recovered when it results in the death of a
passenger
With respect to the award of exemplary damages,
Article 2232 of the Civil Code of the Philippines gives
the Court the discretion to grant said damages in
breach of contract when the defendant acted in a
wanton, fraudulent and reckless manner
The crew assumed a greater risk when, instead of
dropping anchor in or at the periphery of the Port of
Calapan, or returning to the port of Manila which is
nearer, proceeded on its voyage on the assumption that
it will be able to beat and race with the typhoon and
reach its destination before it (Unsang) passes
SULPICIO LINES, INC. vs. FIRST LEPANTO-TAISHO
INSURANCE CORPORATION (full text)

Before Us is a Petition for Review on Certiorari assailing the

Decision1 of the Court of Appeals reversing the Decision2 of
the Regional Trial Court (RTC) of Manila, Branch XIV,
dismissing the complaint for damages for failure of the
plaintiff to prove its case with a preponderance of evidence.
Assailed as well is the Resolution3 of the Court of Appeals
denying petitioners Motion for Reconsideration.
FACTS:
On 25 February 1992, Taiyo Yuden Philippines, Inc. (owner
of the goods) and Delbros, Inc. (shipper) entered into a
contract, evidenced by Bill of Lading No. CEB/SIN-008/92
issued by the latter in favor of the owner of the goods, for
Delbros, Inc. to transport a shipment of goods consisting of
three (3) wooden crates containing one hundred thirty-six
(136) cartons of inductors and LC compound on board the V
Singapore V20 from Cebu City to Singapore in favor of the
consignee, Taiyo Yuden Singapore Pte, Ltd.
For the carriage of said shipment from Cebu City to Manila,
Delbros, Inc. engaged the services of the vessel M/V
Philippine Princess, owned and operated by petitioner
Sulpicio Lines, Inc. (carrier). The vessel arrived at the North
Harbor, Manila, on 24 February 1992.
During the unloading of the shipment, one crate containing
forty-two (42) cartons dropped from the cargo hatch to the
pier apron. The owner of the goods examined the dropped
cargo, and upon an alleged finding that the contents of the
crate were no longer usable for their intended purpose, they
were rejected as a total loss and returned to Cebu City.
The owner of the goods filed a claim with herein petitionercarrier for the recovery of the value of the rejected cargo
which was refused by the latter. Thereafter, the owner of
the goods sought payment from respondent First LepantoTaisho Insurance Corporation (insurer) under a marine
insurance policy issued to the former. Respondent-insurer
paid the claim less thirty-five percent (35%) salvage value or
P194, 220.31.

The payment of the insurance claim of the owner of the

goods by the respondent-insurer subrogated the latter to
whatever right or legal action the owner of the goods may
have against Delbros, Inc. and petitioner-carrier, Sulpicio
Lines, Inc. Thus, respondent-insurer then filed claims for
reimbursement from Delbros, Inc. and petitioner-carrier
Sulpicio Lines, Inc. which were subsequently denied.
On 04 November 1992, respondent-insurer filed a suit for
damages docketed as Civil Case No. 92-63337 with the trial
court against Delbros, Inc. and herein petitioner-carrier. On
05 February 1993, petitioner-carrier filed its Answer with
Counterclaim. Delbros, Inc. filed on 15 April 1993 its Answer
with Counterclaim and Cross-claim, alleging that assuming
the contents of the crate in question were truly in bad order,
fault is with herein petitioner-carrier which was responsible
for the unloading of the crates.
Petitioner-carrier filed its Answer to Delbros, Inc.s crossclaim asserting that it observed extraordinary diligence in
the handling, storage and general care of the shipment and
that subsequent inspection of the shipment by the Manila
Adjusters and Surveyors Company showed that the contents
of the third crate that had fallen were found to be in
apparent sound condition, except that "2 cello bags each of
50 pieces ferri inductors No. LC FL 112270K-60 (c) were
unaccounted for and missing as per packaging list."
After hearing, the trial court dismissed the complaint for
damages as well as the counterclaim filed by therein
defendant Sulpicio Lines, Inc. and the cross-claim filed by
Delbros, Inc. According to the RTC:
The plaintiff has failed to prove its case. The first witness for
the plaintiff merely testified about the payment of the claim
based on the documents accompanying the claim which
were the Packing List, Commercial Invoices, Bill of Lading,
Claims Statement, Marine Policies, Survey Report, Marine
Risk Note, and the letter to Third Party carriers and shipping
lines (Exhibit A-J).
The check was paid and delivered to the assured as
evidenced by the check voucher and the subrogation receipt.
On cross-examination by counsel for the Sulpicio Lines, he
said that their company paid the claim less 35% salvage
value based on the adjuster report. This testimony is
hearsay.
The second witness for the plaintiff, Arturo Valdez, testified,
among others, that he, together with a co-surveyor and a
representative of Sulpicio Lines had conducted a survey of
the shipment at the compound of Sulpicio Lines. He
prepared a survey report (Exhibits G and G-1) and took a
picture of shipment (Exhibit G-2).
On cross-examination, he said that two cartons were torn at
the sides with top portion flaps opened and the 41 cartons
were properly sealed and in good order conditions. Two
cartons were already opened and slightly damaged. He

merely looked at them but did not conduct an inspection of

the contents. What he was referring to as slightly damaged
were the cartons only and not the contents.
From the foregoing evidence, it is apparent that the plaintiff
had failed to prove its case with a preponderance of
evidence.
.WHEREFORE, in view of the foregoing considerations,
judgment is hereby rendered dismissing the Complaint,
defendant Sulpicio Lines counterclaim and defendant
Delbros Inc.s cross-claim.4
A Motion for Reconsideration was then filed by herein
respondent-insurer and subsequently denied by the trial
court in an Order dated 07 February 1995 on the ground
that it did not raise any new issue. Thus, respondent-insurer
instituted an appeal with the Court of Appeals, which
reversed the dismissal of the complaint by the lower court,
the decretal portion of which reads:
WHEREFORE, the appeal is granted. The decision appealed
from is REVERSED. Defendants-appellees Delbros and
Sulpicio Lines are hereby ordered to pay, jointly and
severally, plaintiff-appellant the sum of P194,220.31
representing actual damages, plus legal interest counted
from the filing of the complaint until fully paid.5
The appellate court disposed of the issues in the case in this
wise:
Furthermore, the evidence shows that one of the three
crates fell during the unloading at the pier in Manila. The
wooden crate which fell was damaged such that this
particular crate was not anymore sent to Singapore and was
instead shipped back to Cebu from Manila. Upon
examination, it was found that two (2) cartons of the fortytwo (42) cartons contained in this crate were externally
damaged. They were torn at the sides and their top portions
or flaps were open. These facts were admitted by all the
parties. Defendant-appellees, however, insist that it was only
the external packaging that was damaged, and that there
was no actual damage to the goods such that would make
them liable to the shipper. This theory is erroneous. When
the goods are placed at a common carriers possession for
delivery to a specified consignee, they are in good order and
condition and are supposed to be transported and delivered
to the consignee in the same state. In the case herein, the
goods were received by defendant-appellee Delbros in Cebu
properly packed in cardboard cartons and then placed in
wooden crates, for delivery to the consignee in Singapore.
However, before the shipment reached Singapore (while it
was in Manila) one crate and 2 cartons contained therein
were not anymore in their original state. They were no
longer fit to be sent to Singapore.
.As We have already found, there is damage suffered by
the goods of the shipper. This consists in the destruction of
one wooden crate and the tearing of two of the cardboard
boxes therein rendering then unfit to be sent to Singapore.
Defendant-appellee Sulpicio Lines admits that this crate fell

while it was being unloaded at the Manila pier. Falling of the

crate was negligence on the part of defendant-appellee
Sulpicio Lines under the doctrine of res ipsa loquitur.
Defendant-appellee Sulpicio Lines cannot exculpate itself
from liability because it failed to prove that it exercised due
diligence in the selection and supervision of its employees to
prevent the damage.6
On 21 June 1999, herein petitioner-carrier filed its Motion for
Reconsideration of the decision of the Court of Appeals
which was subsequently denied in a Resolution dated 13
October 1999. Hence, the instant petition.
During the pendency of the appeal before this Court,
Delbros, Inc. filed a manifestation stating that its appeal7
filed before this Court had been dismissed for being filed out
of time and thus the case as against it was declared closed
and terminated. As a consequence, it paid in full the amount
of the damages awarded by the appellate court to the
respondent-insurer. Before this Court, Delbros, Inc. prays for
reimbursement, contribution, or indemnity from its codefendant, herein petitioner-carrier Sulpicio Lines, Inc. for
whatever it had paid to respondent-insurer in consonance
with the decision of the appellate court declaring both
Delbros, Inc. and petitioner-carrier Sulpicio Lines, Inc. jointly
and severally liable.
ISSUES
Petitioner-carrier raises the following issues in its petition:
1. The Court of Appeals erred in not holding that the trial
court justly and correctly dismissed the complaint against
Sulpicio Lines, which dismissal is already final.
2. The Court of Appeals erred in not dismissing the appeal
for failure of appellant to comply with the technical
requirement of the Rules of Court.
RULING
We shall first address the procedural issue raised by
petitioner-carrier, Sulpicio Lines, Inc. that the Court of
Appeals should have dismissed the appeal for failure of
respondent-insurer to attach a copy of the decision of the
trial court to its appellants brief in violation of Rule 44,
Section 13(h) of the Rules of Civil Procedure.8
A perusal of the records will show, however, that in a
Resolution9 dated 13 August 1996, the Court of Appeals
required herein respondent-insurer to submit seven (7)
copies of the questioned decision within five (5) days from
notice. Said Resolution was properly complied with.
As a rule, the right to appeal is a statutory right and one
who seeks to avail of that right must comply with the
manner required by the pertinent rules for the perfection of
an appeal. Nevertheless, this Court has allowed the filing of
an appeal upon subsequent compliance with the
requirements imposed by law, where a strict application of
the technical rules will impair the proper administration of
justice. As enunciated by the Court in the case of Jaro v.
Court of Appeals

There is ample jurisprudence holding that the subsequent

and substantial compliance of an appellant may call for the
relaxation of the rules of procedure. In Cusi-Hernandez vs.
Diaz [336 SCRA 113] and Piglas-Kamao vs. National Labor
Relations Commission [357SCRA 640], we ruled that the
subsequent submission of the missing documents with the
motion for reconsideration amounts to substantial
compliance. The reasons behind the failure of the petitioners
in these two cases to comply with the required attachments
were no longer scrutinized.11
We see no error, therefore, on the part of the Court of
Appeals when it gave due course to the appeal after
respondent-insurer had submitted copies of the RTC
decision, albeit belatedly.
We now come to the substantial issues alleged by petitionercarrier. The pivotal question to be considered in the
resolution of this issue is whether or not, based on the
evidence presented during the trial, the owner of the goods,
respondent-insurers predecessor-in-interest, did incur
damages, and if so, whether or not petitioner-carrier is liable
for the same.
It cannot be denied that the shipment sustained damage
while in the custody of petitioner-carrier. It is not disputed
that one of the three (3) crates did fall from the cargo hatch
to the pier apron while petitioner-carrier was unloading the
cargo from its vessel. Neither is it impugned that upon
inspection, it was found that two (2) cartons were torn on
the side and the top flaps were open and that two (2) cello
bags, each of 50 pieces ferri inductors, were missing from
the cargo.
Petitioner-carrier contends that its liability, if any, is only to
the extent of the cargo damage or loss and should not
include the lack of fitness of the shipment for transport to
Singapore due to the damaged packing. This is erroneous.
Petitioner-carrier
seems
to
belabor
under
the
misapprehension that a distinction must be made between
the cargo packaging and the contents of the cargo.
According to it, damage to the packaging is not tantamount
to damage to the cargo. It must be stressed that in the case
at bar, the damage sustained by the packaging of the cargo
while in petitioner-carriers custody resulted in its unfitness
to be transported to its consignee in Singapore. Such failure
to ship the cargo to its final destination because of the
ruined packaging, indeed, resulted in damages on the part
of the owner of the goods.
The falling of the crate during the unloading is evidence of
petitioner-carriers negligence in handling the cargo. As a
common carrier, it is expected to observe extraordinary
diligence in the handling of goods placed in its possession
for transport.12 The standard of extraordinary diligence
imposed upon common carriers is considerably more
demanding than the standard of ordinary diligence, i.e., the
diligence of a good paterfamilias established in respect of
the ordinary relations between members of society.13 A
common carrier is bound to transport its cargo and its

passengers safely "as far as human care and foresight can

provide, using the utmost diligence of a very cautious
person, with due regard to all circumstances."14 The
extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to know
and to follow the required precaution for avoiding the
damage to, or destruction of, the goods entrusted to it for
safe carriage and delivery.15 It requires common carriers to
render service with the greatest skill and foresight and "to
use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to
exercise due care in the handling and stowage, including
such methods as their nature requires."16

As found by the Court of Appeals, there was damage

suffered by the goods which consisted in the destruction of
one wooden crate and the tearing of two (2) cardboard
boxes therein which rendered them unfit to be sent to
Singapore.26 The falling of the crate was negligence on the
part of Sulpicio Lines, Inc. for which it cannot exculpate itself
from liability because it failed to prove that it exercised
extraordinary diligence.27

Thus, when the shipment suffered damages as it was being

unloaded, petitioner-carrier is presumed to have been
negligent in the handling of the damaged cargo. Under
Articles 173517 and 175218 of the Civil Code, common
carriers are presumed to have been at fault or to have acted
negligently in case the goods transported by them are lost,
destroyed or had deteriorated. To overcome the
presumption of liability for loss, destruction or deterioration
of goods under Article 1735, the common carrier must prove
that they observed extraordinary diligence as required in
Article 173319 of the Civil Code.20

As stated in the manifestation filed by Delbros, Inc.,

however, respondent-insurer had already been paid the full
amount granted by the Court of Appeals, hence, it will be
tantamount to unjust enrichment for respondent-insurer to
again recover damages from herein petitioner-carrier.

Petitioner-carrier miserably failed to adduce any shred of

evidence of the required extraordinary diligence to overcome
the presumption that it was negligent in transporting the
cargo.
Coming now to the issue of the extent of petitioner-carriers
liability, it is undisputed that respondent-insurer paid the
owner of the goods under the insurance policy the amount
of P194,220.31 for the alleged damages the latter has
incurred. Neither is there dispute as to the fact that Delbros,
Inc. paid P194,220.31 to respondent-insurer in satisfaction
of the whole amount of the judgment rendered by the Court
of Appeals. The question then is: To what extent is Sulpicio
Lines, Inc., as common carrier, liable for the damages
suffered by the owner of the goods?
Upon respondent-insurers payment of the alleged amount of
loss suffered by the insured (the owner of the goods), the
insurer is entitled to be subrogated pro tanto to any right of
action which the insured may have against the common
carrier whose negligence or wrongful act caused the loss.21
Subrogation is the substitution of one person in the place of
another with reference to a lawful claim or right, so that he
who is substituted succeeds to the rights of the other in
relation to a debt or claim, including its remedies or
securities.22 The rights to which the subrogee succeeds are
the same as, but not greater than, those of the person for
whom he is substituted, that is, he cannot acquire any claim,
security or remedy the subrogor did not have.23 In other
words, a subrogee cannot succeed to a right not possessed
by the subrogor.24 A subrogee in effect steps into the shoes
of the insured and can recover only if the insured likewise
could have recovered.25

Hence, we uphold the ruling of the appellate court that

herein petitioner-carrier is liable to pay the amount paid by
respondent-insurer for the damages sustained by the owner
of the goods.

With respect to Delbros, Inc.s prayer contained in its

manifestation that, in case the decision in the instant case
be adverse to petitioner-carrier, a pronouncement as to the
matter of reimbursement, indemnification or contribution in
favor of Delbros, Inc. be included in the decision, this Court
will not pass upon said issue since Delbros, Inc. has no
personality before this Court, it not being a party to the
instant case. Notwithstanding, this shall not bar any action
Delbros, Inc. may institute against petitioner-carrier Sulpicio
Lines, Inc. with respect to the damages the latter is liable to
pay.
WHEREFORE, premises considered, the assailed Decision of
the Court of Appeals dated 26 May 1999 and its Resolution
dated 13 October 1999 are hereby AFFIRMED. No costs.

SULPICIO LINES, INC. vs CURSO

March 17, 2010 (full text)
Are the surviving brothers and sisters of a passenger of a
vessel that sinks during a voyage entitled to recover moral
damages from the vessel owner as common carrier?
This is the question presented in the appeal taken by the
common carrier from the reversal by the Court of Appeals
(CA) of the decision of the Regional Trial Court (RTC)
dismissing the complaint for various damages filed by the
surviving brothers and sisters of the late Dr. Cenon E. Curso
upon a finding that force majeure had caused the sinking.
The CA awarded moral and other damages to the surviving
brothers and sisters.
FACTS:
On October 23, 1988, Dr. Curso boarded at the port of
Manila the MV Doa Marilyn, an inter-island vessel owned and
operated by petitioner Sulpicio Lines, Inc., bound for
Tacloban City. Unfortunately, the MV Doa Marilyn sank in the
afternoon of October 24, 1988 while at sea due to the
inclement sea and weather conditions brought about by

Typhoon Unsang. The body of Dr. Curso was not recovered,

along with hundreds of other passengers of the ill-fated
vessel. At the time of his death, Dr. Curso was 48 years old,
and employed as a resident physician at the Naval District
Hospital in Naval, Biliran. He had a basic monthly salary of
P3,940.00, and would have retired from government service
by December 20, 2004 at the age of 65.

In its decision dated September 16, 2002,[3] the CA held

and disposed:

On January 21, 1993, the respondents, allegedly the

surviving brothers and sisters of Dr. Curso, sued the
petitioner in the RTC in Naval, Biliran to claim damages
based on breach of contract of carriage by sea, averring that
the petitioner had acted negligently in transporting Dr. Curso
and the other passengers. They stated, among others, that
their parents had predeceased Dr. Curso, who died single
and without issue; and that, as such, they were Dr. Cursos
surviving heirs and successors in interest entitled to recover
moral and other damages.[1] They prayed for judgment, as
follows: (a) compensatory damages of P1,924,809.00; (b)
moral damages of P100,000.00; (c) exemplary or corrective
damages in the amount deemed proper and just; (d)
expenses of litigation of at least P50,000.00; (e) attorneys
fees of P50,000.00; and (f) costs of suit.

In the first place, the court finds inadequate explanation why

the officers of the M.V. Doa Marilyn had not apprised
themselves of the weather reports on the approach of
typhoon Unsang which had the power of a signal no. 3
cyclone, bearing upon the general direction of the path of
the M.V. Doa Marilyn. If the officers and crew of the Doa
Marilyn had indeed been adequately monitoring the strength
and direction of the typhoon, and had acted promptly and
competently to avoid the same, then such a mishap would
not have occurred.

The petitioner denied liability, insisting that the sinking of

the vessel was due to force majeure (i.e., Typhoon Unsang),
which exempted a common carrier from liability. It averred
that the MV Doa Marilyn was seaworthy in all respects, and
was in fact cleared by the Philippine Coast Guard for the
voyage; and that after the accident it conducted intensive
search and rescue operations and extended assistance and
aid to the victims and their families.
Ruling of the RTC
On July 28, 1995, the RTC dismissed the complaint upon its
finding that the sinking of the vessel was due to force
majeure. The RTC concluded that the officers of the MV Doa
Marilyn had acted with the diligence required of a common
carrier; that the sinking of the vessel and the death of its
passengers, including Dr. Curso, could not have been
avoided; that there was no basis to consider the MV Doa
Marilyn not seaworthy at the time of the voyage; that the
findings of the Special Board of Marine Inquiry (SBMI)
constituted to investigate the disaster absolved the
petitioner, its officers, and crew of any negligence and
administrative liability; and that the respondents failed to
prove their claim for damages.
Ruling of the CA
The respondents appealed to the CA, contending that the
RTC erred: (a) in considering itself barred from entertaining
the case by the findings of fact of the SBMI in SBMI-ADM
Case No. 08-88; (b) in not holding that the petitioner was
negligent and did not exercise the required diligence and
care in conducting Dr. Curso to his destination; (c) in not
finding that the MV Doa Marilyn was unseaworthy at the
time of its sinking; and (d) in not awarding damages to
them.[2]

Based on the events described by the appellees witness, the

Court found inadequate proof to show that Sulpicio Lines,
Inc., or its officers and crew, had exercised the required
degree of diligence to acquit the appellee of liability.

Furthermore, there was no account of the acts and decision

of the crew of the ill-fated ship from 8:00 PM on October 23,
1988 when the Chief Mate left his post until 4:00 AM the
next day when he resumed duty. It does not appear what
occurred during that time, or what weather reports were
received and acted upon by the ship captain. What
happened during such time is important in determining what
information about the typhoon was gathered and how the
ship officers reached their decision to just change course,
and not take shelter while a strong typhoon was
approaching.
Furthermore, the Court doubts the fitness of the ship for the
voyage, since at the first sign of bad weather, the ships
hydraulic system failed and had to be repaired mid-voyage,
making the vessel a virtual derelict amidst a raging storm at
sea. It is part of the appellees extraordinary diligence as a
common carrier to make sure that its ships can withstand
the forces that bear upon them during a voyage, whether
they be the ordinary stress of the sea during a calm voyage
or the rage of a storm. The fact that the stud bolts in the
ships hydraulic system gave way while the ship was at sea
discredits the theory that the appellee exercised due
diligence in maintaining the seaworthy condition of the M.V.
Doa Marilyn. xxx.[4]
xxx
Aside from these, the defendant must compensate the
plaintiffs for moral damages that they suffered as a result of
the negligence attending the loss of the M.V. Doa Marilyn.
Plaintiffs, have established that they took great pains to
recover, in vain, the body of their brother, at their own cost,
while suffering great grief due to the loss of a loved one.
Furthermore, Plaintiffs were unable to recover the body of
their brother. Moral damages worth P100,000.00 is proper.
WHEREFORE, premises considered, the appealed decision of
the RTC of Naval, Biliran, Branch 16, rendered in Civil Case
No. B-0851, is hereby SET ASIDE. In lieu thereof, judgment
is hereby rendered, finding the defendant-appellee Sulpicio
Lines, Inc, to have been negligent in transporting the
deceased Cenon E. Curso who was on board the ill-fated
M.V. Doa Marilyn, resulting in his untimely death.

Defendant-appellee is hereby ordered to pay the plaintiffs

heirs of Cenon E. Curso the following:
(1) Death indemnity in the amount of P50,000.00;
(2) Loss of Earning Capacity in the amount of P504,241.20;
(3) Moral Damages in the amount of P100,000.00.
(4) Costs of the suit.[5]
Hence, this appeal, in which the petitioner insists that the CA
committed grievous errors in holding that the respondents
were entitled to moral damages as the brothers and sisters
of the late Dr. Curso; that the CA thereby disregarded Article
1764 and Article 2206 of the Civil Code, and the ruling in
Receiver for North Negros Sugar Co., Inc. v. Ybaez,[6]
whereby the Supreme Court disallowed the award of moral
damages in favor of the brothers and sisters of a deceased
passenger in an action upon breach of a contract of
carriage.[7]
Issues
The petitioner raises the following issues:
ARE THE BROTHERS AND SISTERS OF A DECEASED
PASSENGER IN A CASE OF BREACH OF CONTRACT OF
CARRIAGE ENTITLED TO AN AWARD OF MORAL DAMAGES
AGAINST THE CARRIER?
ASSUMING (THAT) THEY ARE ENTITLED TO CLAIM MORAL
DAMAGES, SHOULD THE AWARD BE GRANTED OR GIVEN
TO THE BROTHER OR SISTER NOTWITHSTANDING (THE)
LACK OF EVIDENCE AS REGARDS HIS OR HER PERSONAL
SUFFERING?
RULING
The petition is meritorious.
As a general rule, moral damages are not recoverable in
actions for damages predicated on a breach of contract,
unless there is fraud or bad faith.[8] As an exception, moral
damages may be awarded in case of breach of contract of
carriage that results in the death of a passenger,[9] in
accordance with Article 1764, in relation to Article 2206 (3),
of the Civil Code, which provide:
Article 1764. Damages in cases comprised in this Section
shall be awarded in accordance with Title XVIII of this Book,
concerning Damages. Article 2206 shall also apply to the
death of a passenger caused by the breach of contract by a
common carrier.
Article 2206. The amount of damages for death caused by a
crime or quasi-delict shall be at least three thousand pesos,
even though there may have been mitigating circumstances.
In addition:
(1) The defendant shall be liable for the loss of the earning
capacity of the deceased, and the indemnity shall be paid to
the heirs of the latter; such indemnity shall in every case be

assessed and awarded by the court, unless the deceased on

account of permanent physical disability not caused by the
defendant, had no earning capacity at the time of his death;
(2) If the deceased was obliged to give support according to
the provisions of article 291, the recipient who is not an heir
called to the decedent's inheritance by the law of testate or
intestate succession, may demand support from the person
causing the death, for a period not exceeding five years, the
exact duration to be fixed by the court;
(3) The spouse, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for
mental anguish by reason of the death of the deceased.
The foregoing legal provisions set forth the persons entitled
to moral damages. The omission from Article 2206 (3) of the
brothers and sisters of the deceased passenger reveals the
legislative intent to exclude them from the recovery of moral
damages for mental anguish by reason of the death of the
deceased. Inclusio unius est exclusio alterius.[10] The
solemn power and duty of the courts to interpret and apply
the law do not include the power to correct the law by
reading into it what is not written therein.[11] Thus, the CA
erred in awarding moral damages to the respondents.
The petitioner has correctly relied on the holding in Receiver
for North Negros Sugar Company, Inc. v. Ybaez,[12] to the
effect that in case of death caused by quasi-delict, the
brother of the deceased was not entitled to the award of
moral damages based on Article 2206 of the Civil Code.
Essentially, the purpose of moral damages is indemnity or
reparation, that is, to enable the injured party to obtain the
means, diversions, or amusements that will serve to alleviate
the moral suffering he has undergone by reason of the
tragic event. According to Villanueva v. Salvador,[13] the
conditions for awarding moral damages are: (a) there must
be an injury, whether physical, mental, or psychological,
clearly substantiated by the claimant; (b) there must be a
culpable act or omission factually established; (c) the
wrongful act or omission of the defendant must be the
proximate cause of the injury sustained by the claimant; and
(d) the award of damages is predicated on any of the cases
stated in Article 2219 of the Civil Code.
To be entitled to moral damages, the respondents must
have a right based upon law. It is true that under Article
1003[14] of the Civil Code they succeeded to the entire
estate of the late Dr. Curso in the absence of the latters
descendants, ascendants, illegitimate children, and surviving
spouse. However, they were not included among the
persons entitled to recover moral damages, as enumerated
in Article 2219 of the Civil Code, viz:
Article 2219. Moral damages may be recovered in the
following and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;

(3) Seduction, abduction, rape or other lascivious acts;

(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in article 309;
(10) Acts and actions referred to in articles 21, 26, 27, 28,
29, 30, 32, 34 and 35.
The parents of the female seduced, abducted, raped or
abused referred to in No. 3 of this article, may also recover
moral damages.
The spouse, descendants, ascendants and brothers and
sisters may bring the action mentioned in No. 9 of this
article, in the order named.
Article 2219 circumscribes the instances in which moral
damages may be awarded. The provision does not include
succession in the collateral line as a source of the right to
recover moral damages. The usage of the phrase analogous
cases in the provision means simply that the situation must
be held similar to those expressly enumerated in the law in
question[15] following the ejusdem generis rule. Hence,
Article 1003 of the Civil Code is not concerned with recovery
of moral damages.
In fine, moral damages may be recovered in an action upon
breach of contract of carriage only when: (a) where death of
a passenger results, or (b) it is proved that the carrier was
guilty of fraud and bad faith, even if death does not
result.[16] Article 2206 of the Civil Code entitles the
descendants, ascendants, illegitimate children, and surviving
spouse of the deceased passenger to demand moral
damages for mental anguish by reason of the death of the
deceased.[17]
WHEREFORE, the petition for review on certiorari is
and the award made to the respondents in the
dated September 16, 2002 of the Court of Appeals
damages amounting to P100,000.00 is deleted
aside.

granted,
decision
of moral
and set

ABOITIZ CASES
ABOITIZ SHIPPING CORPORATION VS. CA
FACTS:
Anacleto Viana boarded the vessel M/V Antonia, owned by
Aboitiz Shipping Corporation, at the port at San Jose,
Occidental Mindoro, bound for Manila. After said vessel had

landed, the Pioneer Stevedoring Corporation took over the

exclusive control of the cargoes loaded on said vessel
pursuant to the Memorandum of Agreement between
Pioneer and petitioner Aboitiz.
The crane owned by Pioneer was placed alongside the vessel
and one (1) hour after the passengers of said vessel had
disembarked, it started operation by unloading the cargoes
from said vessel. While the crane was being operated,
Anacleto Viana who had already disembarked from said
vessel obviously remembering that some of his cargoes were
still loaded in the vessel, went back to the vessel, and it was
while he was pointing to the crew of the said vessel to the
place where his cargoes were loaded that the crane hit him,
pinning him between the side of the vessel and the crane.
He was thereafter brought to the hospital where he later
expired three (3) days thereafter.
Private respondents Vianas filed a complaint for damages
against petitioner for breach of contract of carriage. Aboitiz
denied responsibility contending that at the time of the
accident, the vessel was completely under the control of
respondent Pioneer Stevedoring Corporation as the exclusive
stevedoring contractor of Aboitiz, which handled the
unloading of cargoes from the vessel of Aboitiz.
ISSUE:
Whether or not Aboitiz is negligent and is thus liable for the
death.
HELD:Yes.
x x x [T]he victim Anacleto Viana guilty of contributory
negligence, but it was the negligence of Aboitiz in
prematurely turning over the vessel to the arrastre operator
for the unloading of cargoes which was the direct,
immediate and proximate cause of the victim's death.
The rule is that the relation of carrier and passenger
continues until the passenger has been landed at the port of
destination and has left the vessel owner's dock or premises.
11 Once created, the relationship will not ordinarily
terminate until the passenger has, after reaching his
destination, safely alighted from the carrier's conveyance or
had a reasonable opportunity to leave the carrier's premises.
All persons who remain on the premises a reasonable time
after leaving the conveyance are to be deemed passengers,
and what is a reasonable time or a reasonable delay within
this rule is to be determined from all the circumstances, and
includes a reasonable time to see after his baggage and
prepare for his departure. 12 The carrier-passenger
relationship is not terminated merely by the fact that the
person transported has been carried to his destination if, for
example, such person remains in the carrier's premises to
claim his baggage.
It is apparent from the foregoing that what prompted the
Court to rule as it did in said case is the fact of the
passenger's reasonable presence within the carrier's
premises. That reasonableness of time should be made to

depend on the attending circumstances of the case, such as

the kind of common carrier, the nature of its business, the
customs of the place, and so forth, and therefore precludes
a consideration of the time element per se without taking
into account such other factors. It is thus of no moment
whether in the cited case of La Mallorca there was no
appreciable interregnum for the passenger therein to leave
the carrier's premises whereas in the case at bar, an interval
of one (1) hour had elapsed before the victim met the
accident. The primary factor to be considered is the
existence of a reasonable cause as will justify the presence
of the victim on or near the petitioner's vessel. We believe
there exists such a justifiable cause.
It is of common knowledge that, by the very nature of
petitioner's business as a shipper, the passengers of vessels
are allotted a longer period of time to disembark from the
ship than other common carriers such as a passenger bus.
With respect to the bulk of cargoes and the number of
passengers it can load, such vessels are capable of
accommodating a bigger volume of both as compared to the
capacity of a regular commuter bus. Consequently, a ship
passenger will need at least an hour as is the usual practice,
to disembark from the vessel and claim his baggage whereas
a bus passenger can easily get off the bus and retrieve his
luggage in a very short period of time. Verily, petitioner
cannot categorically claim, through the bare expedient of
comparing the period of time entailed in getting the
passenger's cargoes, that the ruling in La Mallorca is
inapplicable to the case at bar. On the contrary, if we are to
apply the doctrine enunciated therein to the instant petition,
we cannot in reason doubt that the victim Anacleto Viana
was still a passenger at the time of the incident. When the
accident occurred, the victim was in the act of unloading his
cargoes, which he had every right to do, from petitioner's
vessel. As earlier stated, a carrier is duty bound not only to
bring its passengers safely to their destination but also to
afford them a reasonable time to claim their baggage.
ABOITIZ SHIPPING CORP VS GENERAL FIRE AND
LIFE ASSURANCE CORP
FACTS:
Aboitiz Shipping is the owner of M/V P. Aboitiz, a vessel w/c
sank on a voyage from Hongkong to the Philippines.
Thissinking 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
toforce majeureand that subjectvessel, at the time of the
sinking was seaworthy. The trial court rules against the
carrier on the ground that the loss didnot 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 suchsinking was due toforce majeure.Due to these
different rulings, Aboitiz seeks a pronouncement as to the
applicability of the doctrine of limited liability onthe totality
of the claimsvis a visthe losses brought about by the sinking

of the vessel M/V P. ABOITIZ, as based on thereal 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
inthis 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 lossesrelated to
maritime contracts is confined to the vessel, which is
hypothecated for such obligations or which stands as
theguaranty for their settlement. It has its origin by reason
of the conditions and risks attending maritime trade in its
earliestyears when such trade was replete with innumerable
and unknown hazards since vessels had to go through
largelyuncharted waters to ply their trade. It was designed
to offset such adverse conditions and to encourage people
andentities 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 againstthe 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 quoted in 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
aslimited 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.
ABOITIZ SHIPPING CORPORATIONvs.

NEW INDIA ASSURANCE COMPANY, LTD.,

May 2, 2006(full text)
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 Decision3
dated 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.
FACTS:
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,9 the surveyor concluded that the cause was the
flooding of the holds brought about by the vessels
questionable seaworthiness. Consequently, respondent filed
a complaint for damages against petitioner Aboitiz, FrancoBelgian Services and the latters 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.101avvphil.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
vessels 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, attorneys 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.
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 courts
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 respondents 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 respondents 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 vessels
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 courts 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.