DECISION

AZCUNA, J.:
This is a petition for review on certiorari[1] of the Resolution of the Court of Appeals (CA)
in CA-G.R. CV No. 52855 promulgated on April 13, 2000 granting respondents motion for
reconsideration dated March 9, 2000. The Resolution held respondents liable for
damages to petitioner subject to the limited-liability provision in the bill of lading.
The facts are as follows:
On September 30, 1993, L.T. Garments Manufacturing Corp. Ltd. shipped from Hong
Kong three sets of warp yarn on returnable beams aboard respondent Neptune Orient
Lines vessel, M/V Baltimar Orion, for transport and delivery to Fukuyama Manufacturing
Corporation (Fukuyama) of No. 7 Jasmin Street, AUV Subdivision, Metro Manila.
The said cargoes were loaded in Container No. IEAU-4592750 in good condition under
Bill of Lading No. HKG-0396180. Fukuyama insured the shipment against all risks with
petitioner Philippine Charter Insurance Corporation (PCIC) under Marine Cargo Policy No.
RN55581 in the amount of P228,085.
During the course of the voyage, the container with the cargoes fell overboard and was
lost.
Thus, Fukuyama wrote a letter to respondent Overseas Agency Services, Inc. (Overseas
Agency), the agent of Neptune Orient Lines in Manila, and claimed for the value of the
lost cargoes. However, Overseas Agency ignored the claim. Hence, Fukuyama sought
payment from its insurer, PCIC, for the insured value of the cargoes in the amount of
P228,085, which claim was fully satisfied by PCIC.
On February 17, 1994, Fukuyama issued a Subrogation Receipt to petitioner PCIC for the
latter to be subrogated in its right to recover its losses from respondents.
PCIC demanded from respondents reimbursement of the entire amount it paid to
Fukuyama, but respondents refused payment.
On March 21, 1994, PCIC filed a complaint for damages against respondents with the
Regional Trial Court (RTC) of Manila, Branch 35.
Respondents filed an Answer with Compulsory Counterclaim denying liability. They
alleged that during the voyage, the vessel encountered strong winds and heavy seas
making the vessel pitch and roll, which caused the subject container with the cargoes to
fall overboard. Respondents contended that the occurrence was a fortuitous event which
exempted them from any liability, and that their liability, if any, should not exceed
US$500 or the limit of liability in the bill of lading, whichever is lower.
In a Decision dated January 12, 1996, the RTC held that respondents, as common carrier,
[2] failed to prove that they observed the required extraordinary diligence to prevent
loss of the subject cargoes in accordance with the pertinent provisions of the Civil Code.
[3] The dispositive portion of the Decision reads:

WHEREFORE, judgment is rendered ordering the defendants, jointly and severally, to

pay the plaintiff the Peso equivalent as of February 17, 1994 of HK$55,000.00 or the
sum of P228,085.00, whichever is lower, with costs against the defendants.[4]

Respondents motion for reconsideration was denied by the RTC in an Order dated
February 19, 1996.
Respondents appealed the RTC Decision to the CA.
In a Decision promulgated on February 15, 2000, the CA affirmed the RTC Decision with
modification, thus:
WHEREFORE, the assailed decision is hereby MODIFIED. Appellants Neptune and
Overseas are hereby ordered to pay jointly and severally appellee PCIC P228,085.00,
representing the amount it paid Fukuyama. Costs against the appellants.[5]

Respondents moved for reconsideration of the Decision of the CA arguing, among

others, that their liability was only US$1,500 or US$500 per package under the limited
liability provision of the Carriage of Goods by Sea Act (COGSA).
In its Resolution dated April 13, 2000, the CA found the said argument of respondents to
be meritorious. The dispositive portion of the Resolution reads:
WHEREFORE, the motion is partly granted in the sense that appellants shall be liable to
pay appellee PCIC the value of the three packages lost computed at the rate of US$500
per package or a total of US$1,500.00.[6]
Hence, this petition raising this lone issue:
THE COURT OF APPEALS ERRED IN AWARDING RESPONDENTS DAMAGES SUBJECT TO
THE US$500 PER PACKAGE LIMITATION.
Petitioner contends that the CA erred in awarding damages to respondents subject to
the US$500 per package limitation since the vessel committed a quasi deviation which
is a breach of the contract of carriage when it intentionally threw overboard the
container with the subject shipment during the voyage to Manila for its own benefit or
preservation based on a Survey Report[7] conducted by Mariners Adjustment
Corporation, which firm was tasked by petitioner to investigate the loss of the subject
cargoes. According to petitioner, the breach of contract resulted in the abrogation of
respondents rights under the contract and COGSA including the US$500 per package
limitation. Hence, respondents cannot invoke the benefit of the US$500 per package
limitation and the CA erred in considering the limitation and modifying its decision
accordingly.
The contention lacks merit.
The facts as found by the RTC do not support the new allegation of facts by petitioner
regarding the intentional throwing overboard of the subject cargoes and quasi deviation.
The Court notes that in petitioners Complaint before the RTC, petitioner alleged as
follows:

xxx xxx xxx

2.03
In the course of the maritime voyage from Hongkong to Manila subject
shipment fell overboard while in the custody of the defendants and were never
recovered; it was part of the LCL cargoes packed by defendants in container IEAU4592750 that fell overboard during the voyage.[8]

Art. 1753. The law of the country to which the goods are to be transported shall govern
the liability of the common carrier for their loss, destruction or deterioration.

Moreover, the same Survey Report cited by petitioner stated:

The rights and obligations of respondent common carrier are thus governed by the
provisions of the Civil Code, and the COGSA,[10] which is a special law, applies
suppletorily.

From the investigation conducted, we noted that Capt. S.L. Halloway, Master of MV
BALTIMAR ORION filed a Note of Protest in the City of Manila, and was notarized on 06
October 1993.
Based on Note of Protest, copy attached hereto for your reference, carrier vessel sailed
from Hongkong on 1st October 1993 carrying containers bound for Manila.
Apparently, at the time the vessel [was] sailing at about 2400 hours of 2nd October
1993, she encountered winds and seas such as to cause occasional moderate to heavy
pitching and rolling deeply at times. At 0154 hours, same day, while in position Lat. 20
degrees, 29 minutes North, Long. 115 degrees, 49 minutes East, four (4) x 40 ft.
containers were lost/fell overboard. The numbers of these containers are NUSU3100789, TPHU -5262138, IEAU-4592750, NUSU-4515404.
xxx xxx xxx
Furthermore, during the course of voyage, high winds and heavy seas were encountered
causing the ship to roll and pitch heavily. The course and speed was altered to ease
motion of the vessel, causing delay and loss of time on the voyage.
xxx xxx xxx
SURVEYORS REMARKS:
In view of the foregoing incident, we are of the opinion that the shipment of 3 cases of
Various Warp Yarn on Returnable Beams which were containerized onto 40 feet LCL (no.
IEAU-4592750) and fell overboard the subject vessel during heavy weather is an Actual
Total Loss.[9]

The records show that the subject cargoes fell overboard the ship and petitioner should
not vary the facts of the case on appeal. This Court is not a trier of facts, and, in this
case, the factual finding of the RTC and the CA, which is supported by the evidence on
record, is conclusive upon this Court.
As regards the issue on the limited liability of respondents, the Court upholds the
decision of the CA.

Since the subject cargoes were lost while being transported by respondent common
carrier from Hong Kong to the Philippines, Philippine law applies pursuant to the Civil
Code which provides:

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

The pertinent provisions of the Civil Code applicable to this case are as follows:
Art. 1749. A stipulation that the common carriers liability is limited to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a greater
value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for
the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just
under the circumstances, and has been fairly and freely agreed upon.
In addition, Sec. 4, paragraph (5) of the COGSA, which is applicable to all contracts for
the carriage of goods by sea to and from Philippine ports in foreign trade, provides:
Neither the carrier nor the ship shall in any event be or become liable for any loss or
damage to or in connection with the transportation of goods in an amount exceeding
$500 per package lawful money of the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been declared by the shipper before
shipment and inserted in the bill of lading. This declaration, if embodied in the bill of
lading shall be prima facie evidence, but shall be conclusive on the carrier.
In this case, Bill of Lading No. 0396180 stipulates:
Neither the Carrier nor the vessel shall in any event become liable for any loss of or
damage to or in connection with the transportation of Goods in an amount exceeding
US$500 (which is the package or shipping unit limitation under U.S. COGSA) per
package or in the case of Goods not shipped in packages per shipping unit or customary
freight, unless the nature and value of such Goods have been declared by the Shipper
before shipment and inserted in this Bill of Lading and the Shipper has paid additional
charges on such declared value. . . .
The bill of lading[11] submitted in evidence by petitioner did not show that the shipper
in Hong Kong declared the actual value of the goods as insured by Fukuyama before
shipment and that the said value was inserted in the Bill of Lading, and so no additional
charges were paid. Hence, the stipulation in the bill of lading that the carriers liability
shall not exceed US$500 per package applies.
Such stipulation in the bill of lading limiting respondents liability for the loss of the
subject cargoes is allowed under Art. 1749 of the Civil Code, and Sec. 4, paragraph (5) of
the COGSA. Everett Steamship Corporation v. Court of Appeals[12] held:

A stipulation in the bill of lading limiting the common carriers liability for loss or
destruction of a cargo to a certain sum, unless the shipper or owner declares a greater
value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which
provide:
Art. 1749. A stipulation that the common carriers liability is limited to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a greater
value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for
the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just
under the circumstances, and has been fairly and freely agreed upon.
Such limited-liability clause has also been consistently upheld by this court in a number
of cases. Thus, in Sea-Land Service, Inc. vs. Intermediate Appellate Court, we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not
exist, the validity and binding effect of the liability limitation clause in the bill of lading
here are nevertheless fully sustainable on the basis alone of the cited Civil Code
Provisions. That said stipulation is just and reasonable is arguable from the fact that it
echoes Art. 1750 itself in providing a limit to liability only if a greater value is not
declared for the shipment in the bill of lading. To hold otherwise would amount to
questioning the justness and fairness of the law itself.... But over and above that
consideration, the just and reasonable character of such stipulation is implicit in it giving
the shipper or owner the option of avoiding accrual of liability limitation by the simple
and surely far from onerous expedient of declaring the nature and value of the shipment
in the bill of lading.
The CA, therefore, did not err in holding respondents liable for damages to petitioner
subject to the US$500 per package limited- liability provision in the bill of lading.
WHEREFORE, the petition is DENIED. The Resolution of the Court of Appeals in CA-G.R.
CV No. 52855 promulgated on April 13, 2000 is hereby AFFIRMED.

The court below held from the evidence submitted that the Euclid was worth at a fair
valuation P10,000; that both vessels were responsible for the collision; and that the loss
should be divided equally between the respective owners, P5,000 to be paid the plaintiff
by the defendant, and P5,000 to be borne by the plaintiff himself. From this judgment
both defendant and plaintiff appealed.
After a careful review of all the evidence of record we are all agreed with the trial judge
in his holding that the responsible officers on both vessels were negligent in the
performance of their duties at the time when the accident occurred, and that both
vessels were to blame for the collision. We do not deem it necessary to review the
conflicting testimony of the witnesses called by both parties, the trial also having
inserted in his opinion a careful and critical summary and analysis of the testimony
submitted to him, which, to our minds, fully and satisfactorily disposes of the evidence
are set forth in the following language (translated):
In view of the negligence of which the patron Millonario (of defendant's vessel)
has been guilty as well as that imputable to the patron of the launch Euclid,
both contributed in a decided manner and beyond all doubt to the occurrence
of the accident and the consequent damages resulting therefrom in the loss of
the launch Euclid.
With a little diligence which either of the two patrons might have practiced
under the circumstances existing at the time of the collision, if both had not
been so distracted and so negligent in the fulfillment of their respective duties,
the disaster could have been easily avoided, since the sea was free of obstacles
and the night one which permitted the patron Millonario to distinguish the hull
of the launch twenty minutes before the latter entered upon his path . . .
There is proven, therefore, the negligence of which the patron of the Euclid has
been guilty.

Costs against petitioner.

SO ORDERED.
G.R. No. L-8325

the Euclid sank five minutes thereafter. This action was brought to recover the value of
the Euclid.

March 10, 1914

C. B. WILLIAMS, plaintiff-appellant,
vs.
TEODORO R. YANGCO, defendant-appellant.
CARSON, J.:
The steamer Subic, owned by the defendant, collided with the lunch Euclid owned by the
plaintiff, in the Bay of Manila at an early hour on the morning of January 9, 1911, and

If the negligence by which the patron of the launch Euclid has contributed to
the cause of the accident and to the resulting damages is patent, none the less
so is the negligence of the patron of the steamer Subic, Hilarion Millonario by
name, as may be seen from his own testimony which is here copied for the
better appreciation thereof.
It will be seen that the trial judge was of opinion that the vessels were jointly liable for
the loss resulting from the sinking of the launch. But actions for damages resulting from
maritime collisions are governed in this jurisdiction by the provisions of section 3, title 4,
Book III of the Code of Commerce, and among these provisions we find the following:

ART. 827. If both vessels may be blamed for the collision, each one shall be
liable for its own damages, and both shall be jointly responsible for the loss and
damages suffered by their cargoes.
In disposing of this case the trial judge apparently had in mind that portion of the
section which treats of the joint liability of both vessels for loss or damages suffered by
their cargoes. In the case at bar, however, the only loss incurred was that of the
launch Euclid itself, which went to the bottom soon after the collision. Manifestly, under
the plain terms of the statute, since the evidence of record clearly discloses, as found by
the trail judge, that "both vessels may be blamed for the collision," each one must be
held may be blamed for it own damages, and the owner of neither one can recover from
the other in an action for damages to his vessel.
Counsel for the plaintiff, basing his contention upon the theory of the facts as contended
for by him, insisted that under he doctrine of "the last clear chance," the defendant
should be held liable because, as he insists, even if the officers on board the plaintiff's
launch were negligence in failing to exhibit proper lights and in failing to take the proper
steps to keep out of the path of the defendant's vessel, nevertheless the officers on
defendant's vessel, by the exercise of due precautions might have avoided the collision
by a very simple manuever. But it is sufficient answer to this contention to point out that
the rule of liability in this jurisdiction for maritime accidents such as that now under
consideration is clearly, definitely, and unequivocally laid down in the above-cited article
827 of the Code of Commerce; and under that rule, the evidence disclosing that both
vessels were blameworthy, the owners of either can successfully maintain an action
against the other for the loss or injury of his vessel.
In cases of a disaster arising from the mutual negligence of two parties, the party who
has a last clear opportunity of avoiding the accident, notwithstanding the negligence of
his opponent, is considered wholly responsible for it under the common-law rule of
liability as applied in the courts of common law of the United States. But this rule (which
is not recognized in the courts of admiralty in the United States, wherein the loss is
divided in cases of mutual and concurring negligence, as also where the error of one
vessel has exposed her to danger of collision which was consummated by he further
rule, that where the previous application by the further rule, that where the previous act
of negligence of one vessel has created a position of danger, the other vessel is not
necessarily liable for the mere failure to recognize the perilous situation; and it is only
when in fact it does discover it in time to avoid the casualty by the use of ordinary care,
that it becomes liable for the failure to make use of this last clear opportunity to avoid
the accident. (See cases cited in Notes, 7 Cyc., pp. 311, 312, 313.) So, under the English
rule which conforms very nearly to the common-law rule as applied in the American
courts, it has been held that the fault of the first vessel in failing to exhibit proper lights
or to take the proper side of the channel will relieve from liability one who negligently
runs into such vessels before he sees it; although it will not be a defense to one who,
having timely warning of the danger of collision, fails to use proper care to avoid it.
(Pollock on Torts, 374.) In the case at bar, the most that can be said in support of
plaintiff's contention is that there was negligence on the part of the officers on
defendant's vessel in failing to recognize the perilous situation created by the

negligence of those in charge of plaintiff's launch, and that had they recognized it in
time, they might have avoided the accident. But since it does not appear from the
evidence that they did, in fact, discover the perilous situation of the launch in time to
avoid the accident by the exercise of ordinary care, it is very clear that under the above
set out limitation to the rule, the plaintiff cannot escape the legal consequences of the
contributory negligence of his launch, even were we to hold that the doctrine is
applicable in the jurisdiction, upon which point we expressly reserve our decision at this
time.
The judgment of the court below in favor of the plaintiff and against the defendant
should be reserved, and the plaintiff's complaint should be dismissed without day,
without costs to either party in this instance. So ordered.

G.R. No. 92735

June 8, 2000

MONARCH INSURANCE CO., INC., TABACALERA INSURANCE CO., INC and Hon.
Judge AMANTE PURISIMA, petitioners,
vs.
COURT OF APPEALS and ABOITIZ SHIPPING CORPORATION, respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 94867
ALLIED GUARANTEE INSURANCE COMPANY, petitioner,
vs.
COURT OF APPEALS, Presiding Judge, RTC Manila, Br. 24 and ABOITIZ SHIPPING
CORPORATION,respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 95578
EQUITABLE INSURANCE CORPORATION, petitioner,
vs.
COURT OF APPEALS, Former First Division Composed of Hon. Justices
RODOLFO NOCON, PEDRO RAMIREZ, and JESUS ELBINIAS and ABOITIZ
SHIPPING CORPORATION, respondents.
DE LEON, JR., J.:
Before us are three consolidated petitions. G.R. No. 92735 is a petition for review filed
under Rule 45 of the Rules of Court assailing the decision of the Court of Appeals dated
March 29, 1990 in CA-G.R. SP. Case No. 17427 which set aside the writ of execution

issued by the lower court for the full indemnification of the claims of the petitioners,
Monarch Insurance Company (hereafter "Monarch") and Tabacalera Insurance Company,
Incorporated (hereafter "Tabacalera") against private respondent, Aboitiz Shipping
Corporation (hereafter "Aboitiz") on the ground that the latter is entitled to the benefit of
the limited liability rule in maritime law; G.R. No. 94867 is a petition for certiorari under
Rule 65 of the Rules of Court to annul and set aside the decision of the Court of Appeals
dated August 15, 1990 in CA-G.R. SP No. 20844 which ordered the lower court to stay
the execution of the judgment in favor of the petitioner, Allied Guarantee Insurance
Company (hereafter "Allied") against Aboitiz insofar as it impairs the rights of the other
claimants to their pro-rata share in the insurance proceeds from the sinking of the M/V P.
Aboitiz, in accordance with the rule on limited liability; and G.R. No. 95578 is a petition
for review under Rule 45 of the Rules of Court seeking a reversal of the decision of the
Court of Appeals dated August 24, 1990 and its resolution dated October 4, 1990 in C.A.
G.R. Civil Case No. 15071 which modified the judgment of the lower court's award of
actual damages to petitioner Equitable Insurance Corporation (hereafter "Equitable") to
its pro-rata share in the insurance proceeds from the sinking of the M/V P. Aboitiz.
All cases arose from the loss of cargoes of various shippers when the M/V P. Aboitiz, a
common carrier owned and operated by Aboitiz, sank on her voyage from Hong Kong to
Manila on October 31, 1980. Seeking indemnification for the loss of their cargoes, the
shippers, their successors-in-interest, and the cargo insurers such as the instant
petitioners filed separate suits against Aboitiz before the Regional Trial Courts. The
claims numbered one hundred and ten (110) for the total amount of P41,230,115.00
which is almost thrice the amount of the insurance proceeds of P14,500,000.00 plus
earned freight of 500,000.00 according to Aboitiz. To this day, some of these claims,
including those of herein petitioners, have not yet been settled.
G.R. No. 92735.
Monarch and Tabacalera are insurance carriers of lost cargoes. They indemnified the
shippers and were consequently subrogated to their rights, interests and actions against
Aboitiz, the cargo carrier. 1 Because Aboitiz refused to compensate Monarch, it filed two
complaints against Aboitiz, docketed as Civil Cases Nos. 82-2767 and 82-2770. For its
part, Tabacalera also filed two complaints against the same defendant, docketed as Civil
Cases Nos. 82-2768 and 82-2769. As these four (4) cases had common causes of action,
they were consolidated and jointly tried. 2
In Civil Case No. 82-2767 where Monarch also named Malaysian International Shipping
Corporation and Litonja Merchant Shipping Agency as Aboitiz's co-defendants, Monarch
sough recovery of P29,719.88 representing the value of three (3) pallets of glass tubing
that sank with the M/V P. Aboitiz, plus attorney's fees of not less than P5,000.00,
litigation expenses, interest at the legal rate on all these amounts, and the cost of
suit. 3 Civil Case. No. 82-2770 was a complaint filed by Monarch against Aboitiz and codefendants Compagnie Maritime des Chargeurs Reunis and F.E. Zuellig (M), Inc. for the
recovery of P39,597.00 representing the value of the one case motor vehicle parts which
was lost when the M/V P. Aboitiz sank on her way to Manila, plus Attorney's fees of not
less than P10,000.00 and cost of suit. 4

Tabacalera sought against Franco Belgian Services, F.E. Zuellig and Aboitiz in Civil Case
No. 82-2768 the recovery of P284,218.00 corresponding to the value of nine (9) cases of
Renault spare parts, P213,207.00 for the value of twenty-five (25) cases of door closers
and P42,254.00 representing the value of eighteen (18) cases of plastic spangle, plus
attorney's fees of not less than P50,000.00 and cost of suit. 5 In Civil Case No. 82-2769,
Tabacalera claimed from Hong Kong Island Shipping Co., Ltd., Citadel Lines and Aboitiz
indemnification in the amount of P75,058.00 for the value of four (4) cartons of motor
vehicle parts foundered with the M/V P. Aboitiz, plus attorney's fees of not less than
P20,000.00 and cost of suit. 6
In its answer with counterclaim, Aboitiz rejected responsibility for the claims on the
ground that the sinking of its cargo vessel was due to force majeure or an act of
God. 7 Aboitiz was subsequently declared as in default for its failure to appear during the
pre-trial. Its counsel fried a motion to set aside the order of default with notice of his
withdrawal as such counsel. Before the motion could be acted upon, Judge Bienvenido
Ejercjto, the presiding judge of the trial court, was promoted to the then intermediate
Appellate Court. The cases were thus re-raffled to Branch VII of the RTC of Manila
presided by Judge Amante P. Purisima, the co-petitioner in G.R. No. 92735. Without
resolving the pending motion to set aside the order of default, the trial court set the
cases for hearing. However, since Aboitiz had repeatedly failed to appear in court, the
trial court denied the said motion and allowed Monarch and Tabacalera to present
evidence ex-parte. 8
Monarch and Tabacalera proffered in evidence the survey of Perfect Lambert, a surveyor
commissioned to investigate the possible cause of the sinking of the cargo vessel. The
survey established that on her voyage to Manila from Hong Kong, the vessel did not
encounter weather so inclement that Aboitiz would be exculpated from liability for
losses. In his note of protest, the master of M/V P. Aboitiz described the wind force
encountered by the vessel as from ten (10) to fifteen (15) knots, a weather condition
classified as typical and moderate in the South China Sea at that particular time of the
year. The survey added that the seaworthiness of the vessel was in question especially
because the breaches of the hull and the serious flooding of two (2) cargo holds
occurred simultaneously in "seasonal weather." 9
In due course, the trial court rendered judgment against Aboitiz but the complaint
against all the other defendants was dismissed. Aboitiz was held liable for the following:
(a) in Civil Case No. 82-2767, P29,719.88 with legal interest from the filing of the
complaint until fully paid plus attorney's fees of P30,000.00 and cost of suit; (b) in Civil
Case No. 82-2768, P539,679.00 with legal interest of 12% per annum from date of filing
of the complaint until fully paid, plus attorney's fees of P30,000.00, litigation expenses
and cost of suit; (c) in Civil Case No. 82-2769, P75,058.00 with legal interest of 12% per
annum from date of filing of the complaint until-fully paid, plus P5,000.00 attorney's
fees, litigation expenses and cost of suit, and (d) in Civil Case No. 82-2770, P39,579.66
with legal interest of 12% per annum from date of filing of the complaint until fully paid,
plus attorney's fees of P5,000.00, litigation expenses and cost of suit.

Aboitiz filed a motion for reconsideration of the decision and/or for new trial to lift the
order of default. The court denied the motion on August 27, 1986. 10 Aboitiz appealed to
the Court of Appeals but the appeal was dismissed for its failure to file appellant's brief.
It subsequently filed an urgent motion for reconsideration of the dismissal with prayer
for the admission of its attached appellant's brief. The appellate court denied that
motion for lack of merit in a Resolution dated July 8, 1988. 11
Aboitiz thus filed a petition for review before this Court. Docketed as G.R. No. 84158, the
petition was denied in the Resolution of October 10, 1988 for being filed out of time.
Aboitiz's motion for the reconsideration of said Resolution was similarly denied. 12 Entry
of judgment was made in the case. 13
Consequently, Monarch and Tabacalera moved for execution of judgment. The trial court
granted the motion on April 4, 1989 14 and issued separate writs of execution. However,
on April 12, 1989, Aboitiz, invoking the real and hypothecary nature of liability in
maritime law, filed an urgent motion to quash the writs of execution. 15 According to
Aboitiz, since its liability is limited to the value of the vessel which was insufficient to
satisfy the aggregate claims of all 110 claimants, to indemnify Monarch and Tabacalera
ahead of the other claimants would be prejudicial to the latter. Monarch and Tabacalera
opposed the motion to quash. 16
On April 17, 1989, before the motion to quash could be heard, the sheriff levied upon
five (5) heavy equipment owned by Aboitiz for the public auction sale. At said sale,
Monarch was the highest bidder for one (1) unit FL-151 Fork Lift (big) and one (1) unit
FL-25 Fork Lift (small). Tabacalera was also the highest bidder for one (1) unit TCH TL251 Hyster Container Lifter, one (1) unit Hyster Top Lifter (out of order), and one (1) unit
ER-353 Crane. The corresponding certificates of sale 17 were issued to Monarch and
Tabacalera.
On April 18, 1989, the day before the hearing of the motion to quash, Aboitiz filed a
supplement to its motion, to add the fact that an auction sale had taken place. On April
19, 1989, Judge Purisima issued an order denying the motion to quash but freezing
execution proceedings for ten (10) days to give Aboitiz time to secure a restraining order
from a higher court. 18 Execution was scheduled to resume to fully satisfy the judgment
when the grace period shall have lapsed without such restraining order having been
obtained by Aboitiz.
Aboitiz filed with the Court of Appeals a petition for certiorari and prohibition with prayer
for preliminary injunction and/or temporary restraining order under CA-G.R. No. SP17427. 19 On March 29, 1990, the appellate court rendered a Decision the dispositive
portion of which reads:
WHEREFORE, the writ of certiorari is hereby granted, annulling the subject writs
of execution, auction sale, certificates of sale, and the assailed orders of
respondent Judge dated April 4 and April 19, 1989 insofar as the money value
of those properties of Aboitiz, levied on execution and sold at public auction,

has exceeded the pro-rata shares of Monarch and Tabacalera in the insurance
proceeds of Aboitiz in relation to the pro-rata shares of the 106 other claimants.
The writ of prohibition is also granted to enjoin respondent Judge, Monarch and
Tabacalera from proceeding further with execution of the judgments in question
insofar as the execution would satisfy the claims of Monarch and Tabacalera in
excess of their pro-rata shares and in effect reduce the balance of the proceeds
for distribution to the other claimants to their prejudice.
The question of whether or how much of the claims of Monarch and Tabacalera
against the insurance proceeds has already been settled through the writ of
execution and auction sale in question, being factual issues, shall be threshed
out before respondent judge.
The writ of preliminary injunction issued in favor of Aboitiz, having served its
purpose, is hereby lifted. No pronouncement as to costs.
SO ORDERED.

20

Hence, the instant petition for review on certiorari where petitioners Monarch,
Tabacalera and Judge Purisima raise the following assignment of errors:
1. The appellate court grievously erred in re-opening the Purisima decisions,
already final and executory, on the alleged ground that the issue of real and
hypothecary liability had not been previously resolved by Purisima, the
appellate court, and this Hon. Supreme Court;
2. The appellate court erred when it resolved that Aboitiz is entitled to the
limited real and hypothecary liability of a ship owner, considering the facts on
record and the law on the matter.
3. The appellate court erred when it concluded that Aboitiz does not have to
present evidence to prove its entitlement to the limited real and hypothecary
liability.
4. The appellate court erred in ignoring the case of "Aboitiz Shipping
Corporation v. CA and Allied Guaranty Insurance Co., Inc. (G.R. No. 88159),
decided by this Honorable Supreme Court as early as November 13, 1989,
considering that said case, now factual and executory, is in pari materia with
the instant case.
5. The appellate court erred in not concluding that irrespective of whether
Aboitiz is entitled to limited hypothecary liability or not, there are enough funds
to satisfy all the claimants.

6. The appellate court erred when it concluded that Aboitiz had made an
"abandonment" as envisioned by Art. 587 of the Code of Commerce.
7. The appellate court erred when it concluded that other claimants would
suffer if Tabacalera and Monarch would be fully paid.
8. The appellate court erred in concluding that certiorari was the proper remedy
for Aboitiz. 21
G.R. NOS. 94867 & 95578
Allied as insurer-subrogee of consignee Peak Plastic and Metal Products Limited, filed a
complaint against Aboitiz for the recovery of P278,536.50 representing the value of 676
bags of PVC compound and 10 bags of ABS plastic lost on board the M/V P. Aboitiz, with
legal interest from the date of filing of the complaint, plus attorney's fees, exemplary
damages and costs. 22 Docketed as Civil Case No. 138643, the case was heard before
the Regional Trial Court of Manila, Branch XXIV, presided by Judge Sergio D. Mabunay.
On the other hand, Equitable, as insurer-subrogee of consignee-assured Axel
Manufacturing Corporation, filed an amended complaint against Franco Belgian Services,
F.E. Zuellig, Inc. and Aboitiz for the recovery of P194,794.85 representing the value of 76
drums of synthetic organic tanning substances and 1,000 kilograms of optical bleaching
agents which were also lost on board the M/V P. Aboitiz, with legal interest from the date
of filing of the complaint, plus 25% attorney's fees, exemplary damages, litigation
expenses and costs of suit.23 Docketed as Civil Case No. 138396, the complaint was
assigned to the Regional Trial Court of Manila, Branch VIII.
In its answer with counterclaim in the two cases, Aboitiz disclaimed responsibility for the
amounts being recovered, alleging that the loss was due to a fortuitous event or an act
of God. It prayed for the dismissal of the cases and the payment of attorney's fees,
litigation expenses plus costs of suit. It similarly relied on the defenses of force mejeure,
seaworthiness of the vessel and exercise of due diligence in the carriage of goods as
regards the cross-claim of its co-defendants. 24
In support of its position, Aboitiz presented the testimonies of Capt. Gerry N. Racines,
master mariner of the M/V P. Aboitiz, and Justo C. Iglesias, a meteorologist of the
Philippine Atmospheric Geophysical and Astronomical Services Administration (PAGASA).
The gist of the testimony of Capt. Racines in the two cases follows:
The M/V P. Aboitiz left Hong Kong for Manila at about 7:30 in the evening of October 29,
1980 after securing a departure clearance from the Hong Kong Port Authority. The
departure was delayed for two hours because he (Capt. Racines) was observing the
direction of the storm that crossed the Bicol Region. He proceeded with the voyage only
after being informed that the storm had abated. At about 8:00 o'clock in the morning of
October 30, 1980, after more than twelve (12) hours of navigation, the vessel suddenly
encountered rough seas with waves about fifteen to twenty-five feet high. He ordered

his chief engineer to check the cargo holds. The latter found that sea water had entered
cargo hold Nos. 1 and 2. He immediately directed that water be pumped out by means
of the vessel's bilge pump, a device capable of ejecting 180 gallons of water per minute.
They were initially successful in pumping out the water.
At 6:00 a.m. of October 31, 1980, however, Capt. Racines received a report from his
chief engineer that the water level in the cargo holds was rapidly rising. He altered the
vessel's course and veered towards the northern tip of Luzon to prevent the vessel from
being continuously pummeled by the waves. Despite diligent efforts of the officers and
crew, however, the vessel, which was approximately 250 miles away from the eye of the
storm, began to list on starboard side at 27 degrees. Capt. Racines and his crew were
not able to make as much headway as they wanted because by 12:00 noon of the same
day, the cargo holds were already flooded with sea water that rose from three to twelve
feet, disabling the bilge pump from containing the water.
The M/V P. Aboitiz sank at about 7:00 p.m. of October 31, 1980 at latitude 18 degrees
North, longitude 170 degrees East in the South China Sea in between Hong Kong, the
Philippines and Taiwan with the nearest land being the northern tip of Luzon, around 270
miles from Cape Bojeador, Bangui, Ilocos Norte. Responding to the captain's distress
call, the M/V Kapuas (Capuas) manned by Capt. Virgilio Gonzales rescued the officers
and crew of the ill-fated M/V P. Aboitiz and brought them to Waileen, Taiwan where Capt.
Racines lodged his marine protest dated November 3, 1980.
Justo Iglesias, meteorologist of PAGASA and another witness of Aboitiz, testified in both
cases that during the inclusive dates of October 28-31, 1980, a stormy weather
condition prevailed within the Philippine area of responsibility, particularly along the sea
route from Hong Kong to Manila, because of tropical depression "Yoning." 25 PAGASA
issued weather bulletins from October 28-30, 1980 while the storm was still within
Philippine territory. No domestic bulletins were issued the following day when the storm
which hit Eastern Samar, Southern Quezon and Southern Tagalog provinces, had made
its exit to the South China Sea through Bataan.
Allied and Equitable refuted the allegation that the M/V P. Aboitiz and its cargo were lost
due to force majeure, relying mainly on the marine protest filed by Capt. Racines as well
as on the Beaufort Scale of Wind. In his marine protest under oath, Capt. Racines
affirmed that the wind force an October 29-30, 1980 was only ten (10) to fifteen (15)
knots. Under the Beaufort Scale of Wind, said wind velocity falls under scale No. 4 that
describes the sea condition as "moderate breeze," and "small waves becoming longer,
fairly frequent white horses." 26
To fortify its position, Equitable presented Rogelio T. Barboza who testified that as claims
supervisor and processor of Equitable, he recommended payment to Axel Manufacturing
Corporation as evidenced by the cash voucher, return check and subrogation receipt.
Barboza also presented a letter of demand to Aboitiz which, however, the latter
ignored. 27

On April 24, 1984, the trial court rendered a decision that disposed of Civil Case No.
138643 as follows:
WHEREFORE, judgment is hereby rendered ordering defendant Aboitiz Shipping
Company to pay plaintiff Allied Guarantee Insurance Company, Inc. the sum of
P278,536.50, with legal interest thereon from March 10, 1981, then date of the
filing of the complaint, until fully paid, plus P30,000.00 as attorney's fees, with
costs of suit.
SO ORDERED.

28

A similar decision was arrived at in Civil Case No. 138396, the dispositive portion of
which reads:
WHEREFORE, in view of the foregoing, this Court hereby renders judgment in
favor of plaintiff and against defendant Aboitiz Shipping Corporation, to pay the
sum of P194,794.85 with legal rate of interest thereon from February 27, 1981
until fully paid; attorney's fees of twenty-five (25%) percent of the total claim,
plus litigation expenses and costs of litigation.
SO ORDERED.

29

In Civil Case No. 138643, Aboitiz appealed to the Court of Appeals under CA-G.R. CV No.
04121. On March 23, 1987, the Court of Appeals affirmed the decision of the lower
court. A motion for reconsideration of the said decision was likewise denied by the Court
of Appeals on May 3, 1989. Aggrieved, Aboitiz then filed a petition for review with this
Court docketed as G.R. No. 88159 which was denied for lack merit. Entry of judgment
was made and the lower court's decision in Civil Case No. 138643 became final and
executory. Allied prayed for the issuance of a writ of execution in the lower court which
was granted by the latter on April 4, 1990. To stay the execution of the judgment of the
lower court, Aboitiz filed a petition for certiorari and prohibition with preliminary
injunction with the Court of Appeals docketed as CA-G.R. SP No. 20844. 30 On August 15,
1990, the Court of Appeals rendered the assailed decision, the dispositive portion of
which reads as follows.
WHEREFORE, the challenged order of the respondent Judge dated April 4, 1990
granting the execution is hereby set aside. The respondent Judge is further
ordered to stay the execution of the judgment insofar as it impairs the rights of
the 100 other claimants to the insurance proceeds including the rights of the
petitioner to pay more than the value of the vessel or the insurance proceeds
and to desist from executing the judgment insofar as it prejudices the pro-rata
share of all claimants to the insurance proceeds. No pronouncement as to
costs.
SO ORDERED.

Hence, Allied filed the instant petition for certiorari, mandamus and injunction with
preliminary injunction and/or restraining order before this Court alleging the following
assignment of errors:
1. Respondent Court of Appeals gravely erred in staying the immediate
execution of the judgment of the lower court as it has no authority nor
jurisdiction to directly or indirectly alter, modify, amend, reverse or invalidate a
final judgment as affirmed by the Honorable Supreme Court in G.R. No. 88159.
2. Respondent Court of Appeals with grave abuse of discretion amounting to
lack or excess of jurisdiction, brushed aside the doctrine in G.R. No. 88159
which is now the law of the case and observance of time honored principles
of stare decisis, res adjudicata and estoppel by judgment.
3. Real and hypothecary rule under Articles 587, 590 and 837 of the Code of
Commerce which is the basis of the questioned decision (Annex "C" hereof) is
without application in the face of the facts found by the lower court, sustained
by the Court of Appeals in CA-G.R. No. 04121 and affirmed in toto by the
Supreme Court in G.R. No. 88159.
4. Certiorari as a special remedy is unavailing for private respondent as there
was no grave abuse of discretion nor lack or excess of jurisdiction for Judge
Mabunay to issue the order of April 4, 1990 which was in accord with law and
jurisprudence, nor were there intervening facts and/or supervening events that
will justify respondent court to issue a writ of certiorari or a restraining order on
a final and executory judgment of the Honorable Supreme Court. 32
From the decision of the trial court in Civil Case No. 138396 that favored Equitable,
Aboitiz likewise appealed to the Court of Appeals through CA-G.R. CV No. 15071. On
August 24, 1990, the Court of Appeals rendered the Decision quoting extensively its
Decision in CA-G.R. No. SP-17427 (now G.R. No. 92735) and disposing of the appeal as
follows:
WHEREFORE, we hereby affirm the trial court's awards of actual damages,
attorney's fees and litigation expenses, with the exception of legal interest, in
favor of plaintiff-appellee Equitable Insurance Corporation as subrogee of the
consignee for the loss of its shipment aboard the M/V "P. Aboitiz" and against
defendant-appellant Aboitiz Shipping Corporation. However, the amount and
payment of those awards shall be subject to a determination of the pro-rata
share of said appellee in relation to the pro-rata shares of the 109 other
claimants, which determination shall be made by the trial court. This case is
therefore hereby ordered remanded to the trial court which shall reopen the
case and receive evidence to determine appellee's pro-rata share as aforesaid.
No pronouncement as to costs.

31

SO ORDERED.

33

On September 12, 1990, Equitable moved to reconsider the Court of Appeals' Decision.
The Court of Appeals denied the motion for reconsideration on October 4,
1990. 34 Consequently, Equitable filed with this Court a petition for review alleging the
following assignment of errors:
1. Respondent Court of Appeals, with grave abuse of discretion amounting to
lack or excess of jurisdiction, erroneously brushed aside the doctrine in G.R. No.
88159 which is now the law of the case as held in G.R. No. 89757 involving the
same and identical set of facts and cause of action relative to the sinking of the
M/V "P. Aboitiz" and observance of the time honored principles of stare decisis,
and estoppel by judgment.
2. Real and hypothecary rule under Articles 587, 590 and 837 of the Code of
Commerce which is the basis of the assailed decision and resolution is without
application in the face of the facts found by the trial court which conforms to
the conclusion and finding of facts arrived at in a similar and identical case
involving the same incident and parties similarly situated in G.R. No. 88159
already declared as the "law of the case" in a subsequent decision of this
Honorable Court in G.R. No. 89757 promulgated on August 6, 1990.
3. Respondent Court of Appeals gravely erred in concluding that limited liability
rule applies in case of loss of cargoes when the law itself does not distinguish;
fault of the shipowner or privity thereto constitutes one of the exceptions to the
application of limited liability under Article 587, 590 and 837 of the Code of
Commerce, Civil Code provisions on common carriers for breach of contract of
carriage prevails. 35
These three petitions in G.R. Nos. 92735, 94867 and 95578 were consolidated in the
Resolution of August 5, 1991 on the ground that the petitioners "have identical causes of
action against the same respondent and similar reliefs are prayed for." 36
The threshold issue in these consolidated petitions is the applicability of the limited
liability rule in maritime law in favor of Aboitiz in order to stay the execution of the
judgments for full indemnification of the losses suffered by the petitioners as a result of
the sinking of the M/V P. Aboitiz. Before we can address this issue, however, there are
procedural matters that need to be threshed out.
First. At the outset, the Court takes note of the fact that in G.R. No. 92735, Judge
Amante Purisima, whose decision in the Regional Trial Court is sought to be upheld, is
named as a co-petitioner. In Calderon v. Solicitor General, 37 where the petitioner in the
special civil action of certiorari and mandamus was also the judge whose order was
being assailed, the Court held that said judge had no standing to file the petition
because he was merely a nominal or formal party-respondent under Section 5 of Rule 65
of the Rules of Court. He should not appear as a party seeking the reversal of a decision
that is unfavorable to the action taken by him. The Court there said:

Judge Calderon should be-reminded of the well-known doctrine that a judge

should detach himself from cases where his decision is appealed to a higher
court for review. The raison d'etre for such doctrine is the fact that a judge is
not an active combatant in such proceeding and must leave the opposing
parties to contend their individual positions and for the appellate court to
decide the issues without his active participation. By filing this case, petitioner
in a way ceased to be judicial and has become adversarial instead. 38
While the petition in G.R. No. 92735 does not expressly show whether or not Judge
Purisima himself is personally interested in the disposition of this petition or he was just
inadvertently named as petitioner by the real parties in interest, the fact that Judge
Purisima is named as petitioner has not escaped this Court's notice. Judges and litigants
should be reminded of the basic rule that courts or individual judges are not supposed to
be interested "combatants" in any litigation they resolve.
Second. The petitioners contend that the inapplicability of the limited liability rule to
Aboitiz has already been decided on by no less than this Court in G.R. No. 88159 as
early as November 13, 1989 which was subsequently declared as "law of the case" in
G.R. No. 89757 on August 6, 1990. Herein petitioners cite the aforementioned cases in
support of their theory that the limited liability rule based on the real and hypothecary
nature of maritime law has no application in the cases at bar.
The existence of what petitioners insist is already the "law of the case" on the matter of
limited liability is at best illusory. Petitioners are either deliberately misleading this Court
or profoundly confused. As elucidated in the case of Aboitiz Shipping Corporation vs.
General Accident Fire and Life Assurance Corporation, 39
An examination of the November 13, 1989 Resolution in G.R. No. 88159 (pp.
280-282, Rollo) shows that the same settles two principal matters, first of which
is that the doctrine of primary administrative jurisdiction is not applicable
therein; and second is that a limitation of liability in said case would render
inefficacious the extraordinary diligence required by law of common carriers.
It should be pointed out, however, that the limited liability discussed in said
case is not the same one now in issue at bar, but an altogether different
aspect. The limited liability settled in G.R. No. 88159 is that which attaches to
cargo by virtue of stipulations in the Bill of Lading, popularly known as package
limitation clauses, which in that case was contained in Section 8 of the Bill of
Lading and which limited the carrier's liability to US$500.00 for the cargo
whose value was therein sought to be recovered. Said resolution did not tackle
the matter of the Limited Liability Rule arising out of the real and hypothecary
nature of maritime law, which was not raised therein, and which is the principal
bone of contention in this case. While the matters threshed out in G.R. No.
88159, particularly those dealing with the issues on primary administrative
jurisdiction and the package liability limitation provided in the Bill of Lading are
now settled and should no longer be touched, the instant case raises a
completely different issue. 40

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

court and all the way to the Supreme Court, Aboitiz had not presented an iota of
evidence to exculpate itself from the charge of negligence for the simple reason that it
was declared as in default. 43

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

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

This brings us to the primary question herein which is whether or not

respondent court erred in granting execution of the full judgment award in Civil
Case No. 14425 (G.R. No. 89757), thus effectively denying the application of
the limited liability enunciated under the appropriate articles of the Code of
Commerce. . . . . Collaterally, determination of the question of whether
execution of judgments which have become final and executory may be stayed
is also an issue.
We shall tackle the latter issue first. This Court has always been consistent in
its stand that the very purpose for its existence is to see the accomplishment of
the ends of justice. Consistent with this view, a number of decisions have
originated herefrom, the tenor of which is that no procedural consideration is
sancrosanct if such shall result in the subverting of justice. The right to
execution after finality of a decision is certainly no exception to this. Thus,
in Cabrias v. Adil (135 SCRA 355 [1885]), this Court ruled that:
xxx

xxx

xxx

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

inherent power to enforce it, and to exercise equitable control over
such enforcement. The court has authority to inquire whether its
judgment has been executed, and will remove obstructions to the
enforcement thereof. Such authority extends not only to such orders
and such writs as may be necessary to prevent an improper
enforcement of the judgment. If a judgment is sought to be perverted
and made a medium of consummating a wrong the court on proper
application can prevent it. 42
Fourth. Petitioners in G.R. No. 92735 ever that it was error for the respondent Court of
Appeals to allow Aboitiz the benefit of the limited liability rule despite its failure to
present evidence to prove its entitlement thereto in the court below. Petitioners Monarch
and Tabacalera remind this Court that from the inception of G.R. No. 92735 in the lower

It should be noted that Aboitiz was declared as in default not for its failure to file an
answer but for its absence during pre-trial and the trial proper. In Aboitiz' answer with
counterclaim, it claimed that the sinking of the M/V P. Aboitiz was due to an act of God or
unforeseen event and that the said ship had been seaworthy and fit for the voyage.
Aboitiz also alleged that it exercised the due diligence required by law, and that
considering the real and hypothecary nature of maritime trade, the sinking justified the
extinguishment of its liability for the lost shipment. 44
A judgment of default does not imply a waiver of rights except that of being heard and
presenting evidence in defendant's favor. It does not imply admission by the defendant
of the facts and causes of action of the plaintiff, because the codal section 45 requires
the latter to adduce evidence in support of his allegations as an indispensable condition
before final judgment could be given in his favor. Nor could it be interpreted as an
admission by the defendant that the plaintiff's causes of action find support in the law or
that the latter is entitled to the relief prayed for. 46 This is especially true with respect to
a defendant who had filed his answer but had been subsequently declared in default for
failing to appear at the trial since he has had an opportunity to traverse,via his answer,
the material averments contained in the complaint. Such defendant has a better
standing than a defendant who has neither answered nor appeared at trial. 47 The former
should be allowed to reiterate all affirmative defenses pleaded in his answer before the
Court of Appeals. Likewise, the Court of Appeals may review the correctness of the
evaluation of the plaintiffs evidence by the lower court.
It should also be pointed out that Aboitiz is not raising the issue of its entitlement to the
limited liability rule for the first time on appeal thus, the respondent Court of Appeals
may properly rule on the same.
However, whether or not the respondent Court of Appeals erred in finding, upon review,
that Aboitiz is entitled to the benefit of the limited liability rule is an altogether different
matter which shall be discussed below.1awphi1
Rule on Limited Liability. The petitioners assert in common that the vessel M/V P. Aboitiz
did not sink by reason offorce majeure but because of its unseaworthiness and the
concurrent fault and/or negligence of Aboitiz, the captain and its crew, thereby barring
Aboitiz from availing of the benefit of the limited liability rule.

The principle of limited liability is enunciated in the following provisions of the Code of
Commerce:
Art. 587. The shipagent shall also be civilly liable for the indemnities in favor of
third persons which may arise from the conduct of the captain in the care of
goods which he loaded on the vessel; but he may exempt himself therefrom by
abandoning the vessel with all the equipments and the freight it may have
earned during the voyage.
Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of
their interests in the common fund for the results of the acts of the captain
referred to in Art. 587.
Each co-owner may exempt himself from his liability by the abandonment,
before a notary, of the part of the vessel belonging to him.
Art. 837. The civil liability incurred by shipowners in the case prescribed in this
section, shall be understood as limited to the value of the vessel with all its
appurtenances and the freightage served during the voyage.
Art. 837 appeals the principle of limited liability in cases of collision hence, Arts. 587 and
590 embody the universal principle of limited liability in all cases. In Yangco v.
Laserna, 48 this Court elucidated on the import of Art. 587 as follows:
The provision accords a shipowner or agent the right of abandonment; and by
necessary implication, his liability is confined to that which he is entitled as of
right to abandon-"the vessel with all her equipments and the freight it may
have earned during the voyage." It is true that the article appears to deal only
with the limited liability of the shipowners or agents for damages arising from
the misconduct of the captain in the care of the goods which the vessel carries,
but this is a mere deficiency of language and in no way indicates the true
extent of such liability. The consensus of authorities is to the effect that
notwithstanding the language of the aforequoted provision, the benefit of
limited liability therein provided for, applies in all cases wherein the shipowner
or agent may properly be held liable for the negligent or illicit acts of the
captain. 49
"No vessel, no liability," expresses in a nutshell the limited liability rule. The shipowner's
or agent's liability is merely co-extensive with his interest in the vessel such that a total
loss thereof results in its extinction. The total destruction of the vessel extinguishes
maritime liens because there is no longer any res to which it can attach. 50This doctrine
is based on the real and hypothecary nature of maritime law which has its origin in the
prevailing conditions of the maritime trade and sea voyages during the medieval ages,
attended by innumerable hazards and perils. To offset against these adverse conditions
and to encourage shipbuilding and maritime commerce, it was deemed necessary to

confine the liability of the owner or agent arising from the operation of a ship to the
vessel, equipment, and freight, or insurance, if any. 51
Contrary to the petitioners' theory that the limited liability rule has been rendered
obsolete by the advances in modern technology which considerably lessen the risks
involved in maritime trade, this Court continues to apply the said rule in appropriate
cases. This is not to say, however, that the limited liability rule is without exceptions,
namely: (1) where the injury or death to a passenger is due either to the fault of the
shipowner, or to the concurring negligence of the shipowner and the captain; 52 (2)
where the vessel is insured; and (3) in workmen's compensation claims. 53
We have categorically stated that Article 587 speaks only of situations where the fault or
negligence is committed solely by the captain. In cases where the ship owner is likewise
to be blamed, Article 587 does not apply. Such a situation will be covered by the
provisions of the Civil Code on common carriers. 54
A finding that a fortuitous event was the sole cause of the loss of the M/V P. Aboitiz
would absolve Aboitiz from any and all liability pursuant to Article 1734(1) of the Civil
Code which provides in part that common carriers are responsible for the loss,
destruction, or deterioration of the goods they carry, unless the same is due to flood,
storm, earthquake, lightning, or other natural disaster or calamity. On the other hand, a
finding that the M/V P. Aboitiz sank by reason of fault and/or negligence of Aboitiz, the
ship captain and crew of the M/V P. Aboitiz would render inapplicable the rule on limited
liability. These issues are therefore ultimately questions of fact which have been subject
of conflicting determinations by the trial courts, the Court of Appeals and even this
Court.
In Civil Cases Nos. 82-2767-82-2770 (now G.R. No. 92735), after receiving Monarch's
and Tabacalera's evidence, the trial court found that the complete loss of the shipment
on board the M/V P. Aboitiz when it sank was neither due to a fortuitous event nor a
storm or natural cause. For Aboitiz' failure to present controverting evidence, the trial
court also upheld petitioners' allegation that the M/V P. Aboitiz was
unseaworthy. 55 However, on appeal, respondent Court of Appeals exculpated Aboitiz
from fault or negligence and ruled that:
. . ., even if she (M/V P. Aboitiz) was found to be unseaworthy,
this fault (distinguished from civil liability) cannot be laid on the shipowner's
door. Such fault was directly attributable to the captain. This is so, because
under Art. 612 of the Code of Commerce, among the inherent duties of a
captain, are to examine the vessel before sailing and to comply with the laws
on navigation. 56
and that:

. . . although the shipowner may be held civilly liable for the captain's fault . . .
having abandoned the vessel in question, even if the vessel was unseaworthy
due to the captain's fault, Aboitiz is still entitled to the benefit under the rule of
limited liability accorded to shipowners by the Code of Commerce. 57
Civil Case No. 138396 (now G.R. No. 95578) was similarly resolved by the trial court,
which found that the sinking of the M/V P. Aboitiz was not due to an act of God or force
majeure. It added that the evidence presented by the petitioner Equitable demonstrated
the negligence of Aboitiz Shipping Corporation in the management and operation of its,
vessel M/V P. Aboitiz. 58
However, Aboitiz' appeal was favorably acted upon by the respondent Court of Appeals
which reiterated its ruling in G.R. No. 92735 that the unseaworthiness of the M/V P.
Aboitiz was not a fault directly attributable to Aboitiz but to the captain, and that Aboitiz
is entitled to the benefit of the limited liability rule for having abandoned its ship. 59
Finally, in Civil Case No. 138643 (now G.R. No. 94867), the trial court held that the M/V P.
Aboitiz was not lost due to a fortuitous event or force majeure, and that Aboitiz had
failed to satisfactorily establish that it had observed extraordinary diligence in the
vigilance over the goods transported by it. 60
In CA-G.R. CV No. 04121, the Court of Appeals initially ruled against Aboitiz and found
that the sinking of the vessel was due to its unseaworthiness and the failure of its crew
and master to exercise extraordinary diligence. 61 Subsequently, however, Aboitiz'
petition before the Court of Appeals, docketed as CA-G.R. SP No. 20844 (now G.R. No.
94867) to annul and set aside the order of execution issued by the lower court was
resolved in favor of Aboitiz. The Court of Appeals brushed aside the issue of Aboitiz'
negligence and/or fault and proceeded to allow the application of the limited liability rule
"to accomplish the aims of justice." 62 It elaborated thus: "To execute the judgment in
this case would prejudice the substantial right of other claimants who have filed suits to
claim their cargoes that was lost in the vessel that sank and also against the petitioner
to be ordered to pay more than what the law requires." 63
It should be pointed out that the issue of whether or not the M/V P. Aboitiz sank by
reason of force majeure is not a novel one for that question has already been the
subject of conflicting pronouncements by the Supreme Court. In Aboitiz Shipping
Corporation v. Court of Appeals, 64 this Court approved the findings of the trial court and
the appellate court that the sinking of the M/V P. Aboitiz was not due to the waves
caused by tropical storm "Yoning" but due to the fault and negligence of Aboitiz, its
master and crew. 65 On the other hand, in the later case ofCountry Bankers Insurance
Corporation v. Court of Appeals, 66 this Court issued a Resolution on August 28, 1991
denying the petition for review on the ground that the Court of Appeals committed no
reversible error, thereby affirming and adopting as its own, the findings of the Court of
Appeals that force majeure had caused the M/V P. Aboitiz to founder.

In view of these conflicting pronouncements, we find that now is the opportune time to
settle once and for all the issue or whether or not force mejeure had indeed caused the
M/V P. Aboitiz to sink. After reviewing the records of the instant cases, we categorically
state that by the facts on record, the M/V P. Aboitiz did not go under water because of
the storm "Yoning."
It is true that as testified by Justo Iglesias, meteorologist of Pag-Asa, during the inclusive
dates of October 28-31, 1980, a stormy weather condition prevailed within the Philippine
area of responsibility, particularly along the sea route from Hong Kong to Manila,
because of tropical depression "Yoning". 67 But even Aboitiz' own evidence in the form of
the marine protest filed by Captain Racines affirmed that the wind force when the M/V P.
Aboitiz foundered on October 31, 1980 was only ten (10) to fifteen (15) knots which,
under the Beaufort Scale or Wind, falls within scale No. 4 that describes the wind
velocity as "moderate breeze," and characterizes the waves as "small . . . becoming
longer, fairly frequent white horses." 68 Captain Racines also testified in open court that
the ill-fated M/V P. Aboitiz was two hundred (200) miles away from storm "Yoning" when
it sank. 69
The issue of negligence on the part of Aboitiz, and the captain and crew of the M/V P.
Aboitiz has also been subject of conflicting rulings by this Court. In G.R. No.
100373, Country Bankers Insurance Corporation v. Court of Appeals, this Court found no
error in the findings of the Court of Appeals that the M/V P. Aboitiz sank by reason
offorce majeure, and that there was no negligence on the part of its officers and crew. In
direct contradiction is this Court's categorical declaration in Aboitiz Shipping Corporation
v. Court of Appeals," 70 to wit:
The trial court and the appellate court found that the sinking of the M/V P.
Aboitiz was not due to the waves caused by tropical storm "Yoning" but due to
the fault and negligence of petitioner, its master and crew. The court
reproduces with approval said findings . . . . 71
However, in the subsequent case of Aboitiz Shipping Corporation v. General Accident
Fire and Life Assurance Corporation, Ltd., 72 this Court exculpated Aboitiz from fault
and/or negligence while holding that the unseaworthiness of the M/V P. Aboitiz was only
attributable to the negligence of its captain and crew. Thus,
On this point, it should be stressed that unseaworthiness is not a fault that can
be laid squarely on petitioner's lap, absent a factual basis for such conclusion.
The unseaworthiness found in some cases where the same has been ruled to
exist is directly attributable to the vessel's crew and captain, more so on the
part of the latter since Article 612 of the Code of Commerce provides that
among the inherent duties of a captain is to examine a vessel before sailing
and to comply with the laws of navigation. Such a construction would also put
matters to rest relative to the decision of the Board of Marine Inquiry. While the
conclusion therein exonerating the captain and crew of the vessel was not
sustained for lack of basis, the finding therein contained to the effect that the
vessel was seaworthy deserves merit. Despite appearances, it is not totally

incompatible with the findings of the trial court and the Court of Appeals,
whose finding of "unseaworthiness" clearly did not pertain to the structural
condition of the vessel which is the basis of the BMI's findings, but to the
condition it was in at the time of the sinking, which condition was a result of the
acts of the captain and the crew. 73
It therefore becomes incumbent upon this Court to answer with finality the nagging
question of whether or not it was the concurrent fault and/or negligence of Aboitiz and
the captain and crew of the ill-fated vessel that had caused it to go under water.
Guided by our previous pronouncements and illuminated by the evidence now on record,
we reiterate our findings in Aboitiz Shipping Corporation v. General Accident Fire and
Life Assurance Corporation, Ltd. 74, that the unseaworthiness of the M/V P. Aboitiz had
caused it to founder. We, however, take exception to the pronouncement therein that
said unseaworthiness could not be attributed to the ship owner but only to the negligent
acts of the captain and crew of the M/V P. Aboitiz. On the matter of Aboitiz' negligence,
we adhere to our ruling in Aboitiz Shipping Corporation v. Court of Appeals, 75 that found
Aboitiz, and the captain and crew of the M/V P. Aboitiz to have been concurrently
negligent.
During the trial of Civil Case Nos. 82-2767-82-2770 (now G.R. No. 92735), petitioners
Monarch and Tabacalera presented a survey from Perfect Lambert, a surveyor based in
Hong Kong that conducted an investigation on the possible cause of the sinking of the
vessel. The said survey established that the cause of the sinking of the vessel was the
leakage of water into the M/V P. Aboitiz which probably started in the forward part of the
No. 1 hull, although no explanation was proffered as to why the No. 2 hull was likewise
flooded. Perfect Lambert surmised that the flooding was due to a leakage in the shell
plating or a defect in the water tight bulk head between the Nos. 1 and 2 holds which
allowed the water entering hull No. 1 to pass through hull No. 2. The surveyor concluded
that whatever the cause of the leakage of water into these hulls, the seaworthiness of
the vessel was definitely in question because the breaches of the hulls and serious
flooding of the two cargo holds occurred simultaneously in seasonal weather. 76
We agree with the uniform finding of the lower courts that Aboitiz had failed to prove
that it observed the extraordinary diligence required of it as a common carrier. We
therefore reiterate our pronouncement in Aboitiz Corporation v. Court of Appeals 77 on
the issue of Aboitiz' liability in the sinking of its vessel, to wit:
In accordance with Article 1732 of the Civil Code, the defendant common
carrier from the nature of its business and for reasons of public policy, is bound
to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by it according to all circumstances of the
case. While the goods are in the possession of the carrier, it is but fair that it
exercise extraordinary diligence in protecting them from loss or damage, and if
loss occurs, the law presumes that it was due to the carrier's fault or
negligence; that is necessary to protect the interest of the shipper which is at

the mercy of the carrier . . . In the case at bar, the defendant failed to prove hat
the loss of the subject cargo was not due to its fault or negligence. 78
The failure of Aboitiz to present sufficient evidence to exculpate itself from fault and/or
negligence in the sinking of its vessel in the face of the foregoing expert testimony
constrains us to hold that Aboitiz was concurrently at fault and/or negligent with the ship
captain and crew of the M/V P. Aboitiz. This is in accordance with the rule that in cases
involving the limited liability of shipowners, the initial burden of proof of negligence or
unseaworthiness rests on the claimants. However, once the vessel owner or any party
asserts the right to limit its liability, the burden of proof as to lack of privity or
knowledge on its part with respect to the matter of negligence or unseaworthiness is
shifted to it. 79 This burden, Aboitiz had unfortunately failed to discharge. That Aboitiz
failed to discharge the burden of proving that the unseaworthiness of its vessel was not
due to its fault and/or negligence should not however mean that the limited liability rule
will not be applied to the present cases. The peculiar circumstances here demand that
there should be no strict adherence to procedural rules on evidence lest the just claims
of shippers/insurers be frustrated. The rule on limited liability should be applied in
accordance with the latest ruling in Aboitiz Shipping Corporation v. General Accident Fire
and Life Assurance Corporation, Ltd., 80promulgated on January 21, 1993, that claimants
be treated as "creditors in an insolvent corporation whose assets are not enough to
satisfy the totality of claims against it." 81 To do so, the Court set out in that case the
procedural guidelines:
In the instant case, there is, therefore, a need to collate all claims preparatory
to their satisfaction from the insurance proceeds on the vessel M/V P. Aboitiz
and its pending freightage at the time of its loss. No claimant can be given
precedence over the others by the simple expedience of having completed its
action earlier than the rest. Thus, execution of judgment in earlier completed
cases, even these already final and executory must be stayed pending
completion of all cases occasioned by the subject sinking. Then and only then
can all such claims be simultaneously settled, either completely or pro-rata
should the insurance proceeds and freightage be not enough to satisfy all
claims.
xxx

xxx

xxx

In fairness to the claimants and as a matter of equity, the total proceeds of the
insurance and pending freightage should now be deposited in trust. Moreover,
petitioner should institute the necessary limitation and distribution action
before the proper admiralty court within 15 days from finality of this decision,
and thereafter deposit with it the proceeds from the insurance company and
pending freightage in order to safeguard the same pending final resolution of
all incidents, for final pro-rating and settlement thereof. 82(Emphasis supplied.)
There is no record that Aboitiz. has instituted such action or that it has deposited in trust
the insurance proceeds and freightage earned. The pendency of the instant cases before
the Court is not a reason for Aboitiz to disregard the aforementioned order of the Court.

In fact, had Aboitiz complied therewith, even these cases could have been terminated
earlier. We are inclined to believe that instead of filing the suit as directed by this Court,
Aboitiz tolerated the situation of several claimants waiting to gel hold of its insurance
proceeds, which, if correctly handled must have multiplied in amount by now. By its
failure to abide by the order of this Court, it had caused more damage to the claimants
over and above that which they have endured as a direct consequence of the sinking of
the M/V P. Aboitiz. It was obvious that from among the many cases filed against it over
the years, Aboitiz was waiting for a judgment that might prove favorable to it, in blatant
violation of the basic provisions of the Civil Code on abuse of rights.

Respondent Aboitiz Shipping Corporation is further directed to comply with the Order
promulgated by this Court on January 21, 1993 in Aboitiz Shipping Corporation v.
General Accident Fire and Life Assurance Corporation, Ltd., G.R. No. 100446, January 21,
1993, to (a) institute the necessary limitation and distribution action before the proper
Regional Trial Court, acting as admiralty court, within fifteen (15) days from the finality
of this decision, and (b) thereafter to deposit with the said court the insurance proceeds
from the loss of the vessel, M/V P. Aboitiz, and the freightage earned in order to
safeguard the same pending final resolution of all incidents relative to the final prorating thereof and to the settlement of all claims.1wphi1.nt

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

SO ORDERED.

Aboitiz' blatant disregard of the order of this Court in Aboitiz Shipping Corporation v.
General Accident Fire and Life Assurance Corporation, Ltd. 84 cannot be anything but,
willful on its part. An act is considered willful if it is done with knowledge of its injurious
effect; it is not required that the act be done purposely to produce the injury. 85 Aboitiz is
well aware that by not instituting the said suit, it caused the delay in the resolution of all
claims against it. Having willfully caused loss or injury to the petitioners in a manner
that is contrary to morals, good customs or public policy, Aboitiz is liable for damages to
the latter. 86
Thus, for its contumacious act of defying the order of this Court to file the appropriate
action to consolidate all claims for settlement, Aboitiz must be held liable for moral
damages which may be awarded in appropriate cases under the Chapter on human
relations of the Civil Code (Articles 19 to 36). 87
On account of Aboitiz' refusal to satisfy petitioners' claims in accordance with the
directive of the Court in Aboitiz Shipping Corporation v. General Accident Fire and Life
Assurance Corporation, Ltd., it acted in gross and evident bad faith. Accordingly,
pursuant to Article 2208 of the Civil Code, 88 petitioners should be granted attorney's
fees.
WHEREFORE, the petitions in G.R. Nos. 92735, 94867, and 95578 are DENIED. The
decisions of the Court of Appeals in CA-G.R. No. SP-17427 dated March 29, 1990, CAG.R. SP No. 20844 dated August 15, 1990, and CA-G.R. CV No. 15071 dated August 24,
1990 are AFFIRMED with the MODIFICATION that respondent Aboitiz Shipping
Corporation is ordered to pay each of the respective petitioners the amounts of
P100,000.00 as moral damages and P50,000.00 as attorney's fees, and treble the cost
of suit.

MITSUI O.S.K. LINES LTD., represented by MAGSAYSAY AGENCIES, INC.,

petitioner, vs. COURT OF APPEALS and LAVINE LOUNGEWEAR MFG. CORP.,
respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the January 25, 1995 decision of the Court of
Appeals[1] and its resolution of March 22, 1995 denying petitioners motion for
reconsideration. The appellate court upheld orders of Branch 68 (Pasig) of the Regional
Trial Court, National Capital Judicial Region, denying petitioners motion to dismiss in the
original action filed against petitioner by private respondent.
The facts are not in dispute.[2]
Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the Philippines
by its agent, Magsaysay Agencies. It entered into a contract of carriage through Meister
Transport, Inc., an international freight forwarder, with private respondent Lavine
Loungewear Manufacturing Corporation to transport goods of the latter from Manila to
Le Havre, France. Petitioner undertook to deliver the goods to France 28 days from initial
loading. On July 24, 1991, petitioners vessel loaded private respondents container van
for carriage at the said port of origin.
However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with the
result that the shipment arrived in Le Havre only on November 14, 1991. The consignee
allegedly paid only half the value of the said goods on the ground that they did not
arrive in France until the off season in that country. The remaining half was allegedly
charged to the account of private respondent which in turn demanded payment from
petitioner through its agent.

As petitioner denied private respondents claim, the latter filed a case in the Regional
Trial Court on April 14, 1992. In the original complaint, private respondent impleaded as
defendants Meister Transport, Inc. and Magsaysay Agencies, Inc., the latter as agent of
petitioner Mitsui O.S.K. Lines Ltd. On May 20, 1993, it amended its complaint by
impleading petitioner as defendant in lieu of its agent. The parties to the case thus
became private respondent as plaintiff, on one side, and Meister Transport Inc. and
petitioner Mitsui O.S.K. Lines Ltd. as represented by Magsaysay Agencies, Inc., as
defendants on the other.
Petitioner filed a motion to dismiss alleging that the claim against it had prescribed
under the Carriage of Goods by Sea Act.
The Regional Trial Court, as aforesaid, denied petitioners motion as well as its
subsequent motion for reconsideration. On petition for certiorari, the Court of Appeals
sustained the trial courts orders. Hence this petition containing one assignment of error:
THE RESPONDENT COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN
RULING THAT PRIVATE RESPONDENTS AMENDED COMPLAINT IS (sic) NOT PRESCRIBED
PURSUANT TO SECTION 3(6) OF THE CARRIAGE OF GOODS BY SEA ACT.
The issue raised by the instant petition is whether private respondents action is for loss
or damage to goods shipped, within the meaning of 3(6) of the Carriage of Goods by Sea
Act (COGSA).
Section 3 provides:
(6) Unless notice of loss or damage and the general nature of such loss or damage be
given in writing to the carrier or his agent at the port of discharge or at the time of the
removal of the goods into the custody of the person entitled to delivery thereof under
the contract of carriage, such removal shall be prima facie evidence of the delivery by
the carrier of the goods as described in the bill of lading. If the loss or damage is not
apparent, the notice must be given within three days of the delivery.
Said notice of loss or damage may be endorsed upon the receipt for the goods given by
the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their
receipt been the subject of joint survey or inspection.
In any event the carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the goods or the
date when the goods should have been delivered: Provided, that, if a notice of loss or
damage, either apparent or concealed, is not given as provided for in this section, that
fact shall not affect or prejudice the right of the shipper to bring suit within one year
after the delivery of the goods or the date when the goods should have been delivered.
In the case of any actual or apprehended loss or damage, the carrier and the receiver
shall give all reasonable facilities to each other for inspecting and tallying the goods.
In Ang v. American Steamship Agencies, Inc., the question was whether an action for the
value of goods which had been delivered to a party other than the consignee is for loss
or damage within the meaning of 3(6) of the COGSA. It was held that there was no loss
because the goods had simply been misdelivered. Loss refers to the deterioration or
disappearance of goods.[3]

As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage
of Goods by Sea Act, loss contemplates merely a situation where no delivery at all was
made by the shipper of the goods because the same had perished, gone out of
commerce, or disappeared in such a way that their existence is unknown or they cannot
be recovered.[4]
Conformably with this concept of what constitutes loss or damage, this Court held in
another case[5] that the deterioration of goods due to delay in their transportation
constitutes loss or damage within the meaning of 3(6), so that as suit was not brought
within one year the action was barred:
Whatever damage or injury is suffered by the goods while in transit would result in loss
or damage to either the shipper or the consignee. As long as it is claimed, therefore, as
it is done here, that the losses or damages suffered by the shipper or consignee were
due to the arrival of the goods in damaged or deteriorated condition, the action is still
basically one for damage to the goods, and must be filed within the period of one year
from delivery or receipt, under the above-quoted provision of the Carriage of Goods by
Sea Act.[6]
But the Court allowed that
There would be some merit in appellants insistence that the damages suffered by him as
a result of the delay in the shipment of his cargo are not covered by the prescriptive
provision of the Carriage of Goods by Sea Act above referred to, if such damages were
due, not to the deterioration and decay of the goods while in transit, but to other causes
independent of the condition of the cargo upon arrival, like a drop in their market
value. . . .[7]
The rationale behind limiting the said definitions to such parameters is not hard to find
or fathom. As this Court held in Ang:
Said one-year period of limitation is designed to meet the exigencies of maritime
hazards. In a case where the goods shipped were neither lost nor damaged in transit but
were, on the contrary, delivered in port to someone who claimed to be entitled thereto,
the situation is different, and the special need for the short period of limitation in cases
of loss or damage caused by maritime perils does not obtain.[8]
In the case at bar, there is neither deterioration nor disappearance nor destruction of
goods caused by the carriers breach of contract. Whatever reduction there may have
been in the value of the goods is not due to their deterioration or disappearance
because they had been damaged in transit.
Petitioner contends:
Although we agree that there are places in the section (Article III) in which the phrase
need have no broader meaning than loss or physical damage to the goods, we disagree
with the conclusion that it must so be limited wherever it is used. We take it that the
phrase has a uniform meaning, not merely in Section 3, but throughout the Act; and
there are a number of places in which the restricted interpretation suggested would be
inappropriate. For example Section 4(2) [Article IV(2) (sic) exempts exempts (sic) the
carrier, the ship (sic), from liability loss or damage (sic) resulting from certain courses
beyond their control.[9]

Indeed, what is in issue in this petition is not the liability of petitioner for its handling of
goods as provided by 3(6) of the COGSA, but its liability under its contract of carriage
with private respondent as covered by laws of more general application.
Precisely, the question before the trial court is not the particular sense of damages as it
refers to the physical loss or damage of a shippers goods as specifically covered by 3(6)
of COGSA but petitioners potential liability for the damages it has caused in the general
sense and, as such, the matter is governed by the Civil Code, the Code of Commerce
and COGSA, for the breach of its contract of carriage with private respondent.
We conclude by holding that as the suit below is not for loss or damage to goods
contemplated in 3(6), the question of prescription of action is governed not by the
COGSA but by Art. 1144 of the Civil Code which provides for a prescriptive period of ten
years.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED.
SO ORDERED.

G.R. No. L-11081

February 11, 1916

UNITED STATES, plaintiff-appellee,

vs.
MORO MOHAMAD, MORO ASLANG, MORO POLA, and MORO YUNOS, defendantsappellants.
G.E. Campbell for appellants.
Attorney-General Avancea for appellee.
CARSON, J.:

The death penalty having been imposed on the four defendants and appellants in this
case, by the Court of First Instance of Zamboanga, upon their conviction of the crime
of asesinato, the record of the proceedings had in the court below, including a transcript
of the evidence submitted at the trial, has been brought to this court for review (en
consulta), in accordance with the general provisions of law in such cases.
The information upon which the accused were brought to trial charges the commission
of the crime as follows:
On or about the 3rd day of December, 1914, in the hacienda of San Ramon,
situated in the municipality of Zamboanga, Province of Zamboanga,
Department of Mindanao and Sulu, Philippine Islands, the aforesaid accused, all
being at that time, as at present, prisoners in the San Ramon prison, within the
municipality of Zamboanga, in union with three others of the same prison,
named Damang, Juljani, and Hadais, mutually aiding and conspiring together,
willfully, illegally, and criminally, and with treachery, cruelty, and known
premeditation, armed with hatchets and bolos, attacked and wounded the
guard named Uping, who was at that time in charge of the aforesaid accused,
inflicting mortal wounds as the result of which he died.
That at the time of committing the crime of assassination the accused Moro
Mohamad had been already condemned to five years' imprisonment for the
crime of theft of large cattle, which penalty was imposed on him on February 2,
1914; the accused Moro Pola was serving a sentence of ten years for the crime
of theft of large cattle, which penalty was imposed on him on the 4th of
November, 1913; and the accused Moros Aslang and Yunos were serving a
sentence of two years each for the crime of theft of large cattle, which
sentence was imposed on them on the 13th of May, 1914. All contrary to law.
Upon arraignment each of the accused entered a plea of "guilty." No witnesses were
called for the defense, but a number of witnesses were called for the prosecution, and
their testimony, read together with the pleas of "guilty" entered by the accused,
affirmatively establishes all the material circumstances which marked the commission of
the crime.
On the 3rd day of December, 1914, the accused were prisoners serving sentences at the
San Ramon penal farm for robbery of large cattle. On the day, in furtherance of a
conspiracy to escape from confinement, they treacherously (con alevosia) assaulted and
killed a guard, named Uping. Taking the gun of their victim they made their escape, but
were captured ten days later. When they were brought back to the farm they all
confessed their guilt to the superintendent and through an interpreter, told him in detail
all the circumstances under which the crime was committed.
It appears that on the night of the day before the commission of the crime, the four
defendants, together with three other prisoners, agreed together to kill their guard at
the first opportunity and make their escape. They do not appear to have had any

particular guard in mind, but simply resolved to kill anyone in whose care they might be
on the following day. This group of prisoners worked together under the supervision or
leadership of one of their number named Damang, who acted as a boss or capataz, and
seems to have been the leader in the conspiracy. The next morning the party were
working in one of the coconut groves of the penal farm, and for that purpose were
provided with bolos and hatchets. They were under charge of a guard named Uping.
Between 9 and 10 o'clock, Damang gave the guard Uping a fresh coconut, and while he
was drinking its contents Damang threw sand in his eyes and seized his gun. At the
same time all the members of the party attacked the guard, did him to death with their
hatchets and escaped. The body of the guard was found the following day, lying face
down, with the head almost severed from the trunk by a large wound on the back of the
neck. Four large wounds and a number of smaller ones were found on the cadaver.
Counsel for the accused urges that the evidence of record does not satisfactory
establish the guilty participation of each and all of these accused in the unlawful taking
of the life of the guard, and that even if it be found that they all united in the murderous
assault on the guard, there is not sufficient evidence in the record to sustain a finding as
to each of them, that this participation in the crime was marked with the aggravating
circumstances of treachery (alevosia) and deliberate premeditation, one of which at
least must be proven beyond a reasonable doubt, to sustain the imposition of the death
penalty. Counsel bases his contention on the alleged indefiniteness of the extrajudicial
confessions, and the alleged possibility of error in the interpretation of those
confessions.
But having in mind the pleas of "guilty" of the commission of the crime in the manner
and form charged in the information which were entered by each of the accused upon
arraignment, and which in themselves are sufficient to sustain the judgment of
conviction entered in the court below, we are of opinion that the guilt of each of the
accused of the crime of murder is conclusively established by his extrajudicial
confession, read together with the other evidence in the record. There is nothing in the
record which would justify us in doubting the truth and accuracy of the testimony of the
witnesses for the protection with reference to the extrajudicial confessions; and these
extrajudicial confessions clearly establish the participation of each and all of the
accused in the treacherous and murderous assault on their guard, and conclusively
establish the existence of a conspiracy to do one of the guards to death and escape,
entered into between some of these accused and certain other prisoners at the penal
farm, who are not now on trial, on the night before the crime was committed. It may be
admitted that while the evidence conclusively discloses that all of the accused took part
in the treacherous attack, it does not conclusively appear from the evidence alone that
each and all of them entered into the conspiracy on the night before the assault; and
that a finding of the aggravating circumstances of deliberate
premeditation (premeditacion conocida) could not, therefore, be maintained against all
of them on the evidence of record without taking into consideration their separate pleas
of "guilty."
We do not deem this defect in the evidence of any vital importance however, because
there is nothing in the evidence which tends to put in doubt the truth and accuracy of

their separate pleas of "guilty" as charged in the information; and, because, further,
both the "pleas" and the evidence sustaining a finding that the commission of the crime
was marked with the qualifying circumstance of treachery, each of the accused is
undoubtedly guilty of the crime of "asesinato" (murder); and it appearing that all of the
accused were serving sentence for the commission of a felony at the time of the murder,
the prescribed penalty therefor is death, under the following provisions of article 129 of
the Penal Code.
Any person who shall commit a felony or misdemeanor after having been
convicted by a final judgment, before beginning to serve such sentence or
while serving same, shall be punished in accordance with the following rules:
1. The maximum degree of the penalty prescribed by the law for the new felony
or misdemeanor shall be imposed.
Counsel for the accused urged that the benefit of the provisions of article 11 as
amended by Act No. 2142 should be extended to the convictions, it appearing that they
are all Moros, not wholly civilized and of a somewhat low order of intelligence.
We regret that we are unable to secure our own consent to the application of the
beneficent provisions of this statute in favor of these convicts. We are convinced
however that the statute was not intended to reach a case such as that now before us.
We do not think that the lack of instruction or education of these convicts had aught to
do with their participation in the crime, or that it should be held to extenuate the gravity
of their criminal liability. Their sole purpose and object was to escape from the prison
farm. They were not led on by any religious or superstitious belief, and no tribal custom
suggested the treacherous murder of their guard. The murderous assault was not the
result of a passionate or savage outburst of rage and indignation aroused by some
fancied or real wrong. Indeed the motive which inspired them in committing the crime,
that is to say the desire to escape just chastisement for former offenses by flight from
detention, is calculated to appeal alike to the highly educated, well informed man and
the most ignorant member of an uncivilized tribe.
The ignorance or lack of instruction of convicts serving sentence in goals and
penitentiaries should not be held to extenuate their criminal liability for treacherous and
murderous assault upon their guards, which are actuated by no other motive than the
desire to escape from imprisonment; and the lawmaker having clearly indicated that
discipline in the goals and penitentiaries necessitates the impositions of the maximum
penalties prescribed for offenses committed in such institutions, it becomes our duty to
affirm the imposition of the maximum penalties in the case at bar.
The judgment in this case convicting and sentencing the four accused, Moro Mohamad,
Moro Aslang, Moro Pola and Moro Yunos should be affirmed with a proportionate share of
the costs of this instance against each of them. So ordered.
Arellano, C.J., Torres, Johnson, Moreland and Trent, JJ., concur.

Pertinent parts of the Appeals Court decision are hereby reproduced for a clearer
understanding of the issue involved in this appeal:
The order of cancellation and revocation of appellant certificate of public convenience,
dated October 27, 1953 (Exh. 4-D) does not relieve her of the liability established by
above quoted legal provisions as clearly and positively construed by the highest tribunal
of the land. This order was issued motu propio by the Commission in view of appellant
failure to pay the P15.00 supervision and regulation fee and its 50% surcharge, and not
for the purpose of transferring the same certificate to Jose B. Aguas. A copy of the above
mentioned order was furnished appellant, so that she cannot profess ignorance of what
she termed the "anomalous operation" of the jeepney she sold to Jose B. Aguas without
the required authorization or approval of the Public Service Commission. Appellant's
failure to stop the operation of the vehicle in question and to surrender to the Motor
Vehicles Office the corresponding plates, as ordered by exhibit 4-D, Vargas constitutes a
violation of the Revised Motor Vehicle Law and Commonwealth No. 146, which violation
makes her liability and responsibility clearer and more inescapable.
G.R. No. L-17459

September 29, 1962

xxx

xxx

xxx

DIWATA VARGAS, petitioner,

vs.
SALVADOR LANGCAY, CORAZON LANGCAY, HELEN LANGCAY and JOSE AGUAS,
respondents.

. . . Appellant's liability stems from and is a form of punishment for her failure to comply
with section 20 (g) of Commonwealth Act 146 and with 5 of Act 3992. . . .

Mary Concepcion for petitioner.

Jose R. Abalos and A. M. Ronquillo for respondents.

There is no question that appellees Corazon and Helen Langcay were not passengers of
the jeepney, the reckless operation of which resulted in their injuries. Therefore, the
direct and immediate liability of a common carrier as provided for by the Civil Code
cannot be ascribed to appellant. Accordingly, her liability should be based on article 103
of the Revised Penal Code. . . . Therefore, appellant's responsibility is mere subsidiary,
pursuant to the above cited article of the Revised Penal Code.

LABRADOR, J.:

xxx

xxx

xxx

This is a petition for review of the decision of the Court of Appeals finding petitioner
subsidiarily liable for damages under article 103 of the Revised Penal Code.

xxx

At about 8:00 o'clock in the morning of June 5, 1955, at Rizal Avenue, Manila, Corazon
and Helen Langcay, sisters, were hit and injured by a jeepney bearing plate No. AC4859-Quezon City-1955, then driven by Ramon B. Aguas. Criminally charged with
physical injuries, the said Ramon B. Aguas was finally sentenced by the Court of
Appeals, in CA-G.R. No. 17900-R, to 3 months and 6 days of arresto mayor for serious
and slight physical injuries through reckless imprudence, caused to Corazon and Helen
Langcay, "without pronouncement with respect to the indemnity due to the aggrieved
parties, because the action therefor had been reserved."

. . . the judgment appealed from is hereby modified in the sense that should defendant
Ramon B. Aguas be found insolvent, appellant should pay appellees the sum of P953.00
as compensatory damages, P4,000.00 and P500.00 as moral damages suffered by
Corazon and Helen Langcay, respectively, and P2,000.00 for attorney's fees. It is also
ordered that this case be returned to the court of origin not only for the execution of this
decision once it becomes final, but also for further proceedings against Jose B. Aguas,
after proper summons, in the third party complaint above mentioned. Without special
pronouncement as to the payment of the costs.

Since the records of the Public Service Commission and the Motor Vehicles Office
showed that Diwata Vargas was, at the time of the accident, the owner and operator of
the jeepney in question, the parents of Corazon and Helen sued Diwata Vargas and the
driver for damages. In spite of the defense of appellant Diwata Vargas that prior to the
accident, precisely on August 17, 1953, she had sold the vehicle to Jose B. Aguas (father
of the driver), so that at the time of the accident she was no longer the owner of the
jeepney, and that, further, Public Service Commission, on October 27, 1953, cancelled
the certificate of public convenience issued in her name, the defendants Diwata Vargas
and Ramon B. Aguas were jointly and severally sentenced to pay damages and
attorneys fees by the Court of First Instance of Manila. Diwata Vargas appealed to the
Court of Appeals which affirmed, with modifications, the lower court's decision.

Appellant-petitioner Diwata Vargas brought the case to this Court on a question of law,
alleging that she cannot be held liable under Art. 103 of the Revised Penal Code for
whatever violation or offense she may have committed under the Public Service Law
and the Motor Vehicle Law and in the absence of a showing that she employed the
person (driver) who caused the damage, and that she was engaged in an industry or a
business, and where the evidence prove that the father (Jose B. Aguas ) of the person
primarily liable (Ramon Aguas) is his actual employer.

xxx

xxx

We hold that the Court of Appeals erred in considering appellant-petitioner Diwata

Vargas only subsidiarily liable under Article 103 of the Revised Penal Code. This Court, in
previous decisions, has always considered the registered owner/operator of a passenger
vehicle, jointly and severally liable with the driver for damages incurred by passengers
or third persons as a consequence of injuries (or death) sustained in the operation of

said vehicles. (Montoya vs. Ignacio, G.R. No. L-5868, Dec. 29, 1953; Timbol vs. Osias,
G.R. No. L-7547, April 30, 1955; Vda. de Medina vs. Cresencia, G.R. No. L-8194, July 11,
1956; Necesito vs. Paras, G.R. No. L-10605, June 30, 1955; Erezo vs. Jepte, G.R. No.
L-9605, Sept. 30, 1957; Tamayo vs. Aquino, G.R. No. L-12634, May 29, 1959; Rayos vs.
Tamayo, G.R. No. L-12720, May 29, 1959.) In the case of Erezo vs. Jepte, supra We held:
. . . In synthesis, we hold that the registered owner, the defendant-appellant herein, is
primarily responsible for the damages caused . . . (Emphasis ours)
In the case of Tamayo vs. Aquino, supra We said:
. . . As Tamayo is the registered owner of the truck, his responsibility to the public or to
any passenger riding in the vehicle or truck must be direct . . . (Emphasis
ours)1awphl.nt
Petitioner argues that there was no showing that she employed the person (the driver)
who caused the injuries. On the contrary, she argues, the evidence show that J B. Aguas,
the father of the driver, is his actual employer. We believe that it is immaterial whether
or not the driver was actually employed by the operator of record. is even not necessary
to prove who the actual owner of the vehicle and the employer of the driver is. Granting
that, in this case, the father of the driver is the act owner and that he is the actual
employer, following well-settled principle that the operator of record continues to be the
operator of the vehicle in contemplation of law, as regards the public and third persons,
and such is responsible for the consequences incident to its operation, we must hold and
consider such owner-operation of record as the employer, in contemplation of law, the
driver. And, to give effect to this policy of law enunciated in the above-cited decisions of
this Court, must now extend the same and consider the actual operation and employer
as the agent of the operator of record. In the case of Tamayo vs. Aquino, supra, this
Court said:
. . . In operating the truck without transfer thereof having been approved by the Public
Service Commission, the transferee acted merely as agent of the registered owner. . .
(Emphasis our)
The purpose of the principles evolved by the decision in these matters will be defeated
and thwarted if we entertain the argument of petitioner that she is not liable because
the actual owner and employer was establish by the evidence. In the case of Erezo vs.
Jepte, supra, the Court said:
. . . With the above policy in mind, the question that defendant-appellant poses is:
Should not the registered owner allowed at the trial to prove who the actual and real
owner is, and in accordance with such proof escape or evade responsibility and lay the
same on the person actually owning the vehicle? We hold with the trial court that the
law does not allow him to do so; the law, with its aim and policy in mind, does not
relieve him directly of the responsibility that the law fixes and places upon him as an
incident or consequence of registration. Were a registered owner allowed to evade
responsibility by proving who the supposed transferee or owner is, it would be easy for
him by collusion with others or otherwise, to escape said responsibility and transfer the
same to an indefinite person, or to one who possesses no property with which to
respond financially for the damage or injury done. A victim of recklessness on the public
highways is without means to discover or identify the person actually causing the injury
or damage. He has no means other than by a recourse to the registration in the Motor
Vehicles Office to determine who is the owner. The protection that the law aims to
extend to him would become illusory were the registered owner given the opportunity to
escape liability by disproving his ownership. If the policy of the law is to be enforced and

carried out, the registered owner should not be allowed to prove the contrary to the
prejudice of the person injured; that is, to prove that a third person or another has
become the owner, so that he may thereby be relieved of the responsibility to the
injured person.
For the foregoing considerations, we hold that Article 103 is not the law applicable in
this case; the petitioner stands liable, however, on the basis of the settled principle that
as the registered owner, she is directly and primarily responsible and liable for damages
sustained by passengers or third persons as a consequence of the negligent or careless
operation of the vehicle registered in her name. Petitioner does not question the
amounts of damages granted to respondents by the Court of Appeals and the same not
appearing to be excessive or unconscionable, they should be maintained.
WHEREFORE, the decision of the Court of Appeals is hereby modified, as above
indicated. With costs.

This is an admiralty and arrastre case. On December 18, 1961 the

vessel Daishin Maru arrived in Manila with a cargo of 1,000 bags of synthetic resin
consigned to General Base Metals, Inc. which later sold the cargo to Union Carbide
Philippines, Inc.
On the following day, December 19, that cargo was delivered to the Manila Port Service
in good order and condition except for twenty- five bags which were in bad order (Par. IV
and Annexes C to C-25 of Stipulation of Facts).
On January 20 and February 6 and 8, 1962 eight hundred ninety-eight (898) bags of
resin (out of the 1,000 bags) were delivered by the customs broker to the consignee.
One hundred two bags were missing. The contents of twenty-five bags were damaged or
pilfered while they were in the custody of the arrastre operator (Par. XII and Annexes D
and H of Stipulation of Facts All in all fifty bags out of the 898 bags were damaged
(Annex D-5).
The 152 bags of resin (102 missing and 50 damaged) were valued at $12.65 a bag or a
total value of $1,992.80, which amount at the prevailing rate of exchange of P3.85 to
the American dollar, is equivalent to P7,402.78 (Annex I of Stipulation of Facts).
The consignee, through the customs broker, filed on January 3, 1962 with the Manila
Port Service, as arrastre operator, and the American Steamship Agencies, Inc., as agent
of the carrier, a provisional claim advising them that the shipment in question was
"shorthanded, short delivered and/or landed in bad order" (Annexes E and F of
Stipulation of Facts).
G.R. No. L-27798 June 15, 1977
UNION CARBIDE PHILIPPINES, INC. (formerly National Carbon Philippines,
Inc.), plaintiff-appellant,
vs.
MANILA RAILROAD CO., substituted by the PHILIPPINE NATIONAL RAILWAYS,
MANILA PORT SERVICE and AMERICAN STEAMSHIP AGENCIES, INC., defendantsappellees.
Solicitor General Antonio P. Barredo and Solicitor Buenaventura J. Guerrero for
appellants.

Formal claims dated June 11, 1962 were made by the consignee with the arrastre
operator and the agent of the carrier (Annexes I and I-1 of Stipulation of Facts The claims
were reiterated by the consignee's lawyer in his letters dated September 26, 1962 which
were received by the carrier's agent and the arrastre operator on October 4, 1962
(Annexes J and J-1 of Stipulation of Facts).
As the claims were not paid, Union Carbide Philippines, Inc. filed a complaint on
December 21, 1962 in the Court of First Instance of Manila against the Manila Railroad
Company, the Manila Port Service and the American Steamship Agencies, Inc. for the
recovery of damages amounting to P7,402.78 as the value of the undelivered 102 bags
of resin and the damaged 50 bags plus legal rate of interest from the filing of the
complaint and P1,000 as attorney's fees.

Salcedo, Del Rosario, Bito & Misa for appellee.

AQUINO, J.:

Union Carbide's complaint was a double-barrelled action or a joinder of two causes of

action. One was an action in admiralty under the Carriage of Goods by Sea Act against
the carrier's agent for the recovery of P1,217.56 as the value of twenty-five bags of resin
which were damaged before they were landed (Annex C-25).
The other was an action under the management contract between the Bureau of
Customs and the Manila Port Service, a subsidiary of the Manila Railroad Company, for

the recovery of P6,185.22 as the value of the undelivered 102 bags of resin and twentyfive bags, the contents of which were damaged or pilfered while in the custody of the
arrastre operator.
The case was submitted for decision on the basis of a stipulation of facts. The trial court
in its decision of January 15, 1964 dismissed the case as to the carrier's agent on the
ground that the action had already prescribed because it was not "brought within one
year after delivery of the goods", as contemplated in section 3(6) of the Carriage of
Goods by Sea Act. The one-year period was counted from December 19, 1961 when the
cargo was delivered to the arrastre operator. As above stated, the action was brought on
December 21, 196'2 or two days late, according to the trial court's reckoning (Civil Case
No. 52562).
With respect to the consignee's claim against the arrastre operator, the trial court found
that the provisional claim was filed within the fifteen-day period fixed in paragraph 15 of
the arrastre contract. Yet, in spite of that finding, the trial court dismissed the action
against the arrastre operator (p. 65, Record on Appeal).
Union Carbide appealed to the Court of Appeals on questions of fact and of law, That
Appellate Court elevated the case to this Court because in its opinion the appeal raises
only the legal issue of prescription (Resolution of May 10, 1967 in CA-G. R. No. 33743-R).
Union Carbide contends that the trial court erred (1) in finding that its action was barred
by the statute of limitations and (2) in not holding that the carrier and the arrastre
operator were liable for the value of the undelivered and damaged cargo.
Claim against the carrier's agent.-There is no question that, as shown in the twenty-five
tally sheets, 975 bags of resin were delivered by the carrier in good order to the arrastre
operator and that only twenty-five (25) bags were damaged while in the carrier's
custody (Annexes C to C-25 and K-1 of Stipulation of Facts).
The one-year period within which the consignee should sue the carrier is computed from
"the delivery of the goods or the date when the goods should have been delivered". The
Carriage of Goods by Sea Act provides:
RESPONSIBILITIES AND LIABILITIES

damage is not apparent, the notice must be given within three days of
thedelivery.
Said notice of loss or damage may be endorsed upon the receipt for
the goods given by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at
the time of their receipt been the subject of joint survey or inspection.
In any event the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought within one
year after delivery of the goods or the date when the goods should
have been delivered:
Provided, That if a notice of loss or damage, either apparent or
concealed, is not given as provided for in this section, that fact shall
not affect or prejudice the right of the shipper to bring suit within one
year after the delivery of the goods or the date when the goods should
have been delivered.
In the case of any actual or apprehended loss or damage the carrier
and the receiver shall give all reasonable facilities to each other for
inspecting and tallying the goods. (Commonwealth Act No. 65,
adopting U.S. Public Act No. 521 of April 16,1936).
What is the meaning of "delivery" in section 3(6) of the Carriage of Goods by Sea Act
The trial court construed delivery as referring to the discharge or landing of the cargo.
Union Carbide contends that "delivery" does not mean the discharge of goods or the
delivery thereof to the arrastre operator but the actual delivery of the goods to the
consignee by the customs broker.
The carrier contends that delivery means discharge from the vessel into the custody of
the customs arrastre operator because under sections 1201 and 1206 of the Tariff and
Customs Code merchandise cannot be directly delivered by the carrier to the consignee
but should first pass through the customhouse at a port of entry for the collection of
customs duties.

SEC. 3. xxx xxx xxx

The carrier cites the following provisions of the bill of lading to support its contention:
(6) Unless notice of loss or damage and the general nature of such
loss or damage be given in writing to the carrier or hi agent at the port
of discharge before or at the time of the removal of the goods into the
custody of the person entitled to delivery thereof under the contract of
carriage, such removal shall be prima facie evidence of the delivery by
the carrier of the goods as described in the bill of lading. If the loss or

9. Delivery. The Carrier retains the option of delivery at all times from
ship's side or from craft, hulk, custom house, warehouse, wharf or
quay at the risk of the shippers, consignees or owners of the goods,
and all expenses incurred by delivery otherwise than from ship's side
shall be borne by the shippers, consignee or owners of the goods.

11. Discharge of Goods. The goods may be discharge without notice,

as soon as the ship is ready to unload, continuously day and night,
Sundays and holidays included, on to wharf or quay or into warehouse,
or into hulk, lazaretto or craft or on any other place and be stored
there at the risk and expense of the shippers, consignees or owners of
the goods, any custom of the port to the contrary notwithstanding. In
any case, the Carrier's liability is to cease as soon as the goods are
lifted from ship's deck or leave the ship's tackle, any custom of the
port to the contrary notwithstanding. Consignees to pay charges for
sorting and stocking the goods on wharf or in shed.
If the consignees fail to take delivery of their goods immediately the
ship is ready to discharge them, the Carrier shall be at liberty to land
and warehouse or discharge the said goods into hulk or craft, or at any
other place at the risk and expense of the shippers, consignees or
owners of the goods without notice.
15. Notice of Claim. Any claim for loss of or damage to the goods must
be preferred in writing to the Carrier's Agents at the place of delivery
within 3 days after the ship's discharge thereof, and before the goods
are removed from the quay or ship's " or place of discharge, and in the
event of such claim not being preferred as above specified, the claim
shall be deemed as waived, and the Carrier shall be discharged
therefrom.
Suit for the recovery of loss or damage shall not in any event be
maintainable against the Carrier or the ship unless instituted within
one year after the delivery of the written notice above specified. The
amount of claim shall be restricted to the Cash Value of the goods at
the place and time of original shipment plus all charges actually paid
thereon, and all claims for either partial or total loss or damage shall
be entertained and adjusted upon this basis of value. (Annex B).
In this connection, it is pertinent to state that the Tarifff and Customs Code allows the
delivery of imported merchandise to the arrastre operator:
SEC. 1213. Receiving Handling Custody and Delivery of Articles. The
Bureau of Customs shall have "elusive supervision and control over
the receiving, handling, custody and delivery of articles on the
wharves and piers at all ports of entry and in the exercise of its
functions it is hereby authorized to acquire, take over, operate and
superintend such plants and facilities as may be necessary for the
receiving, handling, custody and delivery of articles, and the
convenience and comfort of passengers and the handling of baggage,
as well as to acquire fire protection equipment for use in the piers:

Provided, That whenever in his judgment the receiving, handling,

custody and delivery of articles can be carried on by private parties
with greater efficiency, the Commissioner may, after public bidding
and subject to the approval of the department head, contract with any
private party for the service of receiving, handling, custody and
delivery of articles, and in such event, the contract may include the
sale or lease of government-owned equipment and facilities used in
such service.
The sensible and practical interpretation is that delivery within the meaning of section
3(6) of the Carriage of Goods by Sea Law means delivery to the arrastre operator. That
delivery is evidenced by tally sheets which show whether the goods were landed in good
order or in bad order, a fact which the consignee or shipper can easily ascertain through
the customs broker.
To use as basis for computing the one-year period the delivery to the consignee would
be unrealistic and might generate confusion between the loss or damage sustained by
the goods while in the carrier's custody and the loss or damage caused to the goods
while in the arrastre operator's possession.
Apparently, section 3(6) adheres to the common-law rule that the duty imposed water
carriers was merely to transport from wharf to wharf and that the carrier was not bound
to deliver the goods at the warehouse of the consignee (Tan Hi vs. United States, 94 Fed.
Supp. 432,435).
In the Tan Hi case, it was held that a requirement of Philippine law that all cargo
unloaded at Manila be delivered to the consignee through the arrastre operator acting
as customs' agent was not unreasonable. The common-law requirements as to the
proper delivery of goods by water carrier apply only when customs regulations at the
port of destination do not otherwise provide. The delivery must be in accordance with
the usages of the port in order that such delivery would discharge the carrier of
responsibility. (Notes 50 and 51, 80 C.J.S. 922; 58 C. J. 372 note 24. See 70 Am. Jur 2nd
613, note 19).
Under the facts of this case, we held that the one-year period was correctly reckoned by
the trial court from December 19, 1961, when, as agreed upon by the parties and as
shown in the tally sheets, the cargo was discharged from the carrying vessel and
delivered to the Manila Port Service. That one-year period expired on December 19,
1962. Inasmuch as the action was filed on December 21, 1962, it was barred by the
statute of limitations.
Defendant American Steamship Agencies, Inc., as agent of the carrier, has no more
liability to the consignee's assignee, Union Carbide Philippines, Inc., in connection with
the damaged twenty-five bags of resin.

Prescription was duly pleaded by the said defendant in its answer and motion to dismiss.
That defense was correctly entertained by trial court.

(Continental Insurance Company vs. Manila Port Service, supra. Philippine Education
Company vs. Manila Port Service, L-23444, October 29, 1971, 42 SCRA 31).

Claim against the arrastre operator. The liability of the arrastre contractor has a
factual and legal basis different from that of the carrier's. The management contract
between the Manila Port Service and the Bureau of Customs provides:

Since the action in this case against the arrastre operator was filed on December 21,
1962, or within the two-year period expiring on December 19, 1963, that action was
filed on time. The trial court erred in dismissing the action against the Manila Port
Service and its principal, the Manila Railroad Company.

15. ... ; in any event the CONTRACTOR hall be relieved and released of
any and all responsibility or liability for loss, damage, misdelivery,
and/or non-delivery of goods, unless suit in the court of proper
jurisdiction is brought within a period of one (1) year from the date of
the discharge of the goods, or from the date when the claim for the
value of such goods have been rejected or denied by the
CONTRACTOR, provided that such claim shall have been filed with the
CONTRACTOR within fifteen (15) days from the date of discharge of
the last package from the carrying vessel. ... (Annex A of Stipulation of
Facts
Under the foregoing contractual provisions, the action against the arrastre operator to
enforce liability for loss of the cargo or damage thereto should be filed within one year
from the date of the discharge of the goods or from the date when the claim for the
value of such goods has been rejected or denied by the arrastre operator.
However, before such action can be filed a condition precedent should be complied with
and that is, that a claim (provisional or final) shall have been previously filed with the
arrastre operator within fifteen days from the date of the discharge of the last package
from the carrying vessel (Continental Insurance Company vs. Manila Port Service, L22208, March 30,1966,16 SCRA 425).
In this case, the consignee's customs broker filed with the Manila Port Service as
provisional claim advising the latter that the cargo was "short, short delivered and/or
landed in bad order". That claim was filed on January 3, 1962 or on the fifteenth day
following December 19, 1961, the date of the discharge of the last package from the
carrying vessel. That claim was never formally rejected or denied by the Manila Port
Service.

As shown in the statement of facts, the arrastre operator is responsible for the value of
102 bags of resin which were not delivered, and twenty-five bags, which were damaged,
or a total of one hundred twenty-seven bags valued at P6,185.22.
The arrastre operator should pay attorney's fees to the plaintiff for not having satisfied
its plainly valid, just and demandable claim (Art. 2208, Civil Code). We fix the attorney's
fees and the litigation expenses in the sum of one thousand pesos.
WHEREFORE, the trial court's judgment is affirmed insofar as it dismissed plaintiffappellant's claim against defendant American Steamship Agencies, Inc. on the ground of
prescription.
The trial court's decision is reversed insofar as it dismissed plaintiff's claim against the
Manila Railroad Company, as arrastre operator. The Philippine National Railways, as the
successor of the Manila Railroad Company (See. 22, Republic Act No. 4156), is hereby
ordered to pay plaintiff Union Carbide Philippines, Inc. the sum of P6,185.22, as the
value of the 127 bags of resin (102 bags missing and 25 bags damaged), with legal rate
of interest from the filing of the complaint on December 21, 1962 up to the date of
payment, Plus P1,000 as attorney's fees and litigation expenses, and the costs.
SO ORDERED.

Having complied with the condition precedent for the filing of a claim within the fifteenday period, Union Carbide could file the court action within one year, either from
December 19, 1961 or from December 19, 1962. This second date is regarded as the
expiration of the period within which the Manila Port Service should have acted on the
claim (Philippine Education Co., Inc. vs. Manila Port Service, L-24091, 21 SCRA, 174,
178).
In other words, the claimant or consignee has a two-year prescriptive period, counted
from the date of the discharge of the goods, within which to file the action in the event
that the arrastre contractor, as in this case, has not rejected nor admitted liability

G.R. No. L-9603

August 7, 1914

THE UNITED STATES, plaintiff-appellee,

vs.
RAFAEL MELAD, defendant-appellant.
D. R. Williams for appellant.
Office of the Solicitor-General Corpus for appellee.
MORELAND, J.:
This is an appeal from a judgment of the Court of First Instance of Cagayan Province
convicting the accused of the crime of estafa and sentencing him to one year one month
and eleven days of imprisonment, to pay the costs, and to indemnify Fernando Molina
Martell in the sum of P130, with subsidiary imprisonment in case some is not paid.
It is the undisputed evidence that on the 19th of April, 1913, the accused was an
employee of Fernando Molina Martell and that, on said date, he was dispatched by his
employer to Tuguegarao to get P130 from the manager of the Tabacalera Company at
that place; that the money was delivered to the accused by the Tabacalera Company to
be handed to Fernando Molina Martell; that the accused never delivered the money to
Martell.
The witness Julian Domingo testified in behalf of the prosecution that the defendant
stated to him on the 27th of April, "I brought money, but I lost it in the game," and "I
have to wait until the head of Seor Molina gets cold." Feliciano Villaflor, a Constabulary
soldier, a witness in behalf of the prosecution, testified that on April 20, 1913, he saw
the defendant in the cockpit of Tuguegarao and that the defendant bet and lost P30 on
cockfights.
The accused admitted that he had received the money with the obligation to deliver it to
Martell and that he did not deliver it, giving as his reason therefore that on April 19 he
tied the money, which was all in silver, in a bag and fastened it behind him on the
saddle of his horse. From thence it was lost on the journey. He denied that he lost the
money in gambling but claimed that it disappeared together with a bundle of his
clothing while he was riding his horse as aforesaid.

Appellant's counsel states in his brief:

The whole case hinges upon the question whether the story told by the witness
who says he saw the accused in the cockpit on April 20, and of the witness who
says the accused stated he lost the money `in the game,' shall be believed, or
whether the story of the defendant is accepted.
The trial court, in its decision upon which the judgment of conviction is based, states
that the defendant's "explanation of the loss of the money is not credible and that his
acts in connection with the loss of the same as alleged by him were inconsistent with
the theory of the innocence." The trial court had all of the witnesses before it and was,
therefore, in some ways, in a better position to judge the relative value of their
declarations than are we, who see merely the typewritten questions and answers. There
is nothing in the record which would intimate, much less demonstrate, that the court
failed to take into consideration some material fact or circumstance, or did not weigh
accurately the evidence presented, or failed to perform some duty to the accused laid
upon him by the law.
While we are of the opinion that the judgment of conviction is well founded, it is our
judgment that the court erred in imposing the maximum penalty. Abuse of confidence,
which the learned trial court used as an aggravating circumstance in order to impose
the maximum penalty, is one of the essential elements of the crime charged and,
therefore, cannot be used as an aggravating circumstance. The medium degree of the
penalty should have been imposed.
The judgment of conviction is affirmed, it being understood that the criminal penalty
imposed is four months and one day of arresto mayor. As so modified, the judgment is
affirmed, with costs against the appellant.
Arellano, C.J., Torres, Johnson, Carson and Araullo, JJ., concur.