Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-1600 June 1, 1906

THE PHILIPPINE SHIPPING COMPANY, ET AL., plaintiffs-appellants,

vs.
FRANCISCO GARCIA VERGARA, defendant-appellee.

Del-Pan, Ortigas and Fisher, for appellants.

Ledesma, Sumulong and Quintos, for appellee.

ARELLANO, C.J.:

The Philippine Shipping Company, the owner of the steamship Nuestra Sra. de Lourdes, claims an
indemnification of 44,000 pesos for the loss of the said ship as a result of a collision. Ynchusti & Co.
also claimed 24,705.64 pesos as an indemnification for the loss of the cargo of hemp
and coprax carried by the said ship on her last trip. The defendant, Francisco Garcia Vergara, was
the owner of the steamship Navarra, which collided with the Lourdes.

From the judgment of the trial court the Philippine Shipping Company and the defendant Vergara
appealed, but the latter has failed to prosecute his appeal by a bill of exceptions or otherwise. The
only appellant who has prosecuted this appeal now reduced its claim to 18,000 pesos, the value of
the colliding vessel.

The court below found as a matter of fact that the steamship Lourdes was sailing in accordance with
law, but that the Navarra was not, and was therefore responsible for the collision. (Bill of exceptions,
p. 7.) The court also found as a fact that "both ships with their respective cargoes were entirely lost."
Construing article 837 of the Code Commerce, the court below held "that the defendant was not
responsible to the plaintiff for the value of the steamship Lourdes, with the costs against the latter."
(Bill of exceptions, p. 8.)

But the appellant, the Philippine Shipping Company, contends that the defendant should pay to
18,000 pesos, the value of the Navarra at the time of its loss; that this is the sense in which the
provisions of article 837 of the Code of Commerce should be understood; that said code has
followed the principles of the English law and not those of the American law, and that it was
immaterial whether the Navarra had been entirely lost, provided her value at the time she was lost
could be ascertained, since the extent of the liability of the owner of the colliding vessel for the
damages resulting from the collision is to be determined in accordance with such value.

Article 837 of the Code Commerce provides: "The civil liability contracted by the shipowners in the
cases prescribed in this section shall be understood as limited to the value of the vessel with all her
equipment and all the freight money earned during the voyage."

This section is a necessary consequence of the right to abandon the vessel given to the
shipowner in article 587 of the code, and it is one of the many superfluities contained in the
code. (Lorenzo Benito, "Lecciones," 352.)
 Art. 587. The agent shall also the civilly liable for the indemnities in favor of third persons
which arise from the conduct of the captain in the care of the goods which the vessel carried,
but he may exempt himself therefrom by abandoning the vessel with all her equipments and
the freight he may have earned during the trip.

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

The "Exposicion de motivos" of the Code of Commerce contains the following: "The present code
(1829) does not determine the juridical status of the agent where such agent is not himself the owner
of the vessel. This omission is supplied by the proposed code, which provides in accordance with
the principles of maritime law that by agent it is to be understood the person intrusted with the
provisioning of the vessel, or the one who represents her in the port in which she happens to be.
This person is the only who represents the interest of the owner of the vessel. This provision has
therefore cleared the doubt which existed as to the extent of the liability, both of the agent and for
the owner of the vessel. Such liability is limited by the proposed code to the value of the vessel and
other things appertaining thereto."

There is no doubt that if the Navarra had not been entirely lost, the agent, having held liable for the
negligence of the captain of the vessel, could have abandoned her with all her equipment and the
freight money earned during the voyage, thus bringing himself within the provisions of the article 837
in so far as the subsidiary civil liability is concerned. This abandonment which would have amounted
to an offer of the value of the vessel, of her equipment, and freight money earned could not have
been refused, and the agent could not have been personally compelled, under such circumstances,
to pay the 18,000 pesos, the estimated value of the vessel at the time of the collision.

This is the difference which exist between the lawful acts and lawful obligation of the captain and the
liability which he incurs on account of any unlawful act committed by him. In the first case, the lawful
acts and obligations of the captain beneficial to the vessel may be enforced as against the agent for
the reason that such obligations arise from the contract of agency (provided, however, that the
captain does not exceed his authority), while as to any liability incurred by the captain through his
unlawful acts, the ship agent is simply subsidiarily civilly liable. This liability of the agent is limited to
the vessel and it does not extend further. For this reason the Code of Commerce makes agent liable
to the extent of the value of the vessel, as to the codes of the principal maritime nations
provided, with the vessel, and not individually. Such is also the spirit of our code.

The spirit of our code is accurately set forth in a treatise on maritime law, from which we deem
proper to quote the following as the basis of this decision:

That which distinguishes the maritime from the civil law and even from the mercantile law in
general is the real and hypothecary nature of the former, and the many securities of a real
nature that maritime customs from time immemorial, the laws, the codes, and the later
jurisprudence, have provided for the protection of the various and conflicting interest which
are ventured and risked in maritime expeditions, such as the interests of the vessel and of
the agent, those of the owners of the cargo and consignees, those who salvage the ship,
those who make loans upon the cargo, those of the sailors and members of the crew as to
their wages, and those of a constructor as to repairs made to the vessel.

As evidence of this "real" nature of the maritime law we have (1) the limitation of the liability
of the agents to the actual value of the vessel and the freight money, and (2) the right to
 retain the cargo and the embargo and detention of the vessel even cases where the ordinary
civil law would not allow more than a personal action against the debtor or person liable. It
will be observed that these rights are correlative, and naturally so, because if the agent can
exempt himself from liability by abandoning the vessel and freight money, thus avoiding the
possibility of risking his whole fortune in the business, it is also just that his maritime creditor
may for any reason attach the vessel itself to secure his claim without waiting for a
settlement of his rights by a final judgment, even to the prejudice of a third person.

This repeals the civil law to such an extent that, in certain cases, where the mortgaged
property is lost no personal action lies against the owner or agent of the vessel. For instance,
where the vessel is lost the sailors and members of the crew can not recover their wages; in
case of collision, the liability of the agent is limited as aforesaid, and in case of shipwrecks,
those who loan their money on the vessel and cargo lose all their rights and can not claim
reimbursement under the law.

There are two reasons why it is impossible to do away with these privileges, to wit: (1) The
risk to which the thing is exposed, and ( 2 ) the "real" nature of maritime law, exclusively
"real," according to which the liability of the parties is limited to a thing to which is at mercy of
the waves. If the agent is only liable with the vessel and freight money and both may be lost
through the accidents of navigation it is only just that the maritime creditor have some means
of obviating this precarious nature of his rights by detaining the ship, his only security, before
it is lost.

The liens, tacit or legal, which may exist upon the vessel and which a purchaser of the same
would be obliged to respect and recognize — in addition to those existing in favor of the
State by virtue of the privileges which are granted to it by all the laws — pilot, tonnage, and
port dues and other similar charges, the wages of the crew earned during the last voyage as
provided in article 646, of the Code of Commerce, salvage dues under article 842, the
indemnification due to the captain of the vessel in case his contract is terminated on account
of the voluntary sale of the ship and the insolvency of the owner as provided in article 608,
and other liabilities arising from collisions under article 837 and 838. (Madariaga, pp. 60-62,
63, 85.)

We accordingly hold that the defendant is liable for the indemnification to which the plaintiff is
entitled by reason of the collision, but he is not required to pay such indemnification of the reason
that the obligation thus incurred has been extinguished on account of the loss of the thing bound for
the payment thereof, and in this respect the judgment of the court below is affirmed except in so far
as it requires the plaintiff to pay the costs of this action, which is not exactly proper. After the
expiration of twenty days let judgment be entered in accordance herewith and ten days thereafter
the record be remanded to the Court of First Instance for execution. So ordered.

Torres, Mapa, Johnson and Carson, JJ., concur.

G.R. No. L-773 December 17, 1946

DIONISIA ABUEG, ET AL., plaintiffs-appellees,

vs.
BARTOLOME SAN DIEGO, defendant-appellant.

----------------------------

CA-No. L-774 December 17, 1946

MARCIANA DE SALVACION, ET AL., plaintiffs-appellees,

vs.
BARTOLOME SAN DIEGO, defendant-appellant.

----------------------------

CA-No. L-775 December 17, 1946

ROSARIO OCHING, ET AL., plaintiffs-appellees,

vs.
BARTOLOME SAN DIEGO, defendant-appellant.

Lichauco, Picazo and Mejia for appellant.

Cecilio I. Lim and Roberto P. Ancog for appellees.

PADILLA, J.:

This is appeal from a judgment rendered by the Court of First Instance of Manila in the above-
entitled cases awarding plaintiffs the compensation provided for in the Workmen's Compensation
Act.

The record of the cases was forwarded to the Court of Appeals for review, but as there was no
question of fact involved in the appeal, said court forwarded the record to this Court. The appeal was
pending when the Pacific War broke up, and continued pending until after liberation, because the
record of the cases was destroyed as a result of the battle waged by the forces of liberation against
the enemy. As provided by law, the record was reconstituted and we now proceed to dispose of the
appeal.

Appellant, who was the owner of the motor ships San Diego II and Bartolome S, states in his brief
the following:

There is no dispute as to the facts involved in these cases and they may be gathered from
the pleadings and the decision of the trial Court. In case CA-G.R. No. 773, Dionisia Abueg is
the widow of the deceased, Amado Nuñez, who was a machinist on board the M/S San
Diego II belonging to the defendant-appellant. In case CA-G.R. No. 774, plaintiff-appellee,
Marciana S. de Salvacion, is the widow of the deceased, Victoriano Salvacion, who was a
machinist on board the M/S Bartolome S also belonging to the defendant-appellant. In case
 CA-G.R. No. 775, the plaintiff-appellee, Rosario R. Oching is the widow of Francisco Oching
who was a captain or patron of the defendant-appellant's M/S Bartolome S.

The M/S San Diego II and the M/S Bartolome, while engaged in fishing operations around
Mindoro Island on Oct. 1, 1941 were caught by a typhoon as a consequence of which they
were sunk and totally lost. Amado Nuñez, Victoriano Salvacion and Francisco Oching while
acting in their capacities perished in the shipwreck (Appendix A, p. IV).

It is also undisputed that the above-named vessels were not covered by any insurance.
(Appendix A, p. IV.).

Counsel for the appellant cite article 587 of the Code of Commerce which provides that if the vessel
together with all her tackle and freight money earned during the voyage are abandoned, the agent's
liability to third persons for tortious acts of the captain in the care of the goods which the ship carried
is extinguished (Yangco vs. Laserna, 73 Phil., 330); article 837 of the same code which provides that
in cases of collision, the ship owners' liability is limited to the value of the vessel with all her
equipment and freight earned during the voyage (Philippine Shipping company vs. Garcia, 6 Phil.,
281), and article 643 of the same Code which provides that if the vessel and freight are totally lost,
the agent's liability for wages of the crew is extinguished. From these premises counsel draw the
conclusion that appellant's liability, as owner of the two motor ships lost or sunk as a result of the
typhoon that lashed the island of Mindoro on October 1, 1941, was extinguished.

The real and hypothecary nature of the liability of the shipowner or agent embodied in the provisions
of the Maritime Law, Book III, Code of Commerce, had its origin in the prevailing continues of the
maritime trade and sea voyages during the medieval ages, attended by innumerable hazards and
perils. To offset against these adverse conditions and encourage shipbuilding and maritime
commerce, it was deemed necessary to confine the liability of the owner or agent arising from the
operation of a ship to the vessel, equipment, and freight, or insurance, if any, so that if the shipowner
or agent abandoned the ship, equipment, and freight, his liability was extinguished.

But the provisions of the Code of Commerce invoked by appellant have no room in the application of
the Workmen's Compensation Act which seeks to improve, and aims at the amelioration of, the
condition of laborers and employees. It is not the liability for the damage or loss of the cargo or injury
to, or death of, a passenger by or through the misconduct of the captain or master of the ship; nor
the liability for the loss of the ship as result of collision; nor the responsibility for wages of the crew,
but a liability created by a statute to compensate employees and laborers in cases of injury received
by or inflicted upon them, while engaged in the performance of their work or employment, or the
heirs and dependents and laborers and employees in the event of death caused by their
employment. Such compensation has nothing to do with the provisions of the Code of Commerce
regarding maritime commerce. It is an item in the cost of production which must be included in the
budget of any well-managed industry. law phil.net

Appellant's assertion that in the case of Enciso vs. Dy-Liaco (57 Phil., 446), and Murillo vs.
Mendoza (66 Phil., 689), the question of the extinction of the shipowner's liability due to
abandonment of the ship by him was not fully discussed, as in the case of Yangco vs. Laserma,
supra, is not entirely correct. In the last mentioned case, the limitation of the shipowner's liability to
the value of the ship, equipment, freight, and insurance, if any, was the lis mota. In the case
of Enciso vs. Dy-Liacco, supra, the application of the Workmen's Compensation Act to a master or
patron who perished as a result of the sinking of the motorboat of which he was the master, was the
controversy submitted to the court for decision. This Court held in that case that "It has been
repeatedly stated that the Workmen's Compensation Act was enacted to abrogate the common law
and our Civil Code upon culpable acts and omissions, and that the employer need not be guilty of
neglect or fault, in order that responsibility may attach to him" (pp. 449-450); and that shipowner was
liable to pay compensation provided for in the Workmen's Compensation Act, notwithstanding the
fact that the motorboat was totally lost. In the case of Murillo vs. Mendoza, supra, this Court held that
"The rights and responsibilities defined in said Act must be governed by its own peculiar provisions
in complete disregard of other similar mercantile law. If an accident is compensable under the
Workmen's Compensation Act, it must be compensated even when the workman's right is not
recognized by or is in conflict with other provisions of the Civil Code or the Code of Commerce. The
reason behind this principle is that the Workmen's Compensation Act was enacted by the Legislature
in abrogation of the other existing laws." This quoted part of the decision is in answer to the
contention that it was not the intention of the Legislature to repeal articles 643 and 837 of the Code
of Commerce with the enactment of the Workmen's Compensation Act.

In the memorandum filed by counsel for the appellant, a new point not relied upon in the court below
is raised. They contend that the motorboats engaged in fishing could not be deemed to be in the
coastwise and interisland trade, as contemplated in section 38 of the Workmen's Compensation Act
(No. 3428), as amended by Act no. 3812, inasmuch as, according to counsel, a craft engaged in the
coastwise and interisland trade is one that carries passengers and/or merchandise for hire between
ports and places in the Philippine Islands.lawphil.net

This new point raised by counsel for the appellant is inconsistent with the first, for, if the motor ships
in question, while engaged in fishing, were to be considered as not engaged in interisland and
coastwise trade, the provisions of the Code of Commerce invoked by them regarding limitation of the
shipowner's liability or extinction thereof when the shipowner abandons the ship, cannot be applied
(Lopez vs. Duruelo, 52 Phil., 229). Granting however, that the motor ships run and operated by the
appellant were not engaged in the coastwise and interisland trade, as contemplated in section 38 of
the Workmen's Compensation Act, as amended, still the deceased officers of the motor ships in
question were industrial employees within the purview of section 39, paragraph (d), as amended, for
industrial employment "includes all employment or work at a trade, occupation or profession
exercised by an employer for the purpose of gain." The only exceptions recognized by the Act are
agriculture, charitable institutions and domestic service. Even employees engaged in agriculture for
the operation of mechanical implements, are entitled to the benefits of the Workmen's Compensation
Act (Francisco vs. Consing, 63 Phil., 354). In Murillo vs. Mendoza, supra, this Court held that "our
Legislature has deemed it admissible to include in the Workmen's Compensation Act all incidents
that may occur to workmen or employees in factories, shops and other industrial and agricultural
workplaces as well as in the interisland seas of the Archipelago." But we do not believe that the term
"coastwise and interisland trade" has such a narrow meaning as to confine it to the carriage for hire
of passengers and/or merchandise on vessels between ports and places in the Philippines, because
while fishing is an industry, if the catch is brought to a port for sale, it is at the same time a trade.

Finding no merit in the appeal filed in these cases, we affirm the judgment of the lower court, with
costs against the appellant.

Moran, Bengzon, C.J., Paras, Feria, Pablo, Perfecto, Hilado, Briones and Tuazon, JJ., concur.
G.R. No. L-47447-47449 October 29, 1941

TEODORO R. YANGCO, ETC., petitioner,

vs.
MANUEL LASERNA, ET AL., respondents.

Claro M. Recto for petitioner.

Powell & Vega for respondents.

MORAN, J.:

At about one o'clock in the afternoon of May 26, 1927, the steamer S.S. Negros, belonging to
petitioner here, Teodoro R. Yangco, left the port of Romblon on its retun trip to Manila. Typhoon
signal No. 2 was then up, of which fact the captain was duly advised and his attention thereto called
by the passengers themselves before the vessel set sail. The boat was overloaded as indicated by
the loadline which was 6 to 7 inches below the surface of the water. Baggage, trunks and other
equipments were heaped on the upper deck, the hold being packed to capacity. In addition, the
vessel carried thirty sacks of crushed marble and about one hundred sacks of copra and some
lumber. The passengers, numbering about 180, were overcrowded, the vessel's capacity being
limited to only 123 passengers. After two hours of sailing, the boat encountered strong winds and
rough seas between the islands of Banton and Simara, and as the waves splashed the ladies'
dresses, the awnings were lowered. As the sea became increasingly violent, the captain ordered the
vessel to turn left, evidently to return to port, but in the manuever, the vessel was caught sidewise by
a big wave which caused it to capsize and sink. Many of the passengers died in the mishap, among
them being Antolin Aldaña and his son Victorioso, husband and son, respectively, of Emilia
Bienvenida who, together with her other children and a brother-in-law, are respondents in G.R. No.
47447; Casiana Laserna, the daughter of respondents Manuel Laserna and P.A. de Laserna in G.R.
47448; and Genaro Basaña, son of Filomeno Basaña, respondent in G.R. No. 47449. These
respondents instituted in the Court of First Instance of Capiz separate civil actions against petitioner
here to recover damages for the death of the passengers aforementioned. The court awarded the
heirs of Antolin and Victorioso Aldana the sum of P2,000; the heirs of Casiana Laserna, P590; and
those of Genaro Basana, also P590. After the rendition of the judgment to this effcet, petitioner, by a
verified pleading, sought to abandon th evessel to the plainitffs in the three cases, together with all
its equipments, without prejudice to his right to appeal. The abandonment having been denied, an
appeal was taken to the Court of Appeals, wherein all the judgmnets were affirmed except that which
sums was increased to P4,000. Petitioner, now deceased, appealed and is here represented by his
legal representative.

Brushing aside the incidental issues, the fundamental question here raised is: May the shipowner or
agent, notwithstanding the total loss of the vessel as a result of the negligence of its captain, be
properly held liable in damages for the consequent death of its passengers? We are of the opinion
and so hold that this question is controlled by the provisions of article 587 of the Code of Commerce.
Said article reads:

The agent shall also be civilly liable for the indemnities in favor of third persons which arise
from the conduct of the captain in the care of the goods which the vessel carried; but he may
exempt himself therefrom by abandoning the vessel with all her equipments and the freight
he may have earned during the voyage.
The provisions 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 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. Dr. Jose Ma. Gonzalez de
Echavarri y Vivanco, commenting on said article, said:

La letra del Codigo, en el articulo 587, presenta una gravisima cuestion. El derecho de
abandono, si se atiende a lo escrito, solo se refiere a las indemnizaciones a que dierQe
lugar la conducta del Capitan en la custodia de los efectos que cargo en el buque.

¿Es ese el espiritu del legislador? No; ¿habra derecho de abandono en las
responsabilidades nacidas de obligaciones contraidas por el Capitan y de otros actos de
este? Lo reputamos evidente y, para fortalecer nuestra opinion, basta copiar el siguiente
parrafo de la Exposicion de motivos:

"El proyecto, al aplicar estos principios, se inspira tambien en los intereses del
comercio maritimo, que quedaran mas asegurados ofreciendo a todo el que contrata
con el naviero o Capitan del buque, la garantia real del mismo, cualesquiera que
sean las facultades o atribuciones de que se hallen investidos." (Echavarri, Codigo
de Comercio, Tomo 4, 2. a ed., pags. 483-484.)

A cursory examination will disclose that the principle of liomited liability of a shipowner or agent is
provided for in but three articles of the Code of Commerce — article 587 aforequoted and article 590
and 837. Article 590 merely reiterates the principle embodied in article 587, applies the same
principle in cases of collision, and it has been observed that said article is but "a necessary
consequences of the right to abandon the vessel given to the shipowner in article 587 of the Code,
and it is one of the many superfluities contained in the Code." (Lorenzo Benito, Lecciones 352,
quoted in Philippine Shipping Co. vs. Garcia, 6 Phil. 281, 282.) In effect, therefore, only articles 587
and 590 are the provisions conatined in our Code of Commerce on the matter, and the framers of
said code had intended those provisions to embody the universal principle of limited liability in all
cases. Thus, in the "Exposicon de Motivos" of the Code of Commerce, we read:

The present code (1829) does not determine the juridical status of the agent where such
agent is not himself the owner of the vessel. This omission is supplied by the proposed code,
which provides in accordance with the principles of maritime law that by agent it is to be
understood the person intrusted with the provisioning of the vessel, or the one who
represents her in the port in which she happens to be. This person is the only one who
represents the vessel — that is to say, the only one who represents the interests of the
owner of the vessel. This provision has therefore cleared the doubt which existed as to the
extent of the liability, both of the agent and of the owner of the vessel. Such liability is limited
by the proposed code to the value of the vesseland other things appertaining thereto.

In Philippine Shipping Co. vs. Garcia (6 Phil., 281, 284-286), we have expressed ourselves in such a
comprehensive manner as to leave no room for doubt on the applicability of our ratio decidendi not
only to cases of collision but also to those of shipwrecks, etc. We said:
This is the difference which exists between the lawful acts and lawful obligations of the
captain and the liability which he incurs on account of any unlawful act committed by him. In
the first case, the lawful acts and obligations of the captain beneficial to the vessel may be
enforced as against the agent for the reason that such obligations arise from te the contract
of agency (provided, however, that the captain does not exceed his authority), while as to
any liability incurred by the captain through his unlawful acts, the ship agent is simply
subsidiarily civilly liable. This liability of the agent is limited to the vessel and it does not
extend further. For this reason the Code of Commerce makes the agent liable to the extent
of the value of the vessel, as the codes of the principal maritime nations provide with the
vessel, and not individually. Such is also the spirit of our Code.

The spirit of our code s accurately set forth in a treatise on maritime law, from which we
deem proper to quote the following as the basis of this decision: lawphil.net

"That which distinguishes the maritime from the civil law and even from the
mercantile law in general is the real and hypothecary nature of the former, and the
many securities of a real nature that maritime customs from time immemorial, the
laws, the codes, and the later jurisprudence, have provided for the protection of the
various and conflicting interests which are ventured and risked in maritime
expeditions, such as the interests of the vessel and of the agent, those of the owners
of the cargo and consignees, those who salvage the ship, those who make loans
upon the cargo, those of the sailors and members of the crew as to their wages, and
those of a constructor as to repairs made to the vessel.

"As evidence of this real nature of the maritime law we have (1) the limitation of the
liability of the agents to the actual value of the vessel and the freight money, and (2)
the right to retain the cargo and the embargo and detention of the vessel even in
cases where the ordinary civil law would not allow more than a personal action
against the debtor or person liable. It will be observed that these rights are
correlative, and naturally so, because if the agent can exempt himself from liability by
abandoning the vessel and freight money, thus avoiding the possibility of risking his
whole fortune in the business, it is also just that his maritime creditor may for any
reason attach the vessel itself to secure his claim without waiting for a settlement of
his rights by a final judgment, even to the prejudice of a third person.

"This repeals the civil law to such an extent that, in certain cases, where
the mortgaged property is lostno personal action lies against the owner or agent of
the vessel. For instance, where the vessel is lost the sailors and members of the
crew cannot recover their wages; in case of collision, the liability of the agent is
limited as aforesaid, and in case of shipwreck, those who loan their money on the
vessel and cargo lose all their rights and cannot claim reimbursement under the law.

"There are two reasons why it is impossible to do away with these privileges, to wit:
(1) The risk to which the thing is exposed, and (2) the real nature of the maritime law,
exclusively real, according to which the liability of the parties is limited to a thing
which is at the mercy of the waves. If the agent is only liable with the vessel and
freight money and both may be lost through the accidents of navigation it is only just
that the maritime creditor have some means to obviating this precarious nature of his
rights by detaining the ship, his only security, before it is lost.

"The liens, tacit or legal, which may exist upon the vessel and which a purchaser of
the same would be obliged to respect and recognize are — in addition to those
 existing in favor of the State by virtue of the privileges which are granted to it by all
the laws — pilot, tonnate, and port dues and other similar charges, the wages of the
crew earned during the last voyage as provided in article 646 of the Code of
Commerce, salvage dues under article 842, the indemnification due to the captain of
the vessel in case his contract is terminated on account of the voluntary sale of the
ship and the insolvency of the owner as provided in article 608, and all other liabilities
arising from collisions under articles 837 and 838."

We are shared in this conclusion by the eminent commentators on the subject. Agustin Vicente y
Gella, asserting, in his "Introduccion al Derecho Mercantil Comparado" 1929 (pages 374-375), the
like principle of limited liability of shipowners or agent in cases of accidents, collisions, shipwrecks,
etc., said:

De las responsabilities que pueden resultar como consequencia del comercio maritimo, y no
solo por hechos propios sino tambien por las que se ocasionen por los del capitan y la
tripulacion, responde frente a tercero el naviero que representa el buque; pero el derecho
maritimo es sobre todo tradicional y siguiendo un viejo principio de la Edad Media la
responsabilidad del naviero se organiza de un modo especifico y particularisimo que no
encuentra similar en el derecho general de las obligaciones.

Una forma corrientisima de verificarse el comercio maritimo durante la epoca medieval, era
prestar un propietario su navio para que cargase en el mercancias determinada persona, y
se hiciese a la mar, yendo al frente de la expedicion un patron del buque, que llegado al
puerto de destino se encargaba de venderlas y retornaba al de salida despues de adquirir
en aquel otros efectos que igualmente revendia a su regreso, verificado lo cual los
beneficios de la expedicion se repartian entre el dueño del buque, el cargador y el capitan y
tripulantes en la proporcion estipulada. El derecho maritimo empezo a considerar la
asociacion asi formada como una verdadera sociedad mercantil, de responsabilidad
limitada, y de acuerdo con los principios que gobiernan aquella en los casos de accidentes,
abordajes, naufragios, etc., se resolvia que el dueño del buque perdia la nave, el cargador
las mercancias embarcadas y el capitan y la tripulacion su trabajo, sin que en ningun caso el
tercer acreedor pudiese reclamar mayor cantidad de ninguno de ellos, porque su
responsabilidad quedaba limitada a lo que cada uno aporto a la sociedad. Recogidas estas
ideas en el derecho comercial de tiempos posteriores, la responsabilidad del naviero se
edifico sobre aquellos principios, y derogando la norma general civil de que del cumplimiento
de sus obligaciones responde el deudor con todos sus bienes presentes y futuros, la
responsabilidad maritima se considero siempre limitada ipso jure al patrimonio de mar. Y
este es el origen de la regla trascendental de derecho maritimo segun la cual el naviero se
libera de toda responsabilidad abandonando el buque y el flete a favor de los acreedores.

From the Enciclopedia Juridica Española, Vol. 23, p. 347, we read:

Ahora bien: ¿hasta donde se extiende esta responsabilidad del naviero? ¿sobre que bienes
pueden los acreedores resarcirse? Esta es otra especialidad del Derecho maritimo; en el
Derecho comun la responsabilidad es limitada; tambien lo era en el antiguo Derecho
maritimo romano; es daba la actio exercitoria contra el exercitor navis sin ninguna
restriccion, pero en la Edad Media una idea nueva se introdujo en los usos maritimos. Las
cargas resultantes de las expediciones maritimas se consideraron limitadas por los
propietarios de las naves a los valores comprometidos por ellos en cada expedicion; se
separo ficticiamente el patrimonio de los navieros en dos partes que todavia se designan de
una manera bastante exacta; fortuna de tierra y fortuna de mar o flotante; y se admitio la
teoria de que esta era la que respondia solo de las deudas provinientes de los actos del
 capitan o de la tripulacion, es decir, que el conjunto del patrimonio del naviero escaparia a
estas cargas desde el momento en que abandonara la nave y los fletes a los acreedores. . .
.

Escriche in his Diccionario de la Legislacion y Jurisprudencia, Vol. 1, p. 38, observes:

La responsabilidad del naviero, en el caso expuesto, se funda en el principio de derecho

comun de ser responsable todo el que pone al frente de un establecimiento a una persona,
de los daños o perjuicios que ocasionare esta desempeñando su cometido, y en que
estando facultado el naviero para la eleccion de capitan de la nave, viene a tener
indirectamente culpa en la negligencia o actos de este que o casionaron daños o perjuicios,
puesto que no se aseguro de su pericia o buena fe. Limitase, sin embargo, la
responsabilidad del naviero a la perdida de la nave, sus aparejos, y fletes devengados
durante el viaje; porque no pudiendo vigilar de un modo directo e inmediato la conducta del
capitan, hubiera sido duro hacerla extensiva a todos sus bienes que podria comprometer el
capitan con sus faltas o delitos.

The views of these learned commentators, including those of Estasen (Derecho Mercantil, Vol. 4,
259) and Supino (Derecho Mercantil, pp. 463-464), leave nothing to be desired and nothing to be
doubted on the principle. It only remains to be noted that the rule of limited liability provided for in our
Code of Commerce reflects merely, or is but a restatement, imperfect though it is, of the almost
universal principle on the subject. While previously under the civil or common law, the owner of a
vessel was liable to the full amount for damages caused by the misconduct of the master, by the
general maritime law of modern Europe, the liability of the shipowner was subsequently limited to his
interest in the vessel. (Norwich & N. Y. Trans. Co. v. Wright, 80 U. S. 104, 20 Law. ed. 585.) A
similar limitation was placed by the British Parliament upon the liability of Englosh shipowners
through a series of statutes beginning in 1734 with the Act of 7 George II, chapter 15. The
legislatures of Massachusetts and Maine followed suit in 1818 and 1821, and finally, Congress
enacted the Limited Liability Act of March 3, 1851, embodying most of the provisions contained in
the British Statutes (see 24 R. C. L. pp. 1387-1389). Section 4283 of the Revised Statutes (sec. 183,
Tit. 46, Code of Laws of U. S. A.) reads:

LIABILITY OF OWNER NOT TO EXCEED INTEREST. — The liability of the owner of any
vessel, for any embezzlement, loss, or destruction, by any person, of any property, goods, or
merchandise, shipped or put on board of such vessel, or for any loss, damage, or injury by
collision, or for any act, matter or thing, loss, damage, or forfeiture, done, occasioned, or
incurred without the privity, or knowledge of such owner or owners, shall in no case exceed
the amount or value of the interest of such owner in such vessel, and her freight then
pending.

The policy which the rule is designed to promote is the encouragement of shipbuilding and
investment in maritime commerce. (Vide: Norwich & N. Y. Trans. Co. v. Wright, supra; The
Main v. Williams, 152 U. S. 122; 58 C. J. 634.) And it is in that spirit that the American courts
construed the Limited Liability Act of Congress whereby the immunities of the Act were applied to
claims not only for lost goods but also for injuries and "loss of life of passengers, whether arising
under the general law of admiralty, or under Federal or State statutes." (The City of Columbus, 22
Fed. 460; The Longfellow, 104 Fed. 360; Butler v. Boston & Savannah Steamship Co., 32 Law. ed.
1017; Craig v. Continental Insurance Co., 35 Law. ed. 836.) The Supreme Court of the United States
in Norwich & N. Y. Trans. Co. v. Wright, 80 U. S. 104, 20 Law. ed. 585, 589-590, accounting for the
history of the principle, clinches our exposition of the supporting authorities:
 The history of the limitation of liability of shipowners is matter of common knowledge. The
learned opinion of Judge Ware in the case of The Rebecca, 1 Ware, 187-194, leaves little to
be desired on the subject. He shows that it originated in the maritime law of modern Europe;
that whilst the civil, as well as the common law, made the owner responsible to the whole
extent of damage caused by the wrongful act or negligence of the matter or crew, the
maritime law only made then liable (if personally free from blame) to the amount of their
interest in the ship. So that, if they surrendered the ship, they were discharged.

Grotius, in his law of War and Peace, says that men would be deterred from investing in
ships if they thereby incurred the apprehension of being rendered liable to an indefinite
amount by the acts of the master and, therefore, in Holland, they had never observed the
Roman Law on that subject, but had a regulation that the ship owners should be bound no
farther than the value of their ship and freight. His words are: Navis et eorum quae in navi
sunt," "the ship and goods therein." But he is speaking of the owner's interest; and this, as to
the cargo, is the freight thereon, and in that sense he is understood by the commentators.
Boulay Paty, Droit Maritime, tit. 3, sec. 1, p. 276; Book II, c. XI, sec. XIII. The maritime law,
as codified in the celebrated French Ordonance de la Marine, in 1681, expressed the rule
thus: 'The proprietors of vessels shall be responsible for the acts of the master, but they shall
be discharged by abandoning the ship and freight.' Valin, in his commentary on this passage,
lib. 2, tit. 8, art. 2, after specifying certain engagements of the master which are binding on
the owners, without any limit of responsibility, such as contracts for the benefit of the vessel,
made during the voyage (except contracts of bottomry) says: "With these exceptions it is just
that the owner should not be bound for the acts of the master, except to the amount of the
ship and freight. Otherwise he would run the risk of being ruined by the bad faith or
negligence of his captain, and the apprehension of this would be fatal to the interests of
navigation. It is quite sufficient that he be exposed to the loss of his ship and of the freight, to
make it his interest, independently of any goods he may have on board to select a reliable
captain." Pardessus says: 'The owner is bound civilly for all delinquencies committed by the
captain within the scope of his authority, but he may discharge himself therefrom by
abandoning the ship and freight; and, if they are lost, it suffices for his discharge, to
surrender all claims in respect of the ship and its freight," such as insurance, etc. Droit
Commercial, part 3, tit. 2, c. 3, sec. 2.

The same general doctrine is laid down by many other writers on maritime law. So that it is
evident that, by this law, the owner's liability was coextensive with his interest in the vessel
and its freight, and ceased by his abandonment and surrender of these to the parties
sustaining loss.

In the light of all the foregoing, we therefore hold that if the shipowner or agent may in any way be
held civilly liable at all for injury to or death of passengers arising from the negligence of the captain
in cases of collisions or shipwrecks, his liability is merely co-extensive with his interest in the vessel
such that a total loss thereof results in its extinction. In arriving at this conclusion, we have not been
unmindful of the fact that the ill-fated steamship Negros, as a vessel engaged in interisland trade, is
a common carrier (De Villata v. Stanely, 32 Phil., 541), and that the as a vessel engaged in
interisland trade, is a common carrier (De Villata v. Stanely, 32 Phil., 541), and that the relationship
between the petitioner and the passengers who died in the mishap rests on a contract of carriage.
But assuming that petitioner is liable for a breach of contract of carriage, the exclusively "real and
hypothecary nature" of maritime law operates to limit such liability to the value of the vessel, or to the
insurance thereon, if any. In the instant case it does not appear that the vessel was insured.

Whether the abandonment of the vessel sought by the petitioner in the instant case was in
accordance with law of not, is immaterial. The vessel having totally perished, any act of
abandonment would be an idle ceremony.
Judgement is reversed and petitioner is hereby absolved of all the complaints, without costs.

Avanceña, C.J., Abad Santos, Diaz, Laurel, Horrilleno, and Ozaeta, JJ., concur.
 [G.R. No. L-9534. September 29, 1956.]
MANILA STEAMSHIP CO., INC., Petitioner, vs. INSA ABDULHAMAN (MORO) and LIM HONG
TO, Respondents.

DECISION
REYES, J. B. L., J.:
This case was begun in the Court of First Instance of Zamboanga (Civil Case No. 170) by Insa Abdulhaman
against the Manila Steamship Co., owner of the M/S “Bowline Knot”, and Lim Hong To, owner of the M/L
“Consuelo V”, to recover damages for the death of his (Plaintiff’s) five children and loss of personal
properties on board the M/L “Consuelo V” as a result of a maritime collision between said vessel and the
M/S “Bowline Knot” on May 4, 1948, a few kilometers distant from San Ramon Beach, Zamboanga City.
On appeal, the Court of Appeals found the following facts to have been established: chanroble svirtuallawlibrary

“From 7: 00 to 8: 00 o’clock in the evening of May 4, 1948, the M/L “Consuelo V”, laden with cargoes
chanroblesvirtuallawlibrary chanroble svirtuallawlibrary

and passengers left the port of Zamboanga City bound for Siokon under the command of Faustino
Macrohon. She was then towing a kumpit, named “Sta. Maria Bay”. The weather was good and fair.
Among her passengers were the Plaintiff Insa Abdulhaman, his wife Carimla Mora and their five children
already mentioned. The Plaintiff and his wife paid their fare before the voyage started.
On that same night the M/S “Bowline Knot” was navigating from Maribojoc towards Zamboanga.
Between 9: 30 to 10: 00 in the evening the dark clouds bloated with rain began to fall and the gushing
chanroblesvirtuallawlibrary chanroblesvirtuallawlibrary

strong wind began to blow steadily harder, lashing the waves into a choppy and roaring sea. Such weather
lasted for about an hour and then it became fair although it was showering and the visibility was good
enough.
When some of the passengers of the M/L “Consuelo V” were then sleeping and some were lying down
awake, all of a sudden they felt the shocking collision of the M/L “Consuelo V” and a big motorship, which
later on was identified as the M/V “Bowline Knot”.
Because the M/L “Consuelo V” capsized, her crew and passengers, before realizing what had happened,
found themselves swimming and floating on the crest of the waves and as a result of which nine (9)
passengers were dead and missing and all the cargoes carried on said boat, including those of
the Plaintiff as appear in the list, Exhibit “A”, were also lost.
Among the dead passengers found were Maria, Amlasa, Bidoaya and Bidalla, all surnamed Inasa, while
the body of the child Abdula Inasa of 6 years of age was never recovered. Before the collision, none of the
passengers were warned or informed of the impending danger as the collision was so sudden and
unexpected. All those rescued at sea were brought by the M/V “Bowline Knot” to Zamboanga City.”
(Decision of C. A., pp. 5-6).
As the cause of the collision, the Court of Appeals affirmed the findings of the Board of Marine Inquiry,
that the commanding officer of the colliding vessels had both been negligent in operating their respective
vessels. Wherefore, the Court held the owners of both vessels solidarily liable to Plaintiff for the damages
caused to him by the collision, under Article 827 of the Code of Commerce; but chan roble svirtualawlibrary

exempted Defendant Lim Hong To from liability by reason of the sinking and total loss of his vessel, the
M/L “Consuelo V”, while the other Defendant, the Manila Steamship Co., owner of the M/S “Bowline
Knot”, was ordered to pay all of Plaintiff’s damages in the amount of P20,784.00 plus one-half of the costs.
It is from this judgment that Defendant Manila Steamship Co. had appealed to this Court.
Petitioner Manila Steamship Co. pleads that it is exempt from any liability to Plaintiff under Article 1903
of the Civil Code because it had exercised the diligence of a good father of a family in the selection of its
employees, particularly Third Mate Simplicio Ilagan, the officer in command of its vessels, the M/S
“Bowline Knot”, at the time of the collision. This defense is untenable. While it is true that Plaintiff’s action
against Petitioner is based on a tort or quasi-delict, the tort in question is not a civil tort under the Civil
Code but a maritime tort resulting in a collision at sea, governed by Articles 826-939 of the Code of
Commerce. Under Article 827 of the Code of Commerce, in case of collision between two vessels
imputable to both of them, each vessel shall suffer her own damage and both shall be solidarily liable for
the damages occasioned to their cargoes. The characteristic language of the law in making the “vessels”
solidarily liable for the damages due to the maritime collision emphasizes the direct nature of the
responsibilities on account of the collision incurred by the shipowner under maritime law, as distinguished
from the civil law and mercantile law in general. This direct responsibility is recognized in Article 618 of
the Code of Commerce under which the captain shall be civilly liable to the ship agent, and the latter is
the one liable to third persons, as pointed out in the collision case of Yueng Sheng Exchange & Trading Co.
vs. Urrutia & Co., 12 Phil. 747, 753: chanroble svirtuallawlibrary

“The responsibility involved in the present action is that derived from the management of the vessel,
which was defective on account of lack of skill, negligence, or fault, either of the captain or of the crew,
for which the captain is responsible to the agent, who in his turn is responsible to the third party
prejudiced or damaged. (Article 618, Code of Commerce).”
In fact, it is a general principle, well established maritime law and custom, that shipowners and ship agents
are civilly liable for the acts of the captain (Code of Commerce, Article 586) and for the indemnities due
the third persons (Article 587); so that injured parties may immediately look for reimbursement to the
chan roblesvirtualawlibrary

owner of the ship, it being universally recognized that the ship master or captain is primarily the
representative of the owner (Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256, 260). This direct liability,
moderated and limited by the owner’s right of abandonment of the vessel and earned freight (Article
587), has been declared to exist, not only in case of breached contracts, but also in cases of tortious
negligence (Yu Biao Sontua vs. Osorio, 43 Phil. 511, 515): chanroblesvirtuallawlibrary

“In the second assignment of error, the Appellant contends that the Defendant ought not to be held liable
for the negligence of his agents and employees.
It is proven that the agents and employees, through whose negligence the explosion and fire in question
occurred, were agents, employees and mandatories of the Defendant. Where the vessel is one of freight,
a public concern or public utility, its owner or agents is liable for the tortious acts of his agents (Articles
587, 613, and 618 Code of Commerce; and Article 1902, 1903, 1908, Civil Code). This principle has been
chan roblesvirtualawlibrary

repeatedly upheld in various decisions of this court.

The doctrines cited by the Appellant in support of his theory have reference to the relations between
principal and agent in general, but not to the relations between ship agent and his agents and employees; chan

for this reason they cannot be applied in the present case.”

roblesvirtualawlibrary

It is easy to see that to admit the defense of due diligence of a bonus paterfamilias (in the selection and
vigilance of the officers and crew) as exempting the shipowner from any liability for their faults, would
render nugatory the solidary liability established by Article 827 of the Code of Commerce for the greater
protection of injured parties. Shipowners would be able to escape liability in practically every case,
considering that the qualifications and licensing of ship masters and officers are determined by the State,
and that vigilance is practically impossible to exercise over officers and crew of vessels at sea. To compel
the parties prejudiced to look to the crew for indemnity and redress would be an illusory remedy for
almost always its members are, from captains down, mere wage earners.
We, therefore, find no reversible error in the refusal of the Court of Appeals to consider the defense of
the Manila Steamship Co., that it is exempt from liability for the collision with the M/L “Consuelo V” due
to absence of negligence on its parts in the selection and supervision of the officers and crew of the M/S
“Bowline Knot”.
The case of Walter S. Smith & Co. vs. Cadwallader Gibson Lumber Co., 55 Phil. 517, invoked by Petitioner,
is not the point. Said case treated of a civil tort, in that the vessel of the Defendant, allegedly negligently
managed by its captain in the course of its maneuvers to moor at Plaintiff’s wharf, struck the same and
partially demolished it, causing damage to Plaintiff. Because the tort allegedly committed was civil, the
provisions of Article 1903 of the Civil Code were correctly applied. The present case, on the other hand,
involves tortious conduct resulting in a maritime collision; wherefore, the liability of the shipowner is,
chan roblesvirtualawlibrary

as already stated, governed by the provisions of the Code of Commerce and not by the Civil Code.
We agree, however, with Petitioner-Appellant, that the Court of Appeals was in error in declaring
the Respondent Lim Hong To, owner of the M/L “Consuelo V”, exempt from liability to the
original Plaintiff, Abdulhaman, in view of the total loss of his own vessel, that sank as a result of the
collision. It is to be noted that both the master and the engineer of the motor launch “Consuelo V” were
not duly licensed as such (Exh. 2). In applying for permission to operate, despite the lack of properly
trained and experienced, crew, Respondent Lim Hong To gave as a reason —
“that the income derived from the vessel is insufficient to pay licensed officers who demand high salaries”,
and expressly declared: chanroblesvirtuallawlibrary

“That in case of any accident, damage or loss, I shall assume full risk and responsibility for all the
consequences thereof.” (Exhibit 2).
His permit to operate, in fact, stipulated —
“that in case of any accident, damage or loss, the registered owner thereof shall assume full risk and
responsibility for all the consequences thereof, and that said vessel shall be held answerable for any
negligence, disregard or violation of any of the conditions herein imposed and for any consequence arising
from such negligence, disregard or violations.” (Exhibit 3.)
The Court of Appeals held that neither the letter (Exhibit 2) nor the permit (Exhibit 3) contained any waiver
of the right of Respondent Lim Hong To to limit his liability to the value of his motor launch and that he
did not lose the statutory right to limit his liability by abandonment of the vessel, as conferred by Article
587 of the Code of Commerce.
We find the ruling untenable. Disregarding the question whether mere inability to meet the salary
demands of duly licensed masters and engineers constitutes non-availability thereof that would excuse
noncompliance with the law and authorize operation without licensed officers under Act 3553, the fact
remains that by operating with an unlicensed master, Lim Hong To deliberately increased the risk to which
the passengers and shippers of cargo aboard the “Consuelo V” would be subjected. In his desire to reap
greater benefits in the maritime trade, Lim Hong To willfully augmented the dangers and hazards to his
vessel’s unwarry passengers, who would normally assume that the launch officers possessed the
necessary skill and experience to evade the perils of the sea. Hence, the liability of said Respondent cannot
be the identical to that of a shipowner who bears in mind the safety of the passengers and cargo by
employing duly licensed officers. To hold, as the Court of Appeals has done, that Lim Hong To may limit
his liability to the value of his vessels, is to erase all difference between compliance with law and the
deliberate disregard thereof. To such proposition we cannot assent.
The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a
shipowner’s liability, does not apply to cases where the injury or the average is due to shipowner’s own
fault. Fariña (Derecho Comercial Maritimo, Vol. I, pp. 122-123), on the authority of judicial precedents
from various nations, sets the rule to be as follows: chanroble svirtuallawlibrary

“Esta generalmente admitido que el propietario del buque no tiene derecho a la limitacion legal de
responsibilidad si los daños o averias que dan origen a la limitacion provienen de sus propias culpas. El
Convenio de Bruselas de 25 de agosto de 1924 tambien invalida la limitacion en el caso de culpa personal
en los accidentes o averías sobrevenidos (Art. 2°).”
To the same effect, a noted French author states: chanroblesvirtuallawlibrary

“La limitacion de la responsabilidad maritima ha sido admitida para proteger a los armadores contra los
actos abusivos de sus encargados y no dejar su patrimonio entero a la discrecion del personal de sus
buques, porque este personal cumple sus obligaciones en condiciones especiales; pero los armadores chan roble svirtualawlibrary

no tienen por sobre los demas derecho a ser amparados contra ellos mismos ni a ser protegidos contra
sus propios actos.”
(Danjon, Derecho Maritimo, Vol. 2, p. 332). (Emphasis supplied.)
That Lim Hong To understood that he would incur greater liability than that normally borne by shipowners,
is clear from his assumption of “ full” risk and responsibility for all the consequences” of the operation of
the M/L “Consuelo V”; a responsibility expressly assumed in his letter Exhibit 2, and imposed in his
chan roblesvirtualawlibrary

special permit, in addition to the vessel itself being held answerable. This express assumption of “full risk
and responsibility” would be meaningless unless intended to broaden the liability of Respondent Lim Hong
To beyond the value of his vessel.
In resume, we hold: chanroblesvirtuallawlibrary

(1) That the Manila Steamship Co., owner of the M/S “Bowline Knot”, is directly and primarily responsible
in tort for the injuries caused to the Plaintiff by the collision of said vessel with the launch “Consuelo V”,
through the negligence of the crews of both vessels, and it may not escape liability on the ground that it
exercised due diligence in the selection and supervision of the officers and crew of the “Bowline Knot”;
(2) That Lim Hong To, as owner of the motor launch “Consuelo V”, having caused the same to sail without
licensed officers, is liable for the injuries caused by the collision over and beyond the value of said launch;
(3) That both vessels being at fault, the liability of Lim Hong To and Manila Steamship Co. to
the Plaintiff herein is in solidum, as prescribed by Article 827 of the Code of Commerce.
In view of the foregoing, the decision of the Court of Appeals is modified, and that of the Court of First
Instance affirmed, in the sense of declaring both original Defendants solidarily liable to Plaintiff Insa
Abdulhaman in the sum of P20,784.00 and the cost of the litigation, without prejudice to the right of the
one who should pay the judgment in full to demand contribution from his co-Defendant.
Paras, C.J., Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia and Felix, JJ., concur.
G.R. No. 74811 September 30, 1988

CHUA YEK HONG, petitioner,

vs.
INTERMEDIATE APPELLATE COURT, MARIANO GUNO, and DOMINADOR OLIT, respondents.

Francisco D. Estrada for petitioner.

Purita Hontanosas-Cortes for private respondents.

MELENCIO-HERRERA, J.:

In this Petition for Review on certiorari petitioner seeks to set aside the Decision of respondent Appellate Court in AC G.R. No. 01375 entitled
"Chua Yek Hong vs. Mariano Guno, et al.," promulgated on 3 April 1986, reversing the Trial Court and relieving private respondents
(defendants below) of any liability for damages for loss of cargo.

The basic facts are not disputed:

Petitioner is a duly licensed copra dealer based at Puerta Galera, Oriental Mindoro, while private
respondents are the owners of the vessel, "M/V Luzviminda I," a common carrier engaged in
coastwise trade from the different ports of Oriental Mindoro to the Port of Manila.

In October 1977, petitioner loaded 1,000 sacks of copra, valued at P101,227.40, on board the vessel
"M/V Luzviminda I" for shipment from Puerta Galera, Oriental Mindoro, to Manila. Said cargo,
however, did not reach Manila because somewhere between Cape Santiago and Calatagan,
Batangas, the vessel capsized and sank with all its cargo.

On 30 March 1979, petitioner instituted before the then Court of First Instance of Oriental Mindoro, a
Complaint for damages based on breach of contract of carriage against private respondents (Civil
Case No. R-3205).

In their Answer, private respondents averred that even assuming that the alleged cargo was truly
loaded aboard their vessel, their liability had been extinguished by reason of the total loss of said
vessel.

On 17 May 1983, the Trial Court rendered its Decision, the dispositive portion of which follows:

WHEREFORE, in view of the foregoing considerations, the court believes and so

holds that the preponderance of evidence militates in favor of the plaintiff and against
the defendants by ordering the latter, jointly and severally, to pay the plaintiff the sum
of P101,227.40 representing the value of the cargo belonging to the plaintiff which
was lost while in the custody of the defendants; P65,550.00 representing
miscellaneous expenses of plaintiff on said lost cargo; attorney's fees in the amount
of P5,000.00, and to pay the costs of suit. (p. 30, Rollo).

On appeal, respondent Appellate Court ruled to the contrary when it applied Article 587 of the Code
of Commerce and the doctrine in Yangco vs. Lasema (73 Phil. 330 [1941]) and held that private
respondents' liability, as ship owners, for the loss of the cargo is merely co-extensive with their
interest in the vessel such that a total loss thereof results in its extinction. The decretal portion of that
Decision 1 reads:
 IN VIEW OF THE FOREGOING CONSIDERATIONS, the decision appealed from is
hereby REVERSED, and another one entered dismissing the complaint against
defendants-appellants and absolving them from any and all liabilities arising from the
loss of 1,000 sacks of copra belonging to plaintiff-appellee. Costs against appellee.
(p. 19, Rollo).

Unsuccessful in his Motion for Reconsideration of the aforesaid Decision, petitioner has availed of
the present recourse.

The basic issue for resolution is whether or not respondent Appellate Court erred in applying the
doctrine of limited liability under Article 587 of the Code of Commerce as expounded in Yangco vs.
Laserna, supra.

Article 587 of the Code of Commerce provides:

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

The term "ship agent" as used in the foregoing provision is broad enough to include the ship owner
(Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256 [1921]). Pursuant to said provision, therefore, both
the ship owner and ship agent are civilly and directly liable for the indemnities in favor of third
persons, which may arise from the conduct of the captain in the care of goods transported, as well
as for the safety of passengers transported Yangco vs. Laserna, supra; Manila Steamship Co., Inc.
vs. Abdulhaman et al., 100 Phil. 32 [1956]).

However, under the same Article, this direct liability is moderated and limited by the ship agent's or
ship owner's right of abandonment of the vessel and earned freight. This expresses the universal
principle of limited liability under maritime law. The most fundamental effect of abandonment is the
cessation of the responsibility of the ship agent/owner (Switzerland General Insurance Co., Ltd. vs.
Ramirez, L-48264, February 21, 1980, 96 SCRA 297). It has thus been held that by necessary
implication, the ship agent's or ship owner's liability is confined to that which he is entitled as of right
to abandon the vessel with all her equipment and the freight it may have earned during the voyage,"
and "to the insurance thereof if any" (Yangco vs. Lasema, supra). In other words, the ship owner'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. "No vessel, no liability" expresses in a nutshell the limited liability rule. The
total destruction of the vessel extinguishes maritime liens as there is no longer any res to which it
can attach (Govt. Insular Maritime Co. vs. The Insular Maritime, 45 Phil. 805, 807 [1924]).

As this Court held:

If the ship owner or agent may in any way be held civilly liable at all for injury to or
death of passengers arising from the negligence of the captain in cases of collisions
or shipwrecks, his liability is merely co-extensive with his interest in the vessel such
that a total loss thereof results in its extinction. (Yangco vs. Laserna, et al., supra).

The rationale therefor has been explained as follows:

The real and hypothecary nature of the liability of the ship owner or agent embodied
in the provisions of the Maritime Law, Book III, Code of Commerce, had its origin in
 the prevailing conditions of the maritime trade and sea voyages during the medieval
ages, attended by innumerable hazards and perils. To offset against these adverse
conditions and to encourage ship building and maritime commerce, it was deemed
necessary to confine the liability of the owner or agent arising from the operation of a
ship to the vessel, equipment, and freight, or insurance, if any, so that if the ship
owner or agent abandoned the ship, equipment, and freight, his liability was
extinguished. (Abueg vs. San Diego, 77 Phil. 730 [1946])

—0—

Without the principle of limited liability, a ship owner and investor in maritime
commerce would run the risk of being ruined by the bad faith or negligence of his
captain, and the apprehension of this would be fatal to the interest of navigation."
Yangco vs. Lasema, supra).

—0—

As evidence of this real nature of the maritime law we have (1) the limitation of the
liability of the agents to the actual value of the vessel and the freight money, and (2)
the right to retain the cargo and the embargo and detention of the vessel even in
cases where the ordinary civil law would not allow more than a personal action
against the debtor or person liable. It will be observed that these rights are
correlative, and naturally so, because if the agent can exempt himself from liability by
abandoning the vessel and freight money, thus avoiding the possibility of risking his
whole fortune in the business, it is also just that his maritime creditor may for any
reason attach the vessel itself to secure his claim without waiting for a settlement of
his rights by a final judgment, even to the prejudice of a third person. (Phil. Shipping
Co. vs. Vergara, 6 Phil. 284 [1906]).

The limited liability rule, however, is not without exceptions, namely: (1) where the injury or death to
a passenger is due either to the fault of the ship owner, or to the concurring negligence of the ship
owner and the captain (Manila Steamship Co., Inc. vs. Abdulhaman supra); (2) where the vessel is
insured; and (3) in workmen's compensation claims Abueg vs. San Diego, supra). In this case, there
is nothing in the records to show that the loss of the cargo was due to the fault of the private
respondent as shipowners, or to their concurrent negligence with the captain of the vessel.

What about the provisions of the Civil Code on common carriers? Considering the "real and
hypothecary nature" of liability under maritime law, these provisions would not have any effect on the
principle of limited liability for ship owners or ship agents. As was expounded by this Court:

In arriving at this conclusion, the fact is not ignored that the illfated, S.S. Negros, as a
vessel engaged in interisland trade, is a common carrier, and that the relationship
between the petitioner and the passengers who died in the mishap rests on a
contract of carriage. But assuming that petitioner is liable for a breach of contract of
carriage, the exclusively 'real and hypothecary nature of maritime law operates to
limit such liability to the value of the vessel, or to the insurance thereon, if any. In the
instant case it does not appear that the vessel was insured. (Yangco vs. Laserila, et
al., supra).

Moreover, Article 1766 of the Civil Code 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.

In other words, the primary law is the Civil Code (Arts. 17321766) and in default thereof, the Code of
Commerce and other special laws are applied. Since the Civil Code contains no provisions
regulating liability of ship owners or agents in the event of total loss or destruction of the vessel, it is
the provisions of the Code of Commerce, more particularly Article 587, that govern in this case.

In sum, it will have to be held that since the ship agent's or ship owner's liability is merely co-
extensive with his interest in the vessel such that a total loss thereof results in its extinction (Yangco
vs. Laserna, supra), and none of the exceptions to the rule on limited liability being present, the
liability of private respondents for the loss of the cargo of copra must be deemed to have been
extinguished. There is no showing that the vessel was insured in this case.

WHEREFORE, the judgment sought to be reviewed is hereby AFFIRMED. No costs.

SO ORDERED.

Paras, Padilla, Sarmiento and Regalado, JJ., concur.

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

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

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

Severino Z. Macavinta, Jr. for petitioners.

Dinglasan Law Office for private respondent.

MEDIALDEA. J.:

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

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

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

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

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

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

As already stated, the boat met typhoon 'Welming' and due to the strong waves it
sank causing the drowning of many passengers among whom were Amparo delos
Santos and all the aforesaid children. It appears also that Teresa Pamatian and
Diego Salim, who were also passengers also drowned. Plaintiff Ruben Reyes was
one of the survivors. 'The plaintiffs presented the birth and death certificates of
Amparo delos Santos and the children (Exhs. 1, I-1, J, J-1, K, K-1, L, L-1, 0 to S, pp.
180 to 194 rec.). They also presented copies of the manifest of passengers of the
M/V 'Mindoro' on November 2,1967 (Exhs. B & C, pp. 163 to 161 rec.).
Eliadora Crisostomo de Justo, one of the survivors, corroborated the testimony of
Mauricio delos Santos that he accompanied Amparo delos Santos and her children
to the port to board the M/V Mindoro. She is a cousin of Amparo delos Santos'
husband. According to her, when she boarded the second deck of the vessel, she
saw about 200 persons therein. She tried to see whether she could be
accommodated in the third deck or first deck because the second deck was very
crowded. She admitted that she was not included in the manifest because she
boarded the boat without a ticket, but she purchased one in the vessel. She testified
further that the boat was not able to reach its destination due to its sinking. During
the typhoon before the vessel sunk, she was able to board a 'balsa'.

Ruben Reyes, the other survivor, declared that he paid for his ticket before boarding
the M/V Mindoro. At that time he had with him personal belongings and cash all in
the amount of P2,900.00. It appears that Felix Reyes Jakusalem, Teresa Pamatian
and Amparo delos Santos drowned during the sinking of the vessel. He was able to
swim on (sic) an island and was with the others, rescued later on and brought to the
hospital. The survivors were then taken ashore (Exh. M, p. 188, rec.).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ERROR I

THE HONORABLE RESPONDENT COURT OF APPEALS ERRED IN NOT

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

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

ERROR II

RESPONDENT COURT OF APPEALS ERRED IN NOT REVERSING THE

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

ERROR III

THE HONORABLE RESPONDENT COURT OF APPEALS ERRED TO NOTE,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ACCORDINGLY, the appealed decision is hereby REVERSED and judgment is hereby rendered
sentencing the private respondent to pay the following: (1) P30,000.00 as indemnity for death to the
heirs of each of the victims; (2) P10,000.00 as moral damages to the heirs of each of the victims; (3)
P6,805.00 as actual damages divided among the petitioners as follows: heirs of Amparo Delos
Santos and her deceased children, P2,000.00; heirs of Teresa Pamatian, P450.00; heirs of Diego
Salem, P400.00; and Ruben Reyes, P2,955.00; (4) P10,000.00 as attorney's fees; and (5) the costs.
G..R. No. 156978 May 2, 2006

ABOITIZ SHIPPING CORPORATION, Petitioner,

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

DECISION

QUISUMBING, J.:

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

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

The pertinent facts are as follows:

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

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

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

Thereafter, petitioner notified7 the consignee, General Textile, of the total loss of the vessel and all of
its cargoes. General Textile, lodged a claim with respondent for the amount of its loss. Respondent
paid General Textile and was subrogated to the rights of the latter.8

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

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

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

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

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

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

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

SO ORDERED.13 1avvphil.net

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

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

I.

x x x DISREGARDING THE RULINGS OF THE HONORABLE SUPREME COURT ON THE

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

A.

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

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

II.

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

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

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

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

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

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

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

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

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

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

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

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

Costs against petitioner.

SO ORDERED.