Duties of a Captain On the night of 31 July 1989, Mr.
On the night of 31 July 1989, Mr. Clark received a call from Captain Tayong informing him that
G.R. No. 115286 August 11, 1994
INTER-ORIENT MARITIME ENTERPRISES, INC., SEA HORSE SHIP, INC. and TRENDA
WORLD SHIPPING (MANILA), INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and RIZALINO D. TAYONG, respondents.
Marilyn Cacho-Naoe for petitioners.
Wilfred L. Pascasio for private respondent.
FELICIANO, J.:
Private respondent Captain Rizalino Tayong, a licensed Master Mariner with experience in
commanding ocean-going vessels, was employed on 6 July 1989 by petitioners Trenda World
Shipping (Manila), Inc. and Sea Horse Ship Management, Inc. through petitioner Inter-Orient
Maritime Enterprises, Inc. as Master of the vessel M/V Oceanic Mindoro, for a period of one (1)
year, as evidenced by an employment contract. On 15 July 1989, Captain Tayong assumed
command of petitioners' vessel at the port of Hongkong. His instructions were to replenish bunker
and diesel fuel, to sail forthwith to Richard Bay, South Africa, and there to load 120,000 metric
tons of coal.
On 16 July 1989, while at the Port of Hongkong and in the process of unloading cargo, Captain
Tayong received a weather report that a storm code-named "Gordon" would shortly hit
Hongkong. Precautionary measures were taken to secure the safety of the vessel, as well as its
crew, considering that the vessel's turbo-charger was leaking and the vessel was fourteen (14)
years old.
On 21 July 1989, Captain Tayong followed-up the requisition by the former captain of
the Oceanic Mindoro for supplies of oxygen and acetylene, necessary for the welding-repair of
the turbo-charger and the economizer.1 This requisition had been made upon request of the
Chief Engineer of the vessel and had been approved by the shipowner.2
On 25 July 1989, the vessel sailed from Hong Kong for Singapore. In the Master's sailing
message, Captain Tayong reported a water leak from M.E. Turbo Charger No. 2 Exhaust gas
casing. He was subsequently instructed to blank off the cooling water and maintain reduced RPM
unless authorized by the owners.3
On 29 July 1989, while the vessel was en route to Singapore, Captain Tayong reported that the
vessel had stopped in mid-ocean for six (6) hours and forty-five (45) minutes due to a leaking
economizer. He was instructed to shut down the economizer and use the auxiliary boiler instead.4
On 31 July 1989 at 0607 hrs., the vessel arrived at the port of Singapore. 5 The Chief Engineer
reminded Captain Tayong that the oxygen and acetylene supplies had not been
delivered.6 Captain Tayong inquired from the ship's agent in Singapore about the supplies. The
ship agent stated that these could only be delivered at 0800 hours on August 1, 1989 as the
stores had closed.7
Captain Tayong called the shipowner, Sea Horse Ship Management, Ltd., in London and
informed them that the departure of the vessel for South Africa may be affected because of the
delay in the delivery of the supplies.8
Sea Horse advised Captain Tayong to contact its Technical Director, Mr. Clark, who was in Tokyo
and who could provide a solution for the supply of said oxygen and acetylene. 9
the vessel cannot sail without the oxygen and acetylene for safety reasons due to the problems
with the turbo charger and economizer. Mr. Clark responded that by shutting off the water to the
turbo chargers and using the auxiliary boiler, there should be no further problems. According to
Mr. Clark, Captain Tayong agreed with him that the vessel could sail as scheduled on 0100 hours
on 1 August 1989 for South Africa.10
According to Captain Tayong, however, he communicated to Sea Horse his reservations
regarding proceeding to South Africa without the requested supplies,11 and was advised by Sea
Horse to wait for the supplies at 0800 hrs. of 1 August 1989, which Sea Horse had arranged to
be delivered on board the Oceanic Mindoro.12 At 0800 hours on 1 August 1989, the requisitioned
supplies were delivered and Captain Tayong immediately sailed for Richard Bay.
When the vessel arrived at the port of Richard Bay, South Africa on 16 August 1989, Captain
Tayong was instructed to turn-over his post to the new captain. He was thereafter repatriated to
the Philippines, after serving petitioners for a little more than two weeks. 13 He was not informed
of the charges against him.14
On 5 October 1989, Captain Tayong instituted a complaint for illegal dismissal before the
Philippine Overseas Employment Administration ("POEA"), claiming his unpaid salary for the
unexpired portion of the written employment contract, plus attorney's fees.
Petitioners, in their answer to the complaint, denied that they had illegally dismissed Captain
Tayong. Petitioners alleged that he had refused to sail immediately to South Africa to the
prejudice and damage of petitioners. According to petitioners, as a direct result of Captain
Tayong's delay, petitioners' vessel was placed "off-hire" by the charterers for twelve (12) hours.
This meant that the charterers refused to pay the charter hire or compensation corresponding to
twelve (12) hours, amounting to US$15,500.00, due to time lost in the voyage. They stated that
they had dismissed private respondent for loss of trust and confidence.
The POEA dismissed Captain Tayong's complaint and held that there was valid cause for his
untimely repatriation. The decision of the POEA placed considerable weight on petitioners'
assertion that all the time lost as a result of the delay was caused by Captain Tayong and that
his concern for the oxygen and acetylene was not legitimate as these supplies were not
necessary or indispensable for running the vessel. The POEA believed that the Captain had
unreasonably refused to follow the instructions of petitioners and their representative, despite
petitioners' firm assurances that the vessel was seaworthy for the voyage to South Africa.
On appeal, the National Labor Relations Commission ("NLRC") reversed and set aside the
decision of the POEA. The NLRC found that Captain Tayong had not been afforded an
opportunity to be heard and that no substantial evidence was adduced to establish the basis for
petitioners' loss of trust or confidence in the Captain. The NLRC declared that he had only acted
in accordance with his duties to maintain the seaworthiness of the vessel and to insure the safety
of the ship and the crew. The NLRC directed petitioners to pay the Captain (a) his salary for the
unexpired portion of the contract at US$1,900.00 a month, plus one (1) month leave benefit; and
(b) attorney's fees equivalent to ten percent (10%) of the total award due.
Petitioners, before this Court, claim that the NLRC had acted with grave abuse of discretion.
Petitioners allege that they had adduced sufficient evidence to establish the basis for private
respondent's discharge, contrary to the conclusion reached by the NLRC. Petitioners insist that
Captain Tayong, who must protect the interest of petitioners, had caused them unnecessary
damage, and that they, as owners of the vessel, cannot be compelled to keep in their employ a
1|Page
captain of a vessel in whom they have lost their trust and confidence. Petitioners finally contend
that the award to the Captain of his salary corresponding to the unexpired portion of the contract
and one (1) month leave pay, including attorney's fees, also constituted grave abuse of
discretion.
The petition must fail.
We note preliminarily that petitioners failed to attach a clearly legible, properly certified, true copy
of the decision of the NLRC dated 23 April 1994, in violation of requirement no. 3 of Revised
Circular No. 1-88. On this ground alone, the petition could have been dismissed. But the Court
chose not to do so, in view of the nature of question here raised and instead required private
respondent to file a comment on the petition. Captain Tayong submitted his comment. The Office
of the Solicitor General asked for an extension of thirty (30) days to file its comment on behalf of
the NLRC. We consider that the Solicitor General's comment may be dispensed with in this case.
It is well settled in this jurisdiction that confidential and managerial employees cannot be
arbitrarily dismissed at any time, and without cause as reasonably established in an appropriate
investigation.15 Such employees, too, are entitled to security of tenure, fair standards of
employment and the protection of labor laws.
The captain of a vessel is a confidential and managerial employee within the meaning of the
above doctrine. A master or captain, for purposes of maritime commerce, is one who has
command of a vessel. A captain commonly performs three (3) distinct roles: (1) he is a general
agent of the shipowner; (2) he is also commander and technical director of the vessel; and (3)
he is a representative of the country under whose flag he navigates.16 Of these roles, by far the
most important is the role performed by the captain as commander of the vessel; for such role
(which, to our mind, is analogous to that of "Chief Executive Officer" [CEO] of a present-day
corporate enterprise) has to do with the operation and preservation of the vessel during its
voyage and the protection of the passengers (if any) and crew and cargo. In his role as general
agent of the shipowner, the captain has authority to sign bills of lading, carry goods aboard and
deal with the freight earned, agree upon rates and decide whether to take cargo. The ship
captain, as agent of the shipowner, has legal authority to enter into contracts with respect to the
vessel and the trading of the vessel, subject to applicable limitations established by statute,
contract or instructions and regulations of the shipowner. 17 To the captain is committed the
governance, care and management of the vessel.18 Clearly, the captain is vested with both
management and fiduciary functions.
It is plain from the records of the present petition that Captain Tayong was denied any opportunity
to defend himself. Petitioners curtly dismissed him from his command and summarily ordered his
repatriation to the Philippines without informing him of the charge or charges levelled against
him, and much less giving him a chance to refute any such charge. In fact, it was only on 26
October 1989 that Captain Tayong received a telegram dated 24 October 1989 from Inter-Orient
requiring him to explain why he delayed sailing to South Africa.
We also find that the principal contention of petitioners against the decision of the NLRC pertains
to facts, that is, whether or not there was actual and sufficient basis for the alleged loss of trust
or confidence. We have consistently held that a question of "fact" is, as a general rule, the
concern solely of an administrative body, so long as there is substantial evidence of record to
sustain its action.
The record requires us to reject petitioners' claim that the NLRC's conclusions of fact were not
supported by substantial evidence. Petitioners rely on self-serving affidavits of their own officers
and employees predictably tending to support petitioners' allegation that Captain Tayong had
performed acts inimical to petitioners' interests for which, supposedly, he was discharged. The
official report of Mr. Clark, petitioners' representative, in fact supports the NLRC's conclusion that
private respondent Captain did not arbitrarily and maliciously delay the voyage to South Africa.
There had been, Mr. Clark stated, a disruption in the normal functioning of the vessel's turbo-
charger19 and economizer and that had prevented the full or regular operation of the vessel.
Thus, Mr. Clark relayed to Captain Tayong instructions to "maintain reduced RPM" during the
voyage to South Africa, instead of waiting in Singapore for the supplies that would permit
shipboard repair of the malfunctioning machinery and equipment.
More importantly, a ship's captain must be accorded a reasonable measure of discretionary
authority to decide what the safety of the ship and of its crew and cargo specifically requires on
a stipulated ocean voyage. The captain is held responsible, and properly so, for such safety. He
is right there on the vessel, in command of it and (it must be presumed) knowledgeable as to the
specific requirements of seaworthiness and the particular risks and perils of the voyage he is to
embark upon. The applicable principle is that the captain has control of all departments of service
in the vessel, and reasonable discretion as to its navigation. 20 It is the right and duty of the
captain, in the exercise of sound discretion and in good faith, to do all things with respect to the
vessel and its equipment and conduct of the voyage which are reasonably necessary for the
protection and preservation of the interests under his charge, whether those be of the
shipowners, charterers, cargo owners or of underwriters.21 It is a basic principle of admiralty law
that in navigating a merchantman, the master must be left free to exercise his own best judgment.
The requirements of safe navigation compel us to reject any suggestion that the judgment and
discretion of the captain of a vessel may be confined within a straitjacket, even in this age of
electronic communications.22 Indeed, if the ship captain is convinced, as a reasonably prudent
and competent mariner acting in good faith that the shipowner's or ship agent's instructions
(insisted upon by radio or telefax from their offices thousands of miles away) will result, in the
very specific circumstances facing him, in imposing unacceptable risks of loss or serious danger
to ship or crew, he cannot casually seek absolution from his responsibility, if a marine casualty
occurs, in such instructions.23
Compagnie de Commerce v. Hamburg24 is instructive in this connection. There, this Court
recognized the discretionary authority of the master of a vessel and his right to exercise his best
judgment, with respect to navigating the vessel he commands. In Compagnie de Commerce, a
charter party was executed between Compagnie de Commerce and the owners of the
vessel Sambia, under which the former as charterer loaded on board the Sambia, at the port of
Saigon, certain cargo destined for the Ports of Dunkirk and Hamburg in Europe. The Sambia,
flying the German flag, could not, in the judgment of its master, reach its ports of destination
because war (World War I) had been declared between Germany and France. The master of
the Sambia decided to deviate from the stipulated voyage and sailed instead for the Port of
Manila. Compagnie de Commerce sued in the Philippines for damages arising from breach of
the charter party and unauthorized sale of the cargo. In affirming the decision of the trial court
dismissing the complaint, our Supreme Court held that the master of the Sambia had reasonable
grounds to apprehend that the vessel was in danger of seizure or capture by the French
authorities in Saigon and was justified by necessity to elect the course which he took — i.e., to
flee Saigon for the Port of Manila — with the result that the shipowner was relieved from liability
2|Page
for the deviation from the stipulated route and from liability for damage to the cargo. The Court
said:
The danger from which the master of the Sambia fled was a real and not merely
an imaginary one as counsel for shipper contends. Seizure at the hands of an
"enemy of the King" though not inevitable, was a possible outcome of a failure
to leave the port of Saigon; and we cannot say that under the conditions existing
at the time when the master elected to flee from that port, there were no grounds
for a "reasonable apprehension of danger" from seizure by the French
authorities, and therefore no necessity for flight.
The word "necessity" when applied to mercantile affairs, where the judgment
must in the nature of things be exercised, cannot, of course, mean an irresistible
compelling power. What is meant by it in such cases is the force of
circumstances which determine the course a man ought to take. Thus, where by
the force of circumstances, a man has the duty cast upon him of taking some
action for another, and under that obligation adopts a course which, to the
judgment of a wise and prudent man, is apparently the best for the interest of
the persons for whom he acts in a given emergency, it may properly be said of
the course so taken that it was in a mercantile sense necessary to take
it.25 (Emphasis supplied)
Compagnie de Commerce contended that the shipowner should, at all events, be held
responsible for the deterioration in the value of the cargo incident to its long stay on board the
vessel from the date of its arrival in Manila until the cargo was sold. The Supreme Court, in
rejecting this contention also, declared that:
But it is clear that the master could not be required to act on the very day of his
arrival; or before he had a reasonable opportunity to ascertain whether he could
hope to carry out his contract and earn his freight; and that he should not be held
responsible for a reasonable delay incident to an effort to ascertain the wishes
of the freighter, and upon failure to secure prompt advice, to decide for himself
as to the course which he should adopt to secure the interests of the absent
owner of the property aboard the vessel.
The master is entitled to delay for such a period as may be reasonable under
the circumstances, before deciding on the course he will adopt. He may claim a
fair opportunity of carrying out a contract, and earning the freight, whether by
repairing or transhipping. Should the repair of the ship be undertaken, it must be
proceeded with diligently; and if so done, the freighter will have no ground of
complaint, although the consequent delay be a long one, unless, indeed, the
cargo is perishable, and likely to be injured by the delay. Where that is the case,
it ought to be forwarded, or sold, or given up, as the case may be, without waiting
for repairs.
A shipowner or shipmaster (if communication with the shipowner is
impossible), will be allowed a reasonable time in which to decide what course
he will adopt in such cases as those under discussion; time must be allowed to
him to ascertain the facts, and to balance the conflicting interests involved, of
shipowner, cargo owner, underwriter on ship and freight. But once the time has
elapsed, he is bound to act promptly according as he has elected either to repair,
or abandon the voyage, or tranship. If he delays, and owing to that delay a
perishable cargo suffers damage, the shipowner will be liable for that damage;
he cannot escape that obligation by pleading the absence of definite instructions
from the owners of the cargo or their underwriters, since he has control of the
cargo and is entitled to elect.26 (Emphasis supplied)
The critical question, therefore, is whether or not Captain Tayong had reasonable grounds to
believe that the safety of the vessel and the crew under his command or the possibility of
substantial delay at sea required him to wait for the delivery of the supplies needed for the repair
of the turbo-charger and the economizer before embarking on the long voyage from Singapore
to South Africa.
In this connection, it is specially relevant to recall that, according to the report of Mr. Robert Clark,
Technical Director of petitioner Sea Horse Ship Management, Inc., the Oceanic Mindoro had
stopped in mid-ocean for six (6) hours and forty-five (45) minutes on its way to Singapore
because of its leaking economizer.27 Equally relevant is the telex dated 2 August 1989 sent by
Captain Tayong to Sea Horse after Oceanic Mindoro had left Singapore and was en route to
South Africa. In this telex, Captain Tayong explained his decision to Sea Horse in the following
terms:
I CAPT. R.D. TAYONG RE: UR PROBLEM IN SPORE (SINGAPORE) I
EXPLAIN AGN TO YOU THAT WE ARE INSECURITY/DANGER TO SAIL IN
SPORE W/OUT HAVING SUPPLY OF OXY/ACET. PLS UNDERSTAND HV
PLENTY TO BE DONE REPAIR FM MAIN ENGINE LIKE TURBO CHARGER
PIPELINE, ECONOMIZER LEAKAGE N ETC WE COULD NOT FIX IT W/OUT
OXY/ACET ONBOARD. I AND MR. CLARK WE CONTACTED EACH OTHER
BY PHONE IN PAPAN N HE ADVSED US TO SAIL TO RBAY N WILL SUPPLY
OXY/ACET UPON ARRIVAL RBAY HE ALSO EXPLAINED TO MY C/E HOW
TO FIND THE REMEDY W/OUT OXY/ACET BUT C/E HE DISAGREED MR.
CLARK IDEA, THAT IS WHY WE URG REQUEST[ED] YR KIND OFFICE TO
ARRANGE SUPPLY OXY/ACET BEFORE SAILING TO AVOID RISK/DANGER
OR DELAY AT SEA N WE TOOK PRECAUTION UR TRIP FOR 16 DAYS FM
SPORE TO RBAY. PLS. UNDERSTAND UR SITUATION.28 (Emphasis partly in
source and partly supplied)
Under all the circumstances of this case, we, along with the NLRC, are unable to hold that
Captain Tayong's decision (arrived at after consultation with the vessel's Chief Engineer) to wait
seven (7) hours in Singapore for the delivery on board the Oceanic Mindoro of the requisitioned
supplies needed for the welding-repair, on board the ship, of the turbo-charger and the
economizer equipment of the vessel, constituted merely arbitrary, capricious or grossly
insubordinate behavior on his part. In the view of the NLRC, that decision of Captain Tayong did
not constitute a legal basis for the summary dismissal of Captain Tayong and for termination of
his contract with petitioners prior to the expiration of the term thereof. We cannot hold this
conclusion of the NLRC to be a grave abuse of discretion amounting to an excess or loss of
jurisdiction; indeed, we share that conclusion and make it our own.
Clearly, petitioners were angered at Captain Tayong's decision to wait for delivery of the needed
supplies before sailing from Singapore, and may have changed their estimate of their ability to
work with him and of his capabilities as a ship captain. Assuming that to be petitioners'
management prerogative, that prerogative is nevertheless not to be exercised, in the case at bar,
3|Page
at the cost of loss of Captain Tayong's rights under his contract with petitioners and under
Philippine law.
ACCORDINGLY, petitioners having failed to show grave abuse of discretion amounting to loss
or excess of jurisdiction on the part of the NLRC in rendering its assailed decision, the Petition
for Certiorari is hereby DISMISSED, for lack of merit. Costs against petitioners.
SO ORDERED.

4|Page
Duties of a pilot
G.R. No. 130068 October 1, 1998
FAR EASTERN SHIPPING COMPANY, petitioner,
vs.
COURT OF APPEALS and PHILIPPINE PORTS AUTHORITY, respondents.
G.R. No. 130150 October, 1998
MANILA PILOTS ASSOCIATION, petitioner,
vs.
PHILIPPINE PORTS AUTHORITY and FAR EASTERN SHIPPING COMPANY, respondents.
REGALADO, J.:
These consolidated petitions for review on certiorari seek in unison to annul and set aside the
decision1 of respondent Court of Appeals of November 15, 1996 and its resolution 2 dated July
31, 1997 in CA-G.R. CV No. 24072, entitled "Philippine Ports Authority, Plaintiff-Appellee vs.
Far Eastern Shipping Company, Senen C. Gavino and Manila Pilots' Association, Defendants-
Appellants," which affirmed with modification the judgment of the trial court holding the
defendants-appellants therein solidarily liable for damages in favor of herein private
respondent.
There is no dispute about the facts as found by the appellate court,
thus —
. . . On June 20, 1980, the M/V PAVLODAR, flying under the flagship of the
USSR, owned and operated by the Far Eastern Shipping Company (FESC for
brevity's sake), arrived at the Port of Manila from Vancouver, British
Columbia at about 7:00 o'clock in the morning. The vessel was assigned Berth
4 of the Manila International Port, as its berthing space. Captain Roberto
Abellana was tasked by the Philippine Port Authority to supervise the
berthing of the vessel. Appellant Senen Gavino was assigned by the Appellant
Manila Pilots' Association (MPA for brevity's sake) to conduct docking
maneuvers for the safe berthing of the vessel to Berth No. 4.
Gavino boarded the vessel at the quarantine anchorage and stationed himself
in the bridge, with the master of the vessel, Victor Kavankov, beside him.
After a briefing of Gavino by Kavankov of the particulars of the vessel and its
cargo, the vessel lifted anchor from the quarantine anchorage and proceeded
to the Manila International Port. The sea was calm and the wind was ideal for
docking maneuvers.
When the vessel reached the landmark (the big church by the Tondo North
Harbor) one-half mile from the pier, Gavino ordered the engine stopped.
When the vessel was already about 2,000 feet from the pier, Gavino ordered
the anchor dropped. Kavankov relayed the orders to the crew of the vessel on
the bow. The left anchor, with two (2) shackles, were dropped. However, the
anchor did not take hold as expected. The speed of the vessel did not slacken.
A commotion ensued between the crew members. A brief conference ensued
between Kavankov and the crew members. When Gavino inquired what was
all the commotion about, Kavankov assured Gavino that there was nothing to
it.
After Gavino noticed that the anchor did not take hold, he ordered the
engines half-astern. Abellana, who was then on the pier apron, noticed that
the vessel was approaching the pier fast. Kavankov likewise noticed that the
anchor did not take hold. Gavino thereafter gave the "full-astern" code.
Before the right anchor and additional shackles could be dropped, the bow of
the vessel rammed into the apron of the pier causing considerable damage to
the pier. The vessel sustained damage too, (Exhibit "7-Far Eastern Shipping).
Kavankov filed his sea protest (Exhibit "1-Vessel"). Gavino submitted his
report to the Chief Pilot (Exhibit "1-Pilot") who referred the report to the
Philippine Ports Authority (Exhibit 2-Pilot"). Abellana likewise submitted his
report of the incident (Exhibit "B").
Per contract and supplemental contract of the Philippine Ports Authority and
the contractor for the rehabilitation of the damaged pier, the same cost the
Philippine Ports Authority the amount of P1,126,132.25 (Exhibits "D" and
"E").3
On January 10, 1983, the Philippine Ports Authority (PPA, for brevity), through the Solicitor
General, filed before the Regional Trial Court of Manila, Branch 39, a complaint for a sum of
money against Far Eastern Shipping Co., Capt. Senen C. Gavino and the Manila Pilots'
Association, docketed as Civil Case No. 83-14958,4 praying that the defendants therein be
held jointly and severally liable to pay the plaintiff actual and exemplary damages plus costs
of suit. In a decision dated August 1, 1985, the trial court ordered the defendants therein
jointly and severally to pay the PPA the amount of P1,053,300.00 representing actual
damages and the costs of suit.5
The defendants appealed to the Court of Appeals and raised the following issues: (1) Is the
pilot of a commercial vessel, under compulsory pilotage, solely liable for the damage caused
by the vessel to the pier, at the port of destination, for his negligence? and (2) Would the
owner of the vessel be liable likewise if the damage is caused by the concurrent negligence of
the master of the vessel and the pilot under a compulsory pilotage?
As stated at the outset, respondent appellate court affirmed the findings of the court a
quo except that if found no employer-employee relationship existing between herein private
respondents Manila Pilots' Association (MPA, for short) and Capt. Gavino. 6 This being so, it
ruled instead that the liability of MPA is anchored, not on Article 2180 of the Civil Code, but
on the provisions of Customs Administrative Order No. 15-65, 7 and accordingly modified
said decision of the trial court by holding MPA, along with its co-defendants therein, still
solidarily liable to PPA but entitled MPA to reimbursement from Capt. Gavino for such
amount of the adjudged pecuniary liability in excess of the amount equivalent to seventy-five
percent (75%) of its prescribed reserve
fund. 8
Neither Far Eastern Shipping Co. (briefly, FESC) nor MPA was happy with the decision of the
Court of Appeals and both of them elevated their respective plaints to us via separate
petitions for review on certiorari.
5|Page
In G. R. No. 130068, which was assigned to the Second Division of this Court, FESC imputed
that the Court of Appeals seriously erred:
1. in not holding Senen C. Gavino and the Manila Pilots' Association as the
parties solely responsible for the resulting damages sustained by the pier
deliberately ignoring the established jurisprudence on the matter;
2. in holding that the master had not exercised the required diligence
demanded from him by the circumstances at the time the incident happened;
3. in affirming the amount of damages sustained by the respondent
Philippine Ports Authority despite a strong and convincing evidence that the
amount is clearly exorbitant and unreasonable;
4. in not awarding any amount of counterclaim prayed for by the petitioner
in its answer; and
5. in not granting herein petitioner's claim against pilot Senen C. Gavino and
Manila Pilots' Association in the event that it be held
liable. 9
Petitioner asserts that since the MV PAVLODAR was under compulsory pilotage at the time of
the incident, it was the compulsory pilot, Capt. Gavino, who was in command and had
complete control in the navigation and docking of the vessel. It is the pilot who supersedes
the master for the time being in the command and navigation of a ship and his orders must
be obeyed in all respects connected with her navigation. Consequently, he was solely
responsible for the damage caused upon the pier apron, and not the owners of the vessel. It
claims that the master of the boat did not commit any act of negligence when he failed to
countermand or overrule the orders of the pilot because he did not see any justifiable reason
to do so. In other words, the master cannot be faulted for relying absolutely on the
competence of the compulsory pilot. If the master does not observe that a compulsory pilot
is incompetent or physically incapacitated, the master is justified in relying on the pilot. 10
Respondent PPA, in its comment, predictably in full agreement with the ruling of respondent
court on the solidary liability of FESC, MPA and Capt. Gavino, stresses the concurrent
negligence of Capt. Gavino, the harbor pilot, and Capt. Viktor Kabankov, * shipmaster of MV
Pavlodar, as the basis of their solidary liability for damages sustained by PPA. It posits that
the vessel was being piloted by Capt. Gavino with Capt. Kabankov beside him all the while on
the bridge of the vessel, as the former took over the helm of MV Pavlodar when it rammed
and damaged the apron of the pier of Berth No. 4 of the Manila International Port. Their
concurrent negligence was the immediate and proximate cause of the collision between the
vessel and the pier — Capt. Gavino, for his negligence in the conduct of docking maneuvers
for the safe berthing of the vessel; and Capt. Kabankov, for failing to countermand the orders
of the harbor pilot and to take over and steer the vessel himself in the face of imminent
danger, as well as for merely relying on Capt. Gavino during the berthing procedure. 11
On the other hand, in G.R. No. 130150, originally assigned to the Court's First Division and
later transferred to the Third Division. MPA, now as petitioner in this case, avers that
respondent court's errors consisted in disregarding and misinterpreting Customs
Administrative Order No. 15-65 which limits the liability of MPA. Said pilots' association
asseverates that it should not be held solidarily liable with Capt. Gavino who, as held by
respondent court is only a member, not an employee, thereof. There being no employer-
employee relationship, neither can MPA be held liable for any vicarious liability for the
respective exercise of profession by its members nor be considered a joint tortfeasor as to be
held jointly and severally liable. 12 It further argues that there was erroneous reliance on
Customs Administrative Order No. 15-65 and the constitution and by-laws of MPA, instead of
the provisions of the Civil Code on damages which, being a substantive law, is higher in
category than the aforesaid constitution and by-laws of a professional organization or an
administrative order which bears no provision classifying the nature of the liability of MPA
for the negligence its member pilots. 13
As for Capt. Gavino, counsel for MPA states that the former had retired from active pilotage
services since July 28, 1994 and has ceased to be a member of petitioner pilots' association.
He is not joined as a petitioner in this case since his whereabouts are unknown. 14
FESC's comment thereto relied on the competence of the Court of Appeals in construing
provisions of law or administrative orders as bases for ascertaining the liability of MPA, and
expressed full accord with the appellate court's holding of solidary liability among itself, MPA
and Capt. Gavino. It further avers that the disputed provisions of Customs Administrative
Order No. 15-65 clearly established MPA's solidary liability. 15
On the other hand, public respondent PPA, likewise through representations by the Solicitor
General, assumes the same supportive stance it took in G.R. No. 130068 in declaring its total
accord with the ruling of the Court of Appeals that MPA is solidarily liable with Capt. Gavino
and FESC for damages, and in its application to the fullest extent of the provisions of Customs
Administrative Order No. 15-65 in relation to MPA's constitution and by-laws which spell out
the conditions of and govern their respective liabilities. These provisions are clear and
unambiguous as regards MPA's liability without need for interpretation or construction.
Although Customs Administrative Order No. 15-65 is a mere regulation issued by an
administrative agency pursuant to delegated legislative authority to fix details to implement
the law, it is legally binding and has the same statutory force as any valid statute. 16
Upon motion 17 by FESC dated April 24, 1998 in G.R. No. 130150, said case was consolidated
with G.R. No. 130068. 18
Prefatorily, on matters of compliance with procedural requirements, it must be mentioned
that the conduct of the respective counsel for FESC and PPA leaves much to be desired, to the
displeasure and disappointment of this Court.
Sec. 2, Rule 42 of the 1997 Rules of Civil Procedure 19 incorporates the former Circular No.
28-91 which provided for what has come to be known as the certification against forum
shopping as an additional requisite for petitions filed with the Supreme Court and the Court
of Appeals, aside from the other requirements contained in pertinent provisions of the Rules
of Court therefor, with the end in view of preventing the filing of multiple complaints
involving the same issues in the Supreme Court, Court of Appeals or different divisions
thereof or any other tribunal or agency.
More particularly, the second paragraph of Section 2, Rule 42 provides:
xxx xxx xxx
The petitioner shall also submit together with the petition a certification
under oath that he has not theretofore commenced any other action involving
the same issues in the Supreme Court, the Court of Appeals or different
divisions thereof, or any other tribunal or agency; if there is such other action
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 or proceeding, he must state the status of the same; and if he should thereafter
learn that a similar action or proceeding has been filed or is pending before the
Supreme Court, the Court of Appeals or different divisions thereof, or any other
tribunal or agency, he undertakes to promptly inform the aforesaid courts and
other tribunal or agency thereof within five (5) days therefrom. (Emphasis
ours.)
For petitions for review filed before the Supreme Court, Section 4(e), Rule 45
specifically requires that such petition shall contain a sworn certification against
forum shopping as provided in the last paragraph of Section 2, Rule 42.
The records show that the law firm of Del Rosario and Del Rosario through its associate, Atty.
Herbert A. Tria, is the counsel of record for FESC in both G.R. No. 130068 and G.R. No. 130150.
G.R. No. 130068, which is assigned to the Court's Second Division, commenced with the filing
by FESC through counsel on August 22, 1997 of a verified motion for extension of time to file
its petition for thirty (30) days from August 28, 1997 or until September 27, 1997. 20 Said
motion contained the following certification against forum shopping 21 signed by Atty.
Herbert A. Tria as affiant:
CERTIFICATION
AGAINST FORUM SHOPPING
I/we hereby certify that I/we have not commenced any other action or
proceeding involving the same issues in the Supreme Court, the Court of
Appeals, or any other tribunal or agency; that to the best of my own
knowledge, no such action or proceeding is pending in the Supreme Court,
the Court of Appeals, or any other tribunal or agency; that if I/we should
thereafter learn that a similar action or proceeding has been filed or is
pending before the Supreme Court, the Court of Appeals, or any other
tribunal or agency, I/we undertake to report that fact within five (5) days
therefrom to this Honorable Court.
This motion having been granted, FESC subsequently filed its petition on September
26, 1997, this time bearing a "verification and certification against forum-shopping"
executed by one Teodoro P. Lopez on September 24, 1997, 22 to wit:
VERIFICATION AND CERTIFICATION
AGAINST FORUM SHOPPING
in compliance with Section 4(e), Rule 45 in relation
to Section 2, Rule 42 of the Revised Rules of Civil Procedure
I, Teodoro P. Lopez, of legal age, after being duly sworn, depose and state:
1. That I am the Manager, Claims Department of Filsov Shipping Company, the
local agent of petitioner in this case.
2. That I have caused the preparation of this Petition for Review on Certiorari.
3. That I have read the same and the allegations therein contained are true
and correct based on the records of this case.
4. That I certify that petitioner has not commenced any other action or
proceeding involving the same issues in the Supreme Court or Court of
Appeals, or any other tribunal or agency, that to the best of my own
knowledge, no such action or proceeding is pending in the Supreme Court, the
Court of Appeals or any other tribunal or agency, that if I should thereafter
learn that a similar action or proceeding has been filed or is pending before the
Supreme Court, the Court of Appeals, or any other tribunal or agency, I
undertake to report the fact within five (5) days therefrom to this Honorable
Court. (Italics supplied for emphasis.)
Reviewing the records, we find that the petition filed by MPA in G.R. No. 130150 then pending
with the Third Division was duly filed on August 29, 1997 with a copy thereof furnished on
the same date by registered mail to counsel for FESC. 23 Counsel of record for MPA. Atty. Jesus
P. Amparo, in his verification accompanying said petition dutifully revealed to the Court that
—
xxx xxx xxx
3. Petitioner has not commenced any other action or proceeding involving
the same issues in this Honorable Court, the Court of Appeals or different
Divisions thereof, or any other tribunal or agency, but to the best of his
knowledge, there is an action or proceeding pending in this Honorable Court,
entitled Far Eastern Shipping Co., Petitioner, vs. Philippine Ports Authority and
Court of Appeals with a Motion for Extension of time to file Petition For Review
by Certiorari filed sometime on August 18, 1987. If undersigned counsel will
come to know of any other pending action or claim filed or pending he
undertakes to report such fact within five (5) days to this Honorable
Court.24 (Emphasis supplied.)
Inasmuch as MPA's petition in G.R. No. 130150 was posted by registered mail on August 29,
1997 and taking judicial notice of the average period of time it takes local mail to reach its
destination, by reasonable estimation it would be fair to conclude that when FESC filed its
petition in G.R. No. 130068 on September 26, 1997, it would already have received a copy of
the former and would then have knowledge of the pendency of the other petition initially
filed with the First Division. It was therefore incumbent upon FESC to inform the Court of that
fact through its certification against forum shopping. For failure to make such disclosure, it
would appear that the aforequoted certification accompanying the petition in G.R. No.
130068 is defective and could have been a ground for dismissal thereof.
Even assuming that FESC had not yet received its copy of MPA's petition at the time it filed its
own petition and executed said certification, its signatory did state "that if I should thereafter
learn that a similar action or proceeding has been filed or is pending before the Supreme
Court, the Court of Appeals or any other tribunal or agency, I undertake to report the fact
within five (5) days therefrom to this Honorable Court." 25 Scouring the records page by page
in this case, we find that no manifestation concordant with such undertaking was then or at
any other time thereafter ever filed by FESC nor was there any attempt to bring such matter
to the attention of the Court. Moreover, it cannot feign non-knowledge of the existence of such
other petition because FESC itself filed the motion for consolidation in G.R. No. 130150 of
these two cases on April 24, 1998.
It is disturbing to note that counsel for FESC, the law firm of Del Rosario and Del Rosario,
displays an unprofessional tendency of taking the Rules for granted, in this instance
exemplified by its pro forma compliance therewith but apparently without full
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comprehension of and with less than faithful commitment to its undertakings to this Court in
the interest of just, speedy and orderly administration of court proceedings.
As between the lawyer and the courts, a lawyer owes candor, fairness and good faith to the
court. 26 He is an officer of the court exercising a privilege which is indispensable in the
administration of justice. 27 Candidness, especially towards the courts, is essential for the
expeditious administration of justice. Courts are entitled to expect only complete honesty
from lawyers appearing and pleading before them. 28 Candor in all dealings is the very
essence of honorable membership in the legal profession. 29 More specifically, a lawyer is
obliged to observe the rules of procedure and not to misuse them to defeat the ends of
justice. 30 It behooves a lawyer, therefore, to exert every effort and consider it his duty to
assist in the speedy and efficient administration of justice. 31 Being an officer of the court, a
lawyer has a responsibility in the proper administration of justice. Like the court itself, he is
an instrument to advance its ends — the speedy, efficient, impartial, correct and inexpensive
adjudication of cases and the prompt satisfaction of final judgments. A lawyer should not only
help attain these objectives but should likewise avoid any unethical or improper practices
that impede, obstruct or prevent their realization, charged as he is with the primary task of
assisting in the speedy and efficient administration of justice. 32
Sad to say, the members of said law firm sorely failed to observe their duties as responsible
members of the Bar. Their actuations are indicative of their predisposition to take lightly the
avowed duties of officers of the Court to promote respect for law and for legal
processes. 33 We cannot allow this state of things to pass judicial muster.
In view of the fact that at around the time these petitions were commenced, the 1997 Rules
of Civil Procedure had just taken effect, the Court treated infractions of the new Rules then
with relative liberality in evaluating full compliance therewith. Nevertheless, it would do well
to remind all concerned that the penal provisions of Circular No. 28-91 which remain
operative provides, inter alia:
3. Penalties. —
xxx xxx xxx
(c) The submission of a false certification under Par. 2 of the Circular shall
likewise constitute contempt of court, without prejudice to the filing of
criminal action against the guilty party. The lawyer may also be subjected to
disciplinary proceedings.
It must be stressed that the certification against forum shopping ordained under the Rules is
to be executed by the petitioner, and not by counsel. Obviously it is the petitioner, and not
always the counsel whose professional services have been retained for a particular case, who
is in the best position to know whether he or it actually filed or caused the filing of a petition
in that case. Hence, a certification against forum shopping by counsel is a defective
certification. It is clearly equivalent to non-compliance with the requirement under Section
2, Rule 42 in relation to Section 4, Rule 45, and constitutes a valid cause for dismissal of the
petition.
Hence, the initial certification appended to the motion for extension of time to file petition in
G.R. No. 130068 executed in behalf of FESC by Atty. Tria is procedurally deficient. But
considering that it was a superfluity at that stage of the proceeding, it being unnecessary to
file such a certification with a mere motion for extension, we shall disregard such error.
Besides, the certification subsequently executed by Teodoro P. Lopez in behalf of FESC cures
that defect to a certain extent, despite the inaccuracies earlier pointed out. In the same vein,
we shall consider the verification signed in behalf of MPA by its counsel, Atty. Amparo, in G.R.
No. 130150 as substantial compliance inasmuch as it served the purpose of the Rules of
informing the Court of the pendency of another action or proceeding involving the same
issues.
It bears stressing that procedural rules are instruments in the speedy and efficient
administration of justice. They should be used to achieve such end and not to derail it. 34
Counsel for PPA did not make matters any better. Despite the fact that, save for the Solicitor
General at the time, the same legal team of the Office of the Solicitor General (OSG, for short)
composed of Assistant Solicitor General Roman G. Del Rosario and Solicitor Luis F. Simon,
with the addition of Assistant Solicitor General Pio C. Guerrero very much later in the
proceedings, represented PPA throughout the appellate proceedings in both G.R. No. 130068
and G.R. No. 130150 and was presumably fully acquainted with the facts and issues of the
case, it took the OSG an inordinately and almost unreasonably long period of time to file its
comment, thus unduly delaying the resolution of these cases. It took several changes of
leadership in the OSG — from Silvestre H. Bello III to Romeo C. dela Cruz and, finally, Ricardo
P. Galvez — before the comment in behalf of PPA was finally filed.
In G.R. No. 130068, it took eight (8) motions for extension of time totaling 210 days, a warning
that no further extensions shall be granted, and personal service on the Solicitor General
himself of the resolution requiring the filing of such comment before the OSG indulged the
Court with the long required comment on July 10, 1998. 35 This, despite the fact that said
office was required to file its comment way back on November 12, 1997. 36 A closer scrutiny
of the records likewise indicates that petitoner FESC was not even furnished a copy of said
comment as required by Section 5, Rule 42. Instead, a copy thereof was inadvertently
furnished to MPA which, from the point of view of G.R. No. 130068, was a non-party. 37 The
OSG fared slightly better in G.R. No. 130150 in that it took only six (6) extensions, or a total of
180 days, before the comment was finally filed. 38 And while it properly furnished petitioner
MPA with a copy of its comment, it would have been more desirable and expedient in this
case to have furnished its therein co-respondent FESC with a copy thereof, if only as a matter
of professional courtesy. 39
This undeniably dilatory disinclination of the OSG to seasonably file required pleadings
constitutes deplorable disservice to the tax-paying public and can only be categorized as
censurable inefficiency on the part of the government law office. This is most certainly
professionally unbecoming of the OSG.
Another thing that baffles the Court is why the OSG did not take the inititive of filing a motion
for consolidation in either G.R. No. 130068 or G.R. No. 130150, considering its familiarity with
the background of the case and if only to make its job easier by having to prepare and file
only one comment. It could not have been unaware of the pendency of one or the other
petition because, being counsel for respondent in both cases, petitioner is required to furnish
it with a copy of the petition under pain of dismissal of the petition for failure otherwise. 40
Besides, in G.R. 130068, it prefaces its discussions thus —
Incidentally, the Manila Pilots' Association (MPA), one of the defendants-
appellants in the case before the respondent Court of Appeals, has taken a
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 separate appeal from the said decision to this Honorable Court, which was
docketed as G.R. No. 130150 and entitled "Manila Pilots' Association,
Petitioner, versus Philippine Ports Authority and Far Eastern Shipping Co.,
Respondents." 41
Similarly, in G.R. No. 130150, it states —
Incidentally, respondent Far Eastern Shipping Co. (FESC) had also taken an
appeal from the said decision to this Honorable Court, docketed as G.R. No.
130068, entitled "Far Eastern Shipping Co. vs. Court of Appeals and
Philippine Ports Authority." 42
We find here a lackadaisical attitude and complacency on the part of the OSG in the handling
of its cases and an almost reflexive propensity to move for countless extensions, as if to test
the patience of the Court, before favoring it with the timely submission of required pleadings.
It must be emphasized that the Court can resolve cases only as fast as the respective parties
in a case file the necessary pleadings. The OSG, by needlessly extending the pendency of these
cases through its numerous motions for extension, came very close to exhausting this Court's
forbearance and has regrettably fallen short of its duties as the People's Tribune.
The OSG is reminded that just like other members of the Bar, the canons under the Code of
Professional Responsibility apply with equal force on lawyers in government service in the
discharge of their official tasks. 43 These ethical duties are rendered even more exacting as to
them because, as government counsel, they have the added duty to abide by the policy of the
State to promote a high standard of ethics in public service. 44 Furthermore, it is incumbent
upon the OSG, as part of the government bureaucracy, to perform and discharge its duties
with the highest degree of professionalism, intelligence and skill 45 and to extend prompt,
courteous and adequate service to the public. 46
Now, on the merits of the case. After a judicious examination of the records of this case, the
pleadings filed, and the evidence presented by the parties in the two petitions, we find no
cogent reason to reverse and set aside the questioned decision. While not entirely a case of
first impression, we shall discuss the issues seriatim and, correlatively by way of a judicial
once-over, inasmuch as the matters raised in both petitions beg for validation and updating
of well-worn maritime jurisprudence. Thereby, we shall write finis to the endless finger-
pointing in this shipping mishap which has been stretched beyond the limits of judicial
tolerance.
The Port of Manila is within the Manila Pilotage District which is under compulsory pilotage
pursuant to Section 8, Article III of Philippine Ports Authority Administrative Order No. 03-
85, 47 which provides that:
Sec. 8. Compulsor Pilotage Service. — For entering a harbor and anchoring
thereat, or passing through rivers or straits within a pilotage district, as well
as docking and undocking at any pier/wharf, or shifting from one berth or
another, every vessel engaged in coastwise and foreign trade shall be under
compulsory pilotage. . . .
In case of compulsory pilotage, the respective duties and responsibilities of the compulsory
pilot and the master have been specified by the same regulation in this wise:
Sec. 11. Control of vessels and liability for damage. — On compulsory pilotage
grounds, the Harbor Pilot providing the service to a vessel shall be
responsible for the damage caused to a vessel or to life and property at ports
due to his negligence or fault. He can only be absolved from liability if the
accident is caused by force majeure or natural calamities provided he has
exercised prudence and extra diligence to prevent or minimize damage.
The Master shall retain overall command of the vessel even on pilotage
grounds whereby he can countermand or overrule the order or command of
the Harbor Pilot on beard. In such event, any damage caused to a vessel or to
life and property at ports by reason of the fault or negligence of the Master
shall be the responsibility and liability of the registered owner of the vessel
concerned without prejudice to recourse against said Master.
Such liability of the owner or Master of the vessel or its pilots shall be
determined by competent authority in appropriate proceedings in the light
of the facts and circumstances of each particular case.
Sec. 32. Duties and responsibilities of the Pilot or Pilots' Association. — The
duties and responsibilities of the Harbor Pilot shall be as follows:
xxx xxx xxx
f) a pilot shall be held responsible for the direction of a vessel from the time
he assumes his work as a pilot thereof until he leaves it anchored or berthed
safely; Provided, however, that his responsibility shall cease at the moment
the Master neglects or refuses to carry out hisorder.
Customs Administrative Order No. 15-65 issued twenty years earlier likewise provided in
Chapter I thereof for the responsibilities of pilots:
Par. XXXIX. — A Pilot shall be held responsible for the direction of a vessel
from the time he assumes control thereof until he leaves it anchored free
from shoal: Provided, That his responsibility shall cease at the moment the
master neglects or refuses to carry out his instructions.
xxx xxx xxx
Par. XLIV. — Pilots shall properly and safely secure or anchor vessels under
their control when requested to do so by the master of such vessels.
I. G.R. No. 130068
Petitioner FESC faults the respondent court with serious error in not holding MPA and Capt.
Gavino solely responsible for the damages cause to the pier. It avers that since the vessel was
under compulsory pilotage at the time with Capt. Gavino in command and having exclusive
control of the vessel during the docking maneuvers, then the latter should be responsible for
damages caused to the pier. 48 It likewise holds the appellate court in error for holding that
the master of the ship, Capt. Kabankov, did not exercise the required diligence demanded by
the circumstances. 49
We start our discussion of the successive issues bearing in mind the evidentiary rule in
American jurisprudence that there is a presumption of fault against a moving vessel that
strikes a stationary object such as a dock or navigational aid. In admiralty, this presumption
does more than merely require the ship to go forward and produce some evidence on the
presumptive matter. The moving vessel must show that it was without fault or that the
collision was occasioned by the fault of the stationary object or was the result of inevitable
accident. It has been held that such vessel must exhaust every reasonable possibility which
9|Page
the circumstances admit and show that in each, they did all that reasonable care
required. 50 In the absence of sufficient proof in rebuttal, the presumption of fault attaches to
a moving vessel which collides with a fixed object and makes a prima facie case of fault
against the vessel. 51 Logic and experience support this presumption:
The common sense behind the rule makes the burden a heavy one. Such
accidents simply do not occur in the ordinary course of things unless the
vessel has been mismanaged in some way. It is nor sufficient for the
respondent to produce witnesses who testify that as soon as the danger
became apparent everything possible was done to avoid an accident. The
question remains, How then did the collision occur? The answer must be
either that, in spite of the testimony of the witnesses, what was done was too
little or too late or, if not, then the vessel was at fault for being in a position
in which an unavoidable collision would occur. 52
The task, therefore, in these cases is to pinpoint who was negligent — the master of
the ship, the harbor pilot or both.
A pilot, in maritime law, is a person duly qualified, and licensed, to conduct a vessel into or
out of ports, or in certain waters. In a broad sense, the term "pilot" includes both (1) those
whose duty it is to guide vessels into or out of ports, or in particular waters and (2) those
entrusted with the navigation of vessels on the high seas. 53 However, the term "pilot" is more
generally understood as a person taken on board at a particular place for the purpose of
conducting a ship through a river, road or channel, or from a port. 54
Under English and American authorities, generally speaking, the pilot supersedes the master
for the time being in the command and navigation of the ship, and his orders must be obeyed
in all matters connected with her navigation. He becomes the master pro hac vice and should
give all directions as to speed, course, stopping and reversing anchoring, towing and the like.
And when a licensed pilot is employed in a place where pilotage is compulsory, it is his duty
to insist on having effective control of the vessel, or to decline to act as pilot. Under certain
systems of foreign law, the pilot does not take entire charge of the vessel, but is deemed
merely the adviser of the master, who retains command and control of the navigation even
in localities where pilotage is compulsory. 55
It is quite common for states and localities to provide for compulsory pilotage, and safety
laws have been enacted requiring vessels approaching their ports, with certain exceptions,
to take on board pilots duly licensed under local law. The purpose of these laws is to create a
body of seamen thoroughly acquainted with the harbor, to pilot vessels seeking to enter or
depart, and thus protect life and property from the dangers of navigation. 56
In line with such established doctrines, Chapter II of Customs Administrative Order No. 15-
65 prescribes the rules for compulsory pilotage in the covered pilotage districts, among
which is the Manila Pilotage District,
viz. —
PARAGRAPH I. — Pilotage for entering a harbor and anchoring thereat, as
well as docking and undocking in any pier or shifting from one berth to
another shall be compulsory, except Government vessels and vessels of
foreign governments entitled to courtesy, and other vessels engaged solely in
river or harbor work, or in a daily ferry service between ports which shall be
exempt from compulsory pilotage provisions of these regulations: provided,
however, that compulsory pilotage shall not apply in pilotage districts whose
optional pilotage is allowed under these regulations.
Pursuant thereto, Capt. Gavino was assigned to pilot MV Pavlodar into Berth 4 of the Manila
International Port. Upon assuming such office as compulsory pilot, Capt. Gavino is held to the
universally accepted high standards of care and diligence required of a pilot, whereby he
assumes to have skill and knowledge in respect to navigation in the particular waters over
which his license extends superior to and more to be trusted than that of the master. 57 A pilot
57 should have a thorough knowledge of general and local regulations and physical
conditions affecting the vessel in his charge and the waters for which he is licensed, such as a
particular harbor or river.
He is not held to the highest possible degree of skill and care, but must have and exercise the
ordinary skill and care demanded by the circumstances, and usually shown by an expert in
his profession. Under extraordinary circumstancesm, a pilot must exercise extraordinary
care. 58
In Atlee vs. The Northwesrern Union Packet Company. 59 Mr. Justice Miller spelled out in great
detail the duties of a pilot:
. . . (T)he pilot of a river steamer, like the harbor pilot, is selected for his
personal knowledge of the topography through which he steers his vessel. In
the long course of a thousand miles in one of these rivers, he must be familiar
with the appearance of the shore on each side of the river as he goes along.
Its banks, towns, its landings, its houses and trees, are all landmarks by which
he steers his vessel. The compass is of little use to him. He must know where
the navigable channel is, in its relation to all these external objects, especially
in the night. He must also be familiar with all dangers that are permanently
located in the course of the river, as sand-bars, snags, sunken rocks or trees
or abandoned vessels orbarges. All this he must know and remember and
avoid. To do this, he must be constantly informed of the changes in the
current of the river, of the sand-bars newly made,of logs or snags, or other
objects newly presented, against which his vessel might be injured.
xxx xxx xxx
It may be said that this is exacting a very high order of ability in a pilot. But
when we consider the value of the lives and property committed to their
control, for in this they are absolute masters, the high compensation they
receive, the care which Congress has taken to secure by rigid and frequent
examinations and renewal of licenses, this very class of skill, we do not think
we fix the standard too high.
Tested thereby, we affirm respondent court's finding that Capt. Gavino failed to measure up
to such strict standard of care and diligence required of pilots in the performance of their
duties. Witness this testimony of Capt. Gavino:
Court: You have testified before that the reason why the
vessel bumped the pier was because the anchor was not
released immediately or as soon as you have given the order.
Do you remember having srated that?
10 | P a g e
 A Yes, your Honor.
Q And you gave this order to the captain of the vessel?
A Yes, your Honor.
Q By that testimony, you are leading the Court to understand
that if that anchor was released immediately at the time you
gave the order, the incident would not have happened. Is that
correct?
A Yes, sir, but actually it was only a presumption on my part
because there was a commotion between the officers who are
in charge of the dropping of the anchor and the captain. I
could not understand their language, it was in Russian, so I
presumed the anchor was not dropped on time.
Q So, you are not sure whether it was really dropped on time
or not?
A I am not sure, your Honor.
xxx xxx xxx
Q You are not even sure what could have caused the incident.
What factor could have caused the incident?
A Well, in this case now, because either the anchor was not
dropped on time or the anchor did not hold, that was the
cause of the incident, your Honor. 60
It is disconcertingly riddled with too much incertitude and manifests a seeming indifference
for the possibly injurious consequences his commands as pilot may have. Prudence required
that he, as pilot, should have made sure that his directions were promptly and strictly
followed. As correctly noted by the trial court —
Moreover, assuming that he did indeed give the command to drop the anchor
on time, as pilot he should have seen to it that the order was carried out, and
he could have done this in a number of ways, one of which was to inspect the
bow of the vessel where the anchor mechanism was installed. Of course,
Captain Gavino makes reference to a commotion among the crew members
which supposedly caused the delay in the execution of the command. This
account was reflected in the pilot's report prepared four hours later, but
Capt. Kavankov, while not admitting whether or not such a commotion
occurred, maintained that the command to drop anchor was followed
"immediately and precisely." Hence, the Court cannot give much weight or
consideration to this portion of Gavino's testimony." 61
An act may be negligent if it is done without the competence that a reasonable person in the
position of the actor would recognize as necessary to prevent it from creating an
unreasonable risk of harm to another. 62 Those who undertake any work calling for special
skills are required not only to exercise reasonable care in what they do but also possess a
standard minimum of special knowledge and ability. 63
Every man who offers his services to another, and is employed, assumes to exercise in the
employment such skills he possesses, with a reasonable degree of diligence. In all these
employments where peculiar skill is requisite, if one offers his services he is understood as
holding himself out to the public as possessing the degree of skill commonly possessed by
others in the same employment, and if his pretensions are unfounded he commits a species
of fraud on every man who employs him in reliance on his public profession. 64
Furthermore, there is an obligation on all persons to take the care which, under ordinary
circumstances of the case, a reasonable and prudent man would take, and the omission of
that care constitutes negligence. 65 Generally, the degree of care required is graduated
according to the danger a person or property attendant upon the activity which the actor
pursues or the instrumentality which he uses. The greater the danger the greater the degree
of care required. What is ordinary under extraordinary of conditions is dictated by those
conditions; extraordinary risk demands extraordinary care. Similarly, the more imminent
the danger, the higher the degree of care. 66
We give our imprimatur to the bases for the conclusion of the Court of Appeals that Capt.
Gavino was indeed negligent in the performance of his duties:
xxx xxx xxx
. . . As can be gleaned from the logbook, Gavino ordered the left anchor and
two (2) shackles dropped at 8:30 o'clock in the morning. He ordered the
engines of the vessel stopped at 8:31 o'clock. By then,Gavino must have
realized that the anchor did not hit a hard object and was not clawed so as to
reduce the momentum of the vessel. In point of fact, the vessel continued
travelling towards the pier at the same speed. Gavino failed to react, At 8:32
o'clock, the two (2) tugboats began to push the stern part of the vessel from
the port side bur the momentum of the vessel was not contained. Still, Gavino
did not react. He did not even order the other anchor and two (2) more
shackles dropped to arrest the momentum of the vessel. Neither did he order
full-astern. It was only at 8:34 o'clock, or four (4) minutes, after the anchor
was dropped that Gavino reacted. But his reaction was even (haphazard)
because instead of arresting fully the momentum of the vessel with the help
of the tugboats, Gavino ordered merely "half-astern". It took Gavino another
minute to order a "full-astern". By then, it was too late. The vessel's
momentum could no longer be arrested and, barely a minute thereafter, the
bow of the vessel hit the apron of the pier. Patently, Gavino miscalculated. He
failed to react and undertake adequate measures to arrest fully the
momentum of the vessel after the anchor failed to claw to the seabed. When
he reacted, the same was even (haphazard). Gavino failed to reckon the bulk
of the vessel, its size and its cargo. He erroneously believed that only one (1)
anchor would suffice and even when the anchor failed to claw into the seabed
or against a hard object in the seabed, Gavino failed to order the other anchor
dropped immediately. His claim that the anchor was dropped when the vessel
was only 1,000 feet from the pier is but a belated attempt to extricate himself
from the quagmire of his own insouciance and negligence. In sum, then,
Appellants' claim that the incident was caused by "force majeure" is barren
of factual basis.
xxx xxx xxx
11 | P a g e
 The harbor pilots are especially trained for this job. In the Philippines, one
may not be a harbor pilot unless he passed the required examination and
training conducted then by the Bureau of Custom, under Customs
Administrative Order No. 15-65, now under the Philippine Ports Authority
under PPA Administrative Order 63-85, Paragraph XXXIX of the Customs
Administrative Order No. 15-65 provides that "the pilot shall be held
responsible for the direction of the vessel from the time he assumes control
thereof, until he leaves it anchored free from shoal: Provided, that his
responsibility shall cease at the.moment the master neglects or refuse(s) to
carry out his instructions." The overall direction regarding the procedure for
docking and undocking the vessel emanates from the harbor pilot. In the
present recourse, Gavino failed to live up to his responsibilities and exercise
reasonable care or that degree of care required by the exigencies of the xxx xxx
occasion. Failure on his part to exercise the degree of care demanded by the
circumstances is negligence (Reese versus Philadelphia & RR Co. 239 US 363,
60 L ed. 384, 57 Am Jur, 2d page 418). 67
This affirms the findings of the trial court regarding Capt. Gavino's negligence:
This discussion should not however, divert the court from the fact that
negligence in manuevering the vessel must be attributed to Capt. Senen
Gavino. He was an experienced pilot and by this time should have long
familiarized himself with the depth of the port and the distance he could keep
between the vessel and port in order to berth safely. 68
The negligence on the part of Capt. Gavino is evident; but Capt. Kabancov is no less
responsible for the allision. His unconcerned lethargy as master of the ship in the face of
troublous exigence constitutes negligence.
While it is indubitable that in exercising his functions a pilot is in sole command of the xxx xxx
ship 69 and supersedes the master for the time being in the command and navigation of a ship
and that he becomes master pro hac vice of a vessel piloted by him, 70 there is overwhelming
authority to the effect that the master does not surrender his vessel to the pilot and the pilot
is not the master. The master is still in command of the vessel notwithstanding the presence
of a pilot. There are occasions when the master may and should interfere and even displace
the pilot, as when the pilot is obviously incompetent or intoxicated and the circumstances
may require the master to displace a compulsory pilot because of incompetency or physical
incapacity. If, however, the master does nor observe that a compulsory pilot is incompetent
or physically incapacitated, the master is justified in relying on the pilot, but not blindly. 71
The master is not wholly absolved from his duties while a pilot is on board his vessel, and
may advise with or offer suggestions to him. He is still in command of the vessel, except so far
as her navigation is concerned, and must cause the ordinary work of the vessel to be properly
carried on and the usual precaution taken. Thus, in particular, he is bound to see that there
is sufficient watch on deck, and that the men are attentive to their duties, also that engines
are stopped, towlines cast off, and the anchors clear and ready to go at the pilot's order. 72
A perusal of Capt. Kabankov's testimony makes it apparent that he was remiss in the
discharge of his duties as master of the ship, leaving the entire docking procedure up to the
pilot, instead of maintaining watchful vigilance over this risky maneuver:
Q Will you please tell us whether you have the right to
intervene in docking of your ship in the harbor?
A No sir, I have no right to intervene in time of docking, only
in case there is imminent danger to the vessel and to the pier.
Q Did you ever intervene during the time that your ship was
being docked by Capt. Gavino?
A No sir, I did not intervene at the time when the pilot was
docking my ship.
Q Up to the time it was actually docked at the pier, is that
correct?
A No sir, I did not intervene up to the very moment when the
vessel was docked.
xxx
Atty. Del Rosario (to the witness)
Q Mr. Witness, what happened, if any, or was there anything
unusual that happened during the docking?
A Yes sir, our ship touched ihe pier and the pier was damaged.
Court (to the witness)
Q When you said touched the pier, are you leading the court
to understand that your ship bumped the pier?
A I believe that my vessel only touched the pier but the impact
was very weak.
Q Do you know whether the pier was damaged as a result of
that slight or weak impact?
A Yes sir, after the pier was damaged.
xxx
Q Being most concerned with the safety of your vessel, in the
maneuvering of your vessel to the port, did you observe
anything irregular in the maneuvering by Capt. Gavino at the
time he was trying to cause the vessel to be docked at the
pier?
A You mean the action of Capt. Gavino or his condition?
Court:
Q Not the actuation that conform to the safety maneuver of
the ship to the harbor?
A No sir, it was a usual docking.
Q By that statement of yours, you are leading the court to
understand that there was nothing irregular in the docking
of the ship?
A Yes sir, during the initial period of the docking, there was
nothing unusual that happened.
Q What about in the last portion of the docking of the ship,
was there anything unusual or abnormal that happened?
12 | P a g e
 A None Your Honor, I believe that Capt. Gavino thought that
the anchor could keep or hold the vessel.
Q You want us to understand, Mr. Witness, that the dropping
of the anchor of the vessel was nor timely?
A I don't know the depth of this port but I think, if the anchor
was dropped earlier and with more shackles, there could not
have been an incident.
Q So you could not precisely tell the court that the dropping
of the anchor was timery because you are not well aware of
the seabed, is that correct?
A Yes sir, that is right.
xxx xxx xxx
Q Alright, Capt. Kavankov, did you come to know later
whether the anchor held its ground so much so that the vessel
could not travel?
A It is difficult for me to say definitely. I believe that the
anchor did not hold the ship.
Q You mean you don't know whether the anchor blades stuck
to the ground to stop the ship from further moving?
A Yes sir, it is possible.
Q What is possible?
A I think, the 2 shackles were not enough to hold the vessel.
Q Did you know that the 2 shackles were dropped?
A Yes sir, I knew that.
Q If you knew that the shackles were not enough to hold the
ship, did you not make any protest to the pilot?
A No sir, after the incident, that was my assumption.
Q Did you come to know later whether that presumption is
correct?
A I still don't know the ground in the harbor or the depths.
Q So from the beginning, you were not competent whether
the 2 shackles were also dropped to hold the ship?
A No sir, at the beginning, I did not doubt it because I believe
Capt. Gavino to be an experienced pilot and he should be
more aware as to the depths of the harbor and the ground and
I was confident in his actions.
xxx xxx xxx
Solicitor Abad (to the witness)
Q Now, you were standing with the pilot on the bridge of the
vessel before the inicident happened, were you not?
A Yes sir, all the time, I was standing with the pilot.
Q And so whatever the pilot saw, you could also see from that
point of view?
A That is right.
Q Whatever the piler can read from the panel of the bridge,
you also could read, is that correct?
A What is the meaning of panel?
Q All indications necessary for men on the bridge to be
informed of the movements of the ship?
A That is right.
Q And whatever sound the captain . . . Capt. Gavino would
hear from the bridge, you could also hear?
A That is right.
Q Now, you said that when the command to lower the anchor
was given, it was obeyed, is that right?
A This command was executed by the third mate and
boatswain.
Court (to the witness)
Q Mr. Witness, earlier in today's hearing, you said that you
did not intervene with the duties of the pilot and that, in your
opinion, you can only intervene if the ship is placed in
imminent danger, is that correct?
A That is right, I did say that.
Q In your observation before the incident actually happened,
did you observe whether or not the ship, before the actual
incident, the ship was placed in imminent danger?
A No sir, I did not observe.
Q By that answer, are you leading the court to understand
that because you did not intervene and because you believed
that it was your duty to intervene when the vessel is placed
in imminent danger to which you did not observe any
imminent danger thereof, you have not intervened in any
manner to the command of the pilot?
A That is right, sir.
xxx xxx xxx
Q Assuminp that you disagreed with the pilot regarding the
step being taken by the pilot in maneuvering the vessel,
whose command will prevail, in case of imminent danger to
the vessel?
A I did nor consider the situation as having an imminent
danger. I believed that the vessel will dock alongside the pier.
Q You want us to understand that you did not see an
imminent danger to your ship, is that what you mean?
A Yes sir, up to the very last moment, I believed that there was
no imminent danger.
Q Because of that, did you ever intervene in the command of
the pilot?
13 | P a g e
 A Yes sir, I did not intervene because I believed that the
command of the pilot to be correct.
Solicitor Abad (to the witness)
Q As a captain of M/V Pavlodar, you consider docking
maneuvers a serious matter, is it not?
A Yes sir, that is right.
Q Since it affects not only the safety of the port or pier, but
also the safety of the vessel and the cargo, is it not?
A That is right.
Q So that, I assume that you were watching Capt. Gavino very
closely at the time he was making his commands?
A I was close to him, I was hearing his command and being
executed.
Q And that you were also alert for any possible mistakes he
might commit in the maneuvering of the vessel?
A Yes sir, that is right.
Q But at no time during the maneuver did you issue order
contrary to the orders Capt. Gavino made?
A No sir.
Q So that you were in full accord with all of Capt. Gavino's
orders?
A Yes sir.
Q Because, otherwise, you would have issued order that
would supersede his own order?
A In that case, I should t,ke him away from his command or
remove the command from him.
Court (to the witness)
Q You were in full accord with the steps being taken by Capt.
Gavino because you relied on his knowledge, on his
familiarity of the seabed and shoals and other surroundings
or conditions under the sea, is that correct?
A Yes sir, that is right.
xxx xxx xxx
Solicitor Abad (to the witness)
Q And so after the anchors were ordered dropped and they
did not take hold of the seabed, you were alerted that there
was danger already on hand?
A No sir, there was no imminent danger to the vessel.
Q Do you mean to tell us that even if the anchor was supposed
to take hold of the bottom and it did not, there was no danger
to the ship?
A Yes sir, because the anchor dragged on the ground later.
Q And after a few moments when the anchor should have
taken hold the seabed bur not done (sic), as you expected, you
already were alerted that there was danger to the ship, is that
correct?
A Yes sir, I was alerted but there was no danger.
Q And you were alerted that somebody was wrong?
A Yes sir, I was alerted.
Q And this alert vou assumed was the ordinary alertness that
you have for normal docking?
A Yes sir, I mean that it was usual condition of any man in time
of docking to be alert.
Q And that is the same alertness when the anchor did not hold
onto the ground, is that correct?
A Yes sir, me and Capt. Gavino (thought) that the anchor will
hold the ground.
Q Since, as you said that you agreed all the while with the
orders of Capt. Gavino, you also therefore agreed with him in
his failure to take necessary precaution against the
eventuality that the anchor will not hold as expected?
Atty. Del Rosario:
May I ask that the question . . .
Solicitor Abad:
Never mind, I will reform the question.
xxx xxx xxx
Solicitor Abad (to the witness)
Q Is it not a fact that the vessel bumped the pier?
A That is right, it bumped the pier.
Q For the main reason that the anchor of the vessel did not
hold the ground as expected?
A Yes sir, that is my opinion. 73
Further, on redirect examination, Capt. Kabankov fortified his apathetic assessment of the
situation:
Q Now, after the anchor was dropped, was there any point in
time that you felt that the vessel was in imminent danger.
A No, at that time, the vessel was not in imminent, danger,
sir. 74
This cavalier appraisal of the event by Capt. Kabankov is disturbingly antipodal to Capt.
Gavino's anxious assessment of the situation:
Q When a pilot is on board a vessel, it is the piler's command
which should be followed at that moment until the vessel is,
or goes to port or reaches port?
A Yes, your Honor, but it does not take away from the Captain
his prerogative to countermand the pilot.
Q In what way?
14 | P a g e
 A In any case, which he thinks the pilot is not maneuvering
correctly, the Captain always has the prerogative to
countermand the pilot's order.
Q But insofar as competence, efficiency and functional
knowledee of the seabed which are vital or decisive in the
safety (sic) bringing of a vessel to the port, he is not
competent?
A Yes, your Honor. That is why they hire a pilot in an advisory
capacity, but still, the safety of the vessel rest(s) upon the
Captain, the Master of the vessel.
Q In this case, there was not a disagreement between you and
the Captain of the vessel in the bringing of the vessel to port?
A No, your Honor.
Court:
May proceed.
Atty. Catris:
In fact, the Master of the vessel testified here that he was all
along in conformity with the orders you, gave to him, and, as
matter of fact, as he said, he obeyed all your orders. Can you
tell, if in the course of giving such normal orders for the saf(e)
docking of the MV Pavlodar, do you remember of any instance
that the Master of the vessel did not obey your command for
the safety docking of the MV Pavlodar?
Atty. del Rosario:
Already answered, he already said yes sir.
Court:
Yes, he has just answered yes sir to the Court that there was
no disagreement insofar as the bringing of the vessel safely
to the port.
Atty. Catris:
But in this instance of docking of the MV Pavlodar, do you
remember of a time during the course of the docking that the
MV Pavlodar was in imminent danger of bumping the pier?
A When we were about more than one thousand meters from
the pier, I think, the anchor was not holding, so I immediately
ordered to push the bow at a fourth quarter, at the back of the
vessel in order to swing the bow away from the pier and at
the same time, I ordered for a full astern of the engine. 75
These conflicting reactions can only imply, at the very least, unmindful disregard or,
worse, neglectful relinquishment of duty by the shipmaster, tantamount to
negligence.
The findings of the trial court on this aspect is noteworthy:
For, while the pilot Gavino may indeed have been charged with the task of
docking the vessel in the berthing space, it is undisputed that the master of
the vessel had the corresponding duty to countermand any of the orders
made by the pilot, and even maneuver the vessel himself, in case of imminent
danger to the vessel and the port.
In fact, in his testimony, Capt. Kavankov admitted that all throughour the
man(eu)vering procedures he did not notice anything was going wrong, and
even observed that the order given to drop the anchor was done at the proper
time. He even ventured the opinion that the accident occurred because the
anchor failed to take hold but that this did not alarm him because.there was
still time to drop a second anchor.
Under normal circumstances, the abovementioned facts would have caused
the master of a vessel to take charge of the situation and see to the
man(eu)vering of the vessel himself. Instead, Capt. Kavankov chose to rely
blindly upon his pilot, who by this time was proven ill-equipped to cope with
the situation.
xxx xxx xxx
It is apparent that Gavino was negligent but Far Eastern's employee Capt.
Kavankov was no lesss responsible for as master of the vessel he stood by the
pilot during the man(eu)vering procedures and was privy to every move the
latter made, as well as the vessel's response to each of the commands. His
choice to rely blindly upon the pilot's skills, to the point that despite being
appraised of a notice of alert he continued to relinquish control of the vessel
to Gavino, shows indubitably that he was not performing his duties with the
diligence required of him and therefore may be charged with negligence
along with defend;int Gavino. 76
As correctly affirmed by the Court of Appeals —
We are in full accord with the findings and disquisitions of the Court a quo.
In the present recourse, Captain Viktor Kavankov had been a mariner for
thirty-two years before the incident. When Gavino was (in) the command of
the vessel, Kavankov was beside Gavino, relaying the commands or orders of
Gavino to the crewmembers-officers of the vessel concerned. He was thus
fully aware of the docking maneuvers and procedure Gavino undertook to
dock the vessel. Irrefragably, Kavankov was fully aware of the bulk and size
of the vessel and its cargo as well as the weight of the vessel. Kavankov
categorically admitted that, when the anchor and two (2) shackles were
dropped to the sea floor, the claws of the anchor did not hitch on to any hard
object in the seabed. The momentum of the vessel was not arrested. The use
of the two (2) tugboats was insufficient. The momentum of the vessel,
although a little bit arrested, continued (sic) the vessel going straightforward
with its bow towards the port (Exhibit "A-1 ). There was thus a need for the
vessel to move "full-astern" and to drop the other anchor with another
shackle or two (2), for the vessel to avoid hitting the pier. Kavankov refused
to act even as Gavino failed to act. Even as Gavino gave mere "half-astern"
order, Kavankov supinely stood by. The vessel was already about twenty (20)
meters away from the pier when Gavino gave the "full-astern" order. Even
15 | P a g e
 then, Kavankov did nothing to prevent the vessel from hitting the pier simply
because he relied on the competence and plan of Gavino. While the "full-
astern'' maneuver momentarily arrested the momentum of the vessel, it was,
by then, too late. All along, Kavankov stood supinely beside Gavino, doing
nothing but relay the commands of Gavino. Inscrutably, then, Kavankov was
negligent.
xxx xxx xxx
The stark incompetence of Kavankov is competent evidence to prove the
unseaworthiness of the vessel. It has been held that the incompetence of the
navigator, the master of the vessel or its crew makes the vessel unseaworthy
(Tug Ocean Prince versus United States of America, 584 F. 2nd, page 1151).
Hence, the Appellant FESC is likewise liable for the damage sustained by the
Appellee. 77
We find strong and well-reasoned support in time-tested American maritime jurisprudence,
on which much of our laws and jurisprudence on the matter are based, for the conclusions of
the Court of Appeals adjudging both Capt. Gavino and Capt. Kabankov negligent.
As early as 1869, the U.S. Supreme Court declared, through Mr. Justice Swayne, in
The Steamship China vs. Walsh, 78 that it is the duty of the master to interfere in cases of the
pilot's intoxication or manifest incapacity, in cases of danger which he does not foresee, and
in all cases of great necessity. The master has the same power to displace the pilot that he has
to remove any subordinate officer of the vessel, at his discretion.
In 1895, the U.S. Supreme Court, this time through Mr. Justice Brown, emphatically ruled that:
Nor are rye satisfied with the conduct of the master in leaving the pilot in sole
charge of the vessel. While the pilot doubtless supersedes the master for the
time being in the command and navigation of the ship, and his orders must
be obeyed in all matters connected with her navigation, the master is not
wholly absolved from his duties while the pilot is on board, and may advise
with him, and even displace him in case he is intoxicated or manifestly
incompetent. He is still in command of the vessel, except so far as her
navigation is concerned, and bound to see that there is a sufficient watch on
deck, and that the men are attentive to their duties.
. . . (N)orwithstanding the pilot has charge, it is the duty of the master to
prevent accident, and not to abandon the vessel entirely to the pilot; but that
there are certain duties he has to discharge (notwithstanding there is a pilot
on board) for the benefit of the owners. . . . that in well conducted ships the
master does not regard the presence of a duly licensed pilot in compulsory pilot
waters as freeing him from every, obligation to attend to the safety of the
vessel; but that, while the master sees that his officers and crew duly attend
to the pilot's orders, he himself is bound to keep a vigilant eye on the
navigation of the vessel, and, when exceptional circumstances exist, not only to
urge upon the pilot to use every precaution, but to insist upon such being
taken. 79 (Italics for emphasis.)
In Jure vs. United Fruit Co., 80 which, like the present petitions, involved compulsory pilotage,
with a similar scenario where at and prior to the time of injury, the vessel was in the charge
of a pilot with the master on the bridge of the vessel beside said pilot, the court therein ruled:
The authority of the master of a vessel is not in complete abeyance while a
pilot, who is required by law to be accepted, is in discharge of his functions. .
. . It is the duty of the master to interfere in cases of the pilot's intoxication or
manifest incapacity, in cases of danger which he does not foresee, and in all
cases of great necessity. The master has the same power to displace the pilot
that he has to remove any subordinate officer of the vessel. He may exercise
it, or not, according to his discretion. There was evidence to support findings
that piaintiff's injury was due to the negligent operation of the Atenas, and
that the master of that vessel was negligent in failing to take action to avoid
endangering a vessel situated as the City of Canton was and persons or
property thereon.
A phase of the evidence furnished support for the inferences . . . that he
negligently failed to suggest to the pilot the danger which was disclosed, and
means of avoiding such danger; and that the master's negligence in failing to
give timelt admonition to the pilot proximately contributed to the injury
complained of. We are of opinion that the evidence mentioned tended to
prove conduct of the pilot, known to the master, giving rise to a case of danger
or great necessity, calling for the intervention of the master. A master of a
vessel is not without fault in acquiescing in canduct of a pilot which involves
apparent and avoidable danger, whether such danger is to the vessel upon
which the pilot is, or to another vessel, or persons or property thereon or on
shore. (Emphasis ours.)
Still in another case involving a nearly identical setting, the captain of a vessel alongside the
compulsory pilot was deemed to be negligent, since, in the words of the court, "he was in a
position to exercise his superior authority if he had deemed the speed excessive on the
occasion in question. I think it was clearly negligent of him not to have recognized the
danger to any craft moored at Gravell Dock and that he should have directed the pilot to
reduce his speed as required by the local governmental regulations. His failure amounted to
negligence and renders the respondent liable." 81 (Emphasis supplied.) Though a compulsory
pilot might be regarded as an independent contractor, he is at all times subject to the ultimate
control of the ship's master. 82
In sum, where a compulsory pilot is in charge of a ship, the master being required to permit
him to navigate it, if the master observes that the pilot is incompetent or physically incapable,
then it is the dury of the master to refuse to permit the pilot to act. But if no such reasons are
present, then the master is justified in relying upon the pilot, but not blindly. Under the
circumstances of this case, if a situation arose where the master, exercising that reasonable
vigilance which the master of a ship should exercise, observed, or should have observed, that
the pilot was so navigating the vessel that she was going, or was likely to go, into danger, and
there was in the exercise of reasonable care and vigilance an opportunity for the master to
intervene so as to save the ship from danger, the master should have acted accordingly. 83 The
master of a vessel must exercise a degree of vigilance commensurate with the circumstances. 84
16 | P a g e
Inasmuch as the matter of negligence is a question of fact, 85 we defer to the findings of the
trial court, especially as this is affirmed by the Court of Appeals. 86 But even beyond that, our
own evaluation is that Capt. Kabankov's shared liability is due mainly to the fact that he failed
to act when the perilous situation should have spurred him into quick and decisive action as
master of the ship. In the face of imminent or actual danger, he did not have to wait for the
happenstance to occur before countermanding or overruling the pilot. By his own admission,
Capt. Kabankov concurred with Capt. Gavino's decisions, and this is precisely the reason why
he decided not to countermand any of the latter's orders. Inasmuch as both lower courts
found Capt. Gavino negligent, by expressing full agreement therewith Capt. Kabankov was
just as negligent as Capt. Gavino.
In general, a pilot is personally liable for damages caused by his own negligence or default to
the owners of the vessel, and to third parties for damages sustained in a collision. Such
negligence of the pilot in the performance of duty constitutes a maritime tort. 87 At common
law, a shipowner is not liable for injuries inflicted exclusively by the negligence of a pilot
accepted by a vessel compulsorily. 88 The exemption from liability for such negligence shall
apply if the pilot is actually in charge and solely in fault. Since, a pilot is responsible only for
his own personal negligence, he cannot be held accountable for damages proximately caused
by the default of others, 89 or, if there be anything which concurred with the fault of the pilot
in producing the accident, the vessel master and owners are liable.
Since the colliding vessel is prima facie responsible, the burden of proof is upon the party
claiming benefit of the exemption from liability. It must be shown affirmatively that the pilot
was at fault, and that there was no fault on the part of the officers or crew, which might have
been conducive to the damage. The fact that the law compelled the master to take the pilot
does not exonerate the vessel from liability. The parties who suffer are entitled to have their
remedy against the vessel that occasioned the damage, and are not under necessity to look to
the pilot from whom redress is not always had for compensation. The owners of the vessel
are responsible to the injured party for the acts of the pilot, and they must be left to recover
the amount as well as they can against him. It cannot be maintained that the circumstance of
having a pilot on board, and acting in conformity to his directions operate as a discharge of
responsibility of the owners. 90 Except insofar as their liability is limited or exempted by
statute, the vessel or her owner are liable for all damages caused by the negligence or other
wrongs of the owners or those in charge of the vessel. Where the pilot of a vessel is not a
compulsory one in the sense that the owner or master of the vessel are bound to accept him,
but is employed voluntarily, the owners of the vessel are, all the more, liable for his negligent
act. 91
In the United States, the owners of a vessel are not personally liable for the negligent acts of
a compulsory pilot, but by admiralty law, the fault or negligence of a compulsory pilot is
imputable to the vessel and it may be held liable therefor in rem. Where, however, by the
provisions of the statute the pilot is compulsory only in the sense that his fee must be paid,
and is not in compulsory charge of the vessel, there is no exemption from liability. Even
though the pilot is compulsory, if his negligence was not the sole cause of the injury, but the
negligence of the master or crew contributed thereto, the owners are liable. 92 But the liability
of the ship in rem does not release the pilot from the consequences of his own
negligence. 93 The rationale for this rule is that the master is not entirely absolved of
responsibility with respect to navigation when a compulsory pilot is in charge. 94
By way of validation and in light of the aforecited guidepost rulings in American maritime
cases, we declare that our rulings during the early years of this century in City of Manila vs.
Gambe, 95 China Navigation Co., Ltd. vs. Vidal, 96 and Yap Tica & Co. vs. Anderson, et al. 97 have
withstood the proverbial test of time and remain good and relevant case law to this day.
City of Manila stands for the doctrine that the pilot who was in command and complete
control of a vessel, and not the owners, must be held responsible for an accident which was
solely the result of the mistake of the pilot in not giving proper orders, and which did not
result from the failure of the owners to equip the vessel with the most modern and improved
machinery. In China Navigation Co., the pilot deviated from the ordinary and safe course,
without heeding the warnings of the ship captain. It was this careless deviation that caused
the vessel to collide with a pinnacle rock which, though uncharted, was known to pilots and
local navigators. Obviously, the captain was blameless. It was the negligence of the pilot alone
which was the proximate cause of the collision. The Court could not but then rule that —
The pilot in the case at bar having deviated from the usual and ordinary
course followed by navigators in passing through the strait in question,
without a substantial reason, was guilty of negligence, and that negligence
having been the proximate cause of the damages, he is liable for such
damages as usually and naturally flow therefrom. . . .
. . . (T)he defendant should have known of the existence and location of the
rock upon which the vessel struck while under his control and management.
....
Consistent with the pronouncements in these two earlier cases, but on a slightly different
tack, the Court in Yap Tico & Co. exonerated the pilot from liability for the accident where the
orders of the pilot in the handling of the ship were disregarded by the officers and crew of
the ship. According to the Court, a pilot is ". . . responsible for a full knowledge of the channel
and the navigation only so far as he can accomplish it through the officers and crew of the
ship, and I don't see chat he can be held responsible for damage when the evidence shows, as
it does in this case, that the officers and crew of the ship failed to obey his orders."
Nonetheless, it is possible for a compulsory pilot and the master of the vessel to
be concurrently negligent and thus share the blame for the resulting damage as joint
tortfeasors, 98 but only under the circumstances obtaining in and demonstrated by the
instant petitions.
It may be said, as a general rule, that negligence in order to render a person liable need not
be the sole cause of an injury. It is sufficient that his negligence, concurring with one or more
efficient causes other than piaintiff's, is the proximate cause of the injury. Accordingly, where
several causes combine to produce injuries, a person is not relieved from liability because he
is responsible for only one of them, it being sufficient that the negligence of the person
charged with injury is an efficient cause without which the injury would not have resulted to
as great an extent, and that such cause is not attributable to the person injured. It is no
defense to one of the concurrent tortfeasors that the injury would not have resulted from his
negligence alone, without the negligence or wrongful acts of the other concurrent
rortfeasor. 99 Where several causes producing an injury are concurrent and each is an
17 | P a g e
efficient cause without which the injury would not have happened, the injury may be
attributed to all or any of the causes and recovery may be had against any or all of the
responsible persons although under the circumstances of the case, it may appear that one of
them was more culpable, and that the duty owed by them to the injured person was not the
same. No actor's negligence ceases to be a proximate cause merely because it does not exceed
the negligence of other actors. Each wrongdoer is responsible for the entire result and is
liable as though his acts were the sole cause of the injury. 100
There is no contribution between joint tortfeasors whose liability is solidary since both of
them are liable for the total damage. Where the concurrent or successive negligent acts or
omissions of two or more persons, although acting independently, are in combination the
direct and proximate cause of a single injury to a third person, it is impossible to determine
in what proportion each contributed to the injury and either of them is responsible for the
whole injury. Where their concurring negligence resulted in injury or damage to a third
party, they become joint tortfeasors and are solidarily liable for the resulting damage under
Article 2194 101 of the Civil Code. 102
As for the amount of damages awarded by the trial court, we find the same to be reasonable.
The testimony of Mr. Pascual Barral, witness for PPA, on cross and redirect examination,
appears to be grounded on practical considerations:
Q So that the cost of the two additional piles as well as the
(two) square meters is already included in this
P1,300,999.77.
A Yes sir, everything. It is (the) final cost already.
Q For the eight piles.
A Including the reduced areas and other reductions.
Q (A)nd the two square meters.
A Yes sir.
Q In other words, this P1,300,999.77 does not represent only
for the six piles that was damaged as well as the
corresponding two piles.
A The area was corresponding, was increased by almost two
in the actual payment. That was why the contract was
decreased, the real amount was P1,124,627.40 and the final
one is P1,300,999.77.
Q Yes, but that P1,300,999.77 included the additional two
new posts.
A It was increased.
Q Why was it increased?
A The original was 48 and the actual was 46.
Q Now, the damage was somewhere in 1980. It took place in
1980 and you started the repair and reconstruction in 1982,
that took almost two years?
A Yes sir.
Q May it not happen that by natural factors, the existing
damage in 1980 was aggravated for the 2 year period that the
damage portion was not repaired?
A I don't think so because that area was at once marked and
no vehicles can park, it was closed.
Q Even if or even natural elements cannot affect the damage?
A Cannot, sir.
xxx xxx xxx
Q You said in the cross-examination that there were six piles
damaged by the accident, but that in the reconstruction of the
pier, PPA drove and constructed 8 piles. Will you explain to
us why there was change in the number of piles from the
original number?
A In piers where the piles are withdrawn or pulled out, you
cannot re-drive or drive piles at the same point. You have to
redesign the driving of the piles. We cannot drive the piles at
the same point where the piles are broken or damaged or
pulled out. We have to redesign, and you will note that in the
reconstruction, we redesigned such that it necessitated 8
plies.
Q Why not, why could you not drive the same number of piles
and on the same spot?
A The original location was already disturbed. We cannot get
required bearing capacity. The area is already disturbed.
Q Nonetheless, if you drove the original number of piles, six,
on different places, would not that have sustained the same
load?
A It will not suffice, sir. 103
We quote the findings of the lower court with approval.
With regards to the amount of damages that is to be awarded to plaintiff, the
Court finds that the amount of P1,053,300.00 is justified. Firstly, the doctrine
of res ipsa loquitur best expounded upon in the landmark case of Republic vs.
Luzon Stevedoring Corp. (21 SCRA 279) establishes the presumption that in
the ordinary course of events the ramming of the dock would not have
occurred if proper care was used.
Secondly, the various estimates and plans justify the cost of the port
construction price. The new structure constructed not only replaced the
damaged one but was built of stronger materials to forestall the possibility of
any similar accidents in the future.
The Court inevitably finds that the plaintiff is entitled to an award of
P1,053,300.00 which represents actual damages caused by the damage to
Berth 4 of the Manila International Port. Co-defendants Far Eastern Shipping,
Capt. Senen Gavino and Manila Pilots Association are solidariiy liable to pay
this amount to plaintiff. 104
18 | P a g e
 The Solicitor General rightly commented that the adjudicated amount of damages Correlatively, the relevant provisions of PPA Administrative Order No. 03-85, which timery
represents the proportional cost of repair and rehabilitation of the damaged section amended this applicable maritime regulation, state:
of the pier. 105 Art. IV
Except insofar as their liability is limited or exempted by statute, the vessel or her owners Sec. 17. Pilots' Association — The Pilots in a Pilotage District shall organize
are liable for all damages caused by the negligence or other wrongs of the owners or those in themselves into a Pilots' Association or firm, the members of which shall
charge of the vessel. As a general rule, the owners or those in possession and control of a promulgate their own By-Laws not in conflict with the rules and regulations
vessel and the vessel are liable for all natural and proximate damages caused to persons or promulgated by the Authority. These By-Laws shall be submitted not later
property by reason of her negligent management or navigation. 106 than one (1) month after the organization of the Pilots' Association for
FESC's imputation of PPA's failure to provide a safe and reliable berthing place is obtuse, not approval by the General Manager of the Authority. Subsequent amendments
only because it appears to be a mere afterthought, being tardily raised only in this petition, thereto shall likewise be submitted for approval.
but also because there is no allegation or evidence on record about Berth No. 4 being unsafe Sec. 25. Indemnity Insurance and Reserve Fund —
and unreliable, although perhaps it is a modest pier by international standards. There was, a) Each Pilots' Association shall collectively
therefore, no error on the part of the Court of Appeals in dismissing FESC's counterclaim. insure its membership at the rate of
II. G.R. No. 130150 P50,000.00 each member to cover in whole
This consolidated case treats on whether the Court of Appeals erred in holding MPA jointly or in part any liability arising from any
and solidarily liable with its member pilot. Capt. Gavino, in the absence of employer- accident resulting in damage to vessel(s),
employee relationship and in applying Customs Administrative Order No. 15-65, as basis for port facilities and other properties and/or
the adjudged solidary liability of MPA and Capt. Gavino. injury to persons or death which any member
The pertinent provisions in Chapter I of Customs Administrative Order No. 15-65 are: may have caused in the course of his
PAR. XXVII. — In all pilotage districts where pilotage is compulsory, there performance of pilotage duties. . . . .
shall be created and maintained by the pilots or pilots' association, in the b) The Pilotage Association shall likewise set
manner hereinafter prescribed, a reserve fund equal to P1,000.00 for each up and maintain a reserve fund which shall
pilot thereof for the purpose of paying claims for damages to vessels or answer for any part of the liability referred to
property caused through acts or omissions of its members while rendered in in the immediately preceding paragraph
compulsory pilotage service. In Manila, the reserve fund shall be P2,000.00 which is left unsatisfied by the insurance
for each pilot. proceeds, in the following manner:
PAR. XXVIII. — A pilots' association shall not be liable under these 1) Each pilot in the
regulations for damage to any vessel, or other property, resulting from acts Association shall contribute
of a member of an association in the actual performance of his duty for a from his own account an
greater amount than seventy-five per centum (75%) of its prescribed reserve amount of P4,000.00
fund; it being understood that if the association is held liable for an amount (P6,000.00 in the Manila
greater than the amount above-stated, the excess shall be paid by the Pilotage District) to the
personal funds of the member concerned. reserve fund. This fund shall
PAR. XXXI. — If a payment is made from the reserve fund of an association on not be considered part of the
account of damages caused by a member thereof, and he shall have been capital of the Association nor
found at fault, such member shall reimburse the association in the amount so charged as an expense
paid as soon as practicable; and for this purpose, not less than twenty-five thereof.
per centum of his dividends shall be retained each month until the full 2) Seventy-five percent (75
amount has been returned to the reserve fund. %) of the reserve fund shall
PAR. XXXIV. — Nothing in these regulations shall relieve any pilots' be set aside for use in the
association or members thereof, individually or collectively, from civil payment of damages
responsibility for damages to life or property resulting from the acts of referred to above incurred in
members in the performance of their duties. the actual performance of
pilots' duties and the excess
19 | P a g e
 shall be paid from the
personal funds of the
member concerned.
xxx xxx xxx
5) If payment is made from
the reserve fund of an
Association on account of
damage caused by a member
thereof who is found at fault,
he shall reimburse the
Association in the amount so
paid as soon as practicable;
and for this purpose, not less
than twenty-five percentum
(25 %) of his dividend shall
be retained each month until
the full amount has been
returned to the reserve fund.
Thereafter, the pilot involved
shall be entitled to his full
dividend.
6) When the reimbursement
has been completed as
prescribed in the preceding
paragraph, the ten
percentum (10%) and the
interest withheld from the
shares of the other pilots in
accordance with paragraph
(4) hereof shall be returned
to them.
c) Liability of Pilots' Association — Nothing in
these regulations shall relieve any Pilots'
Association or members thereof, individually
or collectively, from any civil, administrative
and/or criminal responsibility for damages
to life or property resulting from the
individual acts of its members as well as
those of the Association's employees and
crew in the performance of their duties.
The Court of Appeals, while affirming the trial court's finding of solidary liability on the part
of FESC, MPA and Capt. Gavino, correctly based MPA' s liability not on the concept of
employer-employee relationship between Capt. Gavino and itself, but on the provisions of
Customs Administrative Order No. 15-65:
The Appellant MPA avers that, contrary to the findings and disquisitions of
the Court a quo, the Appellant Gavino was not and has never been an
employee of the MPA but was only a member thereof. The Court a quo, it is
noteworthy, did not state the factual basis on which it anchored its finding
that Gavino was the employee of MPA. We are in accord with MPA's pose. Case
law teaches Us that, for an employer-employee relationship to exist, the
confluence of the following elements must be established: (1) selection and
engagement of employees; (2) the payment of wages; (3) the power of
dismissal; (4) the employer's power to control the employees with respect to
the means and method by which the work is to be performed (Ruga versus
NLRC, 181 SCRA 266).
xxx xxx xxx
The liability of MPA for damages is not anchored on Article 2180 of the New
Civil Code as erroneously found and declared by the Court a quo but under
the provisions of Customs Administrative Order No. 15-65, supra, in tandem
with the by-laws of the MPA. 107
There being no employer-employee relationship, clearly Article 2180 108 of the Civil Code is
inapplicable since there is no vicarious liability of an employer to speak of. It is so stated in
American law, as follows:
The well established rule is that pilot associations are immune to vicarious
liability for the tort of their members. They are not the employer of their
members and exercise no control over them once they take the helm of the
vessel. They are also not partnerships because the members do not function
as agents for the association or for each other. Pilots' associations are also
not liable for negligently assuring the competence of their members because
as professional associations they made no guarantee of the professional
conduct of their members to the general public. 109
Where under local statutes and regulations, pilot associations lack the necessary legal
incidents of responsibility, they have been held not liable for damages caused by the default
of a member pilot. 110 Whether or not the members of a pilots' association are in legal effect
a copartnership depends wholly on the powers and duties of the members in relation to one
another under the provisions of the governing statutes and regulations. The relation of a pilot
to his association is not that of a servant to the master, but of an associate assisting and
participating in a common purpose. Ultimately, the rights and liabilities between a pilots'
association and an individual member depend largely upon the constitution, articles or by-
laws of the association, subject to appropriate government regulations. 111
No reliance can be placed by MPA on the cited American rulings as to immunity from liability
of a pilots' association in ljght of existing positive regulation under Philippine law. The Court
of Appeals properly applied the clear and unequivocal provisions of Customs Administrative
Order No. 15-65. In doing so, it was just being consistent with its finding of the non-existence
of employer-employee relationship between MPA and Capt. Gavino which precludes the
application of Article 2180 of the Civil Code.
True. Customs Administrative Order No. 15-65 does not categorically characterize or label
MPA's liability as solidary in nature. Nevertheless, a careful reading and proper analysis of
20 | P a g e
the correlated provisions lead to the conclusion that MPA is solidarily liable for the The Solicitor Genral is DIRECTED to look into the circumstances of this case and to adopt
negligence of its member pilots, without prejudice to subsequent reimbursement from the provident measures to avoid a repetition of this incident and which would ensure prompt
pilot at fault. compliance with orders of this Court regarding the timely filing of requisite pleadings, in the
Art. 1207 of the Civil Code provides that there is solidary liability only when the obligation interest of just, speedy and orderly administration of justice.
expressly so states, or when the law or the nature of the obligation requires solidarity. Let copies of this decision be spread upon the personal records of the lawyers named herein
Plainly, Customs Administrative Order No. 15-65, which as an implementing rule has the in the Office of the Bar Confidant.
force and effect of law, can validly provide for solidary liability.We note the Solicitor SO ORDERED.
General's comment hereon, to wit:
. . . Customs Administrative Order No. 15-65 may be a mere rule and
regulation issued by an administrative agency pursuant to a delegated
authority to fix "the details" in the execution or enforcement of a policy set
out in the law itself. Nonetheless, said administrative order, which adds to the
procedural or enforcing provisions of substantive law, is legally binding and
receives the same statutory force upon going into effect. In that sense, it has
equal, not lower, statutory force and effect as a regular statute passed by the
legislature. 112
MPA's prayer for modification of the appellate court's decision under review by exculpating
petitioner MPA "from liability beyond seventy-five percent (75 %) of Reserve Fund" is
unnecessary because the liability of MPA under Par. XXVIII of Customs Administrative Order
No. 15-65 is in fact limited to seventy-five percent (75 %) of its prescribed reserve fund, any
amount of liability beyond that being for the personal account of the erring pilot and subject
to reimbursement in case of a finding of fault by the member concerned. This is clarified by
the Solicitor General:
Moreover, contrary to petitioner's pretensions, the provisions of Customs
Administrative Order No. 15-65 do not limit the liability of petitioner as a
pilots' association to an absurdly small amount of seventy-five per centum
(75 %) of the member pilots' contribution of P2,000.00 to the reserve fund.
The law speaks of the entire reserve fund required to be maintained by the
pilots' association to answer (for) whatever liability arising from the tortious
act of its members. And even if the association is held liable for an amount
greater than the reserve fund, the association may not resist the liability by
claiming to be liable only up to seventy-five per centum (75 %) of the reserve
fund because in such instance it has the right to be reimbursed by the
offending member pilot for the excess. 113
WHEREFORE, in view of all of the foregoing, the consolidated petitions for review are DENIED
and the assailed decision of the Court of Appeals is AFFIRMED in toto.
Counsel for FESC, the law firm of Del Rosario and Del Rosario, specifically its associate, Atty.
Herbert A. Tria, is REPRIMANDED and WARNED that a repetition of the same or similar acts
of heedless disregard of its undertakings under the Rules shall be dealt with more severely.
The original members of the legal team of the Office of the Solicitor General assigned to this
case, namely, Assistant Solicitor General Roman G. Del Rosario and Solicitor Luis F. Simon,
are ADMONISHED and WARNED that a repetition of the same or similar acts of unduly
delaying proceedings due to delayed filing of required pleadings shall also be dealt with more
stringently.
21 | P a g e
Maritime contracts; maritime liens
G.R. No. 155014 November 11, 2005
CRESCENT PETROLEUM, LTD., Petitioner,
vs.
M/V "LOK MAHESHWARI," THE SHIPPING CORPORATION OF INDIA, and PORTSERV LIMITED
and/or TRANSMAR SHIPPING, INC., Respondents.
DECISION
PUNO, J.:
This petition for review on certiorari under Rule 45 seeks the (a) reversal of the November 28, 2001
Decision of the Court of Appeals in CA-G.R. No. CV-54920,1 which dismissed for "want of jurisdiction"
the instant case, and the September 3, 2002 Resolution of the same appellate court, 2 which denied
petitioner’s motion for reconsideration, and (b) reinstatement of the July 25, 1996 Decision 3 of the
Regional Trial Court (RTC) in Civil Case No. CEB-18679, which held that respondents were solidarily
liable to pay petitioner the sum prayed for in the complaint.
The facts are as follows: Respondent M/V "Lok Maheshwari" (Vessel) is an oceangoing vessel of
Indian registry that is owned by respondent Shipping Corporation of India (SCI), a corporation
organized and existing under the laws of India and principally owned by the Government of India. It
was time-chartered by respondent SCI to Halla Merchant Marine Co. Ltd. (Halla), a South Korean
company. Halla, in turn, sub-chartered the Vessel through a time charter to Transmar Shipping, Inc.
(Transmar). Transmar further sub-chartered the Vessel to Portserv Limited (Portserv). Both
Transmar and Portserv are corporations organized and existing under the laws of Canada.
On or about November 1, 1995, Portserv requested petitioner Crescent Petroleum, Ltd. (Crescent),
a corporation organized and existing under the laws of Canada that is engaged in the business of
selling petroleum and oil products for the use and operation of oceangoing vessels, to deliver marine
fuel oils (bunker fuels) to the Vessel. Petitioner Crescent granted and confirmed the request through
an advice via facsimile dated November 2, 1995. As security for the payment of the bunker fuels and
related services, petitioner Crescent received two (2) checks in the amounts of US$100,000.00 and
US$200,000.00. Thus, petitioner Crescent contracted with its supplier, Marine Petrobulk Limited
(Marine Petrobulk), another Canadian corporation, for the physical delivery of the bunker fuels to
the Vessel.
On or about November 4, 1995, Marine Petrobulk delivered the bunker fuels amounting to
US$103,544 inclusive of barging and demurrage charges to the Vessel at the port of Pioneer Grain,
Vancouver, Canada. The Chief Engineer Officer of the Vessel duly acknowledged and received the
delivery receipt. Marine Petrobulk issued an invoice to petitioner Crescent for the US$101,400.00
worth of the bunker fuels. Petitioner Crescent issued a check for the same amount in favor of Marine
Petrobulk, which check was duly encashed.
Having paid Marine Petrobulk, petitioner Crescent issued a revised invoice dated November 21,
1995 to "Portserv Limited, and/or the Master, and/or Owners, and/or Operators, and/or Charterers
of M/V ‘Lok Maheshwari’" in the amount of US$103,544.00 with instruction to remit the amount on
or before December 1, 1995. The period lapsed and several demands were made but no payment
was received. Also, the checks issued to petitioner Crescent as security for the payment of the bunker
fuels were dishonored for insufficiency of funds. As a consequence, petitioner Crescent incurred
additional expenses of US$8,572.61 for interest, tracking fees, and legal fees.
On May 2, 1996, while the Vessel was docked at the port of Cebu City, petitioner Crescent instituted
before the RTC of Cebu City an action "for a sum of money with prayer for temporary restraining
order and writ of preliminary attachment" against respondents Vessel and SCI, Portserv and/or
Transmar. The case was raffled to Branch 10 and docketed as Civil Case No. CEB-18679.
On May 3, 1996, the trial court issued a writ of attachment against the Vessel with bond at
₱2,710,000.00. Petitioner Crescent withdrew its prayer for a temporary restraining order and
posted the required bond.
On May 18, 1996, summonses were served to respondents Vessel and SCI, and Portserv and/or
Transmar through the Master of the Vessel. On May 28, 1996, respondents Vessel and SCI, through
Pioneer Insurance and Surety Corporation (Pioneer), filed an urgent ex-parte motion to approve
Pioneer’s letter of undertaking, to consider it as counter-bond and to discharge the attachment. On
May 29, 1996, the trial court granted the motion; thus, the letter of undertaking was approved as
counter-bond to discharge the attachment.
For failing to file their respective answers and upon motion of petitioner Crescent, the trial court
declared respondents Vessel and SCI, Portserv and/or Transmar in default. Petitioner Crescent was
allowed to present its evidence ex-parte.
On July 25, 1996, the trial court rendered its decision in favor of petitioner Crescent, thus:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff [Crescent] and
against the defendants [Vessel, SCI, Portserv and/or Transmar].
Consequently, the latter are hereby ordered to pay plaintiff jointly and solidarily, the following:
(a) the sum of US$103,544.00, representing the outstanding obligation;
(b) interest of US$10,978.50 as of July 3, 1996, plus additional interest at 18% per annum for the
period thereafter, until the principal account is fully paid;
(c) attorney’s fees of ₱300,000.00; and
(d) ₱200,000.00 as litigation expenses.
SO ORDERED.
On August 19, 1996, respondents Vessel and SCI appealed to the Court of Appeals. They attached
copies of the charter parties between respondent SCI and Halla, between Halla and Transmar, and
between Transmar and Portserv. They pointed out that Portserv was a time charterer and that there
is a clause in the time charters between respondent SCI and Halla, and between Halla and Transmar,
which states that "the Charterers shall provide and pay for all the fuel except as otherwise agreed."
They submitted a copy of Part II of the Bunker Fuel Agreement between petitioner Crescent and
Portserv containing a stipulation that New York law governs the "construction, validity and
performance" of the contract. They likewise submitted certified copies of the Commercial
Instruments and Maritime Lien Act of the United States (U.S.), some U.S. cases, and some Canadian
cases to support their defense.
On November 28, 2001, the Court of Appeals issued its assailed Decision, which reversed that of the
trial court, viz:
WHEREFORE, premises considered, the Decision dated July 25, 1996, issued by the Regional Trial
Court of Cebu City, Branch 10, is hereby REVERSED and SET ASIDE, and a new one is entered
DISMISSING the instant case for want of jurisdiction.
The appellate court denied petitioner Crescent’s motion for reconsideration explaining that it
"dismissed the instant action primarily on the ground of forum non conveniens considering that the
parties are foreign corporations which are not doing business in the Philippines."
22 | P a g e
Hence, this petition submitting the following issues for resolution, viz:
1. Philippine courts have jurisdiction over a foreign vessel found inside Philippine waters for the
enforcement of a maritime lien against said vessel and/or its owners and operators;
2. The principle of forum non conveniens is inapplicable to the instant case;
3. The trial court acquired jurisdiction over the subject matter of the instant case, as well as over
the res and over the persons of the parties;
4. The enforcement of a maritime lien on the subject vessel is expressly granted by law. The Ship
Mortgage Acts as well as the Code of Commerce provides for relief to petitioner for its unpaid claim;
5. The arbitration clause in the contract was not rigid or inflexible but expressly allowed petitioner
to enforce its maritime lien in Philippine courts provided the vessel was in the Philippines;
6. The law of the state of New York is inapplicable to the present controversy as the same has not
been properly pleaded and proved;
7. Petitioner has legal capacity to sue before Philippine courts as it is suing upon an isolated business
transaction;
8. Respondents were duly served summons although service of summons upon respondents is not
a jurisdictional requirement, the action being a suit quasi in rem;
9. The trial court’s decision has factual and legal bases; and,
10. The respondents should be held jointly and solidarily liable.
In a nutshell, this case is for the satisfaction of unpaid supplies furnished by a foreign supplier in a
foreign port to a vessel of foreign registry that is owned, chartered and sub-chartered by foreign
entities.
Under Batas Pambansa Bilang 129, as amended by Republic Act No. 7691, RTCs exercise exclusive
original jurisdiction "(i)n all actions in admiralty and maritime where the demand or claim exceeds
two hundred thousand pesos (₱200,000) or in Metro Manila, where such demand or claim exceeds
four hundred thousand pesos (₱400,000)." Two (2) tests have been used to determine whether a
case involving a contract comes within the admiralty and maritime jurisdiction of a court -
the locational test and the subject matter test. The English rule follows the locational test wherein
maritime and admiralty jurisdiction, with a few exceptions, is exercised only on contracts made
upon the sea and to be executed thereon. This is totally rejected under the American rule where the
criterion in determining whether a contract is maritime depends on the nature and subject matter
of the contract, having reference to maritime service and transactions.4 In International Harvester
Company of the Philippines v. Aragon,5 we adopted the American rule and held that "(w)hether
or not a contract is maritime depends not on the place where the contract is made and is to be
executed, making the locality the test, but on the subject matter of the contract, making the true
criterion a maritime service or a maritime transaction."
A contract for furnishing supplies like the one involved in this case is maritime and within the
jurisdiction of admiralty.6 It may be invoked before our courts through an action in rem or quasi in
rem or an action in personam. Thus: 7
xxx
"Articles 579 and 584 [of the Code of Commerce] provide a method of collecting or enforcing not
only the liens created under Section 580 but also for the collection of any kind of lien
whatsoever."8 In the Philippines, we have a complete legislation, both substantive and adjective,
under which to bring an action in rem against a vessel for the purpose of enforcing liens. The
substantive law is found in Article 580 of the Code of Commerce. The procedural law is to be found
in Article 584 of the same Code. The result is, therefore, that in the Philippines any vessel – even
though it be a foreign vessel – found in any port of this Archipelago may be attached and sold under
the substantive law which defines the right, and the procedural law contained in the Code of
Commerce by which this right is to be enforced.9 x x x. But where neither the law nor the contract
between the parties creates any lien or charge upon the vessel, the only way in which it can be seized
before judgment is by pursuing the remedy relating to attachment under Rule 59 [now Rule 57] of
the Rules of Court.10
But, is petitioner Crescent entitled to a maritime lien under our laws? Petitioner Crescent bases its
claim of a maritime lien on Sections 21, 22 and 23 of Presidential Decree No. 1521 (P.D. No.
1521), also known as the Ship Mortgage Decree of 1978, viz:
Sec. 21. Maritime Lien for Necessaries; persons entitled to such lien. - Any person furnishing repairs,
supplies, towage, use of dry dock or maritime railway, or other necessaries, to any vessel, whether
foreign or domestic, upon the order of the owner of such vessel, or of a person authorized by the
owner, shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall be
necessary to allege or prove that credit was given to the vessel.
Sec. 22. Persons Authorized to Procure Repairs, Supplies and Necessaries. - The following persons
shall be presumed to have authority from the owner to procure repairs, supplies, towage, use of dry
dock or marine railway, and other necessaries for the vessel: The managing owner, ship’s husband,
master or any person to whom the management of the vessel at the port of supply is entrusted. No
person tortuously or unlawfully in possession or charge of a vessel shall have authority to bind the
vessel.
Sec. 23. Notice to Person Furnishing Repairs, Supplies and Necessaries. - The officers and agents of
a vessel specified in Section 22 of this Decree shall be taken to include such officers and agents when
appointed by a charterer, by an owner pro hac vice, or by an agreed purchaser in possession of the
vessel; but nothing in this Decree shall be construed to confer a lien when the furnisher knew, or by
exercise of reasonable diligence could have ascertained, that because of the terms of a charter party,
agreement for sale of the vessel, or for any other reason, the person ordering the repairs, supplies,
or other necessaries was without authority to bind the vessel therefor.
Petitioner Crescent submits that these provisions apply to both domestic and foreign vessels, as well
as domestic and foreign suppliers of necessaries. It contends that the use of the term "any person"
in Section 21 implies that the law is not restricted to domestic suppliers but also includes all persons
who supply provisions and necessaries to a vessel, whether foreign or domestic. It points out further
that the law does not indicate that the supplies or necessaries must be furnished in the Philippines
in order to give petitioner the right to seek enforcement of the lien with a Philippine court.11
Respondents Vessel and SCI, on the other hand, maintain that Section 21 of the P.D. No. 1521 or the
Ship Mortgage Decree of 1978 does not apply to a foreign supplier like petitioner Crescent as the
provision refers only to a situation where the person furnishing the supplies is situated inside the
territory of the Philippines and not where the necessaries were furnished in a foreign jurisdiction
like Canada.12
We find against petitioner Crescent.
I.
P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted "to accelerate the growth and
development of the shipping industry" and "to extend the benefits accorded to overseas shipping
under Presidential Decree No. 214 to domestic shipping."13 It is patterned closely from the U.S. Ship
23 | P a g e
Mortgage Act of 1920 and the Liberian Maritime Law relating to preferred mortgages. 14 Notably,
Sections 21, 22 and 23 of P.D. No. 1521 or the Ship Mortgage Decree of 1978 are identical to
Subsections P, Q, and R, respectively, of the U.S. Ship Mortgage Act of 1920, which is part of the
Federal Maritime Lien Act. Hence, U.S. jurisprudence finds relevance to determining whether P.D.
No. 1521 or the Ship Mortgage Decree of 1978 applies in the present case.
The various tests used in the U.S. to determine whether a maritime lien exists are the following:
One. "In a suit to establish and enforce a maritime lien for supplies furnished to a vessel in a foreign
port, whether such lien exists, or whether the court has or will exercise jurisdiction, depends on
the law of the country where the supplies were furnished, which must be pleaded and
proved."15 This principle was laid down in the 1888 case of The Scotia,16 reiterated in The Kaiser
Wilhelm II17 (1916), in The Woudrichem18 (1921) and in The City of Atlanta19 (1924).
Two. The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced such single-factor
methodologies as the law of the place of supply.20
In Lauritzen v. Larsen,21 a Danish seaman, while temporarily in New York, joined the crew of a ship
of Danish flag and registry that is owned by a Danish citizen. He signed the ship’s articles providing
that the rights of the crew members would be governed by Danish law and by the employer’s
contract with the Danish Seamen’s Union, of which he was a member. While in Havana and in the
course of his employment, he was negligently injured. He sued the shipowner in a federal district
court in New York for damages under the Jones Act. In holding that Danish law and not the Jones Act
was applicable, the Supreme Court adopted a multiple-contact test to determine, in the absence of
a specific Congressional directive as to the statute’s reach, which jurisdiction’s law should be
applied. The following factors were considered: (1) place of the wrongful act; (2) law of the flag;
(3) allegiance or domicile of the injured; (4) allegiance of the defendant shipowner; (5) place
of contract; (6) inaccessibility of foreign forum; and (7) law of the forum.
Several years after Lauritzen, the U.S. Supreme Court in the case of Romero v. International
Terminal Operating Co.22 again considered a foreign seaman’s personal injury claim under both
the Jones Act and the general maritime law. The Court held that the factors first announced in the
case of Lauritzen were applicable not only to personal injury claims arising under the Jones
Act but to all matters arising under maritime law in general.23
Hellenic Lines, Ltd. v. Rhoditis24 was also a suit under the Jones Act by a Greek seaman injured
aboard a ship of Greek registry while in American waters. The ship was operated by a Greek
corporation which has its largest office in New York and another office in New Orleans and whose
stock is more than 95% owned by a U.S. domiciliary who is also a Greek citizen. The ship was
engaged in regularly scheduled runs between various ports of the U.S. and the Middle East, Pakistan,
and India, with its entire income coming from either originating or terminating in the U.S. The
contract of employment provided that Greek law and a Greek collective bargaining agreement would
apply between the employer and the seaman and that all claims arising out of the employment
contract were to be adjudicated by a Greek court. The U.S. Supreme Court observed that of the seven
factors listed in the Lauritzen test, four were in favor of the shipowner and against
jurisdiction. In arriving at the conclusion that the Jones Act applies, it ruled that the application of
the Lauritzen test is not a mechanical one. It stated thus: "[t]he significance of one or more factors
must be considered in light of the national interest served by the assertion of Jones Act jurisdiction.
(footnote omitted) Moreover, the list of seven factors in Lauritzen was not intended to be exhaustive.
x x x [T]he shipowner’s base of operations is another factor of importance in determining whether
the Jones Act is applicable; and there well may be others."
The principles enunciated in these maritime tort cases have been extended to cases involving unpaid
supplies and necessaries such as the
cases of Forsythe International U.K., Ltd. v. M/V Ruth Venture,25 and Comoco Marine Services
v. M/V El Centroamericano.26
Three. The factors provided in Restatement (Second) of Conflicts of Law have also been
applied, especially in resolving cases brought under the Federal Maritime Lien Act. Their application
suggests that in the absence of an effective choice of law by the parties, the forum contacts to be
considered include: (a) the place of contracting; (b) the place of negotiation of the contract; (c) the
place of performance; (d) the location of the subject matter of the contract; and (e) the domicile,
residence, nationality, place of incorporation and place of business of the parties. 27
In Gulf Trading and Transportation Co. v. The Vessel Hoegh Shield,28 an admiralty action in
rem was brought by an American supplier against a vessel of Norwegian flag owned by a Norwegian
Company and chartered by a London time charterer for unpaid fuel oil and marine diesel oil
delivered while the vessel was in U.S. territory. The contract was executed in London. It was held
that because the bunker fuel was delivered to a foreign flag vessel within the jurisdiction of the U.S.,
and because the invoice specified payment in the U.S., the admiralty and maritime law of the U.S.
applied. The U.S. Court of Appeals recognized the modern approach to maritime conflict of law
problems introduced in the Lauritzen case. However, it observed that Lauritzen involved a torts
claim under the Jones Act while the present claim involves an alleged maritime lien arising from
unpaid supplies. It made a disclaimer that its conclusion is limited to the unique circumstances
surrounding a maritime lien as well as the statutory directives found in the Maritime Lien Statute
and that the initial choice of law determination is significantly affected by the statutory
policies surrounding a maritime lien. It ruled that the facts in the case call for the application of
the Restatement (Second) of Conflicts of Law. The U.S. Court gave much significance to the
congressional intent in enacting the Maritime Lien Statute to protect the interests of American
supplier of goods, services or necessaries by making maritime liens available where traditional
services are routinely rendered. It concluded that the Maritime Lien Statute represents a relevant
policy of the forum that serves the needs of the international legal system as well as the basic policies
underlying maritime law. The court also gave equal importance to the predictability of result and
protection of justified expectations in a particular field of law. In the maritime realm, it is expected
that when necessaries are furnished to a vessel in an American port by an American supplier, the
American Lien Statute will apply to protect that supplier regardless of the place where the contract
was formed or the nationality of the vessel.
The same principle was applied in the case of Swedish Telecom Radio v. M/V Discovery I29 where
the American court refused to apply the Federal Maritime Lien Act to create a maritime lien for
goods and services supplied by foreign companies in foreign ports. In this case, a Swedish company
supplied radio equipment in a Spanish port to refurbish a Panamanian vessel damaged by fire. Some
of the contract negotiations occurred in Spain and the agreement for supplies between the parties
indicated Swedish company’s willingness to submit to Swedish law. The ship was later sold under a
contract of purchase providing for the application of New York law and was arrested in the U.S. The
U.S. Court of Appeals also held that while the contacts-based framework set forth in Lauritzen was
useful in the analysis of all maritime choice of law situations, the factors were geared towards a
24 | P a g e
seaman’s injury claim. As in Gulf Trading, the lien arose by operation of law because the ship’s
owner was not a party to the contract under which the goods were supplied. As a result, the court
found it more appropriate to consider the factors contained in Section 6 of the Restatement (Second)
of Conflicts of Law. The U.S. Court held that the primary concern of the Federal Maritime Lien Act is
the protection of American suppliers of goods and services.
The same factors were applied in the case of Ocean Ship Supply, Ltd. v. M/V Leah.30
II.
Finding guidance from the foregoing decisions, the Court cannot sustain petitioner Crescent’s
insistence on the application of P.D. No. 1521 or the Ship Mortgage Decree of 1978 and hold that a
maritime lien exists.
First. Out of the seven basic factors listed in the case of Lauritzen, Philippine law only falls under
one – the law of the forum. All other elements are foreign – Canada is the place of the wrongful act,
of the allegiance or domicile of the injured and the place of contract; India is the law of the flag and
the allegiance of the defendant shipowner. Balancing these basic interests, it is inconceivable that
the Philippine court has any interest in the case that outweighs the interests of Canada or India for
that matter.
Second. P.D. No. 1521 or the Ship Mortgage Decree of 1978 is inapplicable following the factors
under Restatement (Second) of Conflict of Laws. Like the Federal Maritime Lien Act of the U.S., P.D.
No. 1521 or the Ship Mortgage Decree of 1978 was enacted primarily to protect Filipino suppliers
and was not intended to create a lien from a contract for supplies between foreign entities delivered
in a foreign port.
Third. Applying P.D. No. 1521 or the Ship Mortgage Decree of 1978 and rule that a maritime lien
exists would not promote the public policy behind the enactment of the law to develop the domestic
shipping industry. Opening up our courts to foreign suppliers by granting them a maritime lien
under our laws even if they are not entitled to a maritime lien under their laws will encourage forum
shopping.
Finally. The submission of petitioner is not in keeping with the reasonable expectation of the parties
to the contract. Indeed, when the parties entered into a contract for supplies in Canada, they could
not have intended the laws of a remote country like the Philippines to determine the creation of a
lien by the mere accident of the Vessel’s being in Philippine territory.
III.
But under which law should petitioner Crescent prove the existence of its maritime lien?
In light of the interests of the various foreign elements involved, it is clear that Canada has the most
significant interest in this dispute. The injured party is a Canadian corporation, the sub-charterer
which placed the orders for the supplies is also Canadian, the entity which physically delivered the
bunker fuels is in Canada, the place of contracting and negotiation is in Canada, and the supplies
were delivered in Canada.
The arbitration clause contained in the Bunker Fuel Agreement which states that New York law
governs the "construction, validity and performance" of the contract is only a factor that may be
considered in the choice-of-law analysis but is not conclusive. As in the cases of Gulf
Trading and Swedish Telecom, the lien that is the subject matter of this case arose by operation of
law and not by contract because the shipowner was not a party to the contract under which the
goods were supplied.
It is worthy to note that petitioner Crescent never alleged and proved Canadian law as basis for the
existence of a maritime lien. To the end, it insisted on its theory that Philippine law applies.
Petitioner contends that even if foreign law applies, since the same was not properly pleaded and
proved, such foreign law must be presumed to be the same as Philippine law pursuant to the
doctrine of processual presumption.
Thus, we are left with two choices: (1) dismiss the case for petitioner’s failure to establish a cause of
action31 or (2) presume that Canadian law is the same as Philippine law. In either case, the case has
to be dismissed.
It is well-settled that a party whose cause of action or defense depends upon a foreign law has the
burden of proving the foreign law. Such foreign law is treated as a question of fact to be properly
pleaded and proved.32 Petitioner Crescent’s insistence on enforcing a maritime lien before our
courts depended on the existence of a maritime lien under the proper law. By erroneously claiming
a maritime lien under Philippine law instead of proving that a maritime lien exists under Canadian
law, petitioner Crescent failed to establish a cause of action.33
Even if we apply the doctrine of processual presumption, the result will still be the same. Under P.D.
No. 1521 or the Ship Mortgage Decree of 1978, the following are the requisites for maritime liens on
necessaries to exist: (1) the "necessaries" must have been furnished to and for the benefit of the
vessel; (2) the "necessaries" must have been necessary for the continuation of the voyage of the
vessel; (3) the credit must have been extended to the vessel; (4) there must be necessity for the
extension of the credit; and (5) the necessaries must be ordered by persons authorized to contract
on behalf of the vessel.34 These do not avail in the instant case.
First. It was not established that benefit was extended to the vessel. While this is presumed when
the master of the ship is the one who placed the order, it is not disputed that in this case it was the
sub-charterer Portserv which placed the orders to petitioner Crescent.35 Hence, the presumption
does not arise and it is incumbent upon petitioner Crescent to prove that benefit was extended to
the vessel. Petitioner did not.
Second. Petitioner Crescent did not show any proof that the marine products were necessary for
the continuation of the vessel.
Third. It was not established that credit was extended to the vessel. It is presumed that "in the
absence of fraud or collusion, where advances are made to a captain in a foreign port, upon his
request, to pay for necessary repairs or supplies to enable his vessel to prosecute her voyage, or to
pay harbor dues, or for pilotage, towage and like services rendered to the vessel, that they are made
upon the credit of the vessel as well as upon that of her owners." 36 In this case, it was the sub-
charterer Portserv which requested for the delivery of the bunker fuels. The issuance of two checks
amounting to US$300,000 in favor of petitioner Crescent prior to the delivery of the bunkers as
security for the payment of the obligation weakens petitioner Crescent’s contention that credit was
extended to the Vessel.
We also note that when copies of the charter parties were submitted by respondents in the Court of
Appeals, the time charters between respondent SCI and Halla and between Halla and Transmar were
shown to contain a clause which states that "the Charterers shall provide and pay for all the fuel
except as otherwise agreed." This militates against petitioner Crescent’s position that Portserv is
authorized by the shipowner to contract for supplies upon the credit of the vessel.
Fourth. There was no proof of necessity of credit. A necessity of credit will be presumed where it
appears that the repairs and supplies were necessary for the ship and that they were ordered by the
25 | P a g e
master. This presumption does not arise in this case since the fuels were not ordered by the master
and there was no proof of necessity for the supplies.
Finally. The necessaries were not ordered by persons authorized to contract in behalf of the vessel
as provided under Section 22 of P.D. No. 1521 or the Ship Mortgage Decree of 1978 - the managing
owner, the ship’s husband, master or any person with whom the management of the vessel at the
port of supply is entrusted. Clearly, Portserv, a sub-charterer under a time charter, is not someone
to whom the management of the vessel has been entrusted. A time charter is a contract for the use
of a vessel for a specified period of time or for the duration of one or more specified voyages wherein
the owner of the time-chartered vessel retains possession and control through the master and crew
who remain his employees.37 Not enjoying the presumption of authority, petitioner Crescent should
have proved that Portserv was authorized by the shipowner to contract for supplies. Petitioner
failed.
A discussion on the principle of forum non conveniens is unnecessary.
IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. No. CV 54920, dated November
28, 2001, and its subsequent Resolution of September 3, 2002 are AFFIRMED. The instant petition
for review on certiorari is DENIED for lack of merit. Cost against petitioner.
SO ORDERED.

26 | P a g e
Limited liability rule
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
27 | P a g e
 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.

28 | P a g e
Limited liability rule
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 vessel and other things appertaining thereto.
29 | P a g e
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 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 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:
30 | P a g e
 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
31 | P a g e
 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.

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Limited liability rule
G.R. No. 131621 September 28, 1999
LOADSTAR SHIPPING CO., INC., petitioner,
vs.
COURT OF APPEALS and THE MANILA INSURANCE CO., INC., respondents.
DAVIDE, JR., C.J.:
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for review
on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, seeks to reverse and set aside the
following: (a) the 30 January 1997 decision 1 of the Court of Appeals in CA-G.R. CV No. 36401, which
affirmed the decision of 4 October 1991 2 of the Regional Trial Court of Manila, Branch 16, in Civil
Case No. 85-29110, ordering LOADSTAR to pay private respondent Manila Insurance Co. (hereafter
MIC) the amount of P6,067,178, with legal interest from the filing of the compliant until fully paid,
P8,000 as attorney's fees, and the costs of the suit; and (b) its resolution of 19 November
1997, 3 denying LOADSTAR's motion for reconsideration of said decision.
The facts are undisputed.1âwphi1.nêt
On 19 November 1984, LOADSTAR received on board its M/V "Cherokee" (hereafter, the vessel) the
following goods for shipment:
a) 705 bales of lawanit hardwood;
b) 27 boxes and crates of tilewood assemblies and the others ;and
c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.
The goods, amounting to P6,067,178, were insured for the same amount with MIC against various
risks including "TOTAL LOSS BY TOTAL OF THE LOSS THE VESSEL." The vessel, in turn, was insured
by Prudential Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million. On 20 November 1984,
on its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank
off Limasawa Island. As a result of the total loss of its shipment, the consignee made a claim with
LOADSTAR which, however, ignored the same. As the insurer, MIC paid P6,075,000 to the insured
in full settlement of its claim, and the latter executed a subrogation receipt therefor.
On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of
the vessel was due to the fault and negligence of LOADSTAR and its employees. It also prayed that
PGAI be ordered to pay the insurance proceeds from the loss the vessel directly to MIC, said amount
to be deducted from MIC's claim from LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the shipper's goods and claimed that
sinking of its vessel was due to force majeure. PGAI, on the other hand, averred that MIC had no cause
of action against it, LOADSTAR being the party insured. In any event, PGAI was later dropped as a
party defendant after it paid the insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC, prompting LOADSTAR to
elevate the matter to the court of Appeals, which, however, agreed with the trial court and affirmed
its decision in toto.
In dismissing LOADSTAR's appeal, the appellate court made the following observations:
1) LOADSTAR cannot be considered a private carrier on the sole
ground that there was a single shipper on that fateful voyage. The
court noted that the charter of the vessel was limited to the ship,
but LOADSTAR retained control over its crew. 4
2) As a common carrier, it is the Code of Commerce, not the Civil
Code, which should be applied in determining the rights and
liabilities of the parties.
3) The vessel was not seaworthy because it was undermanned on
the day of the voyage. If it had been seaworthy, it could have
withstood the "natural and inevitable action of the sea" on 20
November 1984, when the condition of the sea was moderate. The
vessel sank, not because of force majeure, but because it was not
seaworthy. LOADSTAR'S allegation that the sinking was probably
due to the "convergence of the winds," as stated by a PAGASA
expert, was not duly proven at the trial. The "limited liability" rule,
therefore, is not applicable considering that, in this case, there was
an actual finding of negligence on the part of the carrier.5
4) Between MIC and LOADSTAR, the provisions of the Bill of
Lading do not apply because said provisions bind only the
shipper/consignee and the carrier. When MIC paid the shipper for
the goods insured, it was subrogated to the latter's rights as
against the carrier, LOADSTAR. 6
5) There was a clear breach of the contract of carriage when the
shipper's goods never reached their destination. LOADSTAR's
defense of "diligence of a good father of a family" in the training
and selection of its crew is unavailing because this is not a proper
or complete defense in culpa contractual.
6) "Art. 361 (of the Code of Commerce) has been judicially
construed to mean that when goods are delivered on board a ship
in good order and condition, and the shipowner delivers them to
the shipper in bad order and condition, it then devolves upon the
shipowner to both allege and prove that the goods were damaged
by reason of some fact which legally exempts him from liability."
Transportation of the merchandise at the risk and venture of the
shipper means that the latter bears the risk of loss or
deterioration of his goods arising from fortuitous events, force
majeure, or the inherent nature and defects of the goods, but not
those caused by the presumed negligence or fault of the carrier,
unless otherwise proved. 7
The errors assigned by LOADSTAR boil down to a determination of the following issues:
(1) Is the M/V "Cherokee" a private or a common carrier?
(2) Did LOADSTAR observe due and/or ordinary diligence in
these premises.
Regarding the first issue, LOADSTAR submits that the vessel was a private carrier because it was not
issued certificate of public convenience, it did not have a regular trip or schedule nor a fixed route,
and there was only "one shipper, one consignee for a special cargo."
33 | P a g e
In refutation, MIC argues that the issue as to the classification of the M/V "Cherokee" was not timely
raised below; hence, it is barred by estoppel. While it is true that the vessel had on board only the
cargo of wood products for delivery to one consignee, it was also carrying passengers as part of its
regular business. Moreover, the bills of lading in this case made no mention of any charter party but
only a statement that the vessel was a "general cargo carrier." Neither was there any "special
arrangement" between LOADSTAR and the shipper regarding the shipment of the cargo. The
singular fact that the vessel was carrying a particular type of cargo for one shipper is not sufficient
to convert the vessel into a private carrier.
As regards the second error, LOADSTAR argues that as a private carrier, it cannot be presumed to
have been negligent, and the burden of proving otherwise devolved upon MIC. 8
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage on 19 November
1984, the vessel was allegedly dry docked at Keppel Philippines Shipyard and was duly inspected by
the maritime safety engineers of the Philippine Coast Guard, who certified that the ship was fit to
undertake a voyage. Its crew at the time was experienced, licensed and unquestionably competent.
With all these precautions, there could be no other conclusion except that LOADSTAR exercised the
diligence of a good father of a family in ensuring the vessel's seaworthiness.
LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss being due
to force majeure. It points out that when the vessel left Nasipit, Agusan del Norte, on 19 November
1984, the weather was fine until the next day when the vessel sank due to strong waves. MCI's
witness, Gracelia Tapel, fully established the existence of two typhoons, "WELFRING" and "YOLING,"
inside the Philippine area of responsibility. In fact, on 20 November 1984, signal no. 1 was declared
over Eastern Visayas, which includes Limasawa Island. Tapel also testified that the convergence of
winds brought about by these two typhoons strengthened wind velocity in the area, naturally
producing strong waves and winds, in turn, causing the vessel to list and eventually sink.
LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such as
what transpired in this case, is valid. Since the cargo was being shipped at "owner's risk," LOADSTAR
was not liable for any loss or damage to the same. Therefore, the Court of Appeals erred in holding
that the provisions of the bills of lading apply only to the shipper and the carrier, and not to the
insurer of the goods, which conclusion runs counter to the Supreme Court's ruling in the case of St.
Paul Fire & Marine Co. v. Macondray & Co., Inc., 9 and National Union Fire Insurance Company of
Pittsburgh v. Stolt-Nielsen Phils., Inc. 10
Finally, LOADSTAR avers that MIC's claim had already prescribed, the case having been instituted
beyond the period stated in the bills of lading for instituting the same — suits based upon claims
arising from shortage, damage, or non-delivery of shipment shall be instituted within sixty days from
the accrual of the right of action. The vessel sank on 20 November 1984; yet, the case for recovery
was filed only on 4 February 1985.
MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo
was due to force majeure, because the same concurred with LOADSTAR's fault or negligence.
Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same must
be deemed waived.
Thirdly, the " limited liability " theory is not applicable in the case at bar because LOADSTAR was at
fault or negligent, and because it failed to maintain a seaworthy vessel. Authorizing the voyage
notwithstanding its knowledge of a typhoon is tantamount to negligence.
We find no merit in this petition.
Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not necessary that
the carrier be issued a certificate of public convenience, and this public character is not altered by
the fact that the carriage of the goods in question was periodic, occasional, episodic or unscheduled.
In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American
Steamship Agencies, Inc., 11 where this Court held that a common carrier transporting special cargo
or chartering the vessel to a special person becomes a private carrier that is not subject to the
provisions of the Civil Code. Any stipulation in the charter party absolving the owner from liability
for loss due to the negligence of its agent is void only if the strict policy governing common carriers
is upheld. Such policy has no force where the public at is not involved, as in the case of a ship totally
chartered for the use of a single party. LOADSTAR also cited Valenzuela Hardwood and Industrial
Supply, Inc. v. Court of Appeals 12 and National Steel Corp. v. Court of Appeals, 13 both of which upheld
the Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for the simple reason that
the factual settings are different. The records do not disclose that the M/V "Cherokee," on the date
in question, undertook to carry a special cargo or was chartered to a special person only. There was
no charter party. The bills of lading failed to show any special arrangement, but only a general
provision to the effect that the M/V"Cherokee" was a "general cargo carrier." 14 Further, the bare
fact that the vessel was carrying a particular type of cargo for one shipper, which appears to be
purely coincidental, is not reason enough to convert the vessel from a common to a private carrier,
especially where, as in this case, it was shown that the vessel was also carrying passengers.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common
carrier under Article 1732 of the Civil Code. In the case of De Guzman v. Court of Appeals,15 the Court
juxtaposed the statutory definition of "common carriers" with the peculiar circumstances of that
case, viz.:
The Civil Code defines "common carriers" in the following terms:
Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying
only as ancillary activity (in local idiom, as "a sideline". Article 1732 also carefully
avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the "general public," i.e., the
general community or population, and one who offers services or solicits business
only from a narrow segment of the general population. We think that Article 1733
deliberately refrained from making such distinctions.
xxx xxx xxx
It appears to the Court that private respondent is properly characterized as a
common carrier even though he merely "back-hauled" goods for other merchants
from Manila to Pangasinan, although such backhauling was done on a periodic or
occasional rather than regular or scheduled manner, and eventhough private
34 | P a g e
 respondent's principal occupation was not the carriage of goods for others. There
is no dispute that private respondent charged his customers a fee for hauling their
goods; that fee frequently fell below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate
of public convenience, and concluded he was not a common carrier. This is palpable
error. A certificate of public convenience is not a requisite for the incurring of
liability under the Civil Code provisions governing common carriers. That liability
arises the moment a person or firm acts as a common carrier, without regard to
whether or not such carrier has also complied with the requirements of the
applicable regulatory statute and implementing regulations and has been granted
a certificate of public convenience or other franchise. To exempt private
respondent from the liabilities of a common carrier because he has not secured the
necessary certificate of public convenience, would be offensive to sound public
policy; that would be to reward private respondent precisely for failing to comply
with applicable statutory requirements The business of a common carrier impinges
directly and intimately upon the safety and well being and property of those
members of the general community who happen to deal with such carrier. The law
imposes duties and liabilities upon common carriers for the safety and protection
of those who utilize their services and the law cannot allow a common carrier to
render such duties and liabilities merely facultative by simply failing to obtain the
necessary permits and authorizations.
Moving on to the second assigned error, we find that the M/V "Cherokee" was not seaworthy when
it embarked on its voyage on 19 November 1984. The vessel was not even sufficiently manned at
the time. "For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned
with a sufficient number of competent officers and crew. The failure of a common carrier to maintain
in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty
prescribed in Article 1755 of the Civil Code." 16
Neither do we agree with LOADSTAR's argument that the "limited liability" theory should be applied
in this case. The doctrine of limited liability does not apply where there was negligence on the part
of the vessel owner or agent. 17 LOADSTAR was at fault or negligent in not maintaining a seaworthy
vessel and in having allowed its vessel to sail despite knowledge of an approaching typhoon. In any
event, it did not sink because of any storm that may be deemed as force majeure, inasmuch as the
wind condition in the performance of its duties, LOADSTAR cannot hide behind the "limited liability"
doctrine to escape responsibility for the loss of the vessel and its cargo.
LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of the goods,
in utter disregard of this Court's pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray &
Co., Inc., 18 and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc. 19 It was ruled in these two
cases that after paying the claim of the insured for damages under the insurance policy, the insurer
is subrogated merely to the rights of the assured, that is, it can recover only the amount that may, in
turn, be recovered by the latter. Since the right of the assured in case of loss or damage to the goods
is limited or restricted by the provisions in the bills of lading, a suit by the insurer as subrogee is
necessarily subject to the same limitations and restrictions. We do not agree. In the first place, the
cases relied on by LOADSTAR involved a limitation on the carrier's liability to an amount fixed in the
bill of lading which the parties may enter into, provided that the same was freely and fairly agreed
upon (Articles 1749-1750). On the other hand, the stipulation in the case at bar effectively reduces
the common carrier's liability for the loss or destruction of the goods to a degree less than
extraordinary (Articles 1744 and 1745), that is, the carrier is not liable for any loss or damage to
shipments made at "owner's risk." Such stipulation is obviously null and void for being contrary to
public policy." 20 It has been said:
Three kinds of stipulations have often been made in a bill of lading. The first one
exempting the carrier from any and all liability for loss or damage occasioned by
its own negligence. The second is one providing for an unqualified limitation of
such liability to an agreed valuation. And the third is one limiting the liability of the
carrier to an agreed valuation unless the shipper declares a higher value and pays
a higher rate of. freight. According to an almost uniform weight of authority, the
first and second kinds of stipulations are invalid as being contrary to public policy,
but the third is valid and enforceable. 21
Since the stipulation in question is null and void, it follows that when MIC paid the shipper,
it was subrogated to all the rights which the latter has against the common carrier,
LOADSTAR.
Neither is there merit to the contention that the claim in this case was barred by prescription. MIC's
cause of action had not yet prescribed at the time it was concerned. Inasmuch as neither the Civil
Code nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of
Goods by Sea Act (COGSA) — which provides for a one-year period of limitation on claims for loss
of, or damage to, cargoes sustained during transit — may be applied suppletorily to the case at bar.
This one-year prescriptive period also applies to the insurer of the goods. 22 In this case, the period
for filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year
period is null and void; 23 it must, accordingly, be struck down.
WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of the
Court of Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs against petitioner.1âwphi1.nêt
SO ORDERED.
35 | P a g e
Limited liability rule
G.R. No. 92735 June 8, 2000
MONARCH INSURANCE CO., INC., TABACALERA INSURANCE CO., INC and Hon. Judge AMANTE
PURISIMA, petitioners,
vs.
COURT OF APPEALS and ABOITIZ SHIPPING CORPORATION, respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 94867
ALLIED GUARANTEE INSURANCE COMPANY, petitioner,
vs.
COURT OF APPEALS, Presiding Judge, RTC Manila, Br. 24 and ABOITIZ SHIPPING
CORPORATION, respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 95578
EQUITABLE INSURANCE CORPORATION, petitioner,
vs.
COURT OF APPEALS, Former First Division Composed of Hon. Justices RODOLFO NOCON,
PEDRO RAMIREZ, and JESUS ELBINIAS and ABOITIZ SHIPPING CORPORATION, respondents.
DE LEON, JR., J.:
Before us are three consolidated petitions. G.R. No. 92735 is a petition for review filed under Rule
45 of the Rules of Court assailing the decision of the Court of Appeals dated March 29, 1990 in CA-
G.R. SP. Case No. 17427 which set aside the writ of execution issued by the lower court for the full
indemnification of the claims of the petitioners, Monarch Insurance Company (hereafter "Monarch")
and Tabacalera Insurance Company, Incorporated (hereafter "Tabacalera") against private
respondent, Aboitiz Shipping Corporation (hereafter "Aboitiz") on the ground that the latter is
entitled to the benefit of the limited liability rule in maritime law; G.R. No. 94867 is a petition
for certiorari under Rule 65 of the Rules of Court to annul and set aside the decision of the Court of
Appeals dated August 15, 1990 in CA-G.R. SP No. 20844 which ordered the lower court to stay the
execution of the judgment in favor of the petitioner, Allied Guarantee Insurance Company (hereafter
"Allied") against Aboitiz insofar as it impairs the rights of the other claimants to their pro-rata share
in the insurance proceeds from the sinking of the M/V P. Aboitiz, in accordance with the rule on
limited liability; and G.R. No. 95578 is a petition for review under Rule 45 of the Rules of Court
seeking a reversal of the decision of the Court of Appeals dated August 24, 1990 and its resolution
dated October 4, 1990 in C.A. G.R. Civil Case No. 15071 which modified the judgment of the lower
court's award of actual damages to petitioner Equitable Insurance Corporation (hereafter
"Equitable") to its pro-rata share in the insurance proceeds from the sinking of the M/V P. Aboitiz.
All cases arose from the loss of cargoes of various shippers when the M/V P. Aboitiz, a common
carrier owned and operated by Aboitiz, sank on her voyage from Hong Kong to Manila on October
31, 1980. Seeking indemnification for the loss of their cargoes, the shippers, their successors-in-
interest, and the cargo insurers such as the instant petitioners filed separate suits against Aboitiz
before the Regional Trial Courts. The claims numbered one hundred and ten (110) for the total
amount of P41,230,115.00 which is almost thrice the amount of the insurance proceeds of
P14,500,000.00 plus earned freight of 500,000.00 according to Aboitiz. To this day, some of these
claims, including those of herein petitioners, have not yet been settled.
G.R. No. 92735.
Monarch and Tabacalera are insurance carriers of lost cargoes. They indemnified the shippers and
were consequently subrogated to their rights, interests and actions against Aboitiz, the cargo
carrier. 1 Because Aboitiz refused to compensate Monarch, it filed two complaints against Aboitiz,
docketed as Civil Cases Nos. 82-2767 and 82-2770. For its part, Tabacalera also filed two complaints
against the same defendant, docketed as Civil Cases Nos. 82-2768 and 82-2769. As these four (4)
cases had common causes of action, they were consolidated and jointly tried. 2
In Civil Case No. 82-2767 where Monarch also named Malaysian International Shipping Corporation
and Litonja Merchant Shipping Agency as Aboitiz's co-defendants, Monarch sough recovery of
P29,719.88 representing the value of three (3) pallets of glass tubing that sank with the M/V P.
Aboitiz, plus attorney's fees of not less than P5,000.00, litigation expenses, interest at the legal rate
on all these amounts, and the cost of suit. 3 Civil Case. No. 82-2770 was a complaint filed by Monarch
against Aboitiz and co-defendants Compagnie Maritime des Chargeurs Reunis and F.E. Zuellig (M),
Inc. for the recovery of P39,597.00 representing the value of the one case motor vehicle parts which
was lost when the M/V P. Aboitiz sank on her way to Manila, plus Attorney's fees of not less than
P10,000.00 and cost of suit. 4
Tabacalera sought against Franco Belgian Services, F.E. Zuellig and Aboitiz in Civil Case No. 82-2768
the recovery of P284,218.00 corresponding to the value of nine (9) cases of Renault spare parts,
P213,207.00 for the value of twenty-five (25) cases of door closers and P42,254.00 representing the
value of eighteen (18) cases of plastic spangle, plus attorney's fees of not less than P50,000.00 and
cost of suit. 5 In Civil Case No. 82-2769, Tabacalera claimed from Hong Kong Island Shipping Co., Ltd.,
Citadel Lines and Aboitiz indemnification in the amount of P75,058.00 for the value of four (4)
cartons of motor vehicle parts foundered with the M/V P. Aboitiz, plus attorney's fees of not less
than P20,000.00 and cost of suit. 6
In its answer with counterclaim, Aboitiz rejected responsibility for the claims on the ground that the
sinking of its cargo vessel was due to force majeure or an act of God. 7 Aboitiz was subsequently
declared as in default for its failure to appear during the pre-trial. Its counsel fried a motion to set
aside the order of default with notice of his withdrawal as such counsel. Before the motion could be
acted upon, Judge Bienvenido Ejercjto, the presiding judge of the trial court, was promoted to the
then intermediate Appellate Court. The cases were thus re-raffled to Branch VII of the RTC of Manila
presided by Judge Amante P. Purisima, the co-petitioner in G.R. No. 92735. Without resolving the
pending motion to set aside the order of default, the trial court set the cases for hearing. However,
since Aboitiz had repeatedly failed to appear in court, the trial court denied the said motion and
allowed Monarch and Tabacalera to present evidence ex-parte. 8
Monarch and Tabacalera proffered in evidence the survey of Perfect Lambert, a surveyor
commissioned to investigate the possible cause of the sinking of the cargo vessel. The survey
established that on her voyage to Manila from Hong Kong, the vessel did not encounter weather so
inclement that Aboitiz would be exculpated from liability for losses. In his note of protest, the master
of M/V P. Aboitiz described the wind force encountered by the vessel as from ten (10) to fifteen (15)
knots, a weather condition classified as typical and moderate in the South China Sea at that particular
time of the year. The survey added that the seaworthiness of the vessel was in question especially
36 | P a g e
because the breaches of the hull and the serious flooding of two (2) cargo holds occurred
simultaneously in "seasonal weather." 9
In due course, the trial court rendered judgment against Aboitiz but the complaint against all the
other defendants was dismissed. Aboitiz was held liable for the following: (a) in Civil Case No. 82-
2767, P29,719.88 with legal interest from the filing of the complaint until fully paid plus attorney's
fees of P30,000.00 and cost of suit; (b) in Civil Case No. 82-2768, P539,679.00 with legal interest of
12% per annum from date of filing of the complaint until fully paid, plus attorney's fees of
P30,000.00, litigation expenses and cost of suit; (c) in Civil Case No. 82-2769, P75,058.00 with legal
interest of 12% per annum from date of filing of the complaint until-fully paid, plus P5,000.00
attorney's fees, litigation expenses and cost of suit, and (d) in Civil Case No. 82-2770, P39,579.66
with legal interest of 12% per annum from date of filing of the complaint until fully paid, plus
attorney's fees of P5,000.00, litigation expenses and cost of suit.
Aboitiz filed a motion for reconsideration of the decision and/or for new trial to lift the order of
default. The court denied the motion on August 27, 1986. 10 Aboitiz appealed to the Court of Appeals
but the appeal was dismissed for its failure to file appellant's brief. It subsequently filed an urgent
motion for reconsideration of the dismissal with prayer for the admission of its attached appellant's
brief. The appellate court denied that motion for lack of merit in a Resolution dated July 8, 1988. 11
Aboitiz thus filed a petition for review before this Court. Docketed as G.R. No. 84158, the petition
was denied in the Resolution of October 10, 1988 for being filed out of time. Aboitiz's motion for the
reconsideration of said Resolution was similarly denied. 12 Entry of judgment was made in the
case. 13
Consequently, Monarch and Tabacalera moved for execution of judgment. The trial court granted
the motion on April 4, 1989 14 and issued separate writs of execution. However, on April 12, 1989,
Aboitiz, invoking the real and hypothecary nature of liability in maritime law, filed an urgent motion
to quash the writs of execution. 15 According to Aboitiz, since its liability is limited to the value of the
vessel which was insufficient to satisfy the aggregate claims of all 110 claimants, to indemnify
Monarch and Tabacalera ahead of the other claimants would be prejudicial to the latter. Monarch
and Tabacalera opposed the motion to quash. 16
On April 17, 1989, before the motion to quash could be heard, the sheriff levied upon five (5) heavy
equipment owned by Aboitiz for the public auction sale. At said sale, Monarch was the highest bidder
for one (1) unit FL-151 Fork Lift (big) and one (1) unit FL-25 Fork Lift (small). Tabacalera was also
the highest bidder for one (1) unit TCH TL-251 Hyster Container Lifter, one (1) unit Hyster Top Lifter
(out of order), and one (1) unit ER-353 Crane. The corresponding certificates of sale 17 were issued
to Monarch and Tabacalera.
On April 18, 1989, the day before the hearing of the motion to quash, Aboitiz filed a supplement to
its motion, to add the fact that an auction sale had taken place. On April 19, 1989, Judge Purisima
issued an order denying the motion to quash but freezing execution proceedings for ten (10) days
to give Aboitiz time to secure a restraining order from a higher court. 18 Execution was scheduled to
resume to fully satisfy the judgment when the grace period shall have lapsed without such
restraining order having been obtained by Aboitiz.
Aboitiz filed with the Court of Appeals a petition for certiorari and prohibition with prayer for
preliminary injunction and/or temporary restraining order under CA-G.R. No. SP-17427. 19 On
March 29, 1990, the appellate court rendered a Decision the dispositive portion of which reads:
WHEREFORE, the writ of certiorari is hereby granted, annulling the subject writs of
execution, auction sale, certificates of sale, and the assailed orders of respondent Judge
dated April 4 and April 19, 1989 insofar as the money value of those properties of Aboitiz,
levied on execution and sold at public auction, has exceeded the pro-rata shares of Monarch
and Tabacalera in the insurance proceeds of Aboitiz in relation to the pro-rata shares of the
106 other claimants.
The writ of prohibition is also granted to enjoin respondent Judge, Monarch and Tabacalera
from proceeding further with execution of the judgments in question insofar as the
execution would satisfy the claims of Monarch and Tabacalera in excess of their pro-rata
shares and in effect reduce the balance of the proceeds for distribution to the other
claimants to their prejudice.
The question of whether or how much of the claims of Monarch and Tabacalera against the
insurance proceeds has already been settled through the writ of execution and auction sale
in question, being factual issues, shall be threshed out before respondent judge.
The writ of preliminary injunction issued in favor of Aboitiz, having served its purpose, is
hereby lifted. No pronouncement as to costs.
SO ORDERED. 20
Hence, the instant petition for review on certiorari where petitioners Monarch, Tabacalera and
Judge Purisima raise the following assignment of errors:
1. The appellate court grievously erred in re-opening the Purisima decisions, already final
and executory, on the alleged ground that the issue of real and hypothecary liability had not
been previously resolved by Purisima, the appellate court, and this Hon. Supreme Court;
2. The appellate court erred when it resolved that Aboitiz is entitled to the limited real and
hypothecary liability of a ship owner, considering the facts on record and the law on the
matter.
3. The appellate court erred when it concluded that Aboitiz does not have to present
evidence to prove its entitlement to the limited real and hypothecary liability.
4. The appellate court erred in ignoring the case of "Aboitiz Shipping Corporation v. CA and
Allied Guaranty Insurance Co., Inc. (G.R. No. 88159), decided by this Honorable Supreme
Court as early as November 13, 1989, considering that said case, now factual and executory,
is in pari materia with the instant case.
5. The appellate court erred in not concluding that irrespective of whether Aboitiz is entitled
to limited hypothecary liability or not, there are enough funds to satisfy all the claimants.
6. The appellate court erred when it concluded that Aboitiz had made an "abandonment" as
envisioned by Art. 587 of the Code of Commerce.
7. The appellate court erred when it concluded that other claimants would suffer if
Tabacalera and Monarch would be fully paid.
8. The appellate court erred in concluding that certiorari was the proper remedy for
Aboitiz. 21
G.R. NOS. 94867 & 95578
Allied as insurer-subrogee of consignee Peak Plastic and Metal Products Limited, filed a complaint
against Aboitiz for the recovery of P278,536.50 representing the value of 676 bags of PVC compound
and 10 bags of ABS plastic lost on board the M/V P. Aboitiz, with legal interest from the date of filing
of the complaint, plus attorney's fees, exemplary damages and costs. 22 Docketed as Civil Case No.
37 | P a g e
138643, the case was heard before the Regional Trial Court of Manila, Branch XXIV, presided by
Judge Sergio D. Mabunay.
On the other hand, Equitable, as insurer-subrogee of consignee-assured Axel Manufacturing
Corporation, filed an amended complaint against Franco Belgian Services, F.E. Zuellig, Inc. and
Aboitiz for the recovery of P194,794.85 representing the value of 76 drums of synthetic organic
tanning substances and 1,000 kilograms of optical bleaching agents which were also lost on board
the M/V P. Aboitiz, with legal interest from the date of filing of the complaint, plus 25% attorney's
fees, exemplary damages, litigation expenses and costs of suit. 23 Docketed as Civil Case No. 138396,
the complaint was assigned to the Regional Trial Court of Manila, Branch VIII.
In its answer with counterclaim in the two cases, Aboitiz disclaimed responsibility for the amounts
being recovered, alleging that the loss was due to a fortuitous event or an act of God. It prayed for
the dismissal of the cases and the payment of attorney's fees, litigation expenses plus costs of suit. It
similarly relied on the defenses of force mejeure, seaworthiness of the vessel and exercise of due
diligence in the carriage of goods as regards the cross-claim of its co-defendants. 24
In support of its position, Aboitiz presented the testimonies of Capt. Gerry N. Racines, master
mariner of the M/V P. Aboitiz, and Justo C. Iglesias, a meteorologist of the Philippine Atmospheric
Geophysical and Astronomical Services Administration (PAGASA). The gist of the testimony of Capt.
Racines in the two cases follows:
The M/V P. Aboitiz left Hong Kong for Manila at about 7:30 in the evening of October 29, 1980 after
securing a departure clearance from the Hong Kong Port Authority. The departure was delayed for
two hours because he (Capt. Racines) was observing the direction of the storm that crossed the Bicol
Region. He proceeded with the voyage only after being informed that the storm had abated. At about
8:00 o'clock in the morning of October 30, 1980, after more than twelve (12) hours of navigation,
the vessel suddenly encountered rough seas with waves about fifteen to twenty-five feet high. He
ordered his chief engineer to check the cargo holds. The latter found that sea water had entered
cargo hold Nos. 1 and 2. He immediately directed that water be pumped out by means of the vessel's
bilge pump, a device capable of ejecting 180 gallons of water per minute. They were initially
successful in pumping out the water.
At 6:00 a.m. of October 31, 1980, however, Capt. Racines received a report from his chief engineer
that the water level in the cargo holds was rapidly rising. He altered the vessel's course and veered
towards the northern tip of Luzon to prevent the vessel from being continuously pummeled by the
waves. Despite diligent efforts of the officers and crew, however, the vessel, which was
approximately 250 miles away from the eye of the storm, began to list on starboard side at 27
degrees. Capt. Racines and his crew were not able to make as much headway as they wanted because
by 12:00 noon of the same day, the cargo holds were already flooded with sea water that rose from
three to twelve feet, disabling the bilge pump from containing the water.
The M/V P. Aboitiz sank at about 7:00 p.m. of October 31, 1980 at latitude 18 degrees North,
longitude 170 degrees East in the South China Sea in between Hong Kong, the Philippines and
Taiwan with the nearest land being the northern tip of Luzon, around 270 miles from Cape Bojeador,
Bangui, Ilocos Norte. Responding to the captain's distress call, the M/V Kapuas (Capuas) manned by
Capt. Virgilio Gonzales rescued the officers and crew of the ill-fated M/V P. Aboitiz and brought them
to Waileen, Taiwan where Capt. Racines lodged his marine protest dated November 3, 1980.
Justo Iglesias, meteorologist of PAGASA and another witness of Aboitiz, testified in both cases that
during the inclusive dates of October 28-31, 1980, a stormy weather condition prevailed within the
Philippine area of responsibility, particularly along the sea route from Hong Kong to Manila, because
of tropical depression "Yoning." 25 PAGASA issued weather bulletins from October 28-30, 1980 while
the storm was still within Philippine territory. No domestic bulletins were issued the following day
when the storm which hit Eastern Samar, Southern Quezon and Southern Tagalog provinces, had
made its exit to the South China Sea through Bataan.
Allied and Equitable refuted the allegation that the M/V P. Aboitiz and its cargo were lost due to force
majeure, relying mainly on the marine protest filed by Capt. Racines as well as on the Beaufort Scale
of Wind. In his marine protest under oath, Capt. Racines affirmed that the wind force an October 29-
30, 1980 was only ten (10) to fifteen (15) knots. Under the Beaufort Scale of Wind, said wind velocity
falls under scale No. 4 that describes the sea condition as "moderate breeze," and "small waves
becoming longer, fairly frequent white horses." 26
To fortify its position, Equitable presented Rogelio T. Barboza who testified that as claims supervisor
and processor of Equitable, he recommended payment to Axel Manufacturing Corporation as
evidenced by the cash voucher, return check and subrogation receipt. Barboza also presented a
letter of demand to Aboitiz which, however, the latter ignored. 27
On April 24, 1984, the trial court rendered a decision that disposed of Civil Case No. 138643 as
follows:
WHEREFORE, judgment is hereby rendered ordering defendant Aboitiz Shipping Company
to pay plaintiff Allied Guarantee Insurance Company, Inc. the sum of P278,536.50, with legal
interest thereon from March 10, 1981, then date of the filing of the complaint, until fully
paid, plus P30,000.00 as attorney's fees, with costs of suit.
SO ORDERED. 28
A similar decision was arrived at in Civil Case No. 138396, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, this Court hereby renders judgment in favor of
plaintiff and against defendant Aboitiz Shipping Corporation, to pay the sum of P194,794.85
with legal rate of interest thereon from February 27, 1981 until fully paid; attorney's fees
of twenty-five (25%) percent of the total claim, plus litigation expenses and costs of
litigation.
SO ORDERED. 29
In Civil Case No. 138643, Aboitiz appealed to the Court of Appeals under CA-G.R. CV No. 04121. On
March 23, 1987, the Court of Appeals affirmed the decision of the lower court. A motion for
reconsideration of the said decision was likewise denied by the Court of Appeals on May 3, 1989.
Aggrieved, Aboitiz then filed a petition for review with this Court docketed as G.R. No. 88159 which
was denied for lack merit. Entry of judgment was made and the lower court's decision in Civil Case
No. 138643 became final and executory. Allied prayed for the issuance of a writ of execution in the
lower court which was granted by the latter on April 4, 1990. To stay the execution of the judgment
of the lower court, Aboitiz filed a petition for certiorari and prohibition with preliminary injunction
with the Court of Appeals docketed as CA-G.R. SP No. 20844. 30 On August 15, 1990, the Court of
Appeals rendered the assailed decision, the dispositive portion of which reads as follows.
WHEREFORE, the challenged order of the respondent Judge dated April 4, 1990 granting
the execution is hereby set aside. The respondent Judge is further ordered to stay the
execution of the judgment insofar as it impairs the rights of the 100 other claimants to the
insurance proceeds including the rights of the petitioner to pay more than the value of the
vessel or the insurance proceeds and to desist from executing the judgment insofar as it
38 | P a g e
 prejudices the pro-rata share of all claimants to the insurance proceeds. No pronouncement
as to costs.
SO ORDERED. 31
Hence, Allied filed the instant petition for certiorari, mandamus and injunction with preliminary
injunction and/or restraining order before this Court alleging the following assignment of errors:
1. Respondent Court of Appeals gravely erred in staying the immediate execution of the
judgment of the lower court as it has no authority nor jurisdiction to directly or indirectly
alter, modify, amend, reverse or invalidate a final judgment as affirmed by the Honorable
Supreme Court in G.R. No. 88159.
2. Respondent Court of Appeals with grave abuse of discretion amounting to lack or excess
of jurisdiction, brushed aside the doctrine in G.R. No. 88159 which is now the law of the case
and observance of time honored principles of stare decisis, res adjudicata and estoppel by
judgment.
3. Real and hypothecary rule under Articles 587, 590 and 837 of the Code of Commerce
which is the basis of the questioned decision (Annex "C" hereof) is without application in
the face of the facts found by the lower court, sustained by the Court of Appeals in CA-G.R.
No. 04121 and affirmed in toto by the Supreme Court in G.R. No. 88159.
4. Certiorari as a special remedy is unavailing for private respondent as there was no grave
abuse of discretion nor lack or excess of jurisdiction for Judge Mabunay to issue the order
of April 4, 1990 which was in accord with law and jurisprudence, nor were there
intervening facts and/or supervening events that will justify respondent court to issue a
writ of certiorari or a restraining order on a final and executory judgment of the Honorable
Supreme Court. 32
From the decision of the trial court in Civil Case No. 138396 that favored Equitable, Aboitiz likewise
appealed to the Court of Appeals through CA-G.R. CV No. 15071. On August 24, 1990, the Court of
Appeals rendered the Decision quoting extensively its Decision in CA-G.R. No. SP-17427 (now G.R.
No. 92735) and disposing of the appeal as follows:
WHEREFORE, we hereby affirm the trial court's awards of actual damages, attorney's fees
and litigation expenses, with the exception of legal interest, in favor of plaintiff-appellee
Equitable Insurance Corporation as subrogee of the consignee for the loss of its shipment
aboard the M/V "P. Aboitiz" and against defendant-appellant Aboitiz Shipping Corporation.
However, the amount and payment of those awards shall be subject to a determination of
the pro-rata share of said appellee in relation to the pro-rata shares of the 109 other
claimants, which determination shall be made by the trial court. This case is therefore
hereby ordered remanded to the trial court which shall reopen the case and receive
evidence to determine appellee's pro-rata share as aforesaid. No pronouncement as to
costs.
SO ORDERED. 33
On September 12, 1990, Equitable moved to reconsider the Court of Appeals' Decision. The Court of
Appeals denied the motion for reconsideration on October 4, 1990. 34 Consequently, Equitable filed
with this Court a petition for review alleging the following assignment of errors:
1. Respondent Court of Appeals, with grave abuse of discretion amounting to lack or excess
of jurisdiction, erroneously brushed aside the doctrine in G.R. No. 88159 which is now the
law of the case as held in G.R. No. 89757 involving the same and identical set of facts and
cause of action relative to the sinking of the M/V "P. Aboitiz" and observance of the time
honored principles of stare decisis, and estoppel by judgment.
2. Real and hypothecary rule under Articles 587, 590 and 837 of the Code of Commerce
which is the basis of the assailed decision and resolution is without application in the face
of the facts found by the trial court which conforms to the conclusion and finding of facts
arrived at in a similar and identical case involving the same incident and parties similarly
situated in G.R. No. 88159 already declared as the "law of the case" in a subsequent decision
of this Honorable Court in G.R. No. 89757 promulgated on August 6, 1990.
3. Respondent Court of Appeals gravely erred in concluding that limited liability rule applies
in case of loss of cargoes when the law itself does not distinguish; fault of the shipowner or
privity thereto constitutes one of the exceptions to the application of limited liability under
Article 587, 590 and 837 of the Code of Commerce, Civil Code provisions on common
carriers for breach of contract of carriage prevails. 35
These three petitions in G.R. Nos. 92735, 94867 and 95578 were consolidated in the Resolution of
August 5, 1991 on the ground that the petitioners "have identical causes of action against the same
respondent and similar reliefs are prayed for." 36
The threshold issue in these consolidated petitions is the applicability of the limited liability rule in
maritime law in favor of Aboitiz in order to stay the execution of the judgments for full
indemnification of the losses suffered by the petitioners as a result of the sinking of the M/V P.
Aboitiz. Before we can address this issue, however, there are procedural matters that need to be
threshed out.
First. At the outset, the Court takes note of the fact that in G.R. No. 92735, Judge Amante Purisima,
whose decision in the Regional Trial Court is sought to be upheld, is named as a co-petitioner.
In Calderon v. Solicitor General, 37 where the petitioner in the special civil action
of certiorari and mandamus was also the judge whose order was being assailed, the Court held that
said judge had no standing to file the petition because he was merely a nominal or formal party-
respondent under Section 5 of Rule 65 of the Rules of Court. He should not appear as a party seeking
the reversal of a decision that is unfavorable to the action taken by him. The Court there said:
Judge Calderon should be-reminded of the well-known doctrine that a judge should detach
himself from cases where his decision is appealed to a higher court for review. The raison
d'etre for such doctrine is the fact that a judge is not an active combatant in such proceeding
and must leave the opposing parties to contend their individual positions and for the
appellate court to decide the issues without his active participation. By filing this case,
petitioner in a way ceased to be judicial and has become adversarial instead. 38
While the petition in G.R. No. 92735 does not expressly show whether or not Judge Purisima himself
is personally interested in the disposition of this petition or he was just inadvertently named as
petitioner by the real parties in interest, the fact that Judge Purisima is named as petitioner has not
escaped this Court's notice. Judges and litigants should be reminded of the basic rule that courts or
individual judges are not supposed to be interested "combatants" in any litigation they resolve.
Second. The petitioners contend that the inapplicability of the limited liability rule to Aboitiz has
already been decided on by no less than this Court in G.R. No. 88159 as early as November 13, 1989
which was subsequently declared as "law of the case" in G.R. No. 89757 on August 6, 1990. Herein
petitioners cite the aforementioned cases in support of their theory that the limited liability rule
based on the real and hypothecary nature of maritime law has no application in the cases at bar.
39 | P a g e
The existence of what petitioners insist is already the "law of the case" on the matter of limited
liability is at best illusory. Petitioners are either deliberately misleading this Court or profoundly
confused. As elucidated in the case of Aboitiz Shipping Corporation vs. General Accident Fire and Life
Assurance Corporation, 39
An examination of the November 13, 1989 Resolution in G.R. No. 88159 (pp. 280-282, Rollo)
shows that the same settles two principal matters, first of which is that the doctrine of
primary administrative jurisdiction is not applicable therein; and second is that a limitation
of liability in said case would render inefficacious the extraordinary diligence required by
law of common carriers.
It should be pointed out, however, that the limited liability discussed in said case is not the
same one now in issue at bar, but an altogether different aspect. The limited liability settled
in G.R. No. 88159 is that which attaches to cargo by virtue of stipulations in the Bill of Lading,
popularly known as package limitation clauses, which in that case was contained in Section
8 of the Bill of Lading and which limited the carrier's liability to US$500.00 for the cargo
whose value was therein sought to be recovered. Said resolution did not tackle the matter
of the Limited Liability Rule arising out of the real and hypothecary nature of maritime law,
which was not raised therein, and which is the principal bone of contention in this case.
While the matters threshed out in G.R. No. 88159, particularly those dealing with the issues
on primary administrative jurisdiction and the package liability limitation provided in the
Bill of Lading are now settled and should no longer be touched, the instant case raises a
completely different issue. 40
Third. Petitioners asseverate that the judgments of the lower courts, already final and executory,
cannot be directly or indirectly altered, modified, amended, reversed or invalidated.
The rule that once a decision becomes final and executory, it is the ministerial duty of the court to
order its execution, is not an absolute one: We have allowed the suspension of execution in cases of
special and exceptional nature when it becomes imperative in the higher interest of justice. 41 The
unjust and inequitable effects upon various other claimants against Aboitiz should we allow the
execution of judgments for the full indemnification of petitioners' claims impel us to uphold the stay
of execution as ordered by the respondent Court of Appeals. We reiterate our pronouncement
in Aboitiz Shipping Corporation vs. General Accident Fire and Life Assurance Corporation on this very
same issue.
This brings us to the primary question herein which is whether or not respondent court
erred in granting execution of the full judgment award in Civil Case No. 14425 (G.R. No.
89757), thus effectively denying the application of the limited liability enunciated under the
appropriate articles of the Code of Commerce. . . . . Collaterally, determination of the
question of whether execution of judgments which have become final and executory may
be stayed is also an issue.
We shall tackle the latter issue first. This Court has always been consistent in its stand that
the very purpose for its existence is to see the accomplishment of the ends of justice.
Consistent with this view, a number of decisions have originated herefrom, the tenor of
which is that no procedural consideration is sancrosanct if such shall result in the
subverting of justice. The right to execution after finality of a decision is certainly no
exception to this. Thus, in Cabrias v. Adil (135 SCRA 355 [1885]), this Court ruled that:
xxx xxx xxx
. . . every court having jurisdiction to render a particular judgment has inherent
power to enforce it, and to exercise equitable control over such enforcement. The
court has authority to inquire whether its judgment has been executed, and will
remove obstructions to the enforcement thereof. Such authority extends not only
to such orders and such writs as may be necessary to prevent an improper
enforcement of the judgment. If a judgment is sought to be perverted and made a
medium of consummating a wrong the court on proper application can prevent
it. 42
Fourth. Petitioners in G.R. No. 92735 ever that it was error for the respondent Court of Appeals to
allow Aboitiz the benefit of the limited liability rule despite its failure to present evidence to prove
its entitlement thereto in the court below. Petitioners Monarch and Tabacalera remind this Court
that from the inception of G.R. No. 92735 in the lower court and all the way to the Supreme Court,
Aboitiz had not presented an iota of evidence to exculpate itself from the charge of negligence for
the simple reason that it was declared as in default. 43
It is true that for having been declared in default, Aboitiz was precluded from presenting evidence
to prove its defenses in the court a quo. We cannot, however, agree with petitioners that this
circumstance prevents the respondent Court of Appeals from taking cognizance of Aboitiz' defenses
on appeal.
It should be noted that Aboitiz was declared as in default not for its failure to file an answer but for
its absence during pre-trial and the trial proper. In Aboitiz' answer with counterclaim, it claimed
that the sinking of the M/V P. Aboitiz was due to an act of God or unforeseen event and that the said
ship had been seaworthy and fit for the voyage. Aboitiz also alleged that it exercised the due
diligence required by law, and that considering the real and hypothecary nature of maritime trade,
the sinking justified the extinguishment of its liability for the lost shipment. 44
A judgment of default does not imply a waiver of rights except that of being heard and presenting
evidence in defendant's favor. It does not imply admission by the defendant of the facts and causes
of action of the plaintiff, because the codal section 45 requires the latter to adduce evidence in
support of his allegations as an indispensable condition before final judgment could be given in his
favor. Nor could it be interpreted as an admission by the defendant that the plaintiff's causes of
action find support in the law or that the latter is entitled to the relief prayed for. 46 This is especially
true with respect to a defendant who had filed his answer but had been subsequently declared in
default for failing to appear at the trial since he has had an opportunity to traverse, via his answer,
the material averments contained in the complaint. Such defendant has a better standing than a
defendant who has neither answered nor appeared at trial. 47 The former should be allowed to
reiterate all affirmative defenses pleaded in his answer before the Court of Appeals. Likewise, the
Court of Appeals may review the correctness of the evaluation of the plaintiffs evidence by the lower
court.
It should also be pointed out that Aboitiz is not raising the issue of its entitlement to the limited
liability rule for the first time on appeal thus, the respondent Court of Appeals may properly rule on
the same.
However, whether or not the respondent Court of Appeals erred in finding, upon review, that Aboitiz
is entitled to the benefit of the limited liability rule is an altogether different matter which shall be
discussed below.1awphi1
40 | P a g e
Rule on Limited Liability. The petitioners assert in common that the vessel M/V P. Aboitiz did not
sink by reason of force majeure but because of its unseaworthiness and the concurrent fault and/or
negligence of Aboitiz, the captain and its crew, thereby barring Aboitiz from availing of the benefit
of the limited liability rule.
The principle of limited liability is enunciated in the following provisions of the Code of Commerce:
Art. 587. The shipagent shall also be civilly liable for the indemnities in favor of third
persons which may arise from the conduct of the captain in the care of goods which he
loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with
all the equipments and the freight it may have earned during the voyage.
Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their interests
in the common fund for the results of the acts of the captain referred to in Art. 587.
Each co-owner may exempt himself from his liability by the abandonment, before a notary,
of the part of the vessel belonging to him.
Art. 837. The civil liability incurred by shipowners in the case prescribed in this section,
shall be understood as limited to the value of the vessel with all its appurtenances and the
freightage served during the voyage.
Art. 837 appeals the principle of limited liability in cases of collision hence, Arts. 587 and 590
embody the universal principle of limited liability in all cases. In Yangco v. Laserna, 48 this Court
elucidated on the import of Art. 587 as follows:
The provision accords a shipowner or agent the right of abandonment; and by necessary
implication, his liability is confined to that which he is entitled as of right to abandon-"the
vessel with all her equipments and the freight it may have earned during the voyage." It is
true that the article appears to deal only with the limited liability of the shipowners or
agents for damages arising from the misconduct of the captain in the care of the goods which
the vessel carries, but this is a mere deficiency of language and in no way indicates the true
extent of such liability. The consensus of authorities is to the effect that notwithstanding the
language of the aforequoted provision, the benefit of limited liability therein provided for,
applies in all cases wherein the shipowner or agent may properly be held liable for the
negligent or illicit acts of the captain. 49
"No vessel, no liability," expresses in a nutshell the limited liability rule. The shipowner's or agent's
liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in
its extinction. The total destruction of the vessel extinguishes maritime liens because there is no
longer any res to which it can attach. 50 This doctrine is based on the real and hypothecary nature of
maritime law which has its origin in the prevailing conditions of the maritime trade and sea voyages
during the medieval ages, attended by innumerable hazards and perils. To offset against these
adverse conditions and to encourage shipbuilding and maritime commerce, it was deemed
necessary to confine the liability of the owner or agent arising from the operation of a ship to the
vessel, equipment, and freight, or insurance, if any. 51
Contrary to the petitioners' theory that the limited liability rule has been rendered obsolete by the
advances in modern technology which considerably lessen the risks involved in maritime trade, this
Court continues to apply the said rule in appropriate cases. This is not to say, however, that the
limited liability rule is without exceptions, namely: (1) where the injury or death to a passenger is
due either to the fault of the shipowner, or to the concurring negligence of the shipowner and the
captain; 52 (2) where the vessel is insured; and (3) in workmen's compensation claims. 53
We have categorically stated that Article 587 speaks only of situations where the fault or negligence
is committed solely by the captain. In cases where the ship owner is likewise to be blamed, Article
587 does not apply. Such a situation will be covered by the provisions of the Civil Code on common
carriers. 54
A finding that a fortuitous event was the sole cause of the loss of the M/V P. Aboitiz would absolve
Aboitiz from any and all liability pursuant to Article 1734(1) of the Civil Code which provides in part
that common carriers are responsible for the loss, destruction, or deterioration of the goods they
carry, unless the same is due to flood, storm, earthquake, lightning, or other natural disaster or
calamity. On the other hand, a finding that the M/V P. Aboitiz sank by reason of fault and/or
negligence of Aboitiz, the ship captain and crew of the M/V P. Aboitiz would render inapplicable the
rule on limited liability. These issues are therefore ultimately questions of fact which have been
subject of conflicting determinations by the trial courts, the Court of Appeals and even this Court.
In Civil Cases Nos. 82-2767-82-2770 (now G.R. No. 92735), after receiving Monarch's and
Tabacalera's evidence, the trial court found that the complete loss of the shipment on board the M/V
P. Aboitiz when it sank was neither due to a fortuitous event nor a storm or natural cause. For
Aboitiz' failure to present controverting evidence, the trial court also upheld petitioners' allegation
that the M/V P. Aboitiz was unseaworthy. 55 However, on appeal, respondent Court of Appeals
exculpated Aboitiz from fault or negligence and ruled that:
. . ., even if she (M/V P. Aboitiz) was found to be unseaworthy, this fault (distinguished
from civil liability) cannot be laid on the shipowner's door. Such fault was directly
attributable to the captain. This is so, because under Art. 612 of the Code of Commerce,
among the inherent duties of a captain, are to examine the vessel before sailing and to
comply with the laws on navigation. 56
and that:
. . . although the shipowner may be held civilly liable for the captain's fault . . . having
abandoned the vessel in question, even if the vessel was unseaworthy due to the captain's
fault, Aboitiz is still entitled to the benefit under the rule of limited liability accorded to
shipowners by the Code of Commerce. 57
Civil Case No. 138396 (now G.R. No. 95578) was similarly resolved by the trial court, which found
that the sinking of the M/V P. Aboitiz was not due to an act of God or force majeure. It added that the
evidence presented by the petitioner Equitable demonstrated the negligence of Aboitiz Shipping
Corporation in the management and operation of its, vessel M/V P. Aboitiz. 58
However, Aboitiz' appeal was favorably acted upon by the respondent Court of Appeals which
reiterated its ruling in G.R. No. 92735 that the unseaworthiness of the M/V P. Aboitiz was not a fault
directly attributable to Aboitiz but to the captain, and that Aboitiz is entitled to the benefit of the
limited liability rule for having abandoned its ship. 59
Finally, in Civil Case No. 138643 (now G.R. No. 94867), the trial court held that the M/V P. Aboitiz
was not lost due to a fortuitous event or force majeure, and that Aboitiz had failed to satisfactorily
establish that it had observed extraordinary diligence in the vigilance over the goods transported by
it. 60
In CA-G.R. CV No. 04121, the Court of Appeals initially ruled against Aboitiz and found that the
sinking of the vessel was due to its unseaworthiness and the failure of its crew and master to exercise
extraordinary diligence. 61 Subsequently, however, Aboitiz' petition before the Court of Appeals,
docketed as CA-G.R. SP No. 20844 (now G.R. No. 94867) to annul and set aside the order of execution
41 | P a g e
issued by the lower court was resolved in favor of Aboitiz. The Court of Appeals brushed aside the
issue of Aboitiz' negligence and/or fault and proceeded to allow the application of the limited
liability rule "to accomplish the aims of justice." 62 It elaborated thus: "To execute the judgment in
this case would prejudice the substantial right of other claimants who have filed suits to claim their
cargoes that was lost in the vessel that sank and also against the petitioner to be ordered to pay
more than what the law requires." 63
It should be pointed out that the issue of whether or not the M/V P. Aboitiz sank by reason of force
majeure is not a novel one for that question has already been the subject of conflicting
pronouncements by the Supreme Court. In Aboitiz Shipping Corporation v. Court of Appeals, 64 this
Court approved the findings of the trial court and the appellate court that the sinking of the M/V P.
Aboitiz was not due to the waves caused by tropical storm "Yoning" but due to the fault and
negligence of Aboitiz, its master and crew. 65 On the other hand, in the later case of Country Bankers
Insurance Corporation v. Court of Appeals, 66 this Court issued a Resolution on August 28, 1991
denying the petition for review on the ground that the Court of Appeals committed no reversible
error, thereby affirming and adopting as its own, the findings of the Court of Appeals that force
majeure had caused the M/V P. Aboitiz to founder.
In view of these conflicting pronouncements, we find that now is the opportune time to settle once
and for all the issue or whether or not force mejeure had indeed caused the M/V P. Aboitiz to sink.
After reviewing the records of the instant cases, we categorically state that by the facts on record,
the M/V P. Aboitiz did not go under water because of the storm "Yoning."
It is true that as testified by Justo Iglesias, meteorologist of Pag-Asa, during the inclusive dates of
October 28-31, 1980, a stormy weather condition prevailed within the Philippine area of
responsibility, particularly along the sea route from Hong Kong to Manila, because of tropical
depression "Yoning". 67 But even Aboitiz' own evidence in the form of the marine protest filed by
Captain Racines affirmed that the wind force when the M/V P. Aboitiz foundered on October 31,
1980 was only ten (10) to fifteen (15) knots which, under the Beaufort Scale or Wind, falls within
scale No. 4 that describes the wind velocity as "moderate breeze," and characterizes the waves as
"small . . . becoming longer, fairly frequent white horses." 68 Captain Racines also testified in open
court that the ill-fated M/V P. Aboitiz was two hundred (200) miles away from storm "Yoning" when
it sank. 69
The issue of negligence on the part of Aboitiz, and the captain and crew of the M/V P. Aboitiz has
also been subject of conflicting rulings by this Court. In G.R. No. 100373, Country Bankers Insurance
Corporation v. Court of Appeals, this Court found no error in the findings of the Court of Appeals that
the M/V P. Aboitiz sank by reason of force majeure, and that there was no negligence on the part of
its officers and crew. In direct contradiction is this Court's categorical declaration in Aboitiz Shipping
Corporation v. Court of Appeals," 70 to wit:
The trial court and the appellate court found that the sinking of the M/V P. Aboitiz was not
due to the waves caused by tropical storm "Yoning" but due to the fault and negligence of
petitioner, its master and crew. The court reproduces with approval said findings . . . . 71
However, in the subsequent case of Aboitiz Shipping Corporation v. General Accident Fire and Life
Assurance Corporation, Ltd., 72 this Court exculpated Aboitiz from fault and/or negligence while
holding that the unseaworthiness of the M/V P. Aboitiz was only attributable to the negligence of its
captain and crew. Thus,
On this point, it should be stressed that unseaworthiness is not a fault that can be laid
squarely on petitioner's lap, absent a factual basis for such conclusion. The unseaworthiness
found in some cases where the same has been ruled to exist is directly attributable to the
vessel's crew and captain, more so on the part of the latter since Article 612 of the Code of
Commerce provides that among the inherent duties of a captain is to examine a vessel
before sailing and to comply with the laws of navigation. Such a construction would also put
matters to rest relative to the decision of the Board of Marine Inquiry. While the conclusion
therein exonerating the captain and crew of the vessel was not sustained for lack of basis,
the finding therein contained to the effect that the vessel was seaworthy deserves merit.
Despite appearances, it is not totally incompatible with the findings of the trial court and
the Court of Appeals, whose finding of "unseaworthiness" clearly did not pertain to the
structural condition of the vessel which is the basis of the BMI's findings, but to the
condition it was in at the time of the sinking, which condition was a result of the acts of the
captain and the crew. 73
It therefore becomes incumbent upon this Court to answer with finality the nagging question of
whether or not it was the concurrent fault and/or negligence of Aboitiz and the captain and crew of
the ill-fated vessel that had caused it to go under water.
Guided by our previous pronouncements and illuminated by the evidence now on record, we
reiterate our findings in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance
Corporation, Ltd. 74 , that the unseaworthiness of the M/V P. Aboitiz had caused it to founder. We,
however, take exception to the pronouncement therein that said unseaworthiness could not be
attributed to the ship owner but only to the negligent acts of the captain and crew of the M/V P.
Aboitiz. On the matter of Aboitiz' negligence, we adhere to our ruling in Aboitiz Shipping Corporation
v. Court of Appeals, 75 that found Aboitiz, and the captain and crew of the M/V P. Aboitiz to have been
concurrently negligent.
During the trial of Civil Case Nos. 82-2767-82-2770 (now G.R. No. 92735), petitioners Monarch and
Tabacalera presented a survey from Perfect Lambert, a surveyor based in Hong Kong that conducted
an investigation on the possible cause of the sinking of the vessel. The said survey established that
the cause of the sinking of the vessel was the leakage of water into the M/V P. Aboitiz which probably
started in the forward part of the No. 1 hull, although no explanation was proffered as to why the
No. 2 hull was likewise flooded. Perfect Lambert surmised that the flooding was due to a leakage in
the shell plating or a defect in the water tight bulk head between the Nos. 1 and 2 holds which
allowed the water entering hull No. 1 to pass through hull No. 2. The surveyor concluded that
whatever the cause of the leakage of water into these hulls, the seaworthiness of the vessel was
definitely in question because the breaches of the hulls and serious flooding of the two cargo holds
occurred simultaneously in seasonal weather. 76
We agree with the uniform finding of the lower courts that Aboitiz had failed to prove that it
observed the extraordinary diligence required of it as a common carrier. We therefore reiterate our
pronouncement in Aboitiz Corporation v. Court of Appeals 77 on the issue of Aboitiz' liability in the
sinking of its vessel, to wit:
In accordance with Article 1732 of the Civil Code, the defendant common carrier from the
nature of its business and for reasons of public policy, is bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the passengers transported by
it according to all circumstances of the case. While the goods are in the possession of the
42 | P a g e
 carrier, it is but fair that it exercise extraordinary diligence in protecting them from loss or
damage, and if loss occurs, the law presumes that it was due to the carrier's fault or
negligence; that is necessary to protect the interest of the shipper which is at the mercy of
the carrier . . . In the case at bar, the defendant failed to prove hat the loss of the subject
cargo was not due to its fault or negligence. 78
The failure of Aboitiz to present sufficient evidence to exculpate itself from fault and/or negligence
in the sinking of its vessel in the face of the foregoing expert testimony constrains us to hold that
Aboitiz was concurrently at fault and/or negligent with the ship captain and crew of the M/V P.
Aboitiz. This is in accordance with the rule that in cases involving the limited liability of shipowners,
the initial burden of proof of negligence or unseaworthiness rests on the claimants. However, once
the vessel owner or any party asserts the right to limit its liability, the burden of proof as to lack of
privity or knowledge on its part with respect to the matter of negligence or unseaworthiness is
shifted to it. 79 This burden, Aboitiz had unfortunately failed to discharge. That Aboitiz failed to
discharge the burden of proving that the unseaworthiness of its vessel was not due to its fault and/or
negligence should not however mean that the limited liability rule will not be applied to the present
cases. The peculiar circumstances here demand that there should be no strict adherence to
procedural rules on evidence lest the just claims of shippers/insurers be frustrated. The rule on
limited liability should be applied in accordance with the latest ruling in Aboitiz Shipping
Corporation v. General Accident Fire and Life Assurance Corporation, Ltd., 80 promulgated on January
21, 1993, that claimants be treated as "creditors in an insolvent corporation whose assets are not
enough to satisfy the totality of claims against it." 81 To do so, the Court set out in that case the
procedural guidelines:
In the instant case, there is, therefore, a need to collate all claims preparatory to their
satisfaction from the insurance proceeds on the vessel M/V P. Aboitiz and its pending
freightage at the time of its loss. No claimant can be given precedence over the others by the
simple expedience of having completed its action earlier than the rest. Thus, execution of
judgment in earlier completed cases, even these already final and executory must be stayed
pending completion of all cases occasioned by the subject sinking. Then and only then can
all such claims be simultaneously settled, either completely or pro-rata should the
insurance proceeds and freightage be not enough to satisfy all claims.
xxx xxx xxx
In fairness to the claimants and as a matter of equity, the total proceeds of the insurance and
pending freightage should now be deposited in trust. Moreover, petitioner should institute
the necessary limitation and distribution action before the proper admiralty court within
15 days from finality of this decision, and thereafter deposit with it the proceeds from the
insurance company and pending freightage in order to safeguard the same pending final
resolution of all incidents, for final pro-rating and settlement thereof. 82 (Emphasis
supplied.)
There is no record that Aboitiz. has instituted such action or that it has deposited in trust the
insurance proceeds and freightage earned. The pendency of the instant cases before the Court is not
a reason for Aboitiz to disregard the aforementioned order of the Court. In fact, had Aboitiz complied
therewith, even these cases could have been terminated earlier. We are inclined to believe that
instead of filing the suit as directed by this Court, Aboitiz tolerated the situation of several claimants
waiting to gel hold of its insurance proceeds, which, if correctly handled must have multiplied in
amount by now. By its failure to abide by the order of this Court, it had caused more damage to the
claimants over and above that which they have endured as a direct consequence of the sinking of
the M/V P. Aboitiz. It was obvious that from among the many cases filed against it over the years,
Aboitiz was waiting for a judgment that might prove favorable to it, in blatant violation of the basic
provisions of the Civil Code on abuse of rights.
Well aware of the 110 claimants against it, Aboitiz preferred to litigate the claims singly rather than
exert effort towards the consolidation of all claims. Consequently, courts have arrived at conflicting
decisions while claimants waited over the years for a resolution of any of the cases that would lead
to the eventual resolution of the rest. Aboitiz failed to give the claimants their due and to observe
honesty and good faith in the exercise of its rights. 83
Aboitiz' blatant disregard of the order of this Court in Aboitiz Shipping Corporation v. General
Accident Fire and Life Assurance Corporation, Ltd. 84 cannot be anything but, willful on its part. An act
is considered willful if it is done with knowledge of its injurious effect; it is not required that the act
be done purposely to produce the injury. 85 Aboitiz is well aware that by not instituting the said suit,
it caused the delay in the resolution of all claims against it. Having willfully caused loss or injury to
the petitioners in a manner that is contrary to morals, good customs or public policy, Aboitiz is liable
for damages to the latter. 86
Thus, for its contumacious act of defying the order of this Court to file the appropriate action to
consolidate all claims for settlement, Aboitiz must be held liable for moral damages which may be
awarded in appropriate cases under the Chapter on human relations of the Civil Code (Articles 19
to 36). 87
On account of Aboitiz' refusal to satisfy petitioners' claims in accordance with the directive of the
Court in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance Corporation, Ltd., it
acted in gross and evident bad faith. Accordingly, pursuant to Article 2208 of the Civil
Code, 88 petitioners should be granted attorney's fees.
WHEREFORE, the petitions in G.R. Nos. 92735, 94867, and 95578 are DENIED. The decisions of the
Court of Appeals in CA-G.R. No. SP-17427 dated March 29, 1990, CA-G.R. SP No. 20844 dated August
15, 1990, and CA-G.R. CV No. 15071 dated August 24, 1990 are AFFIRMED with the MODIFICATION
that respondent Aboitiz Shipping Corporation is ordered to pay each of the respective petitioners
the amounts of P100,000.00 as moral damages and P50,000.00 as attorney's fees, and treble the cost
of suit.
Respondent Aboitiz Shipping Corporation is further directed to comply with the Order promulgated
by this Court on January 21, 1993 in Aboitiz Shipping Corporation v. General Accident Fire and Life
Assurance Corporation, Ltd., G.R. No. 100446, January 21, 1993, to (a) institute the necessary
limitation and distribution action before the proper Regional Trial Court, acting as admiralty court,
within fifteen (15) days from the finality of this decision, and (b) thereafter to deposit with the said
court the insurance proceeds from the loss of the vessel, M/V P. Aboitiz, and the freightage earned
in order to safeguard the same pending final resolution of all incidents relative to the final pro-rating
thereof and to the settlement of all claims.1âwphi1.nêt
SO ORDERED.
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Limited Liability rule
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 Decision3 dated November 20, 1989 of the Regional Trial Court of Manila in
Civil Case No. 82-1475, in favor of respondent New India Assurance Company, Ltd.
This petition stemmed from the action for damages against petitioner, Aboitiz Shipping Corporation,
arising from the sinking of its vessel, M/V P. Aboitiz, on October 31, 1980.
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,9 the 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.101avvphil.net
Franco-Belgian Services and Zuellig responded, claiming that they exercised extraordinary diligence
in handling the shipment while it was in their possession; its vessel was seaworthy; and the
proximate cause of the loss of cargo was a fortuitous event. They also filed a cross-claim against
petitioner alleging that the loss occurred during the transshipment with petitioner and so liability
should rest with petitioner.
For its part, petitioner also raised the same defense that the ship was seaworthy. It alleged that the
sinking of M/V P. Aboitiz was due to an unforeseen event and without fault or negligence on its part.
It also alleged that in accordance with the real and hypothecary nature of maritime law, the sinking
of M/V P. Aboitiz extinguished its liability on the loss of the cargoes.11
Meanwhile, the Board of Marine Inquiry (BMI) conducted its own investigation to determine
whether the captain and crew were administratively liable. However, petitioner neither informed
respondent nor the trial court of the investigation. The BMI exonerated the captain and crew of any
administrative liability; and declared the vessel seaworthy and concluded that the sinking was due
to the 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.131avvphil.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.
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Petitioner, citing Monarch Insurance Co. Inc. v. Court of Appeals, 15 contends that respondent’s claim Where the shipowner fails to overcome the presumption of negligence, the doctrine of limited
for damages should only be against the insurance proceeds and limited to its pro-rata share in view liability cannot be applied.28 Therefore, we agree with the appellate court in sustaining the trial
of the doctrine of limited liability. court’s ruling that petitioner is liable for the total value of the lost cargo.
Respondent counters that the doctrine of real and hypothecary nature of maritime law is not WHEREFORE, the petition is DENIED for lack of merit. The Decision dated August 29, 2002 and
applicable in the present case because petitioner was found to have been negligent. Hence, according Resolution dated January 23, 2003 of the Court of Appeals in CA-G.R. CV No. 28770 are AFFIRMED.
to respondent, petitioner should be held liable for the total value of the lost cargo. Costs against petitioner.
It bears stressing that this Court has variedly applied the doctrine of limited liability to the same SO ORDERED.
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
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