Aboitiz Shipping v. New India Assurance, 488 SCRA 563 (2006)

9/3/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 488
*
G.R. No. 156978. May 2, 2006.
ABOITIZ SHIPPING CORPORATION, petitioner, vs. NEW

INDIA ASSURANCE COMPANY, LTD., respondent.
Common Carriers; Ships and Shipping; Doctrine of Limited

Liability; 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.—It bears stressing
that this Court has variedly applied the doctrine of limited
liability to the same incident—the sinking of M/V P. Aboitiz on
October 31, 1980. Monarch, the latest ruling, tried to settle the
conflicting pronouncements of this Court relative to the sinking of
M/V P. Aboitiz. In Monarch, we said that the sinking of the vessel
was not due to force
_______________
* THIRD DIVISION.
564
564 SUPREME COURT REPORTS ANNOTATED
Aboitiz Shipping Corporation vs. New India Assurance Company,

Ltd.
www.central.com.ph/sfsreader/session/00000174544e384e70b0358c003600fb002c009e/t/?o=False 1/15
majeure, but to its unseaworthy condition. Therein, we found

petitioner concurrently negligent with the captain and crew. But
the Court stressed that the circumstances therein still made the
doctrine of limited liability applicable. 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. We
thus find it necessary to clarify now the applicability here of the
decision in Monarch.
Same; Same; Same; 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.—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. 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. 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. 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.
Same; Same; Same; To limit itself to the amount of insurance
proceeds, the shipowner has the burden of proving that the
unseawor-thiness of its vessel was not due to its fault or negligence.
—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.
565
VOL. 488, MAY 2, 2006 565
Aboitiz Shipping Corporation vs. New India Assurance Company,

Ltd.
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.
Same; Same; Same; Board of Marine Inquiry (BMI); The
findings of the Board of Marine Inquiry (BMI) are not deemed
always binding on the courts.—In contrast, the findings of the
BMI are not deemed always binding on the courts. Besides,
exoneration of the vessel’s officers and crew by the BMI merely
concerns their respective administrative liabilities. 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.
Same; Same; Same; Where the shipowner fails to overcome the

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

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.

Sycip, Salazar, Hernandez & Gatmaitan for
petitioner.
Dollete, Blanco, Ejercito & Associates for respondent.
QUISUMBING, J.:
1
For review on certiorari are the Decision dated August 29,
2002 of the Court of Appeals in CA-G.R. CV No. 28770 and
its
_______________
1 Rollo, pp. 84-97. Penned by Associate Justice Romeo J. Callejo, Sr.

(now a member of this Court), with Associate Justices Remedios Salazar-
Fernando, and Danilo B. Pine concurring.
566

Aboitiz Shipping Corporation vs. New India Assurance
Company, Ltd.
2
Resolution dated January 23, 2003 denying
reconsideration. The Court of Appeals affirmed the
3
3
Decision 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 4 transferred to M/V P. Aboitiz
for transshipment to Manila.
Before departing, the vessel was advised by the
Japanese Meteorological
5
Center that it was safe to travel to
its destination. 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
_______________
2 Id., at p. 99. Penned by Associate Justice Danilo B. Pine, with

Associate Justices Godardo A. Jacinto, and Remedios Salazar-Fernando
concurring.
3 Id., at pp. 149-166.
4 Id., at pp. 84-85, 150.
5 Id., at p. 65.
567
VOL. 488, MAY 2, 2006 567

Company, Ltd.
weather as “moderate breeze, small 6

waves, becoming
longer, fairly frequent white horses.”
7
Thereafter, petitioner notified 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 8
Textile and
was subrogated to the rights of the latter.
Respondent hired a surveyor, Perfect, Lambert and
Company,
9
to investigate the cause of the sinking. In its
report, 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, 10
defendants therein
breached their contract of carriage.
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.
_______________
6 Id., at pp. 163-164.

7 Exhibit “F-1,” folder of exhibits, p. 8.
8 Exhibits “G, G-1, G-2,” Id., at p. 11.
9 Records, pp. 562-580.
10 Id., at pp. 5-6.
568

Company, Ltd.
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. 11Aboitiz extinguished its liability on the
loss of the cargoes.
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 12
Assurance Corporation v. Aboitiz Shipping Corporation
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
13
against New India is likewise dismissed.
SO ORDERED.”
Petitioner elevated the case to the Court of Appeals and

presented the findings of the BMI. However, on August 29,
_______________
11 Id., at pp. 18-19, 23-24.

12 CA-G.R. C.V. No. 10609, March 9, 1989 (Now SC G.R No. 89757,
August 6, 1990, 188 SCRA 387).
13 Records, p. 859.
569
VOL. 488, MAY 2, 2006 569

Company, Ltd.
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 14PROCEEDS FROM THE SINKING OF THE M/V
“P. ABOITIZ.”
Stated simply, we are asked to resolve whether the limited

liability doctrine, which limits respondent’s award of
damages
_______________
14 Rollo, pp. 68-69.
570

Company, Ltd.
to its pro rata share in the insurance proceeds, applies in

this case.
Petitioner,
15
citing Monarch Insurance Co., Inc. v. Court of
Appeals, contends that respondent’s claim for damages
should only be against the insurance proceeds and limited
to its pro rata share in view of the doctrine of limited
liability.
Respondent counters that the doctrine of real and
hypothecary nature of maritime law is not applicable in the
present case because petitioner was found to have been
negligent. Hence, according to respondent, petitioner
should be held liable for the total value of the lost cargo.
It bears stressing that this Court has variedly applied
the doctrine of limited liability to the same incident—the
sinking of M/V P. Aboitiz on October 31, 1980. Monarch,
the latest ruling, tried to settle the conflicting
pronouncements of this Court relative to the sinking of M/V
P. Aboitiz. In Monarch, we said that the sinking of the
vessel was16 not due to force majeure, but to its unseaworthy
condition. Therein, we found petitioner 17
concurrently
negligent with the captain and crew. But the Court
stressed that the circumstances therein 18
still made the
doctrine of limited liability applicable.
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, the19shipowner shall be liable to the full-extent
19
of the damage. We thus find it necessary to clarify now
the applicability here of the decision in Monarch.
_______________
15 G.R. No. 92735, June 8, 2000, 333 SCRA 71.

16 Id., at pp. 98-99.
17 Id., at p. 101.
18 Id., at p. 103.
19 Id., at p. 97.
571
VOL. 488, MAY 2, 2006 571

Company, Ltd.
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
20
according to all the
circumstances of each case. 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 about21 by the
causes specified in Article 1734 of the Civil Code. In all
other cases, common carriers are presumed to have been at
fault or to have acted negligently, unless
22
they prove that
they observed extraordinary diligence. Moreover, where
the vessel is found unseaworthy, the shipowner is also
presumed to be negligent since
_______________
20 CIVIL CODE, Art. 1733. Common carriers, from the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety
of the passengers transported by them, according to all the circumstances

of each case.
Such extraordinary diligence in the vigilance over the goods is further
expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of the passengers is further set forth
in articles 1755 and 1756.
21 Id., at Art. 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is due to any of
the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or

calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;
(5) Order or act of competent public authority.
22 Id., at Art. 1735. In all cases other than those mentioned in Nos. 1, 2,
3, 4, and 5 of the preceding article, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed
extraordinary diligence as required in article 1733.
572

Company, Ltd.
it is tasked with the maintenance of its vessel. Though this

duty can be delegated, still, the
23
shipowner must exercise
close supervision over its men.
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 24conclusive not
only on the parties but on this Court as well.
In contrast, the findings of 25
the BMI are not deemed
always binding on the courts. Besides, exoneration of the
vessel’s officers and crew by the BMI 26merely concerns their
respective administrative liabilities. It does not in any
way operate to absolve the common carrier from its civil
liabilities arising
_______________
23 Philippine American General Insurance Co., Inc. v. Court of Appeals,

G.R. No. 116940, June 11, 1997, 273 SCRA 262, 272.
24 Prudential Bank v. Chonney Lim, G.R. No. 136371, November 11,
2005, 474 SCRA 485, 491.
25 See Aboitiz Shipping Corporation v. Court of Appeals, G.R. No.
89757, August 6, 1990, 188 SCRA 387, 390-391.
26 Delsan Transport Lines, Inc. v. Court of Appeals, G.R. No. 127897,
November 15, 2001, 369 SCRA 24, 33.
573
VOL. 488, MAY 2, 2006 573

Company, Ltd.
from its failure to exercise extraordinary diligence,27 the

determination of which properly belongs to the courts.
Where the shipowner fails to overcome the presumption
of negligence,
28
the doctrine of limited liability cannot be
applied. Therefore, we agree with the appellate court in
sustaining the trial court’s ruling that petitioner is liable
for the total value of the lost cargo.
WHEREFORE, the petition is DENIED for lack of merit.
The Decision dated August 29, 2002 and Resolution dated
January 23, 2003 of the Court of Appeals in CA-G.R. CV
No. 28770 are AFFIRMED.
Costs against petitioner.
SO ORDERED.
Carpio, Carpio-Morales, Tinga and Velasco, Jr., JJ.,

concur.
Petition denied, judgment and resolution affirmed.
Notes.—Benefits of limited liability are subject to

waiver such as when the air carrier failed to raise timely
objections during the trial when questions and answers
regarding the actual claims and damages sustained by the
passenger were asked. (British Airways vs. Court of
Appeals, 285 SCRA 450 [1998])
The COGSA, which is suppletory to the provisions of the
Civil Code, supplements the latter by establishing a
statutory provision limiting the carrier’s liability in the
absence of a shipper’s declaration of a higher value in the
bill of lading—the provisions on limited liability are as
much a part of the bill of lading as though physically in it
and as though placed
_______________
27 Id., at pp. 33-34.

28 Central Shipping Company, Inc. v. Insurance Company of North
America, G.R. No. 150751, September 20, 2004, 438 SCRA 511, 523-524.
574

Office of the Ombudsman vs. Laja
there by agreement of the parties. (Belgian Overseas

Chartering and Shipping N.V. vs. Philippine First
Insurance Co., Inc., 383 SCRA 23 [2002])
——o0o——
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9/3/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 488

ABOITIZ SHIPPING CORPORATION, petitioner, vs. NEW

Common Carriers; Ships and Shipping; Doctrine of Limited

564 SUPREME COURT REPORTS ANNOTATED

Aboitiz Shipping Corporation vs. New India Assurance Company,

majeure, but to its unseaworthy condition. Therein, we found

had on board in order to invoke the limited liability doctrine.

VOL. 488, MAY 2, 2006 565

Aboitiz Shipping Corporation vs. New India Assurance Company,

Same; Same; Same; Where the shipowner fails to overcome the

PETITION for review on certiorari of the decision and

The facts are stated in the opinion of the Court.

1 Rollo, pp. 84-97. Penned by Associate Justice Romeo J. Callejo, Sr.

566 SUPREME COURT REPORTS ANNOTATED

2 Id., at p. 99. Penned by Associate Justice Danilo B. Pine, with

VOL. 488, MAY 2, 2006 567

weather as “moderate breeze, small 6

6 Id., at pp. 163-164.

568 SUPREME COURT REPORTS ANNOTATED

Aboitiz was due to an unforeseen event and without fault

“WHEREFORE, PREMISES CONSIDERED, judgment is hereby

Petitioner elevated the case to the Court of Appeals and

11 Id., at pp. 18-19, 23-24.

VOL. 488, MAY 2, 2006 569

2002, the appellate court affirmed in toto the trial court’s

Hence, this petition for review, alleging that the Court of

x x x DISREGARDING THE RULINGS OF THE HONORABLE

x x x NOT APPLYING THE RULINGS IN THE CASES OF MONARCH

x x x RULING THAT THE ISSUE ON THE APPLICATION OF THE

x x x NOT LIMITING THE AWARD OF DAMAGES TO

Stated simply, we are asked to resolve whether the limited

14 Rollo, pp. 68-69.

570 SUPREME COURT REPORTS ANNOTATED

to its pro rata share in the insurance proceeds, applies in

15 G.R. No. 92735, June 8, 2000, 333 SCRA 71.

VOL. 488, MAY 2, 2006 571

From the nature of their business and for reasons of public

of the passengers transported by them, according to all the circumstances

(1) Flood, storm, earthquake, lightning, or other natural disaster or

572 SUPREME COURT REPORTS ANNOTATED

it is tasked with the maintenance of its vessel. Though this

the limited liability doctrine. Differently put, to limit its

23 Philippine American General Insurance Co., Inc. v. Court of Appeals,

VOL. 488, MAY 2, 2006 573

from its failure to exercise extraordinary diligence,27 the

Carpio, Carpio-Morales, Tinga and Velasco, Jr., JJ.,

Petition denied, judgment and resolution affirmed.

Notes.—Benefits of limited liability are subject to

27 Id., at pp. 33-34.

574 SUPREME COURT REPORTS ANNOTATED

there by agreement of the parties. (Belgian Overseas

© Copyright 2020 Central Book Supply, Inc. All rights reserved.

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