LUZON STEVEDORING CORPORATION, 

petitioner, 
vs.
COURT OF APPEALS, HIJOS DE F. ESCANO, INC., and DOMESTIC INSURANCE COMPANY OF THE
PHILIPPINES, respondents.

G.R. No. L-58897 December 3, 1987

Facts: A maritime collision occurred within the vicinity of the entrance to the North Harbor,
Manila between the tanker LSCO "Cavite" owned by Luzon Stevedoring Corporation and MV "Fernando
Escano" a passenger ship owned by Hijos de F. Escano, Inc. as a result of which said passenger ship sunk.
An action in admiralty was filed by Hijos de F. Escano, Inc. and Domestic Insurance Company of the
Philippines against the Luzon Stevedoring Company (LSC) in the Court of First Instance of Cebu. In the
course of the trial, the trial court appointed two commissioners representing the plaintiffs and
defendant to determine the value of the LSCO "CAVITE." Said commissioners found the value thereof to
be P180,000.00.

Issue:

Held:

The Supreme Court ruled that;

Articles 587, 590, and 837 of the Code of Commerce provide as follows:

ART. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which
arise from the conduct of the captain in the vigilance over the goods which the vessel carried; but he
may exempt himself therefrom by abandoning the vessel with all her equipment and the freight he may
have earned during the voyage.

xxx xxx xxx

ART. 590. The co-owners of the 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 co-owner may exempt himself from this liability by the abandonment, before a notary, of that part
of the vessel belonging to him.

xxx xxx xxx

ART. 837. The civil liability incurred by the shipowners in the cases prescribed in this section, shall be
understood as limited to the value of the vessel with all her appurtenances and freight earned during
the voyage. 

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 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.

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.

It is clear that in case of collision of vessels, in order to avail of the benefits of Article 837 of the Code of
Commerce the shipowner or agent must abandon the vessel. In such case the civil liability shall be
limited to the value of the vessel with all the appurtenances and freight earned during the voyage.
However, where the injury or average is due to the ship-owner's fault as in said case, the shipowner may
not avail of his right to limited liability by abandoning the vessel.

The real and hypothecary nature of the liability of the shipowner or agent is embodied in the provisions
of the Maritime Law, Book III, Code of Commerce. 21 Articles 587, 590 and 837 of the same code are
precisely intended to limit the liability of the shipowner or agent to the value of the vessel, its
appurtenances and freightage earned in the voyage, provided that owner or agent abandons the vessel.
Although it is not specifically provided for in Article 837 of the same code that in case of collision there
should be such abandonment to enjoy such limited liability, said article on collision of vessels is a mere
amplification of the provisions of Articles 587 and 590 of same code where abandonment of the vessel is
a pre-condition. Even without said article, the parties may avail of the provisions of Articles 587 and 590
of same code in case of collision. This is the reason why Article 837 of the same code is considered a
superfluity.

Hence the rule is that in case of collision there should be abandonment of the vessel by the shipowner
or agent in order to enjoy the limited liability provided for under said Article 837.

The exception to this rule is when the vessel is totally lost in which case there is no vessel to abandon so
abandonment is not required. Because of such total loss the liability of the shipowner or agent for
damages is extinguished. Nevertheless, the shipowner or agent is personally liable for claims under the
Workmen's Compensation Act and for repairs of the vessel before its loss.

In case of illegal or tortious acts of the captain the liability of the shipowner and agent is subsidiary. In
such instance the shipowner or agent may avail of the provisions of Article 837 of the Code by
abandoning the vessel.
However, if the injury or damage is caused by the shipowner's fault as where he engages the services of
an inexperienced and unlicensed captain or engineer, he cannot avail of the provisions of Article 837 of
the Code by abandoning the vessel. He is personally liable for the damages arising thereby.

In the case now before the Court there is no question that the action arose from a collision and the fault
is laid at the doorstep of LSCO "Cavite" of petitioner. Undeniably petitioner has not abandoned the
vessel. Hence petitioner can not invoke the benefit of the provisions of Article 837 of the Code of
Commerce to limit its liability to the value of the vessel, all the appurtenances and freightage earned
during the voyage.
G.R. No. L-773              December 17, 1946

DIONISIA ABUEG, ET AL., plaintiffs-appellees, 

vs.
BARTOLOME SAN DIEGO, defendant-appellant.

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

CA-No. L-774              December 17, 1946

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

vs.
BARTOLOME SAN DIEGO, defendant-appellant.

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

CA-No. L-775              December 17, 1946

ROSARIO OCHING, ET AL., plaintiffs-appellees, 

vs.
BARTOLOME SAN DIEGO, defendant-appellant.

Facts: Dionisia Abueg is the widow of the deceased, Amado Nuñez, who was a machinist on board the
M/S San Diego II belonging to the defendant-appellant. Marciana S. de Salvacion, is the widow of the
deceased, Victoriano Salvacion, who was a machinist on board the M/S Bartolome S also belonging to
the defendant-appellant. Rosario R. Oching is the widow of Francisco Oching who was a captain or
patron of the defendant-appellant's M/S Bartolome S.

The M/S San Diego II and the M/S Bartolome (owned by the appellant), while engaged in fishing
operations around Mindoro Island on Oct. 1, 1941 were caught by a typhoon as a consequence of which
they were sunk and totally lost.

Issue:

Held:

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

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

If the motor ships in question, while engaged in fishing, were to be considered as not engaged in
interisland and coastwise trade, the provisions of the Code of Commerce invoked by them regarding
limitation of the shipowner's liability or extinction thereof when the shipowner abandons the ship,
cannot be applied (Lopez vs. Duruelo, 52 Phil., 229). Granting however, that the motor ships run and
operated by the appellant were not engaged in the coastwise and interisland trade, as contemplated in
section 38 of the Workmen's Compensation Act, as amended, still the deceased officers of the motor
ships in question were industrial employees within the purview of section 39, paragraph (d), as
amended, for industrial employment "includes all employment or work at a trade, occupation or
profession exercised by an employer for the purpose of gain." The only exceptions recognized by the Act
are agriculture, charitable institutions and domestic service. Even employees engaged in agriculture for
the operation of mechanical implements, are entitled to the benefits of the Workmen's Compensation
Act
ABOITIZ SHIPPING CORPORATION, petitioner, vs. EQUITABLE INSURANCE CORPORATION, respondent.

G.R. no. 121833October 17, 2008

Facts: Equitable Insurance Corporation (Equitable) filed an action for damages against Aboitiz to
recover by way of subrogation the value of the cargoes insured by Equitable that were lost in the sinking
of M/V P. Aboitiz. The complaint, which was docketed as Civil Case No. 138395, was later amended
to implead Seatrain Pacific Services S.A. and Citadel Lines, Inc. as party defendants. RTC rendered
judgment ordering Aboitiz to pay Equitable. It found that Aboitizwas guilty of contributory negligence
and, therefore, liable for the loss.   Aboitiz invoked the doctrine of limited liability and claimed that the
typhoon was the proximate cause of the loss. CA ruled that the loss of the cargoes and the sinking of the
vessel were due to its unseaworthiness and the failure of the crew to exercise extraordinary diligence.

Issue: Whether or not Aboitiz can avail limited liability on the basis of the real and hypothecary
doctrine of maritime law.

Held: No, Aboitiz cannot avail limited liability on the basis of the real and hypothecary doctrine of
maritime law.

The Supreme Court ruled that the ruling in the 1993 GAFLAC case cited the real
and hypothecary doctrine in maritime law that the shipowner or agent’s liability is merely co-extensive
with his interest in the vessel such that a total loss thereof results in its extinction. “No vessel, no
liability” expresses in a nutshell the limited liability rule.

In this jurisdiction, the limited liability rule is embodied in Articles 587, 590 and 837 under Book III of the
Code of Commerce, thus:

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

            Art. 590. The co-owners of the 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 this liability by the abandonment, before a notary, of
the part of the vessel belonging to him.

            Art. 837. The civil liability incurred by shipowners in the case prescribed in this section, shall be
understood as limited to the value of the vessel with all its appurtenances and freightage served during
the voyage.

 
 

These articles precisely intend to limit the liability of the shipowner or agent to the value of the vessel,
its appurtenances and freightage earned in the voyage, provided that the owner or agent abandons the
vessel. When the vessel is totally lost in which case there is no vessel to abandon, abandonment is not
required. Because of such total loss the liability of the shipowner or agent for damages is
extinguished. However, despite the total loss of the vessel, its insurance answers for the damages for
which a shipowner or agent may be held liable.

Nonetheless, there are exceptional circumstances wherein the ship agent could still be held answerable
despite the abandonment of the vessel, as where the loss or injury was due to the fault of
theshipowner and the captain. The international rule is to the effect that the right of abandonment of
vessels, as a legal limitation of a shipowner’s liability, does not apply to cases where the injury or
average was occasioned by the shipowner’s own fault. Likewise, the shipowner may be held liable for
injuries to passengers notwithstanding the exclusively real and hypothecary nature of maritime law if
fault can be attributed to the shipowner.

As a general rule, a ship owner’s liability is merely co-extensive with his interest in the vessel, except
where actual fault is attributable to the shipowner.  Thus, as   an   exception to the limited liability
doctrine, a shipowner or ship agent may be held liable for damages when the sinking of the vessel is
attributable to the actual fault or negligence of the shipowner or its failure to ensure the seaworthiness
of the vessel. The instant petitions cannot be spared from the application of the exception to the
doctrine of limited liability in view of the unanimous findings of the courts below that both Aboitiz and
the crew failed to ensure the seaworthiness of the M/V P. Aboitiz.
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-appellee, vs.
PHILIPPINE STEAMSHIP CO., INC., and FERNANDEZ HERMANOS, defendants. 
PHILIPPINE STEAMSHIP CO., INC., appellant.

G.R. No. L-18957             January 16, 1923

Facts: The coastwise Isabel, equipped with motor and sails, left the port of Manila with primary
destination to Balayan, Batangas, carrying, among its cargo, 911 sacks of rice belonging to the plaintiff
and consigned to points in the south. After the boat had been under weigh for about four hours, and has
passed the San Nicolas Light near the entrance into Manila Bay, the watch and the mate on the bridge of
the Isabel discerned the light of another vessel, which proved to be the Antipolo, also a coastwise vessel,
on its way to Manila and coming towards the Isabel. At about the same time both the watch and mate
on the bridge of the Antipolo also saw the Isabel, the two vessels being then about one mile and a half
or two miles apart. Each vessel was going approximately at the speed of 6 miles an hour, and in about
ten minutes they had together traversed the intervening space and were in close proximity to each
other.

When the mate of the Antipolo, who was then at the wheel, awoke to the danger of the situation and
saw the Isabel"almost on top of him," to use the words of the committee on marine accidents reporting
the incident, he put his helm hard to the starboard. However, the mate on the Isabel at this critical
juncture lost his wits and, in disregard of the regulations and of common prudence, at once placed his
own helm hard to port, with the result that his boat veered around directly in the path of the other
vessel and a collision became inevitable. Upon this the mate on the Antipolo fortunately stopped his
engines, but the Isabel continued with full speed ahead, and the two vessels came together near the
bows. The Isabel immediately sank, with total loss of vessel and cargo, though the members of her crew
were picked up from the water and saved. Trial court ruled that both mates of the ship were at fault.
The mate of the Antipolo was clearly negligent in having permitted that vessel to approach directly
towards the Isabel until the two were in dangerous proximity. Negligence shortly preceding the moment
of collision is, however, undoubtedly chargeable to the Isabel, for the incorrect and incompetent way in
which this vessel was then handled.

Issue:

Held:

The Supreme Court ruled that the trial judge committed no error in holding that both vessels
were to blame and in applying article 827 of the Code of Commerce to the situation before him. It is
there declared that where both vessels are to blame, both shall be solidarily responsible for the damage
occasioned to their cargoes. As the Isabel was a total loss and cannot sustain any part of this liability, the
burden of responding to the Government of the Philippine Islands, as owner of the rice embarked on
the Isabel, must fall wholly upon the owner of the other ship, that is, upon the defendant, the Philippine
Steamship Company, Inc.
Only one observation will be added, in response to one of the contentions of the appellant's attorneys,
which is, that the application of article 827 of the Code of Commerce is not limited by article 828 to the
case where it cannot be determined which of the two vessels was the cause of the collision. On the
contrary article 828 must be considered as an extension of article combined the rule of liability
announced in article 827 is applicable not only to the case where both vessels may be shown to be
actually blameworthy but also to the case where it is obvious that only one was at fault but the proof
does not show which.
VICENTE VERZOSA and RUIZ, REMENTERIA Y CIA., S. en C., plaintiffs-appellants, vs.
SILVINO LIM and SIY CONG BIENG and COMPANY, INC., defendants-appellants.

G.R. No. L-20145             November 15, 1923

Facts: The coastwise steamer Ban Yekleft the port of Naga on the Bicol River, in the Province of
Camarines Sur, with destination to the City of Manila. At the time of her departure from said port the
sea was approaching to high tide but the current was still running in through the Bicol River, with the
result that the Ban Yek had the current against her. As the ship approached the Malbong bend of the
Bicol River, in the municipality of Gainza, another vessel, the Perla, was sighted coming up the river on
the way to Naga. While the boats were yet more than a kilometer apart, the Ban Yek gave two blasts
with her whistle, thus indicating an intention to pass on the left, or to her own port side. In reply to this
signal the Perla gave a single blast, thereby indicating that she disagreed with the signal given by the Ban
Yek and would maintain her position on the right, that is, would keep to the starboard. The Ban
Yek made no reply to this signal. As the Perla was navigating with the current, then running in from the
sea, this vessel, under paragraph 163 of Customs Marine Circular No. 53, had the right of way over
the Ban Yek, and the officers of the Perla interpreted the action of the Ban Yek in not replying to
the Perla's signal as an indication of acquiescene of the officers of theBan Yek in the determination of
the Perla to keep to the starboard.

The river at this point is about two hundred and fifty feet wide, and the courses thus being
respectively pursued by the two vessels necessarily tended to bring them into a head-on collision. When
the danger of such an occurrence became imminent, Captain Garrido of the Perla, seeing that he was
shut off by the Ban Yek from passing to the right, put his vessel to port, intending to avoid collision or
minimize its impact by getting farther out into the stream. An additional reason for this maneuver, as
stated by Captain Carrido, is that the captain of the Ban Yek waived his hand to Garrido, indicating that
the latter should turn his vessel towards the middle of the stream. At about the same time that
the Perla was thus deflected from her course the engine on the Ban Yek was reversed and three blasts
were given by this vessel to indicate that she was backing.

When the engine is reversed, a vessel swings to the right or left in accordance with the direction
in which the blades of the propeller are set; and as the Ban Yek began to back, her bow was thrown out
into the stream, a movement which was assisted by the current of the river. By this means the Ban
Yek was brought to occupy an oblique position across the stream at the moment the Perla was passing;
and the bow of theBan Yek crashed into the starboard bumpers of the Perla, carrying away external
parts of the ship and inflicting material damage on the hull.

Issue:

Held:

The Supreme Court ruled that the fault is to be attributed exclusively to the negligence and
inattention of the captain and pilot in charge of the Ban Yek. The Perla undoubtedly had the right of
way, since this vessel was navigating with the current, and the officers in charge of the Perla were
correct in assuming, from the failure of the Ban Yek to respond to the single blast of the Perla, that the
officers in charge of the Ban Yek recognized that the Perla had a right of way and acquiesced in her
resolution to keep to the right. The excuse urged for the Ban Yek is that this vessel is somewhat larger
than the Perla and that it was desirable for the Ban Yek to keep on the side of the long arc of the curve
of the river; and in this connection it is suggested that the river is deeper on the outer edge of the bend
than on the inner edge. It is also stated that on a certain previous occasion the Ban Yek on coming out
from this port had gotten stuck in the mud in this bend by keeping too far to the right. Moreover, it is
said to be the practice of ships in navigating this stream to keep nearer the outside than to the inside of
the bend. These suggestions are by no means convincing. It appears in evidence that the river bottom
here is composed of mud and silt, and as the tide at the time of this incident was nearly at its flood,
there was ample depth of water to have accommodated the Ban Yek if she had kept to that part of the
stream which it was proper for her to occupy. We may further observe that the disparity in the size of
the vessels was not such as to dominate the situation and deprive the Perla of the right of way under the
conditions stated. Blame for the collision must therefore, as already stated, be attributed to the Ban Yek.

On the other hand no fault can be attributed to the officers navigating the Perla either in
maintaining the course which had been determined upon for that vessel in conformity with the marine
regulations applicable to the case or in deflecting the vessel towards the middle of the stream after the
danger of collision became imminent.

But while it is thus demonstrated that Silvino Lim is liable for these damages in the character of
owner, it does not necessarily follows that Siy Cong Bieng & Co., as character or agent (casa naviera), is
exempt from liability; and we are of the opinion that both the owner and agent can be held responsible
where both are impleaded together. In Philippine Shipping Co.,  vs.  Garcia Vergara (6 Phil., 281), it seems
to have been accepted as a matter of course that both owner and agent of the offending vessel are
liable for the damage done; and this must, we think, be true. The liability of the naviero, in the sense of
charterer or agent, if not expressed in article 826 of the Code of Commerce, is clearly deducible from the
general doctrine of jurisprudence stated in article 1902 of the Civil Code, and it is also recognized, but
more especially as regards contractual obligations, in article 586 of the Code of Commerce. Moreover,
we are of the opinion that both the owner and agent (naviero) should be declared to be jointly and
severally liable, since the obligation which is the subject of this action had its origin in a tortious act and
did not arise from contract. Article 1137 of the Civil Code, declaring that joint obligations shall be
apportionable unless otherwise provided, has no application to obligation arising from tort.