Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 74811 September 30, 1988
CHUA YEK HONG, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, MARIANO GUNO, and DOMINADOR OLIT, respondents.
Francisco D. Estrada for petitioner.
Purita Hontanosas-Cortes for private respondents.

MELENCIO-HERRERA, J.:
In this Petition for Review on certiorari petitioner seeks to set aside the Decision of respondent Appellate Court in AC G.R. No. 01375 entitled "Chua Yek Hong vs.
Mariano Guno, et al.," promulgated on 3 April 1986, reversing the Trial Court and relieving private respondents (defendants below) of any liability for damages for
loss of cargo.
The basic facts are not disputed:
Petitioner is a duly licensed copra dealer based at Puerta Galera, Oriental Mindoro, while private respondents are the owners of the
vessel, "M/V Luzviminda I," a common carrier engaged in coastwise trade from the different ports of Oriental Mindoro to the Port of
Manila.
In October 1977, petitioner loaded 1,000 sacks of copra, valued at P101,227.40, on board the vessel "M/V Luzviminda I" for shipment
from Puerta Galera, Oriental Mindoro, to Manila. Said cargo, however, did not reach Manila because somewhere between Cape
Santiago and Calatagan, Batangas, the vessel capsized and sank with all its cargo.
On 30 March 1979, petitioner instituted before the then Court of First Instance of Oriental Mindoro, a Complaint for damages based on
breach of contract of carriage against private respondents (Civil Case No. R-3205).
In their Answer, private respondents averred that even assuming that the alleged cargo was truly loaded aboard their vessel, their
liability had been extinguished by reason of the total loss of said vessel.
On 17 May 1983, the Trial Court rendered its Decision, the dispositive portion of which follows:
WHEREFORE, in view of the foregoing considerations, the court believes and so holds that the preponderance of
evidence militates in favor of the plaintiff and against the defendants by ordering the latter, jointly and severally, to
pay the plaintiff the sum of P101,227.40 representing the value of the cargo belonging to the plaintiff which was lost
while in the custody of the defendants; P65,550.00 representing miscellaneous expenses of plaintiff on said lost
cargo; attorney's fees in the amount of P5,000.00, and to pay the costs of suit. (p. 30, Rollo).
On appeal, respondent Appellate Court ruled to the contrary when it applied Article 587 of the Code of Commerce and the doctrine in
Yangco vs. Lasema (73 Phil. 330 [1941]) and held that private respondents' liability, as ship owners, for the loss of the cargo is merely
co-extensive with their interest in the vessel such that a total loss thereof results in its extinction. The decretal portion of that
Decision reads:
1

IN VIEW OF THE FOREGOING CONSIDERATIONS, the decision appealed from is hereby REVERSED, and
another one entered dismissing the complaint against defendants-appellants and absolving them from any and all
liabilities arising from the loss of 1,000 sacks of copra belonging to plaintiff-appellee. Costs against appellee.
(p. 19, Rollo).
Unsuccessful in his Motion for Reconsideration of the aforesaid Decision, petitioner has availed of the present recourse.
The basic issue for resolution is whether or not respondent Appellate Court erred in applying the doctrine of limited liability under Article
587 of the Code of Commerce as expounded in Yangco vs. Laserna, supra.
Article 587 of the Code of Commerce provides:
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from
the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself
therefrom by abandoning the vessel with all the equipments and the freight it may have earned during the voyage.
The term "ship agent" as used in the foregoing provision is broad enough to include the ship owner (Standard Oil Co. vs. Lopez
Castelo, 42 Phil. 256 [1921]). Pursuant to said provision, therefore, both the ship owner and ship agent are civilly and directly liable for
the indemnities in favor of third persons, which may arise from the conduct of the captain in the care of goods transported, as well as for
the safety of passengers transported Yangco vs. Laserna, supra; Manila Steamship Co., Inc. vs. Abdulhaman et al., 100 Phil. 32
[1956]).
However, under the same Article, this direct liability is moderated and limited by the ship agent's or ship owner's right of abandonment
of the vessel and earned freight. This expresses the universal principle of limited liability under maritime law. The most fundamental
effect of abandonment is the cessation of the responsibility of the ship agent/owner (Switzerland General Insurance Co., Ltd. vs.
Ramirez, L-48264, February 21, 1980, 96 SCRA 297). It has thus been held that by necessary implication, the ship agent's or ship
owner's liability is confined to that which he is entitled as of right to abandon the vessel with all her equipment and the freight it may
have earned during the voyage," and "to the insurance thereof if any" (Yangco vs. Lasema, supra). In other words, the ship owner's or
agent's liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. "No vessel, no
liability" expresses in a nutshell the limited liability rule. The total destruction of the vessel extinguishes maritime liens as there is no
longer any res to which it can attach (Govt. Insular Maritime Co. vs. The Insular Maritime, 45 Phil. 805, 807 [1924]).
As this Court held:
If the ship owner or agent may in any way be held civilly liable at all for injury to or death of passengers arising from
the negligence of the captain in cases of collisions or shipwrecks, his liability is merely co-extensive with his interest
in the vessel such that a total loss thereof results in its extinction. (Yangco vs. Laserna, et al., supra).
The rationale therefor has been explained as follows:
The real and hypothecary nature of the liability of the ship owner or agent embodied in the provisions of the Maritime
Law, Book III, Code of Commerce, had its origin in the prevailing conditions of the maritime trade and sea voyages
during the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions
and to encourage ship building and maritime commerce, it was deemed necessary to confine the liability of the owner
or agent arising from the operation of a ship to the vessel, equipment, and freight, or insurance, if any, so that if the
ship owner or agent abandoned the ship, equipment, and freight, his liability was extinguished. (Abueg vs. San Diego,
77 Phil. 730 [1946])
—0—
Without the principle of limited liability, a ship owner and investor in maritime commerce would run the risk of being
ruined by the bad faith or negligence of his captain, and the apprehension of this would be fatal to the interest of
navigation." Yangco vs. Lasema, supra).
—0—
As evidence of this real nature of the maritime law we have (1) the limitation of the liability of the agents to the actual
value of the vessel and the freight money, and (2) the right to retain the cargo and the embargo and detention of the
vessel even in cases where the ordinary civil law would not allow more than a personal action against the debtor or
person liable. It will be observed that these rights are correlative, and naturally so, because if the agent can exempt
himself from liability by abandoning the vessel and freight money, thus avoiding the possibility of risking his whole
 fortune in the business, it is also just that his maritime creditor may for any reason attach the vessel itself to secure
his claim without waiting for a settlement of his rights by a final judgment, even to the prejudice of a third person.
(Phil. Shipping Co. vs. Vergara, 6 Phil. 284 [1906]).
The limited liability rule, however, is not without exceptions, namely: (1) where the injury or death to a passenger is due either to the
fault of the ship owner, or to the concurring negligence of the ship owner and the captain (Manila Steamship Co., Inc. vs.
Abdulhaman supra); (2) where the vessel is insured; and (3) in workmen's compensation claims Abueg vs. San Diego, supra). In this
case, there is nothing in the records to show that the loss of the cargo was due to the fault of the private respondent as shipowners, or
to their concurrent negligence with the captain of the vessel.
What about the provisions of the Civil Code on common carriers? Considering the "real and hypothecary nature" of liability under
maritime law, these provisions would not have any effect on the principle of limited liability for ship owners or ship agents. As was
expounded by this Court:
In arriving at this conclusion, the fact is not ignored that the illfated, S.S. Negros, as a vessel engaged in interisland
trade, is a common carrier, and that the relationship between the petitioner and the passengers who died in the
mishap rests on a contract of carriage. But assuming that petitioner is liable for a breach of contract of carriage, the
exclusively 'real and hypothecary nature of maritime law operates to limit such liability to the value of the vessel, or to
the insurance thereon, if any. In the instant case it does not appear that the vessel was insured. (Yangco vs. Laserila,
et al., supra).
Moreover, Article 1766 of the Civil Code provides:
Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed
by the Code of Commerce and by special laws.
In other words, the primary law is the Civil Code (Arts. 17321766) and in default thereof, the Code of Commerce and other special laws
are applied. Since the Civil Code contains no provisions regulating liability of ship owners or agents in the event of total loss or
destruction of the vessel, it is the provisions of the Code of Commerce, more particularly Article 587, that govern in this case.
In sum, it will have to be held that since the ship agent's or ship owner's liability is merely co-extensive with his interest in the vessel
such that a total loss thereof results in its extinction (Yangco vs. Laserna, supra), and none of the exceptions to the rule on limited
liability being present, the liability of private respondents for the loss of the cargo of copra must be deemed to have been extinguished.
There is no showing that the vessel was insured in this case.
WHEREFORE, the judgment sought to be reviewed is hereby AFFIRMED. No costs.
SO ORDERED.
Paras, Padilla, Sarmiento and Regalado, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-42926 September 13, 1985
PEDRO VASQUEZ, SOLEDAD ORTEGA, CLETO B. BAGAIPO, AGUSTINA VIRTUDES, ROMEO VASQUEZ and MAXIMINA
CAINAY, petitioners,
vs.
THE COURT OF APPEALS and FILIPINAS PIONEER LINES, INC., respondents.
Emilio D. Castellanes for petitioners.
Apolinario A. Abantao for private respondents.

MELENCIO-HERRERA, J.:
This litigation involves a claim for damages for the loss at sea of petitioners' respective children after the shipwreck of MV Pioneer Cebu
due to typhoon "Klaring" in May of 1966.
The factual antecedents, as summarized by the trial Court and adopted by respondent Court, and which we find supported by the
record, read as follows:
When the inter-island vessel MV "Pioneer Cebu" left the Port of Manila in the early morning of May 15, 1966 bound
for Cebu, it had on board the spouses Alfonso Vasquez and Filipinas Bagaipo and a four-year old boy, Mario Marlon
Vasquez, among her passengers. The MV "Pioneer Cebu" encountered typhoon "Klaring" and struck a reef on the
southern part of Malapascua Island, located somewhere north of the island of Cebu and subsequently sunk. The
aforementioned passengers were unheard from since then.
Plaintiffs Pedro Vasquez and Soledad Ortega are the parents of Alfonso Vasquez; plaintiffs Cleto Bagaipo and
Agustina Virtudes are the parents of Filipinas Bagaipo; and plaintiffs Romeo Vasquez and Maxima Cainay are the
parents of the child, Mario Marlon Vasquez. They seek the recovery of damages due to the loss of Alfonso Vasquez,
Filipinas Bagaipo and Mario Marlon Vasquez during said voyage.
At the pre-trial, the defendant admitted its contract of carriage with Alfonso Vasquez, Filipinas Bagaipo and Mario
Marlon Vasquez, and the fact of the sinking of the MV "Pioneer Cebu". The issues of the case were limited to the
defenses alleged by the defendant that the sinking of the vessel was caused by force majeure, and that the
defendant's liability had been extinguished by the total loss of the vessel.
The evidence on record as to the circumstances of the last voyage of the MV "Pioneer Cebu" came mainly, if not
exclusively, from the defendant. The MV "Pioneer Cebu" was owned and operated by the defendant and used in the
transportation of goods and passengers in the inter-island shipping. Scheduled to leave the Port of Manila at 9:00
p.m. on May 14, 1966, it actually left port at 5:00 a.m. the following day, May 15, 1966. It had a passenger capacity of
three hundred twenty-two (322) including the crew. It undertook the said voyage on a special permit issued by the
Collector of Customs inasmuch as, upon inspection, it was found to be without an emergency electrical power
system. The special permit authorized the vessel to carry only two hundred sixty (260) passengers due to the said
deficiency and for lack of safety devices for 322 passengers (Exh. 2). A headcount was made of the passengers on
board, resulting on the tallying of 168 adults and 20 minors, although the passengers manifest only listed 106
passengers. It has been admitted, however, that the headcount is not reliable inasmuch as it was only done by one
man on board the vessel.
When the vessel left Manila, its officers were already aware of the typhoon Klaring building up somewhere in
Mindanao. There being no typhoon signals on the route from Manila to Cebu, and the vessel having been cleared by
the Customs authorities, the MV "Pioneer Cebu" left on its voyage to Cebu despite the typhoon. When it reached
Romblon Island, it was decided not to seek shelter thereat, inasmuch as the weather condition was still good. After
passing Romblon and while near Jintotolo island, the barometer still indicated the existence of good weather
condition continued until the vessel approached Tanguingui island. Upon passing the latter island, however, the
weather suddenly changed and heavy rains felt Fearing that due to zero visibility, the vessel might hit Chocolate
island group, the captain ordered a reversal of the course so that the vessel could 'weather out' the typhoon by facing
the winds and the waves in the open. Unfortunately, at about noontime on May 16, 1966, the vessel struck a reef
 near Malapascua island, sustained leaks and eventually sunk, bringing with her Captain Floro Yap who was in
command of the vessel.
Due to the loss of their children, petitioners sued for damages before the Court of First Instance of Manila (Civil Case No. 67139).
Respondent defended on the plea of force majeure, and the extinction of its liability by the actual total loss of the vessel.
After proper proceedings, the trial Court awarded damages, thus:
WHEREFORE, judgment is hereby rendered ordering the defendant to pay:
(a) Plaintiffs Pedro Vasquez and Soledad Ortega the sums of P15,000.00 for the loss of earning capacity of the
deceased Alfonso Vasquez, P2,100.00 for support, and P10,000.00 for moral damages;
(b) Plaintiffs Cleto B. Bagaipo and Agustina Virtudes the sum of P17,000.00 for loss of earning capacity of deceased
Filipinas Bagaipo, and P10,000.00 for moral damages; and
(c) Plaintiffs Romeo Vasquez and Maximina Cainay the sum of P10,000.00 by way of moral damages by reason of
the death of Mario Marlon Vasquez.
On appeal, respondent Court reversed the aforementioned judgment and absolved private respondent from any and all liability.
Hence, this Petition for Review on Certiorari, the basic issue being the liability for damages of private respondent for the presumptive
death of petitioners' children.
The trial Court found the defense of caso fortuito untenable due to various decisive factors, thus:
... It is an admitted fact that even before the vessel left on its last voyage, its officers and crew were already aware of
the typhoon brewing somewhere in the same general direction to which the vessel was going. The crew of the vessel
took a calculated risk when it proceeded despite the typhoon advisory. This is quite evident from the fact that the
officers of the vessel had to conduct conferences amongst themselves to decide whether or not to proceed. The crew
assumed a greater risk when, instead of seeking shelter in Romblon and other islands the vessel passed en route,
they decided to take a change on the expected continuation of the good weather the vessel was encountering, and
the possibility that the typhoon would veer to some other directions. The eagerness of the crew of the vessel to
proceed on its voyage and to arrive at its destination is readily understandable. It is undeniably lamentable, however,
that they did so at the risk of the lives of the passengers on board.
Contrariwise, respondent Appellate Court believed that the calamity was caused solely and proximately by fortuitous event which not
even extraordinary diligence of the highest degree could have guarded against; and that there was no negligence on the part of the
common carrier in the discharge of its duties.
Upon the evidence and the applicable law, we sustain the trial Court. "To constitute a caso fortuito that would exempt a person from
responsibility, it is necessary that (1) the event must be independent of the human will; (2) the occurrence must render it impossible for
the debtor to fulfill the obligation in a normal manner; and that (3) the obligor must be free of participation in, or aggravation of, the
injury to the creditor." In the language of the law, the event must have been impossible to foresee, or if it could be foreseen, must have
1

been impossible to avoid. There must be an entire exclusion of human agency from the cause of injury or loss.
2 3

Turning to this case, before they sailed from the port of Manila, the officers and crew were aware of typhoon "Klaring" that was reported
building up at 260 kms. east of Surigao. In fact, they had lashed all the cargo in the hold before sailing in anticipation of strong winds
and rough waters. They proceeded on their way, as did other vessels that day. Upon reaching Romblon, they received the weather
4

report that the typhoon was 154 kms. east southeast of Tacloban and was moving west northwest. Since they were still not within the
5

radius of the typhoon and the weather was clear, they deliberated and decided to proceed with the course. At Jintotolo Island, the
typhoon was already reported to be reaching the mainland of Samar. They still decided to proceed noting that the weather was still
6

"good" although, according to the Chief Forecaster of the Weather Bureau, they were already within the typhoon zone. At Tanguingui
7

Island, about 2:00 A.M. of May 16, 1966, the typhoon was in an area quite close to Catbalogan, placing Tanguingui also within the
typhoon zone. Despite knowledge of that fact, they again decided to proceed relying on the forecast that the typhoon would weaken
upon crossing the mainland of Samar. After about half an hour of navigation towards Chocolate Island, there was a sudden fall of the
8

barometer accompanied by heavy downpour, big waves, and zero visibility. The Captain of the vessel decided to reverse course and
face the waves in the open sea but because the visibility did not improve they were in total darkness and, as a consequence, the vessel
ran aground a reef and sank on May 16, 1966 around 12:45 P.M. near Malapascua Island somewhere north of the island of Cebu.
Under the circumstances, while, indeed, the typhoon was an inevitable occurrence, yet, having been kept posted on the course of the
typhoon by weather bulletins at intervals of six hours, the captain and crew were well aware of the risk they were taking as they hopped
from island to island from Romblon up to Tanguingui. They held frequent conferences, and oblivious of the utmost diligence required of
very cautious persons, they decided to take a calculated risk. In so doing, they failed to observe that extraordinary diligence required
9

of them explicitly by law for the safety of the passengers transported by them with due regard for an circumstances and unnecessarily
10

exposed the vessel and passengers to the tragic mishap. They failed to overcome that presumption of fault or negligence that arises in
cases of death or injuries to passengers. 11

While the Board of Marine Inquiry, which investigated the disaster, exonerated the captain from any negligence, it was because it had
considered the question of negligence as "moot and academic," the captain having "lived up to the true tradition of the profession."
While we are bound by the Board's factual findings, we disagree with its conclusion since it obviously had not taken into account the
legal responsibility of a common carrier towards the safety of the passengers involved.
With respect to private respondent's submission that the total loss of the vessel extinguished its liability pursuant to Article 587 of the
Code of Commerce as construed in Yangco vs. Laserna, 73 Phil. 330 [1941], suffice it to state that even in the cited case, it was held
12

that the liability of a shipowner is limited to the value of the vessel or to the insurance thereon. Despite the total loss of the vessel
therefore, its insurance answers for the damages that a shipowner or agent may be held liable for by reason of the death of its
passengers.
WHEREFORE, the appealed judgment is hereby REVERSED and the judgment of the then Court of First Instance of Manila, Branch V,
in Civil Case No. 67139, is hereby reinstated. No costs.
SO ORDERED.
Teehankee (Chairman), Plana, Relova, Gutierrez, Jr., De la Fuente and Patajo, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 110398 November 7, 1997

NEGROS NAVIGATION CO., INC., petitioner,
vs.
THE COURT OF APPEALS, RAMON MIRANDA, SPS. RICARDO and VIRGINIA DE LA VICTORIA, respondents.

MENDOZA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals affirming with modification the Regional Trial Court's
award of damages to private respondents for the death of relatives as a result of the sinking of petitioner's vessel.
In April of 1980, private respondent Ramon Miranda purchased from the Negros Navigation Co., Inc. four special cabin tickets (#74411,
74412, 74413 and 74414) for his wife, daughter, son and niece who were going to Bacolod City to attend a family reunion. The tickets
were for Voyage No. 457-A of the M/V Don Juan, leaving Manila at 1:00 p.m. on April 22, 1980.
The ship sailed from the port of Manila on schedule.
At about 10:30 in the evening of April 22, 1980, the Don Juan collided off the Tablas Strait in Mindoro, with the M/T Tacloban City, an oil
tanker owned by the Philippine National Oil Company (PNOC) and the PNOC Shipping and Transport Corporation (PNOC/STC). As a
result, the M/V Don Juan sank. Several of her passengers perished in the sea tragedy. The bodies of some of the victims were found
and brought to shore, but the four members of private respondents' families were never found.
Private respondents filed a complaint on July 16, 1980 in the Regional Trial Court of Manila, Branch 34, against the Negros Navigation,
the Philippine National Oil Company (PNOC), and the PNOC Shipping and Transport Corporation (PNOC/STC), seeking damages for
the death of Ardita de la Victoria Miranda, 48, Rosario V. Miranda, 19, Ramon V. Miranda, Jr., 16, and Elfreda de la Victoria, 26.
In its answer, petitioner admitted that private respondents purchased ticket numbers 74411, 74412, 74413 and 74414; that the ticket
numbers were listed in the passenger manifest; and that the Don Juan left Pier 2, North Harbor, Manila on April 22, 1980 and sank that
night after being rammed by the oil tanker M/T Tacloban City, and that, as a result of the collision, some of the passengers of the
M/V Don Juan died. Petitioner, however, denied that the four relatives of private respondents actually boarded the vessel as shown by
the fact that their bodies were never recovered. Petitioner further averred that the Don Juan was seaworthy and manned by a full and
competent crew, and that the collision was entirely due to the fault of the crew of the M/T Tacloban City.
On January 20, 1986, the PNOC and petitioner Negros Navigation Co., Inc. entered into a compromise agreement whereby petitioner
assumed full responsibility for the payment and satisfaction of all claims arising out of or in connection with the collision and releasing
the PNOC and the PNOC/STC from any liability to it. The agreement was subsequently held by the trial court to be binding upon
petitioner, PNOC and PNOC/STC. Private respondents did not join in the agreement.
After trial, the court rendered judgment on February 21, 1991, the dispositive portion of which leads as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the plaintiffs, ordering all the defendants to
pay jointly and severally to the plaintiffs damages as follows:
To Ramon Miranda:
P42,025.00 for actual damages;
P152,654.55 as compensatory damages for loss of
earning capacity of his wife;
P90,000.00 as compensatory damages for wrongful
death of three (3) victims;
P300,000.00 as moral damages;
P50,000.00 as exemplary damages, all in the total
amount of P634,679.55; and
P40,000.00 as attorney's fees.
To Spouses Ricardo and Virginia de la Victoria:
P12,000.00 for actual damages;
P158,899.00 as compensatory damages for loss of
earning capacity;
P30,000.00 as compensatory damages for wrongful
death;
P100,000.00 as moral damages;
P20,000.00 as exemplary damages, all in the total
amount of P320,899.00; and
P15,000.00 as attorney's fees.
On appeal, the Court of Appeals affirmed the decision of the Regional Trial Court with modification —
1

1. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiff-appellee Ramon Miranda the amount
of P23,075.00 as actual damages instead of P42,025.00;
2. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiff-appellee Ramon Miranda the amount
of P150,000.00, instead of P90,000.00, as compensatory damages for the death of his wife and two children;
3. Ordering and sentencing defendants-appellants, jointly and severally, to pay plaintiffs-appellees Dela Victoria spouses the
amount of P50,000.00, instead of P30,000.00, as compensatory damages for the death of their daughter Elfreda Dela Victoria;
Hence this petition, raising the following issues:
(1) whether the members of private respondents' families were actually passengers of the Don Juan;
(2) whether the ruling in Mecenas v. Court of Appeals, finding the crew members of petitioner to be grossly negligent in the
2

performance of their duties, is binding in this case;

(3) whether the total loss of the M/V Don Juan extinguished petitioner's liability; and
(4) whether the damages awarded by the appellate court are excessive, unreasonable and unwarranted.
First. The trial court held that the fact that the victims were passengers of the M/V Don Juan was sufficiently proven by private
respondent Ramon Miranda, who testified that he purchased tickets numbered 74411, 74412, 74413, and 74414 at P131.30 each from
the Makati office of petitioner for Voyage No. 47-A of the M/V Don Juan, which was leaving Manila on April 22, 1980. This was
corroborated by the passenger manifest (Exh. E) on which the numbers of the tickets and the names of Ardita Miranda and her children
and Elfreda de la Victoria appear.
Petitioner contends that the purchase of the tickets does not necessarily mean that the alleged victims actually took the trip. Petitioner
asserts that it is common knowledge that passengers purchase tickets in advance but do not actually use them. Hence, private
respondent should also prove the presence of the victims on the ship. The witnesses who affirmed that the victims were on the ship
were biased and unreliable.
This contention is without merit. Private respondent Ramon Miranda testified that he personally took his family and his niece to the
vessel on the day of the voyage and stayed with them on the ship until it was time for it to leave. There is no reason he should claim
members of his family to have perished in the accident just to maintain an action. People do not normally lie about so grave a matter as
the loss of dear ones. It would be more difficult for private respondents to keep the existence of their relatives if indeed they are alive
than it is for petitioner to show the contrary. Petitioner's only proof is that the bodies of the supposed victims were not among those
recovered from the site of the mishap. But so were the bodies of the other passengers reported missing not recovered, as this Court
noted in the Mecenas case.
3

Private respondent Miranda's testimony was corroborated by Edgardo Ramirez. Ramirez was a seminarian and one of the survivors of
the collision. He testified that he saw Mrs. Miranda and Elfreda de la Victoria on the ship and that he talked with them. He knew Mrs.
Miranda who was his teacher in the grade school. He also knew Elfreda who was his childhood friend and townmate. Ramirez said he
was with Mrs. Miranda and her children and niece from 7:00 p.m. until 10:00 p.m. when the collision happened and that he in fact had
dinner with them. Ramirez said he and Elfreda stayed on the deck after dinner and it was there where they were jolted by the collision
of the two vessels. Recounting the moments after the collision, Ramirez testified that Elfreda ran to fetch Mrs. Miranda. He escorted her
to the room and then tried to go back to the deck when the lights went out. He tried to return to the cabin but was not able to do so
because it was dark and there was a stampede of passengers from the deck.
Petitioner casts doubt on Ramirez' testimony, claiming that Ramirez could not have talked with the victims for about three hours and not
run out of stories to tell, unless Ramirez had a "storehouse" of stories. But what is incredible about acquaintances thrown together on a
long journey staying together for hours on end, in idle conversation precisely to while the hours away?
Petitioner also points out that it took Ramirez three (3) days before he finally contacted private respondent Ramon Miranda to tell him
about the fate of his family. But it is not improbable that it took Ramirez three days before calling on private respondent Miranda to tell
him about the last hours of Mrs. Miranda and her children and niece, in view of the confusion in the days following the collision as
rescue teams and relatives searched for survivors.
Indeed, given the facts of this case, it is improper for petitioner to even suggest that private respondents' relatives did not board the ill-
fated vessel and perish in the accident simply because their bodies were not recovered.
Second. In finding petitioner guilty of negligence and in failing to exercise the extraordinary diligence required of it in the carriage of
passengers, both the trial court and the appellate court relied on the findings of this Court in Mecenas v. Intermediate Appellate
Court, which case was brought for the death of other passengers. In that case it was found that although the proximate cause of the
4

mishap was the negligence of the crew of the M/T Tacloban City, the crew of the Don Juan was equally negligent as it found that the
latter's master, Capt. Rogelio Santisteban, was playing mahjong at the time of collision, and the officer on watch, Senior Third Mate
Rogelio De Vera, admitted that he failed to call the attention of Santisteban to the imminent danger facing them. This Court found that
Capt. Santisteban and the crew of the M/V Don Juan failed to take steps to prevent the collision or at least delay the sinking of the ship
and supervise the abandoning of the ship.
Petitioner Negros Navigation was found equally negligent in tolerating the playing of mahjong by the ship captain and other crew
members while on board the ship and failing to keep the M/V Don Juan seaworthy so much so that the ship sank within 10 to 15
minutes of its impact with the M/T Tacloban City.
In addition, the Court found that the Don Juan was overloaded. The Certificate of Inspection, dated August 27, 1979, issued by the
Philippine Coast Guard Commander at Iloilo City stated that the total number of persons allowed on the ship was 864, of whom 810 are
passengers, but there were actually 1,004 on board the vessel when it sank, 140 persons more than the maximum number that could
be safely carried by it.
Taking these circumstances together, and the fact that the M/V Don Juan, as the faster and better-equipped vessel, could have avoided
a collision with the PNOC tanker, this Court held that even if the Tacloban City had been at fault for failing to observe an internationally-
recognized rule of navigation, the Don Juan was guilty of contributory negligence. Through Justice Feliciano, this Court held:
The grossness of the negligence of the "Don Juan" is underscored when one considers the foregoing circumstances in the
context of the following facts: Firstly, the "Don Juan" was more than twice as fast as the "Tacloban City." The "Don Juan's" top
speed was 17 knots; while that of the "Tacloban City" was 6.3. knots. Secondly, the "Don Juan" carried the full complement of
officers and crew members specified for a passenger vessel of her class. Thirdly, the "Don Juan" was equipped with radar
which was functioning that night. Fourthly, the "Don Juan's officer on-watch had sighted the "Tacloban City" on his radar
screen while the latter was still four (4) nautical miles away. Visual confirmation of radar contact was established by the "Don
Juan" while the "Tacloban City" was still 2.7 miles away. In the total set of circumstances which existed in the instant case, the
"Don Juan," had it taken seriously its duty of extraordinary diligence, could have easily avoided the collision with the "Tacloban
City." Indeed, the "Don Juan" might well have avoided the collision even if it had exercised ordinary diligence merely.
It is true that the "Tacloban City" failed to follow Rule 18 of the International Rules of the Road which requires two (2) power-
driven vessels meeting end on or nearly end on each to alter her course to starboard (right) so that each vessel may pass on
the port side (left) of the other. The "Tacloban City," when the two (2) vessels were only three-tenths (0.3) of a mile apart,
turned (for the second time) 15° to port side while the "Don Juan" veered hard to starboard. . . . [But] "route observance" of the
International Rules of the Road will not relieve a vessel from responsibility if the collision could have been avoided by proper
care and skill on her part or even by a departure from the rules.
In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it was still a long way off was negligent in failing
to take early preventive action and in allowing the two (2) vessels to come to such close quarters as to render the collision
inevitable when there was no necessity for passing so near to the "Tacloban City" as to create that hazard or inevitability, for
the "Don Juan" could choose its own distance. It is noteworthy that the "Tacloban City," upon turning hard to port shortly
before the moment of collision, signalled its intention to do so by giving two (2) short blasts with its horn. The "Don Juan" gave
no answering horn blast to signal its own intention and proceeded to turn hard to starboard.
We conclude that Capt. Santisteban and Negros Navigation are properly held liable for gross negligence in connection with the
collision of the "Don Juan" and "Tacloban City" and the sinking of the "Don Juan" leading to the death of hundreds of
passengers. . . . 5

Petitioner criticizes the lower court's reliance on the Mecenas case, arguing that, although this case arose out of the same incident as
that involved in Mecenas, the parties are different and trial was conducted separately. Petitioner contends that the decision in this case
should be based on the allegations and defenses pleaded and evidence adduced in it or, in short, on the record of this case.
The contention is without merit. What petitioner contends may be true with respect to the merits of the individual claims against
petitioner but not as to the cause of the sinking of its ship on April 22, 1980 and its liability for such accident, of which there can only be
one truth. Otherwise, one would be subscribing to the sophistry: truth on one side of the Pyrenees, falsehood on the other!
Adherence to the Mecenas case is dictated by this Court's policy of maintaining stability in jurisprudence in accordance with the legal
maxim "stare decisis et non quieta movere" (Follow past precedents and do not disturb what has been settled.) Where, as in this case,
the same questions relating to the same event have been put forward by parties similarly situated as in a previous case litigated and
decided by a competent court, the rule of stare decisis is a bar to any attempt to relitigate the same issue. In Woulfe v. Associated
6

Realties Corporation, the Supreme Court of New Jersey held that where substantially similar cases to the pending case were
7

presented and applicable principles declared in prior decisions, the court was bound by the principle of stare decisis. Similarly, in State
ex rel. Tollinger v. Gill, it was held that under the doctrine of stare decisis a ruling is final even as to parties who are strangers to the
8

original proceeding and not bound by the judgment under the res judicata doctrine. The Philadelphia court expressed itself in this wise:
"Stare decisis simply declares that, for the sake of certainty, a conclusion reached in one case should be applied to those which follow,
if the facts are substantially the same, even though the parties may be different." Thus, in J.M. Tuason v. Mariano, supra, this Court
9

relied on its rulings in other cases involving different parties in sustaining the validity of a land title on the principle of "stare decisis et
non quieta movere."
Indeed, the evidence presented in this case was the same as those presented in the Mecenas case, to wit:
Document Mecenas case This case
Decision of Commandant, Exh. 10 Exh. 11-B-NN/X
10

Phil. Coast Guard

in BMI Case No.
415-80 dated 3/26/81
Decision of the Minister Exh. 11 Exh. ZZ
11

of National Defense
dated 3/12/82
Resolution on the Exh. 13 Exh. AAA
12

motion for reconsideration (private

of the decision of the respondents)
Minister of National
defense dated 7/27/84
Certificate of Exh. 1-A Exh. 19-NN
13

inspection dated
8/27/79
Certificate of Stability Exh. 6-A Exh. 19-D-NN
14

dated 12/16/76
Nor is it true that the trial court merely based its decision on the Mecenas case. The trial court made its own independent findings on
the basis of the testimonies of witnesses, such as Senior Third Mate Rogelio de Vera, who incidentally gave substantially the same
testimony on petitioner's behalf before the Board of Marine Inquiry. The trial court agreed with the conclusions of the then Minister of
National Defense finding both vessels to be negligent.
Third. The next issue is whether petitioner is liable to pay damages notwithstanding the total loss of its ship. The issue is not one of first
impression. The rule is well-entrenched in our jurisprudence that a 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. 15

In Mecenas, this Court found petitioner guilty of negligence in (1) allowing or tolerating the ship captain and crew members in playing
mahjong during the voyage, (2) in failing to maintain the vessel seaworthy and (3) in allowing the ship to carry more passengers than it
was allowed to carry. Petitioner is, therefore, clearly liable for damages to the full extent.
Fourth. Petitioner contends that, assuming that the Mecenas case applies, private respondents should be allowed to claim only
P43,857.14 each as moral damages because in the Mecenas case, the amount of P307,500.00 was awarded to the seven children of
the Mecenas couple. Under petitioner's formula, Ramon Miranda should receive P43,857.14, while the De la Victoria spouses should
receive P97,714.28.
Here is where the principle of stare decisis does not apply in view of differences in the personal circumstances of the victims. For that
matter, differentiation would be justified even if private respondents had joined the private respondents in the Mecenas case. The
doctrine of stare decisis works as a bar only against issues litigated in a previous case. Where the issue involved was not raised nor
presented to the court and not passed upon by the court in the previous case, the decision in the previous case is not stare decisis of
the question presently presented. The decision in the Mecenas case relates to damages for which petitioner was liable to the
16

claimants in that case.

In the case at bar, the award of P300,000.00 for moral damages is reasonable considering the grief petitioner Ramon Miranda suffered
as a result of the loss of his entire family. As a matter of fact, three months after the collision, he developed a heart condition
undoubtedly caused by the strain of the loss of his family. The P100,000.00 given to Mr. and Mrs. de la Victoria is likewise reasonable
and should be affirmed.
As for the amount of civil indemnity awarded to private respondents, the appellate court's award of P50,000.00 per victim should be
sustained. The amount of P30,000.00 formerly set in De Lima v. Laguna Tayabas Co., Heirs of Amparo delos Santos v. Court of
17

Appeals, and Philippine Rabbit Bus Lines, Inc. v. Intermediate Appellate Court as benchmark was subsequently increased to
18 19

P50,000.00 in the case of Sulpicio Lines, Inc. v. Court of Appeals, which involved the sinking of another interisland ship on October
20

24, 1988.
We now turn to the determination of the earning capacity of the victims. With respect to Ardita Miranda, the trial court awarded
damages computed as follows: 21

In the case of victim Ardita V. Miranda whose age at the time of the accident was 48 years, her life expectancy was computed
to be 21.33 years, and therefore, she could have lived up to almost 70 years old. Her gross earnings for 21.33 years based on
P10,224.00 per annum, would be P218,077.92. Deducting therefrom 30% as her living expenses, her net earnings would be
P152,654.55, to which plaintiff Ramon Miranda is entitled to compensatory damages for the loss of earning capacity of his
wife. In considering 30% as the living expenses of Ardita Miranda, the Court takes into account the fact that plaintiff and his
wife were supporting their daughter and son who were both college students taking Medicine and Law respectively.
In accordance with the ruling in Villa-Rey Transit, Inc. v. Court of Appeals, we think the life expectancy of Ardita Miranda was correctly
22

determined to be 21.33 years, or up to age 69. Petitioner contends, however, that Mrs. Miranda would have retired from her job as a
public school teacher at 65, hence her loss of earning capacity should be reckoned up to 17.33 years only.
The accepted formula for determining life expectancy is 2/3 multiplied by (80 minus the age of the deceased). It may be that in the
Philippines the age of retirement generally is 65 but, in calculating the life expectancy of individuals for the purpose of determining loss
of earning capacity under Art. 2206(1) of the Civil Code, it is assumed that the deceased would have earned income even after
retirement from a particular job. In this case, the trial court took into account the fact that Mrs. Miranda had a master's degree and a
good prospect of becoming principal of the school in which she was teaching. There was reason to believe that her income would have
increased through the years and she could still earn more after her retirement, e.g., by becoming a consultant, had she not died. The
gross earnings which Mrs. Miranda could reasonably be expected to earn were it not for her untimely death was, therefore, correctly
computed by the trial court to be P218,077.92 (given a gross annual income of P10,224.00 and life expectancy of 21.33 years).
Petitioner contends that from the amount of gross earnings, 60% should be deducted as necessary living expenses, not merely 30% as
the trial court allowed. Petitioner contends that 30% is unrealistic, considering that Mrs. Miranda's earnings would have been subject to
taxes, social security deductions and inflation.
We agree with this contention. In Villa-Rey Transit, Inc. v. Court of Appeals, the Court allowed a deduction of P1,184.00 for living
23

expenses from the P2,184.00 annual salary of the victim, which is roughly 54.2% thereof. The deceased was 29 years old and a
training assistant in the Bacnotan Cement Industries. In People v. Quilation, the deceased was a 26-year old laborer earning a daily
24

wage. The court allowed a deduction of P120,000.00 which was 51.3% of his annual gross earnings of P234,000.00. In People
v. Teehankee, the court allowed a deduction of P19,800.00, roughly 42.4% thereof from the deceased's annual salary of P46,659.21.
25

The deceased, Maureen Hultman, was 17 years old and had just received her first paycheck as a secretary. In the case at bar, we hold
that a deduction of 50% from Mrs. Miranda's gross earnings (P218,077.92) would be reasonable, so that her net earning capacity
should be P109,038.96. There is no basis for supposing that her living expenses constituted a smaller percentage of her gross income
than the living expenses in the decided cases. To hold that she would have used only a small part of her income for herself, a larger
part going to the support of her children would be conjectural and unreasonable.
As for Elfreda de la Victoria, the trial court found that, at the time of her death, she was 26 years old, a teacher in a private school in
Malolos, Bulacan, earning P6,192.00 per annum. Although a probationary employee, she had already been working in the school for
two years at the time of her death and she had a general efficiency rating of 92.85% and it can be presumed that, if not for her untimely
death, she would have become a regular teacher. Hence, her loss of earning capacity is P111,456.00, computed as follows:
net earning = life x gross less reasonable
capacity (x) expectancy annual & necessary
income living expenses
(50%)
x = [2(80-26)] x [P6,192.00 - P3,096.00]
————
3
= 36 x 3,096.00
= P111,456.00
On the other hand, the award of actual damages in the amount of P23,075.00 was determined by the Court of Appeals on the basis
receipts submitted by private respondents. This amount is reasonable considering the expenses incurred by private respondent
Miranda in organizing three search teams to look for his family, spending for transportation in going to places such as Batangas City
and Iloilo, where survivors and the bodies of other victims were found, making long distance calls, erecting a monument in honor of the
four victims, spending for obituaries in the Bulletin Today and for food, masses and novenas.
Petitioner's contention that the expenses for the erection of a monument and other expenses for memorial services for the victims
should be considered included in the indemnity for death awarded to private respondents is without merit. Indemnity for death is given
to compensate for violation of the rights of the deceased, i.e., his right to life and physical integrity. On the other hand, damages
26

incidental to or arising out of such death are for pecuniary losses of the beneficiaries of the deceased.
As for the award of attorney's fees, we agree with the Court of Appeals that the amount of P40,000.00 for private respondent Ramon
Miranda and P15,000.00 for the de la Victoria spouses is justified. The appellate court correctly held:
The Mecenas case cannot be made the basis for determining the award for attorney's fees. The award would naturally vary or
differ in each case. While it is admitted that plaintiff-appellee Ramon Miranda who is himself a lawyer, represented also
plaintiffs-appellees Dela Victoria spouses, we note that separate testimonial evidence were adduced by plaintiff-appellee
Ramon Miranda (TSN, February 26, 1982, p. 6) and plaintiffs-appellees spouses Dela Victoria (TSN, August 13, 1981, p. 43).
Considering the amount of work and effort put into the case as indicated by the voluminous transcripts of stenographic notes,
we find no reason to disturb the award of P40,000.00 for plaintiff-appellee Ramon Miranda and P15,000.00 for plaintiffs-
appellees Dela Victoria spouses. 27

The award of exemplary damages should be increased to P300,000.00 for Ramon Miranda and P100,000.00 for the de la Victoria
spouses in accordance with our ruling in the Mecenas case:
Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its
consequence by creating negative incentives or deterrents against such behaviour. In requiring compliance with the standard
of extraordinary diligence, a standard which is in fact that of the highest possible degree of diligence, from common carriers
and in creating a presumption of negligence against them, the law seeks to compel them to control their employees, to tame
their reckless instincts and to force them to take adequate care of human beings and their property. The Court will take judicial
notice of the dreadful regularity with which grievous maritime disasters occur in our waters with massive loss of life. The bulk
of our population is too poor to afford domestic air transportation. So it is that notwithstanding the frequent sinking of
passenger vessels in our waters, crowds of people continue to travel by sea. This Court is prepared to use the instruments
given to it by the law for securing the ends of law and public policy. One of those instruments is the institution of exemplary
damages; one of those ends, of special importance in an archipelagic state like the Philippines, is the safe and reliable
carriage of people and goods by sea. 28

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with modification and petitioner is ORDERED to pay private
respondents damages as follows:
To private respondent Ramon Miranda:
P23,075.00 for actual damages;
P109,038.96 as compensatory damages for loss of
earning capacity of his wife;
P150,000.00 as compensatory damages for wrongful
death of three (3) victims;
P300,000.00 as moral damages;
P300,000.00 as exemplary damages, all in the total
amount of P882,113.96; and
P40,000.00 as attorney's fees.
To private respondents Spouses Ricardo and Virginia de la Victoria:
P12,000.00 for actual damages;
P111,456.00 as compensatory damages for loss of
earning capacity;
P50,000.00 as compensatory damages for wrongful
death;
P100,000.00 as moral damages;
P100,000.00 as exemplary damages, all in the total
amount of P373,456.00; and
P15,000.00 as attorney's fees.
Petitioners are further ordered to pay costs of suit.
In the event the Philippine National Oil Company and/or the PNOC Shipping and Transport Corporation pay or are required to pay all or
a portion of the amounts adjudged, petitioner Negros Navigation Co., Inc. shall reimburse either of them such amount or amounts as
either may have paid, and in the event of failure of Negros Navigation Co., Inc., to make the necessary reimbursement, PNOC and/or
PNOC/STC shall be entitled to a writ of execution without need of filing another action.
SO ORDERED.
Regalado and Puno, JJ., concur.

THIRD DIVISION
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 Decision 3 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. 10 1avvphil.net

Franco-Belgian Services and Zuellig responded, claiming that they exercised extraordinary diligence in handling the shipment while it
was in their possession; its vessel was seaworthy; and the proximate cause of the loss of cargo was a fortuitous event. They also filed a
cross-claim against petitioner alleging that the loss occurred during the transshipment with petitioner and so liability should rest with
petitioner.
For its part, petitioner also raised the same defense that the ship was seaworthy. It alleged that the sinking of M/V P. Aboitiz was due to
an unforeseen event and without fault or negligence on its part. It also alleged that in accordance with the real and hypothecary nature
of maritime law, the sinking of M/V P. Aboitiz extinguished its liability on the loss of the cargoes.11
Meanwhile, the Board of Marine Inquiry (BMI) conducted its own investigation to determine whether the captain and crew were
administratively liable. However, petitioner neither informed respondent nor the trial court of the investigation. The BMI exonerated the
captain and crew of any administrative liability; and declared the vessel seaworthy and concluded that the sinking was due to the
vessel’s exposure to the approaching typhoon.
On November 20, 1989, the trial court, citing the Court of Appeals decision in General Accident Fire and Life Assurance Corporation v.
Aboitiz Shipping Corporation12 involving the same incident, ruled in favor of respondent. It held petitioner liable for the total value of the
lost cargo plus legal interest, thus:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of New India and against Aboitiz ordering the latter to
pay unto the former the amount of P142,401.60, plus legal interest thereon until the same is fully paid, attorney’s fees equivalent to
fifteen [percent] (15%) of the total amount due and the costs of suit.
The complaint with respect to Franco and Zuellig is dismissed and their counterclaim against New India is likewise dismissed
SO ORDERED.13 1avvphil.net

Petitioner elevated the case to the Court of Appeals and presented the findings of the BMI. However, on August 29, 2002, the appellate
court affirmed in toto the trial court’s decision. It held that the proceedings before the BMI was only for the administrative liability of the
captain and crew, and was unilateral in nature, hence not binding on the courts. Petitioner moved for reconsideration but the same was
denied on January 23, 2003.
Hence, this petition for review, alleging that the Court of Appeals gravely erred in:
I.
x x x DISREGARDING THE RULINGS OF THE HONORABLE SUPREME COURT ON THE APPLICATION OF THE RULE ON
LIMITED LIABILITY UNDER ARTICLE 587, 590 AND 837 OF THE CODE OF COMMERCE TO CASES INVOLVING THE SINKING
OF THE M/V "P. ABOITIZ;
A.
x x x NOT APPLYING THE RULINGS IN THE CASES OF MONARCH INSURANCE CO., INC. ET AL. V. COURT OF APPEALS ET
AL. AND ABOITIZ SHIPPING CORPORATION V. GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, LTD.;
B.
x x x RULING THAT THE ISSUE ON THE APPLICATION OF THE RULE ON LIMITED LIABILITY UNDER ARTICLES 587, 590 AND
837 OF THE CODE OF COMMERCE HAD BEEN CONSIDERED AND PASSED UPON IN ITS DECISION;
II.
x x x NOT LIMITING THE AWARD OF DAMAGES TO RESPONDENT TO ITS PRO-RATA SHARES IN THE INSURANCE
PROCEEDS FROM THE SINKING OF THE M/V "P. ABOITIZ". 14
Stated simply, we are asked to resolve whether the limited liability doctrine, which limits respondent’s award of damages to its pro-rata
share in the insurance proceeds, applies in this case.
Petitioner, citing Monarch Insurance Co. Inc. v. Court of Appeals, 15 contends that respondent’s claim for damages should only be
against the insurance proceeds and limited to its pro-rata share in view of the doctrine of limited liability.
Respondent counters that the doctrine of real and hypothecary nature of maritime law is not applicable in the present case because
petitioner was found to have been negligent. Hence, according to respondent, petitioner should be held liable for the total value of the
lost cargo.
It bears stressing that this Court has variedly applied the doctrine of limited liability to the same incident – the sinking of M/V P.
Aboitiz on October 31, 1980. Monarch, the latest ruling, tried to settle the conflicting pronouncements of this Court relative to the sinking
of M/V P. Aboitiz. In Monarch, we said that the sinking of the vessel was not due to force majeure, but to its unseaworthy
condition.16 Therein, we found petitioner concurrently negligent with the captain and crew. 17 But the Court stressed that the
circumstances therein still made the doctrine of limited liability applicable. 18
Our ruling in Monarch may appear inconsistent with the exception of the limited liability doctrine, as explicitly stated in the earlier part of
the Monarch decision. An exception to the limited liability doctrine is when the damage is due to the fault of the shipowner or to the
concurrent negligence of the shipowner and the captain. In which case, the shipowner shall be liable to the full-extent of the
damage.19 We thus find it necessary to clarify now the applicability here of the decision in Monarch.
From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over
the goods they transport according to all the circumstances of each case. 20 In the event of loss, destruction or deterioration of the
insured goods, common carriers are responsible, unless they can prove that the loss, destruction or deterioration was brought about by
the causes specified in Article 1734 of the Civil Code.21 In all other cases, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence. 22 Moreover, where the vessel is found
unseaworthy, the shipowner is also presumed to be negligent since it is tasked with the maintenance of its vessel. Though this duty can
be delegated, still, the shipowner must exercise close supervision over its men. 23
In the present case, petitioner has the burden of showing that it exercised extraordinary diligence in the transport of the goods it had on
board in order to invoke the limited liability doctrine. Differently put, to limit its liability to the amount of the insurance proceeds,
petitioner has the burden of proving that the unseaworthiness of its vessel was not due to its fault or negligence. Considering the
evidence presented and the circumstances obtaining in this case, we find that petitioner failed to discharge this burden. It initially
attributed the sinking to the typhoon and relied on the BMI findings that it was not at fault. However, both the trial and the appellate
courts, in this case, found that the sinking was not due to the typhoon but to its unseaworthiness. Evidence on record showed that the
weather was moderate when the vessel sank. These factual findings of the Court of Appeals, affirming those of the trial court are not to
be disturbed on appeal, but must be accorded great weight. These findings are conclusive not only on the parties but on this Court as
well.24
In contrast, the findings of the BMI are not deemed always binding on the courts. 25 Besides, exoneration of the vessel’s officers and
crew by the BMI merely concerns their respective administrative liabilities. 26 It does not in any way operate to absolve the common
carrier from its civil liabilities arising from its failure to exercise extraordinary diligence, the determination of which properly belongs to
the courts.27
Where the shipowner fails to overcome the presumption of negligence, the doctrine of limited liability cannot be applied. 28 Therefore, we
agree with the appellate court in sustaining the trial court’s ruling that petitioner is liable for the total value of the lost cargo.
WHEREFORE, the petition is DENIED for lack of merit. The Decision dated August 29, 2002 and Resolution dated January 23, 2003 of
the Court of Appeals in CA-G.R. CV No. 28770 are AFFIRMED.
Costs against petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 98243 July 1, 1992

ALEJANDRO ARADA, doing business under the name and style "SOUTH NEGROS ENTERPRISES", petitioner,
vs.
HONORABLE COURT OF APPEALS, respondents.

PARAS, J.:
This is a petition for review on certiorari which seeks to annul and set aside the decision * of the Court of Appeals dated April 8, 1991 in CA-G.R.
CV No. 20597 entitled "San Miguel Corporation v. Alejandro Arada, doing business under the name and style "South Negros Enterprises", reversing the decision
of the RTC, Seventh Judicial Region, Branch XII, Cebu City, ordering petitioner to pay the private respondent tho amount of P172,284.80 representing the value of
the cargo lost on board the ill-fated, M/L Maya with interest thereon at the legal rate from the date of the filing of the complaint on March 25, 1983 until fully paid,
and the costs.
The undisputed facts of the case are as follows: Alejandro Arada, herein petitioner, is the proprietor and operator of the firm South
Negros Enterprises which has been organized and established for more than ten (10) years. It is engaged in the business of small scale
shipping as a common carrier, servicing the hauling of cargoes of different corporations and companies with the five (5) vessels it was
operating (Rollo, p. 121).
On March 24, 1982. petitioner entered into a contract with private respondent to safely transport as a common carrier, cargoes of the
latter from San Carlos City, Negros Occidental to Mandaue City using one of petitioner's vessels, M/L Maya. The cargoes of private
respondent consisted of 9,824 cases of beer empties valued at P176,824.80, were itemized as follows:
On March 24, 1982, petitioner thru its crew master, Mr. Vivencio Babao, applied for a clearance with the Philippine Coast Guard for M/L
Maya to leave the port of San Carlos City, but due to a typhoon, it was denied clearance by SNI Antonio Prestado PN who was then
assigned at San Carlos City Coast Guard Detachment (Rollo, p. 122).
On March 25, 1982 M/L Maya was given clearance as there was no storm and the sea was calm. Hence, said vessel left for Mandaue
City. While it was navigating towards Cebu, a typhoon developed and said vessel was buffeted on all its sides by big waves. Its rudder
was destroyed and it drifted for sixteen (16) hours although its engine was running.
On March 27, 1982 at about 4:00 a.m., the vessel sank with whatever was left of its cargoes. The crew was rescued by a passing pump
boat and was brought to Calanggaman Island. Later in the afternoon, they were brought to Palompon, Leyte, where Vivencio Babao
filed a marine protest (Rollo, p. 10).
On the basis of such marine protest, the Board of Marine Inquiry conducted a hearing of the sinking of M/L Maya wherein private
respondent was duly represented. Said Board made its findings and recommendation dated November 7, 1983, the dispositive portion
of which reads as:
WHEREFORE, premises considered, this Board recommends as it is hereby recommended that the owner/operator,
officers and crew of M/L Maya be exonerated or absolved from any administrative liability on account of this incident
(Exh. 1).
The Board's report containing its findings and recommendation was then forwarded to the headquarters of the Philippine Coast Guard
for appropriate action. On the basis of such report, the Commandant of the Philippine Coast Guard rendered a decision dated
December 21, 1984 in SBMI Adm. Case No. 88-82 exonerating the owner/operator officers and crew of the ill-fated M/L Maya from any
administrative liability on account of said incident (Exh. 2).
On March 25, 1983, Private respondent filed a complaint in the Regional Trial Court its first cause of action being for the recovery of the
value of the cargoes anchored on breach of contract of carriage. After due hearing, said court rendered a decision dated July 18, 1988,
the dispositive portion of which reads
WHEREFORE, judgment is hereby rendered as follows:
(1) With respect to the first cause of action, claim of plaintiff is hereby dismissed;
(2) Under the second cause of action, defendant must pay plaintiff the sum of P2,000.00;
(3) In the third cause of action, the defendant must pay plaintiff the sum of P2,849.20;
(4) Since the plaintiff has withheld the payment of P12,997.47 due the defendynt, the plaintiff should deduct the
amount of P4,849.20 from the P12,997.47 and the balance of P8,148.27 must be paid to the defendant; and
(5) Defendant's counterclaim not having been substantiated by evidence is likewise dismissed. NO COSTS. (Orig.
Record, pp. 193-195).
Thereafter, private respondent appealed said decision to the Court of Appeals claiming that the trial court erred in —
(1) holding that nothing was shown that the defendant, or any of his employees who manned the M/L Maya was
negligent in any way nor did they fail to observe extraordinary diligence over the cargoes of the plaintiff; and
(2) holding that the sinking of said vessel was caused by the storm, consequently, dismissing the claim of plaintiff in
its first cause of action for breach of contract of carriage of goods (Rollo, pp. 33-34; Decision, pp. 3-4).
In its decision Promulgated on April 8, 1991, the Court of Appeals reversed the decision of the court a quo, the dispositive portion and
the dispositive part of its decision reads as:
WHEREFORE, that part of the Judgment appeal6d from is REVERSED and the appellee Aleiandro Arada, doing
business by the name and style, "South Negros Enterprises", ordered (sic) to pay unto the appellant San Miguel
Corporation the amount of P176,824.80 representing the value of the cargo lost on board the ill-fated vessel, M/L
Maya, with interest thereon at the legal rate from date of the filing of the complaint on March 25, 1983, until fully paid,
and the costs. (Rollo, p. 37)
The Court of Appeals ruled that "in view of his failure to observe extraordinary diligence over the cargo in question and his negligence
previous to the sinking of the carrying vessel, as above shown, the appellee is liable to the appellant for the value of the lost cargo.
Hence the present recourse.
On November 20, 1991, this Court gave due course to the petition. The pivotal issue to be resolved is whether or not petitioner is liable
for the value of the lost cargoes.
Petitioner contends that it was not in the exercise of its function as a common carrier when it entered into a contract with private
respondent,but was then acting as a private carrier not bound by the requirement of extraordinary diligence (Rollo, p. 15) and that the
factual findings of the Board of Marine Inquiry and the Special Board of Marine Inquiry are binding and conclusive on the Court (Rollo,
pp. 16-17).
Private respondent counters that M/L Maya was in the exercise of its function as a common carrier and its failure to observe the
extraordinary diligence required of it in the vigilance over their cargoes makes Petitioner liable for the value of said cargoes.
The petition is devoid of merit.
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 (Art. 1732 of the New Civil Code).
In the case at bar, there is no doubt that petitioner was exercising its function as a common carrier when it entered into a contract with
private respondent to carry and transport the latter's cargoes. This fact is best supported by the admission of petitioner's son, Mr. Eric
Arada, who testified as the officer-in-charge for operations of South Negros Enterprises in Cebu City. In substance his testimony on
January 14, 1985 is as follows:
Q. How many vessels are you operating?
A. There were all in all around five (5).
Q. And you were entering to service hauling of cargoes to different companies, is that correct?
A. Yes, sir.
Q. In one word, the South Negros Enterprises is engaged in the business of common carriers, is
that correct?
A. Yes, sir,
Q. And in fact, at the time of the hauling of the San Miguel Beer, it was also in the same category
as a common carrier?
A. Yes, sir,
(TSN. pp. 3-4, Jan. 29, 1985)
A common carrier, both from the nature of its business and for insistent reasons of public policy is burdened by law with the duty of
exercising extraordinary diligence not only in ensuring the safety of passengers, but in caring for the goods transported by it. The loss
or destruction or deterioration of goods turned over to the common carrier for the conveyance to a designated destination raises
instantly a presumption of fault or negligence on the part of the carrier, save only where such loss, destruction or damage arises from
extreme circumstances such as a natural disaster or calamity ... (Benedicto v. IAC, G.R. No. 70876, July 19, 1990, 187 SCRA 547)
(Emphasis supplied).
In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only
cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize the loss before, during and after the
occurrence of flood, storm or other natural disaster in order that the common carrier may be exempted from liability for the destruction
or deterioration of the goods (Article 1739, New Civil Code).
In the instant case, the appellate court was correct in finding that petitioner failed to observe the extraordinary diligence over the cargo
in question and he or the master in his employ was negligent previous to the sinking of the carrying vessel. In substance, the decision
reads:
... VIVENCIO BABAO, the master of the carrying vessel, knew that there was a typboon coming before his departure
but did not check where it was.
xxx xxx xxx
If only for the fact that he was first denied clearance to depart on March 24, 1982, obviously because of a typhoon
coming, Babao, as master of the vessel, should have verified first where the typhoon was before departing on March
25, 1982. True, the sea was calm at departure time. But that might be the calm before the storm. Prudence dictates
that he should have ascertained first where the storm was before departing as it might be on his path. (Rollo, pp. 35-
36)
Respondent court's conclusion as to the negligence of petitioner is supported by evidence. It will be noted that Vivencio Babao knew of
the impending typhoon on March 24, 1982 when the Philippine Coast Guard denied M/L Maya the issuance of a clearance to sail. Less
than 24 hours elapsed since the time of the denial of said clearance and the time a clearance to sail was finally issued on March 25,
1982. Records will show that Babao did not ascertain where the typhoon was headed by the use of his vessel's barometer and radio
(Rorlo, p. 142). Neither did the captain of the vessel monitor and record the weather conditions everyday as required by Art, 612 of the
Code of Commerce (Rollo, pp. 142-143). Had he done so while navigating for 31 hours, he could have anticipated the strong winds and
big waves and taken shelter (Rollo, pp- 36; 145). His testimony on May 4, 1982 is as follows:
Q. Did you not check on your own where the typhoon was?
A. No. sir. (TSN, May 4, 1982, pp. 58-59)
Noteworthy is the fact that as Per official records of the Climatological Division of the Philippine Atmospheric, Geophysical and
Astronomical Services Administration (PAG-ASA for brevity) issued by its Chief of Climatological Division, Primitivo G. Ballan, Jr. as to
the weather and sea conditions that prevailed in the vicinity of Catmon, Cebu during the period March 25-27, 1982, the sea conditions
on March 25, 1982 were slight to rough and the weather conditions then prevailing during those times were cloudy skies with
rainshowers and the small waves grew larger and larger, to wit:
(Exh. 3)
A common carrier is obliged to observe extraordinary diligence and the failure of Babao to ascertain the direction of the storm and the
weather condition of the path they would be traversing, constitute lack of foresight and minimum vigilance over its cargoes taking into
account the surrounding circumstances of the case.
While the goods are in the possession of the carrier, it is but fair that it exercises 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 (Art. 1756, Civil Code, Aboitiz Shipping Corporation v. Court of Appeals, G.R. No.
89757, Aug. 6, 1990, 188 SCRA 387).
Furthermore, the records show that the crew of M/L Maya did not have the required qualifications provided for in P.D. No. 97 or the
Philippine Merchant Marine Officers Law, all of whom were unlicensed. While it is true that they were given special permit to man the
vessel, such permit was issued at the risk and responsibility of the owner (Rollo, p. 36).
Finally, petitioner claims that the factual findings of the Special Board of Marine Inquiry exonerating the owner/operator, crew officers of
the ill-fated vessel M/L Maya from any administrative liability is binding on the court.
In rejecting petitioner's claim, respondent court was correct in ruling that "such exoneration was but with respect to the administrative
liability of the owner/operator, officers and crew of the ill-fated" vessel. It could not have meant exoneration of appellee from liability as
a common carrier for his failure to observe extraordinary diligence in the vigilance over the goods it was transporting and for the
negligent acts or omissions of his employees. Such is the function of the Court, not the Special Board of Marine Inquiry." (Rollo, P. 37,
Annex A, p. 7)
The Philippine Merchant Marine Rules and Regulations particularly Chapter XVI thereof entitled "Marine Investigation and Suspension
and Revocation Proceedings" prescribes the Rules governing maritime casualties or accidents, the rules and Procedures in
administrative investigation of all maritime cases within the jurisdiction or cognizance of the Philippine Coast Guard and the grounds for
suspension and revocation of licenses/certificates of marine officers and seamen (1601 — SCOPE); clearly, limiting the jurisdiction of
the Board of Marine Inquiry and Special Board of Marine Inquiry to the administrative aspect of marine casualties in so far as it involves
the shipowners and officers.
PREMISES CONSIDERED, the appealed decision is AFFIRMED.
SO ORDERED.
Narvasa, C. J., (Chairman), Regalado and Nocon, JJ., concur.
Padilla, J. took no part.