(2) Monarch Insurance vs. CA

These are three consolidated cases. All cases arose from the loss of cargoes of various shippers when the M/VP. Aboitiz, a common carrier owned and operated by Aboitiz, sank on her voyage from HK to Manila. The claims numbered 110 for the total amount of P41,230,115.00 which is al-most thrice the amount of the insurance proceeds of P14,500,000.00 plus earned freight of 500,000 according to Aboitiz.

Facts: The M/VP. Aboitiz left HK for Manila at about 7:30pm of 29 October 1980 after securing a departure clearance from the HK Port Authority. The departure was delayed for 2 hours because he (Capt. Racines) was observing the direction of the storm that crossed the Bicol Region. He pro-ceeded with the voyage only after being informed that the storm had abated. The M/VP. Aboitiz sank at about 7pm of 31 October 1980.

Justo Iglesias, meteorologista of PAGSASA, testified in both cases that during the inclusive dates of Oct. 28-31 1980, a stormy weather condition prevailed within the Philippine area of responsibility, particularly along the sea rout from HK to Manila, because of tropical depression “Yoning”.

Petitioners Allied and Equitable refuted the allegation that the M/VP. Aboitiz and its cargo were lost due to force majeure, relying mainly on the marine protest filed by Capt. Racines under scale No. 4 that describes the sea condition as “moderate breeze,” and “small waves becoming longer, fairly frequent white horses.”

Monarch and Tabacalera are insurance carriers of lost cargoes. They indemnified the shippers and were consequently surrogated to their rights, interests and actions against Aboitiz. Because Aboitiz refused to compensate Monarch, it filed two complaints against Aboitiz. In its answer with counter-claim, Aboitiz rejected responsibility for the claims on the ground that the sinking of its cargo ves-sel was due to force major or ac act of God.

Aboitiz had repeatedly failed to appear in court, it then allowed Monarch and Tabacalera to present evidence ex-parte. The survey established that on her voyage to Manila from HK, the vessel did not encounter weather so inclement that Aboitiz would be exculpated from liability for losses. The survey added that the seaworthiness of the vessel was in question especially because the breaches of the hull and the serious flooding of 2 cargo holds occurred simultaneously in “sea-sonal weather.”

Consequently, Monarch and Tabacalera moved for execution of judgment. The trial court granted the motion and issued separate writs of execution. However, Aboitiz, invoking the real and hy-pothecary nature of liability in maritime law, filed an urgent motion to quast the writs of execu-tion.

According to Aboitiz, since its liability is limited to the value of the vessel which was insuffi-cient to satisfy the aggregate claims of all 110 claimants, to indemnify Monarch and Taba-calera ahead of the other claimants would be prejudicial to the latter.

Aboitiz filed with the CA a petition for certiorari and prohibition with prayer for preliminary in-junction and/or temporary restraining order, the same was granted by the court.

Issue: Whether the respondent CA erred in finding, upon review, that Aboitiz is entitled to the ben-efit of the limited liability rule.

Held: NO.

Rule on Limited LiabilityThe petitioners assert in common that the vessel M/VP. Aboitiz did not sink by reason of force ma-jor but because of its unseaworthiness and the concurrent fault and/or negligence of Aboitiz, the captain and its crew, thereby barring Aboitiz from availing of the benefit of the limited liability rule.

In Yangco vs. Laserna, this Court elucidated on the import of Art. 587 as follows:

The provision accords a shipowner or agent the right of abandonment; and by necessary implica-tion, his liability is confined to that which he is entitlted as of right to abandon-“the vessel with all her equipments and the freight it may have earned during the voyage.” It is true that the article ap-pears to deal only with the limited liability of the shipowners or agents for damages arising from the misconduct of the captain in the care of the goods which the vessel carries, but this is a mere defi-ciency of language and in no way indicates the true extent of such liability. The consensus of au-thorities is to the effect that notwithstanding the language of the aforequoted provision, the benefit of limited liability therein provided for, applies in all cases wherein the shipowner or agent may

properly be held liable for the negligence or illicit acts of the captain.In cases where the shipowner is likewise to be blamed, Art. 587 does not apply. Such a situation

will be covered by the provisions of the Civil Code on common carriers.The CA brushed aside the issue of Aboitiz’ negligence and/or fault and proceeds to allow the appli-cation of the limited liability rule “to accomplish the aims of justice.” It elaborated thus: “To exe-cute the judgment in this case would prejudice the substantial right of other claimants who have filed suits to claim their cargoes that was lost in the vessel that sank and also against the petitioner to be ordered to pay more than what the law requires.”

After receiving the records of the instant cases, we categorically state that by the facts on record, the M/VP Aboitiz did no go under water because of the storm “Yoning.” Captain Racines also testified in open court that the ill-fated M/VP Aboitiz was 200 miles away from the storm “Yoning” when it sank.

“No vessel, no liability,” expresses in a nutshell the limited liability rule. The shipowner’s or agent’s liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. The total destruction of the vessel extin-guishes maritime liens because there is no longer any res to which it can attach.

A finding that a fortuitous event was the sole cause of the loss of the M/VP. Aboitiz would absolve from any and all liability pursuant to Art. 1734 (1) of the Civil Code which provides in part that common carriers are responsible for the loss, destruction, or deterioration of the goods they carry, unless the same is due to flood, storm, earth-quake, lightning, or other nature disaster or calamity. On the other hand, a finding that M/VP. Aboitiz sank by reason of fault and/or negligence of Aboitiz, the ship captain and crew of the M/VP Aboitiz would render inapplicable the rule on limited liability. These issues are therefore ultimately questions of fact which have been subject of conflicting determinations by the trial courts, the CA and even this Court.

There is, therefore, a need to collate all claims predatory to their satisfaction from the insur-ance proceeds on the vessel M/VP Aboitiz and its pending freightage at the time of its loss. No claimant can be given precedence over the others by the simple expedience of having completed its action earlier than the rest. In fairness to the claimants and as a matter of equity, the total proceeds of the insurance and pending should now be deposited in trust.

(3) Yangco vs Laserna 73 Phil 330

F: Petitioner Yangco's vessel SS Negros left Romblon for Manila. The captain was duly advised and his attention was called by the passengers that typhoon Signal No. 2 was up. But the boat pro-ceeded

to sail after some loading. The boat was overloaded with cargo and passengers (180 instead of only 123). After two weeks of sailing, the sea became too dangerous. The captain ordered that they re-turn to Romblon and while turning, a big wave caught them on the side causing it to capsize. Among the passengers who perished were the relatives of respondents Laserna.

In the separate civil action for damages for the death of the passengers, the CFI held Yangco liable for a total of P3,180. After the rendition of the judgment, Yangco sought to abandon the vessel to plaintiffs/respondents with all its equipments. Abandonment was denied. The CA affirmed the judg-ment.

Held : Art. 587 accords a shipowner or agent the right of abandonment; and by necessary implica-tion, his liability is confined to that which he is entitled as of right to abandon -- the vessel with all her equipments and the freight it may have earned during the voyage. In other words, such liability is limited to the value of the vessel and other things appertaining thereto such that a total loss thereof results in its extinction. Although the article appears to deal only with the limited liability of shipowners or agents for damages arising from the misconduct of the captain in the care of the

On the matter of Aboitiz’ negligence, we adhere to our ruling in Aboitiz Shipping Corporation vs. CA, that found Aboitiz, and the captain and crew of the M/VP Aboitiz to have been concurrently negligent. The said survey established that the cause of the sinking of the vessel was the leakage of water into the M/VP Aboitiz.

The failure of Aboitiz to present sufficient evidence to exculpate itself from the fault and/or negligence in the sinking of its vessel in the face of the foregoing expert testi-mony constrains us to hold that Aboitiz was concurrently at fault and/pr negli-gent with the ship captain and crew of the M/VP Aboitiz. This is in accordance with the rule that in cases involving the limited liability of shipowners, the initial bur-den of proof of negligence or unseaworthiness rests on the claimants. How-ever, once the vessel owner or any party asserts the right to limit its liability, the burden of proof as to lack of privity or knowledge on its part with respect to the matter of negligence or unseaworthiness is shifted to it. This burden, Aboitiz failed to discharge the burden of proving that the unseaworthiness of its ves-sel was not due to its fault and/or negligence should not however mean that the lim-ited liability rule will not be applied to the present cases. The peculiar circum-stances here demand that there should be no strict adherence to procedural rules on evidence lest the just claims of shippers/insurers be frustrated. The rule on limited liability should be applied in accordance with the latest ruling in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance Corpora-tion., promulgated on 21 January 1993, that claimants be treated as “creditors in an insolvent corporation whose assets are not enough to satisfy the totality of claims against it.”

goods which the vessel carries, this is a mere deficiency of language and in no way indicates the true extent of such liability, to wit, the benefit of limited liability applies in all cases (as regards both goods and passengers of the vessel) wherein the shipowner or agent may properly be held for the negligent or illicit acts of the captain.

The reason for the limited liability is the real and hypothecary nature of maritime law as distin-guished from civil law and mercantile law in general. As evidence of this real nature, 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 of the maritime creditor to retain the cargo, and the embargo and detention of the vessel in cases where the ordinary civil law would not allow more than a personal action against the debtor or person liable. Thus, even assuming that Yangco is liable for breach of contract because his relationship to the passengers rests on a contract of carriage, the exclusively real and hypothecary nature of maritime law still operates to limit his liability to the value of the vessel or to the insur-ance thereon, if any. In this case, the vessel was not insured. Whether the abandonment of the vessel sought by the petitioner in instant case was in accordance with law or not, is immaterial. The vessel having totally perished, any act of abandonment would be an idle ceremony. Petitioner is absolved from all complaints.

Facts: On the after of 26 May 1927, the steamer SS N euros left the port of Romblon on its return trip to Manila. Typhoon signal no. 2 was then up and in fact, the passengers duly advised the cap-tain before sailing. The boat was overloaded. After 2 hours of sailing, the boat encountered strong winds and rough seas between the islands of Banton and Simara. While in the act of maneuvering, the vessel was caught sidewise by a big wave which caused it to capsize and sink. Many of the pas-sengers died on the mishap. Civil actions were instituted in the CFI of Capiz, the petitioner sought to abandon the vessel to the plaintiffs in 3 cases.

Issue: Whether the shipowner or agent is liable for damages for the consequent death of its passen-gers notwithstanding the total loss of the vessel?

Held: The petitioner is absolved from all complaints. Under Art 587 - “the ship agent shall also be civilly liable for indemnities in favor of 3rd person which arise from the conduct of the captain in the vigilance over the goods which the vessels carried; BUT he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight he may have earned during the voy-age.”

Whether the abandonment of the vessel sought by the petitioner in the case was in accordance with the law or not, is immaterial. The vessel having totally perished, any act of abandonment would be idle ceremony.

“NO VESSEL, NO LIABILITY”

(4) PHILIPPINE SHIPPING CO. vs. VERGARA

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