TRANSPORTATION LAWS

CASE DIGESTS FIRST SET

Luque V. Villegas JG Summit Holdings, Inc., V. CA

Kmu Labor Center V. Garcia

SULPICIO LINES CASES

Caltex V. Sulpicio Lines, Inc. Sulpicio V. CA

Sulpicio Lines, Inc. V. First Lepanto-Taisho Insurance Corporation Sulpicio Lines, Inc. V. Curso

ABOITIZ CASES Aboitiz Shipping Corporation vs CA

Aboitiz Shipping Corp vs General Fire And Life Assurance Corp Aboitiz Shipping Corporation vs New India Assurance Company, Ltd.,

LUQUE VS VILLEGAS Facts: Petitioners ( who are passengers from Cavite and Batangas who ride on buses to and from their province and Manila) and some public service operators of buses and jeeps assail the validity of Ordinance 4986and Administrative Order 1. Ordinance 4986 states that PUB and PUJs shall be allowed to enter Manila only from 6:30am to 8:30pm every day except Sundays and holidays. Petitioners contend that since they possess a valid CPC, they have already acquired a vested right to operate. Administrative Order 1 issued by Commissioner of Public Service states that all jeeps authorized to operate from Manila to any point in Luzon, beyond the perimeter of Greater Manila, shall carry the words "For Provincial

Operation". Issue: 1. Whether or not the said regulations are valid. 2. Whether or not Ordinance 4986 destroys vested rights to operate in Manila. Held: 1. YES! Using the doctrine in Lagman vs. City of Manila, Petitioner's Certificate of Public Convenience was issued subject to the condition that operators shall observe and comply with all the rules and regulations of the PSC relative to PUB service. The purpose of the ban is to minimize the problem in Manila and the traffic congestion, delays and accidents resulting from the free entry into the streets of Manila and the operation around said streets. Both Ordinance 4986 and AO 1 fit into the concept of promotion and regulation of general welfare. 2. NO! A vested right is some right or interest in the property which has become fixed and established and is no longer open to doubt or controversy. As far as the State is concerned, a CPC constitutes neither a franchise nor a contract, confers no property right, and is a mere license or privilege. The holder does not acquire a property right in the route covered, nor does it confer upon the holder any proprietary

right/interest/franchise in the public highways. Neither do bus passengers have a vested right to be transported directly to Manila. The alleged right is dependent upon the manner public services are allowed to operate within a given area. It is no argument that the passengers enjoyed the privilege of having been continuously transported even before outbreak of war. Times have changed and vehicles have increased. Traffic congestion has moved from worse to critical. Hence, there is a need to regulate the operation of public services.

JG SUMMIT HOLDINGS, INC., vs. CA November 20, 2000 FACTS: National Investment and Development Corporation (NIDC) and Kawasaki Heavy Industries entered into a Joint Venture Agreement in a shipyard business named PHILSECO, with a shareholding of 60-40 respectively. NIDCs interest was later transferred to the National Government. Pursuant to President Aquinos Proclamation No.5, which established the Committee on Privatization (COP) and Asset Privatization Trust (APT), and allowed for the disposition of the governments non-performing assets, the latter allowed Kawasaki Heavy Industries to choose a company to which it has stockholdings, to top the winning bid of JG Summit Holdings over PHILSECO. JG Summit protested alleging that such act would effectively increase Kawasakis interest in PHILSECOa shipyard is a public utilityand thus violative of the Constitution.

ISSUE: Whether or not respondents act is valid. HELD:No. A shipyard such as PHILSECO being a public utility as provided by law, the following provision of the Article XII of the Constitution applies: Sec. 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association shall be citizens of the Philippines. Notably, paragraph 1.4 of the JVA accorded the parties the right of first refusal under the same terms. This phrase implies that when either party exercises the right of first refusal under paragraph 1.4, they can only do so to the extent allowed them by paragraphs 1.2 and 1.3 of the JVA or under the proportion of 60%-40% of the shares of stock.

Thus, should the NIDC opt to sell its shares of stock to a third party, Kawasaki could only exercise its right of first refusal to the extent that its total shares of stock would not exceed 40% of the entire shares of stock of SNS or PHILSECO. The NIDC, on the other hand, may purchase even beyond 60% of the total shares. As a government corporation and necessarily a 100% Filipino-owned corporation, there is nothing to prevent its purchase of stocks even beyond 60% of the capitalization as the

Constitution clearly limits only foreign capitalization.

KMU LABOR CENTER V. GARCIA DEC. 23, 1994 FACTS: Department of Transportation and Communication (DOTC) Secretary Oscar M. Orbos issued Memorandum Circular No. 90-395 to Land Transportation Franchising and Regulatory Board (LTFRB) Chairman, Remedios A.S. Fernando that will allow provincial bus operators to charge passengers rates within a range of 15% above and 15% below the LTFRB official rate for a period of one (1) year to be implemented on August 6, 1990. The Memo read as is the liberalization of regulations in the transport sector and to move away gradually from regulatory policies and make progress towards greater reliance to market forces: Chairman Fernando informed Sec. Orbos that the Memo is not legally feasible and recommended for further studies because (1) under Public Service Act rates should be approved by public service operators; there should be publication and notice

especially to affected sectors; and a public hearing be held; (2) it was untimely due to an earthquake happened on July 16; (3) it will trigger upward adjustment in bus fares especially in trips bound for Northern Luzon; and (4) DOTC should consider reforms that will be uplifting after the earthquake. On December 5, 1990 the Provincial Bus Operators Association of the Philippines, Inc. (PBOAP) filed an application for fare rate increase. On December 14, 1990 LTFRB released a fare schedule based on a straight computation. On March 30, 1992 DOTC Sec. Pete Nicomedes Prado issued Department Order No 92-587 defining the framework on the regulation of transport services. Then on October 8, 1992 DOTC Sec. Jose B. Garcia issued a memorandum to LTFRB for the swift action on the adoption of the rules and procedures to implement Department Order No. 92-587 that laid down the deregulation and other liberalization policies for the transport sector. LTFRB issued on February 17, 1993 On March 16, 1994. Kilusang Mayo Uno anchors its claim on two (2) grounds. First, the authority given by respondent LTFRB to provincial bus operators to set a fare range of plus or minus fifteen (15%) percent, later increased to plus twenty (20%) and minus twenty-five (-25%) percent, over and above the existing authorized fare without having to file a petition for the purpose, is unconstitutional, invalid and illegal. Second, the establishment of a presumption of public need in favor of an applicant for a proposed transport service without having to prove public necessity is illegal for being violative of the Public Service Act and the Rules of Court and petitions before the LTFRB.

LTFRB dismissed because of lack of merit. The Court, on June 20, 1994, issued a temporary restraining order enjoining, prohibiting and preventing respondents from implementing the bus fare rate increase as well as the questioned orders and memorandum circulars. This meant that provincial bus fares were rolled back to the levels duly authorized by the LTFRB prior to March 16, 1994. A moratorium was likewise enforced on the issuance of

franchises for the operation of buses, jeepneys, and taxicabs. DOTC Secretary Jesus B. Garcia, Jr. and the LTFRB asseverate that the petitioner does not have the standing to maintain the instant suit. They further claim that it is within DOTC and LTFRBs authority to set a fare range scheme and establish a presumption of public need in applications for certificates of public convenience. ISSUE:Are the petitioners have the right to petition of this case? Whether or not the fare adjustment is constitutional? HELD: (1) YES. KMU has a locus standi (or ability of a party to demonstrate to the court sufficient connection to and harm

from the law or action challenged to support that partys participation in the case) which is inherent in the Section 1 of Article VIII of the Constitution provides: Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. NO. WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED and the challenged administrative issuances and orders, namely: DOTC Department Order No. 92-587, LTFRB Memorandum Circular No. 92-009, and the order dated March 24, 1994 issued by respondent LTFRB are hereby DECLARED contrary to law and invalid insofar as they affect provisions therein (a) delegating to provincial bus and jeepney operators the authority to increase or decrease the duly prescribed transportation fares; and (b) creating a presumption of public need for a service in favor of the applicant for a certificate of public convenience and placing the burden of proving that there is no need for the proposed service to the oppositor. The Temporary Restraining Order issued on June 20, 1994 is hereby MADE PERMANENT insofar as it enjoined the bus fare rate increase granted under the provisions of the aforementioned administrative circulars, memoranda and/or orders declared invalid.

SULPICIO LINES CASES

CALTEX VS. SULPICIO LINES, INC. Facts: On December 20, 1987, motor tanker MV Vector, carrying petroleum products of Caltex, collided in the open sea with passenger ship MV Doa Paz, causing the death of all but 25 of the latters passengers. Among those who died were Sebastian Canezal and his daughter Corazon Canezal. On March 22, 1988, the board of marine inquiry found that Vector Shipping Corporation was at fault. On February 13,

1989, Teresita Caezal and Sotera E. Caezal, Sebastian Caezals wife and mother respectively, filed with the Regional Trial Court of Manila a complaint for damages arising from breach of contract of carriage against Sulpicio Lines. Sulpicio filed a third-party complaint against Vector and Caltex. The trial court dismissed the complaint against Caltex, but the Court of Appeals included the same in the liability. Hence, Caltex filed this petition. Issue:Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel and a passenger ship? Held: First: The charterer has no liability for damages under Philippine Maritime laws. Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter.

A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight. A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ships store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship. If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship. Second: MT Vector is a common carrier The charter party agreement did not convert the common carrier into a private carrier. The parties entered into a voyage charter, which retains the character of the vessel as a common carrier. It is imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-

charter or voyage charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a ship-owner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. A common carrier is a person or corporation whose regular business is to carry passengers or property for all persons who may choose to employ and to

remunerate him. 16 MT Vector fits the definition of a common carrier under Article 1732 of the Civil Code. The public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and safety of the passengers, especially because with the modern development of science and invention, transportation has become more rapid, more complicated and somehow more hazardous. For these reasons, a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness. Third: Is Caltex liable for damages under the Civil Code? The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied with all legal requirements. The duty rests upon the common carrier simply for being engaged in "public service." The relationship between the parties in this case is

governed by special laws. Because of the implied warranty of seaworthiness, shippers of goods, when transacting with common carriers, are not expected to inquire into the vessels seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from shippers and hold them liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of the public in general is concerned. Such a practice would be an absurdity in a business where time is always of the essence. Considering the nature of transportation business, passengers and shippers alike customarily presume that common carriers possess all the legal requisites in its operation.

SULPICIO V. CA July 14, 1995 Lessons Applicable: Exceptions to Contracting Parties FACTS: October 23, 1988: Tito Duran Tabuquilde (Tito) and his

3-year old daughter Jennifer Anne (Anne) boarded the M/V Dona Marilyn at North Harbor, Manila, bringing with them several pieces of luggage.

Storm Signal No. 2 had been raised by the PAG-ASA authorities over Leyte as early as 5:30 P.M. of October 23, 1988 and which signal was raised to Signal No. 3 by 10 P.M

ship captain ordered the vessel to proceed to Tacloban when prudence dictated that he should have taken it to the nearest port for shelter, thus

violating his duty to exercise extraordinary diligence in the carrying of passengers safely to their destination

October 24, 1988 morning: M/V Dona Marilyn, while in transit, encountered inclement weather which caused huge waves due to Typhoon Unsang.

Angelina Tabuquilde contacted the Sulpicio Office to verify radio reports that the vessel M/V Dona Marilyn was missing

Sulpicio Lines assured her that the ship was merely "hiding" thereby assuaging her anxiety

October 24, 1988 2:00 P.M.: vessel capsized, throwing Tito and Anne, along with hundreds of passengers, into the sea.

Tito tried to keep himself and his daughter afloat but to no avail as the waves got stronger and he was subsequently separated from his daughter despite his efforts.

October 25, 1988 11:00 A.M.: He found himself on Almagro Island in Samar

He immediately searched for his daughter among the survivors in the island, but failed

Angelina tried to seek the assistance of the Sulpicio Lines in Manila to no avail

Angelina spent sleepless nights worrying about her husband and daughter in view of the refusal of Sulpicio Lines to release a verification of the sinking of the ship

October 26, 1988: Tito and other survivors in the Almagro Island were fetched and were brought to Tacloban Medical Center for treatment

October 31, 1988: Tito reported the loss of his daughter and was informed that the corpse of a child with his daughter's description had been found

Tito wrote a letter to his wife, reporting the sad fact that Jennifer Anne was dead

Angelina suffered from shock and severe grief upon receipt of the news

November 3, 1988: coffin bearing the corpse of Anne was buried

November 24, 1988: Tito filed a claim for damages against Sulpicio Lines for the death of Anne and the loss of his belongings worth P27,580

Trial Court: in favor of Tito actual damages, P30,000.00 for the death of Anne P100,000.00 as moral damages P50,000.00 as exemplary damages P50,000.00 as attorney's fees, and costs ISSUE: W/N Tito has a right to recover damage for his lost belongings HELD: NO. Court of Appeals is AFFIRMED with the MODIFICATION that the award of P27,580.00 as actual damages for the loss of the contents of the pieces of baggage is deleted and that the award of P30,000.00 under Article 2206 in relation Article 1764 is increased to P50,000.00. There is no showing that the value of the contents of

the lost pieces of baggage was based on the bill of lading or was previously declared by Tito before he boarded the ship

Article 2206 of the Civil Code of the Philippines: only deaths caused by a crime as quasi delict are entitled to actual and compensatory damages without the need of proof of the said damages The amount of damages for death caused by a crime or quasi delict shall be at least Three Thousand Pesos, even though there may have been mitigating circumstances. . . . Deducing alone from said provision, one can conclude

that damages arising from culpa contractual are not compensable without proof of special damages sustained by the heirs of the victim.

With respect to the award of moral damages, the general rule is that said damages are not recoverable in culpa contractual except when the presence of bad faith was proven

in breach of contract of carriage, moral damages may be recovered when it results in the death of a passenger

With respect to the award of exemplary damages, Article 2232 of the Civil Code of the Philippines gives the Court the discretion to grant said damages in breach of contract when the defendant acted in a wanton, fraudulent and reckless manner

The crew assumed a greater risk when, instead of dropping anchor in or at the periphery of the Port of Calapan, or returning to the port of Manila which is nearer, proceeded on its voyage on the assumption that it will be able to beat and race with the typhoon and reach its destination before it (Unsang) passes

SULPICIO LINES, INC. vs. FIRST LEPANTO-TAISHO

INSURANCE CORPORATION (full text) Before Us is a Petition for Review on Certiorari assailing the Decision1 of the Court of Appeals reversing the Decision2 of the Regional Trial Court (RTC) of Manila, Branch XIV, dismissing the complaint for damages for failure of the plaintiff to prove its case with a preponderance of evidence. Assailed as well is the Resolution3 of the Court of Appeals denying petitioners Motion for Reconsideration. FACTS: On 25 February 1992, Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a contract, evidenced by Bill of Lading No. CEB/SIN-008/92 issued by the latter in favor of the owner of the goods, for Delbros, Inc. to transport a shipment of goods consisting of three (3) wooden crates containing one hundred thirty-six (136) cartons of inductors and LC compound on board the V Singapore V20 from Cebu City to Singapore in favor of the consignee, Taiyo Yuden Singapore Pte, Ltd. For the carriage of said shipment from Cebu City to Manila, Delbros, Inc. engaged the services of the vessel M/V Philippine Princess, owned and operated by petitioner Sulpicio Lines, Inc. (carrier). The vessel arrived at the North Harbor, Manila, on 24 February 1992. During the unloading of the shipment, one crate containing forty-two (42) cartons dropped from the cargo hatch to the pier apron. The owner of the goods examined the dropped cargo, and upon an alleged finding that the contents of the

crate were no longer usable for their intended purpose, they were rejected as a total loss and returned to Cebu City. The owner of the goods filed a claim with herein petitioner-carrier for the recovery of the value of the rejected cargo which was refused by the latter. Thereafter, the owner of the goods sought payment from respondent First Lepanto-Taisho Insurance Corporation (insurer) under a marine insurance policy issued to the former. Respondent-insurer paid the claim less thirty-five percent (35%) salvage value or P194, 220.31.

The payment of the insurance claim of the owner of the goods by the respondent-insurer subrogated the latter to whatever right or legal action the owner of the goods may have against Delbros, Inc. and petitioner-carrier, Sulpicio Lines, Inc. Thus, respondent-insurer then filed claims for reimbursement from Delbros, Inc. and petitioner-carrier Sulpicio Lines, Inc. which were subsequently denied. On 04 November 1992, respondent-insurer filed a suit for damages docketed as Civil Case No. 92-63337 with the trial court against Delbros, Inc. and herein petitioner-carrier. On 05 February 1993, petitioner-carrier filed its Answer with Counterclaim. Delbros, Inc. filed on 15 April 1993 its Answer with Counterclaim and Cross-claim, alleging that assuming the contents of the crate in question were truly in bad order, fault is with herein petitioner-carrier which was responsible for the unloading of the crates.

Petitioner-carrier filed its Answer to Delbros, Inc.s cross-claim asserting that it observed extraordinary diligence in the handling, storage and general care of the shipment and that subsequent inspection of the shipment by the Manila Adjusters and Surveyors Company showed that the contents of the third crate that had fallen were found to be in apparent sound condition, except that "2 cello bags each of 50 pieces ferri inductors No. LC FL 112270K-60 (c) were unaccounted for and missing as per packaging list." After hearing, the trial court dismissed the complaint for damages as well as the counterclaim filed by therein defendant Sulpicio Lines, Inc. and the cross-claim filed by Delbros, Inc. According to the RTC: The plaintiff has failed to prove its case. The first witness for the plaintiff merely testified about the payment of the claim based on the documents accompanying the claim which were the Packing List, Commercial Invoices, Bill of Lading, Claims Statement, Marine Policies, Survey Report, Marine Risk Note, and the letter to Third Party carriers and shipping lines (Exhibit A-J). The check was paid and delivered to the assured as evidenced by the check voucher and the subrogation receipt. On cross-examination by counsel for the Sulpicio Lines, he said that their company paid the claim less 35% salvage value based on the adjuster report. This testimony is hearsay.

The second witness for the plaintiff, Arturo Valdez, testified, among others, that he, together with a co-surveyor and a representative of Sulpicio Lines had conducted a survey of the shipment at the compound of Sulpicio Lines. He prepared a survey report (Exhibits G and G-1) and took a picture of shipment (Exhibit G-2). On cross-examination, he said that two cartons were torn at the sides with top portion flaps opened and the 41 cartons were properly sealed and in good order conditions. Two cartons were already opened and slightly damaged. He

merely looked at them but did not conduct an inspection of the contents. What he was referring to as slightly damaged were the cartons only and not the contents. From the foregoing evidence, it is apparent that the plaintiff had failed to prove its case with a preponderance of evidence. .WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered dismissing the Complaint, defendant Sulpicio Lines counterclaim and defendant Delbros Inc.s cross-claim.4 A Motion for Reconsideration was then filed by herein respondent-insurer and subsequently denied by the trial court in an Order dated 07 February 1995 on the ground that it did not raise any new issue. Thus, respondent-insurer instituted an appeal with the Court of Appeals, which reversed the dismissal of the complaint by the lower court,

the decretal portion of which reads: WHEREFORE, the appeal is granted. The decision appealed from is REVERSED. Defendants-appellees Delbros and Sulpicio Lines are hereby ordered to pay, jointly and severally, plaintiff-appellant the sum of P194,220.31 representing actual damages, plus legal interest counted from the filing of the complaint until fully paid.5 The appellate court disposed of the issues in the case in this wise: Furthermore, the evidence shows that one of the three crates fell during the unloading at the pier in Manila. The wooden crate which fell was damaged such that this particular crate was not anymore sent to Singapore and was instead shipped back to Cebu from Manila. Upon examination, it was found that two (2) cartons of the forty-two (42) cartons contained in this crate were externally damaged. They were torn at the sides and their top portions or flaps were open. These facts were admitted by all the parties. Defendant-appellees, however, insist that it was only the external packaging that was damaged, and that there was no actual damage to the goods such that would make them liable to the shipper. This theory is erroneous. When the goods are placed at a common carriers possession for delivery to a specified consignee, they are in good order and condition and are supposed to be transported and delivered to the consignee in the same state. In the case herein, the goods were received by defendant-appellee Delbros in Cebu properly packed in cardboard cartons and then placed in

wooden crates, for delivery to the consignee in Singapore. However, before the shipment reached Singapore (while it was in Manila) one crate and 2 cartons contained therein were not anymore in their original state. They were no longer fit to be sent to Singapore. .As We have already found, there is damage suffered by the goods of the shipper. This consists in the destruction of one wooden crate and the tearing of two of the cardboard boxes therein rendering then unfit to be sent to Singapore. Defendant-appellee Sulpicio Lines admits that this crate fell

while it was being unloaded at the Manila pier. Falling of the crate was negligence on the part of defendant-appellee Sulpicio Lines under the doctrine of res ipsa loquitur. Defendant-appellee Sulpicio Lines cannot exculpate itself from liability because it failed to prove that it exercised due diligence in the selection and supervision of its employees to prevent the damage.6 On 21 June 1999, herein petitioner-carrier filed its Motion for Reconsideration of the decision of the Court of Appeals which was subsequently denied in a Resolution dated 13 October 1999. Hence, the instant petition. During the pendency of the appeal before this Court, Delbros, Inc. filed a manifestation stating that its appeal7 filed before this Court had been dismissed for being filed out of time and thus the case as against it was declared closed and terminated. As a consequence, it paid in full the amount of the damages awarded by the appellate court to the

respondent-insurer. Before this Court, Delbros, Inc. prays for reimbursement, contribution, or indemnity from its co-defendant, herein petitioner-carrier Sulpicio Lines, Inc. for whatever it had paid to respondent-insurer in consonance with the decision of the appellate court declaring both Delbros, Inc. and petitioner-carrier Sulpicio Lines, Inc. jointly and severally liable. ISSUES Petitioner-carrier raises the following issues in its petition: 1. The Court of Appeals erred in not holding that the trial court justly and correctly dismissed the complaint against Sulpicio Lines, which dismissal is already final. 2. The Court of Appeals erred in not dismissing the appeal for failure of appellant to comply with the technical requirement of the Rules of Court. RULING We shall first address the procedural issue raised by petitioner-carrier, Sulpicio Lines, Inc. that the Court of Appeals should have dismissed the appeal for failure of respondent-insurer to attach a copy of the decision of the trial court to its appellants brief in violation of Rule 44, Section 13(h) of the Rules of Civil Procedure.8 A perusal of the records will show, however, that in a Resolution9 dated 13 August 1996, the Court of Appeals required herein respondent-insurer to submit seven (7) copies of the questioned decision within five (5) days from

notice. Said Resolution was properly complied with. As a rule, the right to appeal is a statutory right and one who seeks to avail of that right must comply with the manner required by the pertinent rules for the perfection of an appeal. Nevertheless, this Court has allowed the filing of an appeal upon subsequent compliance with the requirements imposed by law, where a strict application of the technical rules will impair the proper administration of justice. As enunciated by the Court in the case of Jaro v. Court of Appeals

There is ample jurisprudence holding that the subsequent and substantial compliance of an appellant may call for the relaxation of the rules of procedure. In Cusi-Hernandez vs. Diaz [336 SCRA 113] and Piglas-Kamao vs. National Labor Relations Commission [357SCRA 640], we ruled that the subsequent submission of the missing documents with the motion for reconsideration amounts to substantial compliance. The reasons behind the failure of the petitioners in these two cases to comply with the required attachments were no longer scrutinized.11 We see no error, therefore, on the part of the Court of Appeals when it gave due course to the appeal after respondent-insurer had submitted copies of the RTC decision, albeit belatedly. We now come to the substantial issues alleged by petitioner-carrier. The pivotal question to be considered in the

resolution of this issue is whether or not, based on the evidence presented during the trial, the owner of the goods, respondent-insurers predecessor-in-interest, did incur damages, and if so, whether or not petitioner-carrier is liable for the same. It cannot be denied that the shipment sustained damage while in the custody of petitioner-carrier. It is not disputed that one of the three (3) crates did fall from the cargo hatch to the pier apron while petitioner-carrier was unloading the cargo from its vessel. Neither is it impugned that upon inspection, it was found that two (2) cartons were torn on the side and the top flaps were open and that two (2) cello bags, each of 50 pieces ferri inductors, were missing from the cargo. Petitioner-carrier contends that its liability, if any, is only to the extent of the cargo damage or loss and should not include the lack of fitness of the shipment for transport to Singapore due to the damaged packing. This is erroneous. Petitioner-carrier seems to belabor under the misapprehension that a distinction must be made between the cargo packaging and the contents of the cargo. According to it, damage to the packaging is not tantamount to damage to the cargo. It must be stressed that in the case at bar, the damage sustained by the packaging of the cargo while in petitioner-carriers custody resulted in its unfitness to be transported to its consignee in Singapore. Such failure to ship the cargo to its final destination because of the ruined packaging, indeed, resulted in damages on the part of the owner of the goods.

The falling of the crate during the unloading is evidence of petitioner-carriers negligence in handling the cargo. As a common carrier, it is expected to observe extraordinary diligence in the handling of goods placed in its possession for transport.12 The standard of extraordinary diligence imposed upon common carriers is considerably more demanding than the standard of ordinary diligence, i.e., the diligence of a good paterfamilias established in respect of the ordinary relations between members of society.13 A common carrier is bound to transport its cargo and its

passengers safely "as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with due regard to all circumstances."14 The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding the damage to, or destruction of, the goods entrusted to it for safe carriage and delivery.15 It requires common carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires."16 Thus, when the shipment suffered damages as it was being unloaded, petitioner-carrier is presumed to have been negligent in the handling of the damaged cargo. Under Articles 173517 and 175218 of the Civil Code, common carriers are presumed to have been at fault or to have acted

negligently in case the goods transported by them are lost, destroyed or had deteriorated. To overcome the presumption of liability for loss, destruction or deterioration of goods under Article 1735, the common carrier must prove that they observed extraordinary diligence as required in Article 173319 of the Civil Code.20 Petitioner-carrier miserably failed to adduce any shred of evidence of the required extraordinary diligence to overcome the presumption that it was negligent in transporting the cargo. Coming now to the issue of the extent of petitioner-carriers liability, it is undisputed that respondent-insurer paid the owner of the goods under the insurance policy the amount of P194,220.31 for the alleged damages the latter has incurred. Neither is there dispute as to the fact that Delbros, Inc. paid P194,220.31 to respondent-insurer in satisfaction of the whole amount of the judgment rendered by the Court of Appeals. The question then is: To what extent is Sulpicio Lines, Inc., as common carrier, liable for the damages suffered by the owner of the goods? Upon respondent-insurers payment of the alleged amount of loss suffered by the insured (the owner of the goods), the insurer is entitled to be subrogated pro tanto to any right of action which the insured may have against the common carrier whose negligence or wrongful act caused the loss.21 Subrogation is the substitution of one person in the place of another with reference to a lawful claim or right, so that he who is substituted succeeds to the rights of the other in

relation to a debt or claim, including its remedies or securities.22 The rights to which the subrogee succeeds are the same as, but not greater than, those of the person for whom he is substituted, that is, he cannot acquire any claim, security or remedy the subrogor did not have.23 In other words, a subrogee cannot succeed to a right not possessed by the subrogor.24 A subrogee in effect steps into the shoes of the insured and can recover only if the insured likewise could have recovered.25

As found by the Court of Appeals, there was damage suffered by the goods which consisted in the destruction of one wooden crate and the tearing of two (2) cardboard boxes therein which rendered them unfit to be sent to Singapore.26 The falling of the crate was negligence on the part of Sulpicio Lines, Inc. for which it cannot exculpate itself from liability because it failed to prove that it exercised extraordinary diligence.27 Hence, we uphold the ruling of the appellate court that herein petitioner-carrier is liable to pay the amount paid by respondent-insurer for the damages sustained by the owner of the goods. As stated in the manifestation filed by Delbros, Inc., however, respondent-insurer had already been paid the full amount granted by the Court of Appeals, hence, it will be tantamount to unjust enrichment for respondent-insurer to again recover damages from herein petitioner-carrier.

With respect to Delbros, Inc.s prayer contained in its manifestation that, in case the decision in the instant case be adverse to petitioner-carrier, a pronouncement as to the matter of reimbursement, indemnification or contribution in favor of Delbros, Inc. be included in the decision, this Court will not pass upon said issue since Delbros, Inc. has no personality before this Court, it not being a party to the instant case. Notwithstanding, this shall not bar any action Delbros, Inc. may institute against petitioner-carrier Sulpicio Lines, Inc. with respect to the damages the latter is liable to pay. WHEREFORE, premises considered, the assailed Decision of the Court of Appeals dated 26 May 1999 and its Resolution dated 13 October 1999 are hereby AFFIRMED. No costs.

SULPICIO LINES, INC. vs CURSO March 17, 2010 (full text) Are the surviving brothers and sisters of a passenger of a vessel that sinks during a voyage entitled to recover moral damages from the vessel owner as common carrier? This is the question presented in the appeal taken by the common carrier from the reversal by the Court of Appeals (CA) of the decision of the Regional Trial Court (RTC) dismissing the complaint for various damages filed by the surviving brothers and sisters of the late Dr. Cenon E. Curso upon a finding that force majeure had caused the sinking.

The CA awarded moral and other damages to the surviving brothers and sisters. FACTS: On October 23, 1988, Dr. Curso boarded at the port of Manila the MV Doa Marilyn, an inter-island vessel owned and operated by petitioner Sulpicio Lines, Inc., bound for Tacloban City. Unfortunately, the MV Doa Marilyn sank in the afternoon of October 24, 1988 while at sea due to the inclement sea and weather conditions brought about by

Typhoon Unsang. The body of Dr. Curso was not recovered, along with hundreds of other passengers of the ill-fated vessel. At the time of his death, Dr. Curso was 48 years old, and employed as a resident physician at the Naval District Hospital in Naval, Biliran. He had a basic monthly salary of P3,940.00, and would have retired from government service by December 20, 2004 at the age of 65. On January 21, 1993, the respondents, allegedly the surviving brothers and sisters of Dr. Curso, sued the petitioner in the RTC in Naval, Biliran to claim damages based on breach of contract of carriage by sea, averring that the petitioner had acted negligently in transporting Dr. Curso and the other passengers. They stated, among others, that their parents had predeceased Dr. Curso, who died single and without issue; and that, as such, they were Dr. Cursos surviving heirs and successors in interest entitled to recover moral and other damages.[1] They prayed for judgment, as follows: (a) compensatory damages of P1,924,809.00; (b)

moral damages of P100,000.00; (c) exemplary or corrective damages in the amount deemed proper and just; (d) expenses of litigation of at least P50,000.00; (e) attorneys fees of P50,000.00; and (f) costs of suit. The petitioner denied liability, insisting that the sinking of the vessel was due to force majeure (i.e., Typhoon Unsang), which exempted a common carrier from liability. It averred that the MV Doa Marilyn was seaworthy in all respects, and was in fact cleared by the Philippine Coast Guard for the voyage; and that after the accident it conducted intensive search and rescue operations and extended assistance and aid to the victims and their families. Ruling of the RTC On July 28, 1995, the RTC dismissed the complaint upon its finding that the sinking of the vessel was due to force majeure. The RTC concluded that the officers of the MV Doa Marilyn had acted with the diligence required of a common carrier; that the sinking of the vessel and the death of its passengers, including Dr. Curso, could not have been avoided; that there was no basis to consider the MV Doa Marilyn not seaworthy at the time of the voyage; that the findings of the Special Board of Marine Inquiry (SBMI) constituted to investigate the disaster absolved the petitioner, its officers, and crew of any negligence and administrative liability; and that the respondents failed to prove their claim for damages. Ruling of the CA

The respondents appealed to the CA, contending that the RTC erred: (a) in considering itself barred from entertaining the case by the findings of fact of the SBMI in SBMI-ADM Case No. 08-88; (b) in not holding that the petitioner was negligent and did not exercise the required diligence and care in conducting Dr. Curso to his destination; (c) in not finding that the MV Doa Marilyn was unseaworthy at the time of its sinking; and (d) in not awarding damages to them.[2]

In its decision dated September 16, 2002,[3] the CA held and disposed: Based on the events described by the appellees witness, the Court found inadequate proof to show that Sulpicio Lines, Inc., or its officers and crew, had exercised the required degree of diligence to acquit the appellee of liability. In the first place, the court finds inadequate explanation why the officers of the M.V. Doa Marilyn had not apprised themselves of the weather reports on the approach of typhoon Unsang which had the power of a signal no. 3 cyclone, bearing upon the general direction of the path of the M.V. Doa Marilyn. If the officers and crew of the Doa Marilyn had indeed been adequately monitoring the strength and direction of the typhoon, and had acted promptly and competently to avoid the same, then such a mishap would not have occurred.

Furthermore, there was no account of the acts and decision of the crew of the ill-fated ship from 8:00 PM on October 23, 1988 when the Chief Mate left his post until 4:00 AM the next day when he resumed duty. It does not appear what occurred during that time, or what weather reports were received and acted upon by the ship captain. What happened during such time is important in determining what information about the typhoon was gathered and how the ship officers reached their decision to just change course, and not take shelter while a strong typhoon was approaching. Furthermore, the Court doubts the fitness of the ship for the voyage, since at the first sign of bad weather, the ships hydraulic system failed and had to be repaired mid-voyage, making the vessel a virtual derelict amidst a raging storm at sea. It is part of the appellees extraordinary diligence as a common carrier to make sure that its ships can withstand the forces that bear upon them during a voyage, whether they be the ordinary stress of the sea during a calm voyage or the rage of a storm. The fact that the stud bolts in the ships hydraulic system gave way while the ship was at sea discredits the theory that the appellee exercised due diligence in maintaining the seaworthy condition of the M.V. Doa Marilyn. xxx.[4] xxx Aside from these, the defendant must compensate the plaintiffs for moral damages that they suffered as a result of the negligence attending the loss of the M.V. Doa Marilyn. Plaintiffs, have established that they took great pains to recover, in vain, the body of their brother, at their own cost,

while suffering great grief due to the loss of a loved one. Furthermore, Plaintiffs were unable to recover the body of their brother. Moral damages worth P100,000.00 is proper. WHEREFORE, premises considered, the appealed decision of the RTC of Naval, Biliran, Branch 16, rendered in Civil Case No. B-0851, is hereby SET ASIDE. In lieu thereof, judgment is hereby rendered, finding the defendant-appellee Sulpicio Lines, Inc, to have been negligent in transporting the deceased Cenon E. Curso who was on board the ill-fated M.V. Doa Marilyn, resulting in his untimely death.

Defendant-appellee is hereby ordered to pay the plaintiffs heirs of Cenon E. Curso the following: (1) Death indemnity in the amount of P50,000.00; (2) Loss of Earning Capacity in the amount of P504,241.20; (3) Moral Damages in the amount of P100,000.00. (4) Costs of the suit.[5] Hence, this appeal, in which the petitioner insists that the CA committed grievous errors in holding that the respondents were entitled to moral damages as the brothers and sisters of the late Dr. Curso; that the CA thereby disregarded Article 1764 and Article 2206 of the Civil Code, and the ruling in Receiver for North Negros Sugar Co., Inc. v. Ybaez,[6] whereby the Supreme Court disallowed the award of moral

damages in favor of the brothers and sisters of a deceased passenger in an action upon breach of a contract of carriage.[7] Issues The petitioner raises the following issues: ARE THE BROTHERS AND SISTERS OF A DECEASED PASSENGER IN A CASE OF BREACH OF CONTRACT OF CARRIAGE ENTITLED TO AN AWARD OF MORAL DAMAGES AGAINST THE CARRIER? ASSUMING (THAT) THEY ARE ENTITLED TO CLAIM MORAL DAMAGES, SHOULD THE AWARD BE GRANTED OR GIVEN TO THE BROTHER OR SISTER NOTWITHSTANDING (THE) LACK OF EVIDENCE AS REGARDS HIS OR HER PERSONAL SUFFERING? RULING The petition is meritorious. As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract, unless there is fraud or bad faith.[8] As an exception, moral damages may be awarded in case of breach of contract of carriage that results in the death of a passenger,[9] in accordance with Article 1764, in relation to Article 2206 (3), of the Civil Code, which provide: Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the

death of a passenger caused by the breach of contract by a common carrier. Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. In addition: (1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be

assessed and awarded by the court, unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death; (2) If the deceased was obliged to give support according to the provisions of article 291, the recipient who is not an heir called to the decedent's inheritance by the law of testate or intestate succession, may demand support from the person causing the death, for a period not exceeding five years, the exact duration to be fixed by the court; (3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased. The foregoing legal provisions set forth the persons entitled to moral damages. The omission from Article 2206 (3) of the brothers and sisters of the deceased passenger reveals the legislative intent to exclude them from the recovery of moral

damages for mental anguish by reason of the death of the deceased. Inclusio unius est exclusio alterius.[10] The solemn power and duty of the courts to interpret and apply the law do not include the power to correct the law by reading into it what is not written therein.[11] Thus, the CA erred in awarding moral damages to the respondents. The petitioner has correctly relied on the holding in Receiver for North Negros Sugar Company, Inc. v. Ybaez,[12] to the effect that in case of death caused by quasi-delict, the brother of the deceased was not entitled to the award of moral damages based on Article 2206 of the Civil Code. Essentially, the purpose of moral damages is indemnity or reparation, that is, to enable the injured party to obtain the means, diversions, or amusements that will serve to alleviate the moral suffering he has undergone by reason of the tragic event. According to Villanueva v. Salvador,[13] the conditions for awarding moral damages are: (a) there must be an injury, whether physical, mental, or psychological, clearly substantiated by the claimant; (b) there must be a culpable act or omission factually established; (c) the wrongful act or omission of the defendant must be the proximate cause of the injury sustained by the claimant; and (d) the award of damages is predicated on any of the cases stated in Article 2219 of the Civil Code. To be entitled to moral damages, the respondents must have a right based upon law. It is true that under Article 1003[14] of the Civil Code they succeeded to the entire estate of the late Dr. Curso in the absence of the latters descendants, ascendants, illegitimate children, and surviving

spouse. However, they were not included among the persons entitled to recover moral damages, as enumerated in Article 2219 of the Civil Code, viz: Article 2219. Moral damages may be recovered in the following and analogous cases: (1) A criminal offense resulting in physical injuries; (2) Quasi-delicts causing physical injuries;

(3) Seduction, abduction, rape or other lascivious acts; (4) Adultery or concubinage; (5) Illegal or arbitrary detention or arrest; (6) Illegal search; (7) Libel, slander or any other form of defamation; (8) Malicious prosecution; (9) Acts mentioned in article 309; (10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34 and 35. The parents of the female seduced, abducted, raped or abused referred to in No. 3 of this article, may also recover moral damages.

The spouse, descendants, ascendants and brothers and sisters may bring the action mentioned in No. 9 of this article, in the order named. Article 2219 circumscribes the instances in which moral damages may be awarded. The provision does not include succession in the collateral line as a source of the right to recover moral damages. The usage of the phrase analogous cases in the provision means simply that the situation must be held similar to those expressly enumerated in the law in question[15] following the ejusdem generis rule. Hence, Article 1003 of the Civil Code is not concerned with recovery of moral damages. In fine, moral damages may be recovered in an action upon breach of contract of carriage only when: (a) where death of a passenger results, or (b) it is proved that the carrier was guilty of fraud and bad faith, even if death does not result.[16] Article 2206 of the Civil Code entitles the descendants, ascendants, illegitimate children, and surviving spouse of the deceased passenger to demand moral damages for mental anguish by reason of the death of the deceased.[17] WHEREFORE, the petition for review on certiorari is granted, and the award made to the respondents in the decision dated September 16, 2002 of the Court of Appeals of moral damages amounting to P100,000.00 is deleted and set aside.

ABOITIZ CASES ABOITIZ SHIPPING CORPORATION VS. CA FACTS: Anacleto Viana boarded the vessel M/V Antonia, owned by Aboitiz Shipping Corporation, at the port at San Jose, Occidental Mindoro, bound for Manila. After said vessel had

landed, the Pioneer Stevedoring Corporation took over the exclusive control of the cargoes loaded on said vessel pursuant to the Memorandum of Agreement between Pioneer and petitioner Aboitiz. The crane owned by Pioneer was placed alongside the vessel and one (1) hour after the passengers of said vessel had disembarked, it started operation by unloading the cargoes from said vessel. While the crane was being operated, Anacleto Viana who had already disembarked from said vessel obviously remembering that some of his cargoes were still loaded in the vessel, went back to the vessel, and it was while he was pointing to the crew of the said vessel to the place where his cargoes were loaded that the crane hit him, pinning him between the side of the vessel and the crane. He was thereafter brought to the hospital where he later expired three (3) days thereafter. Private respondents Vianas filed a complaint for damages

against petitioner for breach of contract of carriage. Aboitiz denied responsibility contending that at the time of the accident, the vessel was completely under the control of respondent Pioneer Stevedoring Corporation as the exclusive stevedoring contractor of Aboitiz, which handled the unloading of cargoes from the vessel of Aboitiz. ISSUE: Whether or not Aboitiz is negligent and is thus liable for the death. HELD:Yes. x x x [T]he victim Anacleto Viana guilty of contributory negligence, but it was the negligence of Aboitiz in prematurely turning over the vessel to the arrastre operator for the unloading of cargoes which was the direct, immediate and proximate cause of the victim's death. The rule is that the relation of carrier and passenger continues until the passenger has been landed at the port of destination and has left the vessel owner's dock or premises. 11 Once created, the relationship will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted from the carrier's conveyance or had a reasonable opportunity to leave the carrier's premises. All persons who remain on the premises a reasonable time after leaving the conveyance are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances, and

includes a reasonable time to see after his baggage and prepare for his departure. 12 The carrier-passenger relationship is not terminated merely by the fact that the person transported has been carried to his destination if, for example, such person remains in the carrier's premises to claim his baggage. It is apparent from the foregoing that what prompted the Court to rule as it did in said case is the fact of the passenger's reasonable presence within the carrier's premises. That reasonableness of time should be made to

depend on the attending circumstances of the case, such as the kind of common carrier, the nature of its business, the customs of the place, and so forth, and therefore precludes a consideration of the time element per se without taking into account such other factors. It is thus of no moment whether in the cited case of La Mallorca there was no appreciable interregnum for the passenger therein to leave the carrier's premises whereas in the case at bar, an interval of one (1) hour had elapsed before the victim met the accident. The primary factor to be considered is the existence of a reasonable cause as will justify the presence of the victim on or near the petitioner's vessel. We believe there exists such a justifiable cause. It is of common knowledge that, by the very nature of petitioner's business as a shipper, the passengers of vessels are allotted a longer period of time to disembark from the ship than other common carriers such as a passenger bus. With respect to the bulk of cargoes and the number of

passengers it can load, such vessels are capable of accommodating a bigger volume of both as compared to the capacity of a regular commuter bus. Consequently, a ship passenger will need at least an hour as is the usual practice, to disembark from the vessel and claim his baggage whereas a bus passenger can easily get off the bus and retrieve his luggage in a very short period of time. Verily, petitioner cannot categorically claim, through the bare expedient of comparing the period of time entailed in getting the passenger's cargoes, that the ruling in La Mallorca is inapplicable to the case at bar. On the contrary, if we are to apply the doctrine enunciated therein to the instant petition, we cannot in reason doubt that the victim Anacleto Viana was still a passenger at the time of the incident. When the accident occurred, the victim was in the act of unloading his cargoes, which he had every right to do, from petitioner's vessel. As earlier stated, a carrier is duty bound not only to bring its passengers safely to their destination but also to afford them a reasonable time to claim their baggage. ABOITIZ SHIPPING CORP VS GENERAL FIRE AND LIFE ASSURANCE CORP FACTS: Aboitiz Shipping is the owner of M/V P. Aboitiz, a vessel w/c sank on a voyage from Hongkong to the Philippines. Thissinking of the vessel gave rise to the filing of several suits for recovery of the lost cargo either by the shippers their successors-in-interest, or the cargo insurers like General Accident (GAFLAC).Board of Marine Inquiry (BMI), on its initial investigation found that such sinking was due

toforce majeureand that subjectvessel, at the time of the sinking was seaworthy. The trial court rules against the carrier on the ground that the loss didnot occur as a result of force majeure. This was affirmed by the CA and ordered the immediate execution of the full judgment award.However, other cases have resulted in the finding that vessel was seaworthy at the time of the sinking, and that suchsinking was due toforce majeure.Due to these different rulings, Aboitiz seeks a pronouncement as to the applicability of the doctrine of limited liability onthe totality of the claimsvis a visthe losses brought about by the sinking

of the vessel M/V P. ABOITIZ, as based on thereal and hypothecary nature of maritime law. Aboitiz argued that the Limited Liability Rule warrants immediate stay of execution of judgment to prevent impairment of other creditors' shares. ISSUE: Whether the Limited Liability Rule arising out of the real and hypothecary nature of maritime law should apply inthis and related cases. RULING: The SC ruled in the affirmative.The real and hypothecary nature of maritime law simply means that the liability of the carrier in connection with lossesrelated to maritime contracts is confined to the vessel, which is hypothecated for such obligations or which stands as theguaranty for their settlement. It has its origin by reason of the conditions and risks attending maritime trade in its earliestyears when such trade was replete with innumerable and unknown hazards since vessels had to go through

largelyuncharted waters to ply their trade. It was designed to offset such adverse conditions and to encourage people andentities to venture into maritime commerce despite the risks and the prohibitive cost of shipbuilding. Thus, the liability of the vessel owner and agent arising from the operation of such vessel were confined to the vessel itself, its equipment,freight, and insurance, if any, which limitation served to induce capitalists into effectively wagering their resources againstthe consideration of the large profits attainable in the trade. The Limited Liability Rule in the Philippines is taken up in Book III of the Code of Commerce, particularly in Articles 587,590, and 837, hereunder quoted in toto: Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which mayarise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he mayexempt himself therefrom by abandoning the vessel with all her equipment and the freight it may haveearned during the voyage. Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their interests in the commonfund 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 (on collisions),shall be understood aslimited to the value of the vessel with all its appurtenances and freightage served during the voyage. The only time the Limited Liability Rule does not apply is when there is an actual finding of

negligence on the part of thevessel owner or agent. ISSUE 2: Whether there is a finding of such negligence on the part of the owner in this case. RULING 2: The SC ruled in the negative.In its Decision, the trial court merely held that: Considering the foregoing reasons, the Court holds that the vessel M/V "Aboitiz" and its cargo werenot lost due to fortuitous event or force majeure. ABOITIZ SHIPPING CORPORATIONvs.

NEW INDIA ASSURANCE COMPANY, LTD., May 2, 2006(full text) For review on certiorari are the Decision1 dated August 29, 2002 of the Court of Appeals in CA-G.R. CV No. 28770 and its Resolution2 dated January 23, 2003 denying reconsideration. The Court of Appeals affirmed the Decision3 dated November 20, 1989 of the Regional Trial Court of Manila in Civil Case No. 82-1475, in favor of respondent New India Assurance Company, Ltd. This petition stemmed from the action for damages against petitioner, Aboitiz Shipping Corporation, arising from the sinking of its vessel, M/V P. Aboitiz, on October 31, 1980. FACTS: 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 vessels questionable seaworthiness. Consequently, respondent filed

a complaint for damages against petitioner Aboitiz, Franco-Belgian Services and the latters local agent, F.E. Zuellig, Inc. (Zuellig). Respondent alleged that the proximate cause of the loss of the shipment was the fault or negligence of the master and crew of the vessel, its unseaworthiness, and the failure of defendants therein to exercise extraordinary diligence in the transport of the goods. Hence, respondent added, defendants therein breached their contract of carriage.101avvphil.net

Franco-Belgian Services and Zuellig responded, claiming that they exercised extraordinary diligence in handling the shipment while it was in their possession; its vessel was seaworthy; and the proximate cause of the loss of cargo was a fortuitous event. They also filed a cross-claim against petitioner alleging that the loss occurred during the transshipment with petitioner and so liability should rest with petitioner. For its part, petitioner also raised the same defense that the ship was seaworthy. It alleged that the sinking of M/V P. Aboitiz was due to an unforeseen event and without fault or negligence on its part. It also alleged that in accordance with the real and hypothecary nature of maritime law, the sinking of M/V P. Aboitiz extinguished its liability on the loss of the cargoes.11 Meanwhile, the Board of Marine Inquiry (BMI) conducted its own investigation to determine whether the captain and

crew were administratively liable. However, petitioner neither informed respondent nor the trial court of the investigation. The BMI exonerated the captain and crew of any administrative liability; and declared the vessel seaworthy and concluded that the sinking was due to the vessels 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, attorneys 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. 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 courts 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 respondents 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 respondents 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 vessels 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 courts 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.