EN BANC

[G.R. No. L-9534. September 29, 1956.]

MANILA STEAMSHIP CO., INC., petitioner, vs.

INSA ABDULHAMAN (MORO) and LIM HONG TO, respondents.

Pacifico de Ocampo for the petitioner.

Felix F. Catis, Fernando P. Blanco and Carlos Camins, Jr., for respondents.

SYLLABUS

1. COMMON CARRIERS; MARITIME TORTS; COLLISION IMPUTABLE TO

BOTH VESSELS; LIABILITY OF SHIPOWNERS, SOLIDARILY. — In case of collision
between two vessels imputable to both of them, each vessel shall suffer her own damage and
both shall be solidarily liable for the damages occasioned to their cargoes. (Article 827, Code
of Commerce.)
2. ID.; ID.; LIABILITY OF SHIPOWNERS. — The shipowner is directly and
primarily responsible in tort resulting in a collision at sea, and it may not escape liability on
the ground that it exercised due diligence in the selection and supervision of the vessels's
officer and crew.
3. ID.; ID.; LIABILITY OF SHIPOWNER WHERE OFFICERS OF THE SHIP ARE
UNLICENSED. — The owner of a vessel who had caused the same to sail without licensed
officers is liable for the injuries caused by the collission over and beyond the value of his
vessel; hence, he can not escape liability because of the sinking of the vessel.

DECISION

REYES, J. B. L., J p:

This case was begun in the Court of First Instance of Zamboanga (Civil Case No.
170) by Insa Abdulhaman against the Manila Steamship Co., owner of the M/S "Bowline
Knot", and Lim Hong To, owner of the M/L "Consuelo V", to recover damages for the death
of his (plaintiff's) five children and loss of personal properties on board the M/L
"Consuelo V" as a result of a maritime collision between said vessel and the M/S "Bowline
Knot" on May 4, 1948, a few kilometers distant from San Ramon Beach, Zamboanga City.
On appeal, the Court of Appeals found the following facts to have been established:
 "From 7:00 to 8:00 o'clock in the evening of May 4, 1948, the M/L
"Consuelo V", laden with cargoes and passengers left the port of Zamboanga City
bound for Siokon under the command of Faustino Macrohon. She was then
towing a kumpit, named "Sta. Maria Bay". The weather was good and fair.
Among her passengers were the plaintiff Insa Abdulhaman, his wife Carimla
Mora and their five children already mentioned. The plaintiff and his wife paid
their fare before the voyage started.
On that same night the M/S "Bowline Knot" was navigating from
Maribojoc towards Zamboanga.
Between 9:30 to 10:00 in the evening the dark clouds bloated with rain
began to fall and the gushing strong wind began to blow steadily harder, lashing
the waves into a choppy and roaring sea. Such weather lasted for about an hour
and then it became fair although it was showering and the visibility was good
enough.
When some of the passengers of the M/L "Consuelo V" were then
sleeping and some were lying down awake, all of a sudden they felt the shocking
collision of the M/L "Consuelo V" and a big motorship, which later on was
identified as the M/V "Bowline Knot".
Because the M/L "Consuelo V" capsized, her crew and passengers, before
realizing what had happened, found themselves swimming and floating on the
crest of the waves and as a result of which nine (9) passengers were dead and
missing and all the cargoes carried on said boat, including those of the plaintiff
as appear in the list, Exhibit "A", were also lost.
Among the dead passengers found were Maria, Amlasa, Bidoaya and
Bidalla, all surnamed Inasa, while the body of the child Abdula Inasa of 6 years
of age was never recovered. Before the collision, none of the passengers were
warned or informed of the impending danger as the collision was so sudden and
unexpected. All those rescued at sea were brought by the M/V "Bowline Knot"
to Zamboanga City." (Decision of C. A., pp. 5-6).
As the cause of the collision, the Court of Appeals affirmed the findings of the Board
of Marine Inquiry, that the commanding officer of the colliding vessels had both been
negligent in operating their respective vessels. Wherefore, the Court held the owners of both
vessels solidarily liable to plaintiff for the damages caused to him by the collision, under
Article 827 of the Code of Commerce; but exempted defendant Lim Hong To from liability
by reason of the sinking and total loss of his vessel, the M/L "Consuelo V", while the other
defendant, the Manila Steamship Co., owner of the M/S "Bowline Knot", was ordered to pay
all of plaintiff's damages in the amount of P20,784.00 plus one-half of the costs. It is from
this judgment that defendant Manila Steamship Co. had appealed to this Court.
Petitioner Manila Steamship Co. pleads that it is exempt from any liability to plaintiff
under Article 1903 of the Civil Code because it had exercised the diligence of a good father
of a family in the selection of its employees, particularly Third Mate Simplicio Ilagan, the
officer in command of its vessels, the M/S "Bowline Knot", at the time of the collision. This
defense is untenable. While it is true that plaintiff's action against petitioner is based on a tort
or quasi-delict, the tort in question is not a civil tort under the Civil Code but a maritime tort
resulting in a collision at sea, governed by Articles 826-939 of the Code of Commerce.
Under Article 827 of the Code of Commerce, in case of collision between two vessels
imputable to both of them, each vessel shall suffer her own damage and both shall
be solidarily liable for the damages occasioned to their cargoes. The characteristic language
of the law in making the "vessels" solidarily liable for the damages due to the maritime
collision emphasizes the direct nature of the responsibilities on account of the collision
incurred by the shipowner under maritime law, as distinguished from the civil law and
mercantile law in general. This direct responsibility is recognized in Article 618 of the Code
of Commerce under which the captain shall be civilly liable to the ship agent, and the latter is
the one liable to third persons, as pointed out in the collision case of Yueng Sheng Exchange
& Trading Co. vs. Urrutia & Co., 12 Phil. 747, 753:
"The responsibility involved in the present action is that derived from
the management of the vessel, which was defective on account of lack of skill,
negligence, or fault, either of the captain or of the crew, for which the captain is
responsible to the agent, who in his turn is responsible to the third party
prejudiced or damaged. (Article 618, Code of Commerce)."
In fact, it is a general principle, well established maritime law and custom, that
shipowners and ship agents are civilly liable for the acts of the captain (Code of Commerce,
Article 586) and for the indemnities due the third persons (Article 587); so that injured
parties may immediately look for reimbursement to the owner of the ship, it being
universally recognized that the ship master or captain is primarily the representative of the
owner (Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256, 260). This direct liability,
moderated and limited by the owner's right of abandonment of the vessel and earned freight
(Article 587), has been declared to exist, not only in case of breached contracts, but also in
cases of tortious negligence (Yu Biao Sontua vs. Osorio, 43 Phil. 511, 515):
"In the second assignment of error, the appellant contends that the
defendant ought not to be held liable for the negligence of his agents and
employees.
It is proven that the agents and employees, through whose negligence the
explosion and fire in question occurred, were agents, employees and mandatories
of the defendant. Where the vessel is one of freight, a public concern or public
utility, its owner or agents is liable for the tortious acts of his agents (Articles 587,
613, and 618 Code of Commerce; and Article 1902, 1903, 1908, Civil Code).
This principle has been repeatedly upheld in various decisions of this court.
The doctrines cited by the appellant in support of his theory have reference
to the relations between principal and agent in general, but not to the relations
between ship agent and his agents and employees; for this reason they cannot be
applied in the present case."
It is easy to see that to admit the defense of due diligence of a bonus paterfamilias (in
the selection and vigilance of the officers and crew) as exempting the shipowner from any
liability for their faults, would render nugatory the solidary liability established by Article
827 of the Code of Commerce for the greater protection of injured parties. Shipowners would
be able to escape liability in practically every case, considering that the qualifications and
licensing of ship masters and officers are determined by the State, and that vigilance is
practically impossible to exercise over officers and crew of vessels at sea. To compel the
parties prejudiced to look to the crew for indemnity and redress would be an illusory remedy
for almost always its members are, from captains down, mere wage earners.
We, therefore, find no reversible error in the refusal of the Court of Appeals to
consider the defense of the Manila Steamship Co., that it is exempt from liability for the
collision with the M/L "Consuelo V" due to absence of negligence on its parts in the
selection and supervision of the officers and crew of the M/S "Bowline Knot".
The case of Walter S. Smith & Co. vs. Cadwallader Gibson Lumber Co., 55 Phil.
517, invoked by petitioner, is not the point. Said case treated of a civil tort, in that the vessel
of the defendant, allegedly negligently managed by its captain in the course of its maneuvers
to moor at plaintiff's wharf, struck the same and partially demolished it, causing damage to
plaintiff. Because the tort allegedly committed was civil, the provisions of Article 1903 of the
Civil Code were correctly applied. The present case, on the other hand, involves tortious
conduct resulting in a maritime collision; wherefore, the liability of the shipowner is, as
already stated, governed by the provisions of the Code of Commerce and not by the Civil
Code.
We agree, however, with petitioner-appellant, that the Court of Appeals was in error
in declaring the respondent Lim Hong To, owner of the M/L "Consuelo V", exempt from
liability to the original plaintiff, Abdulhaman, in view of the total loss of his own vessel, that
sank as a result of the collision. It is to be noted that both the master and the engineer of the
motor launch "Consuelo V" were not duly licensed as such (Exh. 2). In applying for
permission to operate, despite the lack of properly trained and experienced, crew, respondent
Lim Hong To gave as a reason —
"that the income derived from the vessel is insufficient to pay licensed officers
who demand high salaries",
and expressly declared:
"That in case of any accident, damage or loss, I shall assume full risk
and responsibility for all the consequences thereof." (Exhibit 2).
His permit to operate, in fact, stipulated —
"that in case of any accident, damage or loss, the registered owner thereof shall
assume full risk and responsibility for all the consequences thereof, and that said
vessel shall be held answerable for any negligence, disregard or violation of any
of the conditions herein imposed and for any consequence arising from such
negligence, disregard or violations." (Exhibit 3.)
The Court of Appeals held that neither the letter (Exhibit 2) nor the permit (Exhibit 3)
contained any waiver of the right of respondent Lim Hong To to limit his liability to the
value of his motor launch and that he did not lose the statutory right to limit his liability by
abandonment of the vessel, as conferred by Article 587 of the Code of Commerce.
We find the ruling untenable. Disregarding the question whether mere inability to
meet the salary demands of duly licensed masters and engineers constitutes non-availability
thereof that would excuse noncompliance with the law and authorize operation without
licensed officers under Act 3553, the fact remains that by operating with an unlicensed
master, Lim Hong To deliberately increased the risk to which the passengers and shippers of
cargo aboard the "Consuelo V" would be subjected. In his desire to reap greater benefits in
the maritime trade, Lim Hong To willfully augmented the dangers and hazards to his vessel's
unwarry passengers, who would normally assume that the launch officers possessed the
necessary skill and experience to evade the perils of the sea. Hence, the liability of said
respondent can not be the identical to that of a shipowner who bears in mind the safety of the
passengers and cargo by employing duly licensed officers. To hold, as the Court of Appeals
has done, that Lim Hong To may limit his liability to the value of his vessels, is to erase all
difference between compliance with law and the deliberate disregard thereof. To such
proposition we can not assent.
The international rule is to the effect that the right of abandonment of vessels, as a
legal limitation of a shipowner's liability, does not apply to cases where the injury or the
average is due to shipowner's own fault. Fariña (Derecho Comercial Maritimo, Vol. I, pp.
122-123), on the authority of judicial precedents from various nations, sets the rule to be as
follows:
"Esta generalmente admitido que el propietario del buque no tiene
derecho a la limitacion legal de responsibilidad si los daños o averias que dan
origen a la limitacion provienen de sus propias culpas. El Convenio de Bruselas
de 25 de agosto de 1924 tambien invalida la limitacion en el caso de culpa
personal en los accidentes o averías sobrevenidos (Art. 2°)."
To the same effect, a noted French author states:
"La limitacion de la responsabilidad maritima ha sido admitida para
proteger a los armadores contra los actos abusivos de sus encargados y no dejar
su patrimonio entero a la discrecion del personal de sus buques, porque este
personal cumple sus obligaciones en condiciones especiales; pero los armadores
no tienen por sobre los demas derecho a ser amparados contra ellos mismos ni a
ser protegidos contra sus propios actos."
(Danjon, Derecho Maritimo, Vol. 2, p. 332). (Emphasis supplied.)
That Lim Hong To understood that he would incur greater liability than that normally
borne by shipowners, is clear from his assumption of " full" risk and responsibility for all the
consequences" of the operation of the M/L "Consuelo V"; a responsibility expressly assumed
in his letter Exhibit 2, and imposed in his special permit, in addition to the vessel itself being
held answerable. This express assumption of "full risk and responsibility" would be
meaningless unless intended to broaden the liability of respondent Lim Hong To beyond the
value of his vessel.
In resume, we hold:
(1) That the Manila Steamship Co., owner of the M/S "Bowline Knot", is directly and
primarily responsible in tort for the injuries caused to the plaintiff by the collision of said
vessel with the launch "Consuelo V", through the negligence of the crews of both vessels,
and it may not escape liability on the ground that it exercised due diligence in the selection
and supervision of the officers and crew of the "Bowline Knot";
(2) That Lim Hong To, as owner of the motor launch "Consuelo V", having caused
the same to sail without licensed officers, is liable for the injuries caused by the collision
over and beyond the value of said launch;
 (3) That both vessels being at fault, the liability of Lim Hong To
and Manila Steamship Co. to the plaintiff herein is in solidum, as prescribed by Article 827
of the Code of Commerce.
In view of the foregoing, the decision of the Court of Appeals is modified, and that of
the Court of First Instance affirmed, in the sense of declaring both original defendants
solidarily liable to plaintiff Insa Abdulhaman in the sum of P20,784.00 and the cost of the
litigation, without prejudice to the right of the one who should pay the judgment in full to
demand contribution from his co-defendant.
||| (Manila Steamship Co., Inc. v. Abdulhaman, G.R. No. L-9534, [September 29, 1956], 100
PHIL 32-40)

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 OFAPPEALS and FILIPINAS
PIONEER LINES, INC., respondents.

Emilio D. Castellanes for petitioners.

Apolinario A. Abantao for private respondents.

DECISION

MELENCIO-HERRERA, J p:

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 Mayof 1966. LLjur
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 interisland 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
AlfonsoVasquez 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 Maximina Cainay are the parents of the child, Mario Marlon Vasquez. They
seek the recovery of damages due to the loss of AlfonsoVasquez, 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
interisland 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 fell. 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 offorce
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 enroute, 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 ofthe 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." 1 In the language of the law, the event must have
been impossible to foresee, or if it could be foreseen, must have been impossible to
avoid. 2 There must be an entire exclusion of human agency from the cause of injury or loss. 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 ofSurigao. In fact,
they had lashed all the cargo in the hold before sailing in anticipation of strong winds and rough
waters. 4 They proceeded on their way, as did other vessels that day. Upon reaching Romblon,
they received the weather report that the typhoon was 154 kms. east southeast of Tacloban and
was moving west northwest.5 Since they were still not within the 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. 6 They still decided to
proceed noting that the weather was still "good" although, according to the Chief
Forecaster of the Weather Bureau, they were already within the typhoon zone. 7 At Tanguingui
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. 8 After about half an hour of navigation towards Chocolate Island, there was
a sudden fall of the 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. Cdpr
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, 9 they decided to take a calculated risk. In so
doing, they failed to observe that extraordinary diligence required of them explicitly by law for
the safety of the passengers transported by them with due regard for all circumstances 10 and
unnecessarily 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 ofnegligence 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 12 as construed in Yangco vs.
Laserna, 73 Phil. 330 [1941], suffice it to state that even in the cited case, it was held 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. LLpr
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.
||| (Vasquez v. Court of Appeals, G.R. No. L-42926, [September 13, 1985], 223 PHIL 147-154)
 EN BANC

[CA-No. 773 . December 17, 1946.]

DIONISIA ABUEG, ET AL., plaintiffs-appellees, vs.

BARTOLOME SAN DIEGO, defendant-appellant.

[CA-No. 774 . December 17, 1946.]

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

BARTOLOME SAN DIEGO, defendant-appellant.

[CA-No. 775 . December 17, 1946.]

ROSARIO OCHING, ET AL., plaintiffs-appellees, vs.

BARTOLOME SAN DIEGO, defendant-appellant.

Lichauco, Picazo & Mejia, for appellant.

Cecilio I. Lim and Roberto P. Ancog, for appellees.

SYLLABUS

1. MARITIME LAW; SHIPOWNER OR AGENT, ORIGIN OF REAL AND

HYPOTHECARY NATURE OF LIABILITY OF. — The real and hypothecary nature of the
liability of the shipowner or agent embodied in 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 shipbuilding and maritime commerce, it was deemed
necessary to confine the liability of the owner or agent arising from the operation of a ship to
the vessel, equipment, and freight, or insurance, if any, so that if the shipowner or agent
abandoned the ship, equipment, and freight, his liability was extinguished.
2. WORKMEN'S COMPENSATION ACT; PROVISIONS OF CODE OF
COMMERCE REGARDING MARITIME COMMERCE WITHOUT EFFECT IN
APPLICATION OF. — The provisions of the Code of Commerce regarding maritime
commerce have no room in the application of the Workmen's Compensation Act which seeks
to improve, and aims at the amelioration of, the condition of laborers and employees. Said Act
creates a liability to compensate employees and laborers in cases of injury received by or
inflicted upon them, while engaged in the performance of their work or employment, or the
 heirs and dependents of such laborers and employees in the event of death caused by their
employment.
3. ID.; INDUSTRIAL EMPLOYEES; OFFICERS OF MOTOR SHIPS ENGAGED IN
FISHING EXCEPTIONS. — The officers of motor ships engaged in fishing are industrial
employees within the purview of section 39, paragraph (d), as amended, for industrial
employment "includes all employment or work at a trade, occupation or profession exercised
by an employer for the purpose of gain." The only exceptions recognized by the Workmen's
Compensation Act are agriculture, charitable institutions and domestic service. Even
employees engaged in agriculture for the operation of mechanical implements, are entitled to
the benefits of the Workmen's Compensation Act.
4. ID.; COASTWISE AND INTERISLAND TRADE, MEANING OF; FISHING,
WHEN A TRADE . — The term "coastwise and interisland trade" does not have such a narrow
meaning as to confine it to the carriage for hire of passengers and/or merchandise on vessels
between ports and places in the Philippines because while fishing is an industry, if the catch is
brought to a port for sale, it is at the same time a trade.

DECISION

PADILLA, J p:

This is an appeal from a judgment rendered by the Court of First Instance of Manila
in the above-entitled cases awarding plaintiffs the compensation provided for in the
Workmen's Compensation Act.
The record of the cases was forwarded the Court of Appeals for review, but as there
was no question of fact involved in the appeal, said court forwarded the record to this Court.
The appeal was pending when the Pacific War broke out, and continued pending until after
liberation, because the record of the cases was destroyed as a result of the battle waged by the
forces of liberation against the enemy. As provided by law, the record was reconstituted and
we now proceed to dispose of the appeal.
Appellant, who was the owner of the motor ships San Diego II and Bartolome S,
states in his brief the following:
There is no dispute as to the facts involved in these cases and they may be
gathered from the pleadings and the decision of the trial Court. In case CA-G. R.
No. 773, Dionisia Abueg is the widow of the deceased, Amado Nuñez; who was
a machinist on board the M/S San Diego II belonging to the defendant-appellant.
In case CA-G. R. NO. 774, plaintiff-appellee, Marciana S. dc Salvacion, is the
widow of the deceased, Victoriano Salvacion, who was a machinist on board the
M/S Bartolome S also belonging to the defendant-appellant. In case CA-G. R.
NO. 775, the plaintiff-appellee, Rosario R. Oching is the widow of Francisco
Oching who was captain or patron of the defendant-appellant's M/S Bartolome S.
The M/S San Diego II and the M/S Bartolome, while engaged in fishing
operations around Mindoro Island on Oct. 1, 1941 were caught by a typhoon as a
 consequence of which they were sunk and totally lost. Amado Nuñez, Victoriano
Salvacion and Francisco Oching while acting in their capacities perished in the
shipwreck(Appendix A, p. IV).
It is also undisputed that the above-named vessels were not covered by
any insurance. (Appendix A, p. IV.)
Counsel for the appellant cite article 587 of the Code of Commerce which provides
that if the vessel together with all her tackle and freight money earned during the voyage are
abandoned, the agent's liability to third persons for tortuous acts of the captain in the care of
the goods which the ship carried is extinguished (Yangco vs. Laserna, 73 Phil., 330); article
837 of the same Code which provides that in cases of collision, the shipowners' liability is
limited to the value of the vessel with all her equipment and freight during the voyage
(Philippines Shipping Company vs. Garcia, 6 Phil., 281); and article 643 of the same Code
which provides that if the vessels and freight are totally lost, the agent's liability for wages of
the crew is extinguished. From these premises counsel draw the conclusion that appellant's
liability, as owner of the two motor ships lost or sunk as a result of the typhoon that lashed
the island of Mindoro on October 1, 1941, was extinguished.
The real and hypothecary nature of the liability of the shipower 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 shipbuilding and maritime commerce it was deemed necessary to confine the
liability of the owner or agent arising from the operation of a ship to the vessel, equipment,
and freight, or insurance, if any, so that if the shipowner or agent abandoned the ship,
equipment, and freight, his liability was extinguished.
But the provisions of the Code of Commerce invoked by appellant have no room in
the application of the Workmen's Compensation Act which seeks to improve, and aims at the
amelioration of, the condition of laborers and employees. It is not the liability for the damage
or loss of the cargo or injury to, or death of, a passenger by or through the misconduct of the
captain or master of the ship; nor the liability for the loss of the ship as a result of collision;
nor the responsibility for w ages of the crew, but a liability created by a statute to compensate
employees and laborers in cases of injury received by or inflicted upon them, while engaged
in the performance of their work or employment, or the heirs and dependents of such laborers
and employees in the event of death caused by their employment Such Compensation has
nothing to do with the provisions of the Code of Commerce regarding maritime commerce. It
is an item in the costs of production which must be included in the budget of any well-
managed industry.
Appellant's assertion that in the case of Francisco vs. Dy Liaco (57 Phil., 446), and
Murillo vs. Mendoza (66 Phil., 689), the question of the extinction of the shipowner's liability
due to abandonment of the ship by him was not fully discussed, as in the case of Yangco vs.
Laserna, supra, is not entirely correct. In the last mentioned case, the limitation of the
shipowner's liability to the value of the ship, equipment, freight, and insurance, if any, was
the lis mota. In the case of Franciscovs. Dy-Liacco, supra, the application of the Workmen's
Compensation Act to a master or patron who perished as a result of the sinking of the
motorboat of which he was the master, was the controversy submitted to the court for
decision. This Court held in that case that "It has been repeatedly stated that the Workmen's
 Compensation Act was enacted to abrogate the common law and our Civil Code upon
culpable acts and omissions, and that the employer need not be guilty of neglect or fault, in
order that responsibility may attach to him" (pp. 449-450); and that the shipowner was liable
to pay compensation provided for in the Workmen's Compensation Act, notwithstanding the
fact that the motorboat was totally lost. In the case of Murillo vs. Mendoza, supra, this Court
held that "The rights and responsibilities defined in said Act must be governed by its own
peculiar provisions in complete disregard of other similar provisions of the civil as well as
the mercantile law. If an accident is compensable under the Workmen's Compensation Act, it
must be compensated even when the workman's right is not recognized by or is in conflict
with other provisions of the Civil Code or of the Code of Commerce. The reason behind this
principle is that the Workmen's Compensation Act was enacted by the Legislature in
abrogation of the other existing laws." This quoted part of the decision is in answer to the
contention that it was not the intention of the Legislature to repeal articles 643 and 837 of
the Code of Commerce with the enactment of the Workmen's Compensation Act.
In the memorandum filed by counsel for the appellant, a new point not relied upon in
the court below is raised. They contend that the motorboats engaged in fishing could not be
deemed to be in the coastwise and interisland trade, as contemplated in section 38 of the
Workmen's Compensation Act (No. 3428), as amended by Act No. 3812, in as much as,
according to counsel, a craft engaged in the coastwise and interisland trade is one that carries
passengers and/or merchandise for hire between ports and places in the Philippine Islands.

This new point raised by counsel for the appellant is inconsistent with the first, for, if
the motor ships in question while engaged in fishing, were to be considered as not engaged in
interisland and coastwise trade, the provisions or the Code of Commerce invoked by them
regarding limitation of the shipowner's liability or extinction thereof when the shipowner
abandons the ship, cannot be applied Lopez vs. Duruelo, 52 Phil., 229). Granting however,
that the motor ships run and operated by the appellant were not engaged in the coastwise
and interisland trade, as contemplated in section 38 of the Workmen's compensation Act, as
amended, still the deceased officers of the motor ships in question were industrial employees
within the purview of section 39, paragraph (d), as amended, for industrial employment
"includes all employment or work at a trade, occupation or profession exercised by an
employer for the purpose of gain." The only exceptions recognized by the Act are
agriculture, charitable institutions and domestic service. Even employees engaged in
agriculture for the operation of mechanical implements, are entitled to the benefits of the
Workmen's Compensation Act Francisco vs. Consing, 63 Phil., 354). In Murillo vs. Mendoza,
supra, this Court held that "our Legislature has deemed it advisable to include in the
Workmen's Compensation Act all accidents that may occur to workmen or employees in
factories, shops and other industrial and agricultural workplaces as well as in the interisland
seas of the Archipelago." But we do not believe that the term "coastwise and interisland
trade" has such a narrow meaning as to confine it to the carriage for hire of passengers
and/or merchandise, on vessels between Ports and Places in the Philippines, because while
fishing is an industry, if the catch is brought to a port for sale, it is at the same time a trade.
Finding no merit in the appeal filed in these cases, we affirm the judgment of the
lower court, with costs against the appellant.
||| (Abueg v. San Diego, CA-No. 773, 774, 775, [December 17, 1946], 77 PHIL 730-736)
 THIRD DIVISION

[G.R. No. 100446. January 21, 1993.]

ABOITIZ SHIPPING CORPORATION, petitioner, vs. GENERAL ACCID

ENT FIRE AND LIFE ASSURANCE CORPORATION, LTD., respondent.

Sycip, Salazar, Hernandez & Gatmaitan Law Office for petitioner.

Napoleon Rama collaborating counsel for petitioner.
Dollete, Blanco, Ejercito & Associates for private respondent.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; STAY OF EXECUTION OF

JUDGMENT; GROUNDS THEREFOR. — This Court has always been consistent in its stand that
the very purpose for its existence is to see to the accomplishment of the ends of justice. Consistent
with this view, a number of decisions have originated herefrom, the tenor of which is that no
procedural consideration is sacrosanct if such shall result in the subverting of substantial justice.
The right to an execution after finality of a decision is certainly no exception to this. Thus,
in Cabrias v. Adil (135 SCRA 355 [1985]), this Court ruled that: ". . . It is a truism that every court
has the power 'to control, in the furtherance of justice, the conduct of its ministerial officers, and
of all other persons in any manner connected with a case before it, in every manner appertaining
thereto.' It has also been said that: '. . . every court having jurisdiction to render a particular
judgment has inherent power to enforce it, and to exercise equitable control over such enforcement.
The court has authority to inquire whether its judgment has been executed, and will remove
obstructions to the enforcement thereof. Such authority extends not only to such orders and such
writs as may be necessary to carry out the judgment into effect and render it binding and operative,
but also to such orders and such writs as may be necessary to prevent an improper enforcement of
the judgment. If a judgment is sought to be perverted and made a medium of consummating a
wrong the court on proper application can prevent it.'" (at p. 359) and again in the case of Lipana v.
Development Bank of Rizal (154 SCRA 257 [1987]), this Court found that: "The rule that once a
decision becomes final and executory, it is the ministerial duty of the court to order its execution,
admits of certain exceptions as in cases of special and exceptional nature where it becomes the
imperative in the higher interest of justice to direct the suspension of its execution (Vecine v.
Geronimo, 59 OG 579); whenever it is necessary to accomplish the aims of justice (Pascual v. Tan,
85 Phil. 164); or when certain facts and circumstances transpired after the judgment became final
which would render the execution of the judgment unjust (Cabrias v. Adil, 135 SCRA 354)." (at
p. 201)
2. COMMERCIAL LAW; CODE OF COMMERCE; REAL AND HYPOTHECARY NATURE
OF MARITIME LAW; MEANING; ORIGIN AND PURPOSE. — The real and hypothecary
nature of maritime law simply means that the liability of the carrier in connection with losses
related to maritime contracts is confined to the vessel, which is hypothecated for such obligations
or which stands as the guaranty for their settlement. It has its origin by reason of the conditions
and risks attending maritime trade in its earliest years when such trade was replete with
innumerable and unknown hazards since vessels had to go through largely uncharted waters to ply
their trade. It was designed to offset such adverse conditions and to encourage people and entities
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 against the consideration of the large profits
attainable in the trade. It might be noteworthy to add in passing that despite the modernization of
the shipping industry and the development of high-technology safety devices designed to reduce
the risks therein, the limitation has not only persisted, but is even practically absolute in well-
developed maritime countries such as the United States and England where it covers almost all
maritime casualties. Philippine maritime law is of Anglo-American extraction, and is governed by
adherence to both international maritime conventions and generally accepted practices relative to
maritime trade and travel.
3. ID.; ID.; LIMITED LIABILITY RULE; WHEN RULE NOT APPLICABLE; WHEN RULE
PROPERLY INVOKED; CASE AT BAR. — In this jurisdiction, on the other hand, its application
has been well-nigh constricted by the very statute from which it originates. 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 may arise from the conduct of the captain in
the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by
abandoning the vessel with all her equipment and the freight it may have earned during the voyage.
"Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their interests in the
common fund for the results of the acts of the captain referred to in Art. 587. "Each co-owner may
exempt himself from this liability by the abandonment, before a notary, of the part of the vessel
belonging to him" "Art. 837. The civil liability incurred by shipowners in the case prescribed in
this section (on collisions), shall be understood as limited to the value of the vessel with all its
appurtenances and freightage served during the voyage." Taken together with related articles, the
foregoing cover only liability for injuries to third parties (Art. 587), acts of the captain (Art. 590)
and collisions (Art. 837). In view of the foregoing, this Court shall not take the application of such
limited liability rule, which is a matter of near absolute application in other jurisdictions, so lightly
as to merely "imply" its inapplicability, because as could be seen, the reasons for its being are still
apparently much in existence and highly regarded. We now come to its applicability in the instant
case. In the few instances when the matter was considered by this Court, we have been consistent
in this jurisdiction in holding that the only time the Limited Liability Rule does not apply is when
there is an actual finding of negligence on the part of the vessel owner or agent (Yango v. Laserna,
73 Phil. 330 [1941]; Manila Steamship Co., Inc. v. Abdulhanan, 101 Phil. 32 [1957]; Heirs of
Amparo delos Santos v. Court of Appeals, 186 SCRA 649 [1967]) . . . We must stress that the
matter of the Limited Liability Rule as discussed was never in issue in all prior cases, including
those before the RTCs and the Court of Appeals. As discussed earlier, the "limited liability" in
issue before the trial courts referred to the package limitation clauses in the bills of lading and not
the limited liability doctrine arising from the real and hypothecary nature of maritime trade. The
latter rule was never made a matter of defense in any of the cases a quo, as properly it could not
have been made so since it was not relevant in said cases. The only time it could come into play is
when any of the cases involving the mishap were to be executed, as in this case. Then, and only
then, could the matter have been raised, as it has now been brought before the Court.
4. ID.; ID.; ID.; RIGHTS OF VESSEL OWNER OR AGENT AKIN TO RIGHTS OF
SHAREHOLDERS TO LIMITED LIABILITY UNDER CORPORATION LAW; RIGHTS OF
CLAIMANTS AGAINST VESSEL OWNER OR AGENT COMPARED TO RIGHTS OF
CREDITORS AGAINST INSOLVENT CORPORATION WITH SUFFICIENT ASSETS. — The
rights of a vessel owner or agent under the Limited Liability Rule are akin to those of the rights of
shareholders to limited liability under our corporation law. Both are privileges granted by statute,
and while not absolute, must be swept aside only in the established existence of the most
compelling of reasons. In the absence of such reasons, this Court chooses to exercise prudence and
shall not sweep such rights aside on mere whim or surmise, for even in the existence of cause to
do so, such incursion is definitely punitive in nature and must never be taken lightly. More to the
point, the rights of parties to claim against an agent or owner of a vessel may be compared to those
of creditors against an insolvent corporation whose assets are not enough to satisfy the totality of
claims as against it. While each individual creditor may, and in fact shall, be allowed to prove the
actual amounts of their respective claims, this does not mean that they shall all be allowed to
recover fully thus favoring those who filed and proved their claims sooner to the prejudice of those
who come later. In such an instance, such creditors too would not also be able to gain access to the
assets of the individual shareholders, but must limit their recovery to what is left in the name of
the corporation. Thus, in the case of Lipana v. Development Bank of Rizal earlier cited, We held
that: "In the instant case, the stay of execution of judgment is warranted by the fact that respondent
bank was placed under receivership. To execute the judgment would unduly deplete the assets of
respondent bank to the obvious prejudice of other depositors and creditors, since, as aptly stated
in Central Bank v. Morfe (63 SCRA 114), after the Monetary Board has declared that a bank is
insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets for the
equal benefit of all creditors, and after its insolvency, one cannot obtain an advantage or preference
over another by an attachment, execution or otherwise." In both insolvency of a corporation and
the sinking of a vessel, the claimants or creditors are limited in their recovery to the remaining
value of accessible assets. In the case of an insolvent corporation, these are the residual assets of
the corporation left over from its operations. In the case of a lost vessel, these are the insurance
proceeds and pending freightage for the particular voyage.

5. ID.; ID.; ID.; COLLATION OF ALL CLAIMS PREPARATORY TO SETTLEMENT OUT

OF INSURANCE PROCEEDS ON VESSEL; NO CLAIMANT GIVEN PRECEDENCE OVER
OTHERS; CASE AT BAR. — In the instant case, there is, therefore, a need to collate all claims
preparatory to their satisfaction from the insurance proceeds on the vessel M/V P. 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 filed or completed its action earlier than the rest. Thus, execution
of judgment in earlier completed cases, even those already final and executory, must be stayed
pending completion of all cases occasioned by the subject sinking. Then and only then can all such
claims be simultaneously settled, either completely or pro-rata should the insurance proceeds and
freightage be not enough to satisfy all claims . . . In fairness to the claimants, and as a matter of
equity, the total proceeds of the insurance and pending freightage should now be deposited in trust.
Moreover, petitioner should institute the necessary limitation and distribution action before the
proper admiralty court within 15 days from the finality of this decision, and thereafter deposit with
it the proceeds from the insurance company and pending freightage in order to safeguard the same
pending final resolution of all incidents, for final pro-rating and settlement thereof.

DECISION

MELO, J p:

This refers to a petition for review which seeks to annul and set aside the decision of the Court of
Appeals dated June 21, 1991, in CA G.R. SP No. 24918. The appellate court dismissed the petition
for certiorari filed by herein petitioner, Aboitiz Shipping Corporation, questioning the Order of
April 30, 1991 issued by the Regional Trial Court of the National Capital Judicial Region (Manila,
Branch IV) in its Civil Case No. 144425 granting private respondent's prayer for execution for the
full amount of the judgment award. The trial court in so doing swept aside petitioner's opposition
which was grounded on the real and hypothecary nature of petitioner's liability as ship owner. The
application of this established principle of maritime law would necessarily result in a probable
reduction of the amount to be recovered by private respondent, since it would have to share with
a number of other parties similarly situated in the insurance proceeds on the vessel that sank.
The basic facts are not disputed.
Petitioner is a corporation organized and operating under Philippine laws and engaged in the
business of maritime trade as a carrier. As such, it owned and operated the ill-fated
"M/V P. ABOITIZ," a common carrier which sank on a voyage from Hongkong to the Philippines
on October 31, 1980. Private respondent General AccidentFire and Life Assurance Corporation,
Ltd. (GAFLAC), on the other hand, is a foreign insurance company pursuing its remedies as a
subrogee of several cargo consignees whose respective cargo sank with the said vessel and for
which it has priorly paid.
The incident of said vessel's sinking gave rise to the filing of suits for recovery of lost cargo either
by the shippers, their successor-in-interest, or the cargo insurers like GAFLAC as subrogees. The
sinking was initially investigated by the Board of Marine Inquiry (BMI Case No. 466, December
26, 1984), which found that such sinking was due to force majeure and that subject vessel, at the
time of the sinking was seaworthy. This administrative finding notwithstanding, the trial court in
said Civil Case No. 144425 found against the carrier on the basis that the loss subject matter therein
did not occur as a result of force majeure. Thus, in said case, plaintiff GAFLAC was allowed to
prove, and was later awarded, its claim. This decision in favor or GAFLAC was elevated all the
way up to this Court in G.R. No. 89757 (Aboitiz v. Court of Appeals, 188 SCRA 387 [1990]),
with Aboitiz, like its ill-fated vessel, encountering rough sailing. The attempted execution of the
judgment award in said case in the amount of P1,072,611.20 plus legal interest has given rise to
the instant petition.
On the other hand, other cases have resulted in findings upholding the conclusion of the BMI that
the vessel was seaworthy at the time of the sinking, and that such sinking was due to force majeure.
One such ruling was likewise elevated to this Court in G.R. No. 100373, Country Bankers
Insurance Corporation v. Court of Appeals, et al., August 28, 1991 and was sustained. Part of the
task resting upon this Court, therefore, is to reconcile the resulting apparent contrary findings in
cases originating out of a single set of facts.
It is in this factual milieu that the instant petition seeks a pronouncement as to the applicability of
the doctrine of limited liability on the totality of the claims vis a vis the losses brought about by
the sinking of the vessel MV P. ABOITIZ, as based on the real and hypothecary nature of maritime
law. This is an issue which begs to be resolved considering that a number of suits alleged in the
petition number about 110 (p. 10 and pp. 175 to 183, Rollo) still pend and whose resolution shall
well-nigh result in more confusion than presently attends the instant case.
In support of the instant petition, the following arguments are submitted by the petitioner:
1. The Limited Liability Rule warrants immediate stay of execution of judgment to prevent
impairment of other creditors' shares;
2. The finding of unseaworthiness of a vessel is not necessarily attributable to the shipowner; and
3. The principle of "Law of the Case" is not applicable to the present petition. (pp. 2-26, Rollo.)
On the other hand, private respondent opposes the foregoing contentions, arguing that: LexLib
1. There is no limited liability to speak of or applicable real and hypothecary rule under Articles
587, 590, and 837 of the Code of Commerce in the face of the facts found by the lower court (Civil
Case No. 144425), upheld by the Appellate Court (CA G.R. No. 10609), and affirmed in toto by
the Supreme Court in G.R. No. 89757 which cited G.R. No. 88159 as the Law of the Case; and
2. Under the doctrine of the Law of the Case, cases involving the same incident, parties similarly
situated and the same issues litigated should be decided in conformity therewith following the
maxim stare decisis et non quieta movere. (pp. 225 to 279, Rollo.).
Before proceeding to the main bone of contention, it is important to determine first whether or not
the Resolution of this Court in G.R. No. 88159, Aboitiz ShippingCorporation vs. The Honorable
Court of Appeals and Allied Guaranty Insurance Company, Inc., dated November 13, 1989
effectively bars and precludes the instant petition as argued by respondent GAFLAC.
An examination of the November 13, 1989 Resolution in G.R. No. 88159 (pp. 280 to 282, Rollo)
shows that the same settles two principal matters, first of which is thatthe doctrine of primary
administrative jurisdiction is not applicable therein; and second is that a limitation of liability in
said case would render inefficacious the extraordinary diligence required by law of common
carriers.
It should be pointed out, however, that the limited liability discussed in said case is not the same
one now in issue at bar, but an altogether different aspect. The limited liability settled in G.R. No.
88159 is that which attaches to cargo by virtue of stipulations in the Bill of Lading, popularly
known as package limitation clauses, which in that case was contained in Section 8 of the Bill of
Lading and which limited the carrier's liability to US$500.00 for the cargo whose value was therein
sought to be recovered. Said resolution did not tackle the matter of the Limited Liability Rule
arising out of the real and hypothecary nature of maritime law, which was not raised therein, and
which is the principal bone of contention in this case. While the matters threshed out in G.R. No.
88159, particularly those dealing with the issues on primary administrative jurisdiction and the
package liability limitation provided in the Bill of Lading are now settled and should no longer be
touched, the instant case raises a completely different issue. It appears, therefore, that the resolution
in G.R. 88159 adverted to has no bearing other than factual to the instant case.
This brings us to the primary question herein which is whether or not respondent court erred in
granting execution of the full judgment award in Civil Case No. 14425 (G.R. No. 89757), thus
effectively denying the application of the limited liability enunciated under the appropriated
articles of the Code of Commerce. The articles may be ancient, but they are timeless and have
remained to be good law. Collaterally, determination of the question of whether execution of
judgments which have become final and executory may be stayed is also an issue.
We shall tackle the latter issue first. This Court has always been consistent in its stand that the very
purpose for its existence is to see to the accomplishment of the ends of justice. Consistent with this
view, a number of decisions have originated herefrom, the tenor of which is that no procedural
consideration is sacrosanct if such shall result in the subverting of substantial justice. The right to
an execution after finality of a decision is certainly no exception to this. Thus, in Cabrias v.
Adil (135 SCRA 355 [1985]), this Court ruled that: LLjur
". . . It is a truism that every court has the power 'to control, in the furtherance of
justice, the conduct of its ministerial officers, and of all other persons in any
manner connected with a case before it, in every manner appertaining thereto.' It
has also been said that:
'. . . every court having jurisdiction to render a particular judgment
has inherent power to enforce it, and to exercise equitable control over
such enforcement. The court has authority to inquire whether its judgment
has been executed, and will remove obstructions to the enforcement
thereof. Such authority extends not only to such orders and such writs as
may be necessary to carry out the judgment into effect and render it
binding and operative, but also to such orders and such writs as may be
necessary to prevent an improper enforcement of the judgment. If a
judgment is sought to be perverted and made a medium of consummating
a wrong the court on proper application can prevent it.'" (at p. 359)

and again in the case of Lipana v. Development Bank of Rizal (154 SCRA 257 [1987]), this
Court found that:
"The rule that once a decision becomes final and executory, it is the ministerial
duty of the court to order its execution, admits of certain exceptions as in cases
of special and exceptional nature where it becomes the imperative in the higher
interest of justice to direct the suspension of its execution (Vecine v. Geronimo,
59 OG 579); whenever it is necessary to accomplish the aims of justice
(Pascual v. Tan, 85 Phil. 164); or when certain facts and circumstances transpired
after the judgment became final which would render the execution of the
judgment unjust (Cabrias v. Adil, 135 SCRA 354)." (at p. 201)
We now come to the determination of the principal issue as to whether the Limited Liability Rule
arising out of the real and hypothecary nature of maritime law should apply in this and related
cases. We rule in the affirmative. Cdpr
In deciding the instant case below, the Court of Appeals took refuge in this Court's decision in
G.R. No. 89757 upholding private respondent's claims in that particular case, which the Court of
Appeals took to mean that this Court has "considered, passed upon and resolved Aboitiz's
contention that all claims for the losses should first be determined before GAFLAC's judgment
may be satisfied," and that such ruling "in effect necessarily negated the application of the limited
liability principle" (p. 175, Rollo). Such conclusion is not accurate. The decision in G.R. No. 89757
considered only the circumstances peculiar to that particular case, and was not meant to traverse
the larger picture herein brought to fore, the circumstances of which heretofore were not relevant.
We must stress that the matter of the Limited Liability Rule as discussed was never in issue in all
prior cases, including those before the RTCs and the Court of Appeals. As discussed earlier, the
"limited liability" in issue before the trial courts referred to the package limitation clauses in the
bills of lading and not the limited liability doctrine arising from the real and hypothecary nature of
maritime trade. The latter rule was never made a matter of defense in any of the cases a quo, as
properly it could not have been made so since it was not relevant in said cases. The only time it
could come into play is when any of the cases involving the mishap were to be executed, as in this
case. Then, and only then, could the matter have been raised, as it has now been brought before
the Court.
The real and hypothecary nature of maritime law simply means that the liability of the carrier in
connection with losses related to maritime contracts is confined to the vessel, which is
hypothecated for such obligations or which stands as the guaranty for their settlement. It has its
origin by reason of the conditions and risks attending maritime trade in its earliest years when such
trade was replete with innumerable and unknown hazards since vessels had to go through largely
uncharted waters to ply their trade. It was designed to offset such adverse conditions and to
encourage people and entities 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 against
the consideration of the large profits attainable in the trade.
It might be noteworthy to add in passing that despite the modernization of the shipping industry
and the development of high-technology safety devices designed to reduce the risks therein, the
limitation has not only persisted, but is even practically absolute in well-developed maritime
countries such as the United States and England where it covers almost all maritime casualties.
Philippine maritime law is of Anglo-American extraction, and is governed by adherence to both
international maritime conventions and generally accepted practices relative to maritime trade and
travel. This is highlighted by the following excerpts on the limited liability of vessel owners and/or
agents: prLL
"SECTION 183. The liability of the owner of any vessel, whether American or
foreign, for any embezzlement, loss, or destruction by any person of any person
or any property, goods, or merchandise shipped or put on board such vessel, or
for any loss, damage, or forfeiture, done, occasioned, or incurred, without the
privity or knowledge of such owner or owners shall not exceed the amount or
 value of the interest of such owner in such vessel, and her freight then pending."
(Section 183 of the US Federal Limitation of Liability Act)
— and —
"1. The owner of a sea-going ship may limit his liability in accordance with
Article 3 of this Convention in respect of claims arising from any of the following
occurrences, unless the occurrence giving rise to the claim resulted from the
actual fault or privity of the owner;
(a) loss of life of, or personal injury to, any person being carried in the ship, and
loss of, or damage to, any property on board the ship.
(b) loss of life of, or personal injury to, any other person, whether on land or on
water, loss of or damage to any other property or infringement of any rights
caused by the act, neglect or default the owner is responsible for, or any person
not on board the ship for whose act, neglect or default the owner is responsible:
Provided, however, that in regard to the act, neglect or default of this last class of
person, the owner shall only be entitled to limit his liability when the act, neglect
or default is one which occurs in the navigation or the management of the ship or
in the loading, carriage or discharge of its cargo or in the embarkation, carriage
or disembarkation of its passengers.
(c) any obligation or liability imposed by any law relating to the removal of wreck
and arising from or in connection with the raising, removal or destruction of any
ship which is sunk, stranded or abandoned (including anything which may be on
board such ship) and any obligation or liability arising out of damage caused to
harbor works, basins and navigable waterways." (Section 1, Article I of the
Brussels International Convention of 1957)
In this jurisdiction, on the other hand, its application has been well-nigh constricted by the very
statute from which it originates. 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:
"ARTICLE 587. The ship agent shall also be civilly liable for the indemnities in
favor of third persons which may arise from the conduct of the captain in the care
of the goods which he loaded on the vessel; but he may exempt himself therefrom
by abandoning the vessel with all her equipment and the freight it may have
earned during the voyage. cdrep
"ARTICLE 590. The co-owners of a vessel shall be civilly liable in the proportion
of their interests in the common fund for the results of the acts of the captain
referred to in Art. 587.
"Each co-owner may exempt himself from this liability by the abandonment,
before a notary, of the part of the vessel belonging to him"
"ARTICLE 837. The civil liability incurred by shipowners in the case prescribed
in this section (on collisions), shall be understood as limited to the value of the
vessel with all its appurtenances and freightage served during the voyage."
(Emphasis supplied)
 Taken together with related articles, the foregoing cover only liability for injuries to third
parties (Art. 587), acts of the captain (Art. 590) and collisions (Art. 837).
In view of the foregoing, this Court shall not take the application of such limited liability rule,
which is a matter of near absolute application in other jurisdictions, so lightly as to merely "imply"
its inapplicability, because as could be seen, the reasons for its being are still apparently much in
existence and highly regarded.
We now come to its applicability in the instant case. In the few instances when the matter was
considered by this Court, we have been consistent in this jurisdiction in holding that the only time
the Limited Liability Rule does not apply is when there is an actual finding of negligence on the
part of the vessel owner or agent (Yango v. Laserna, 73 Phil. 330 [1941]; Manila Steamship Co.,
Inc. v. Abdulhanan, 101 Phil. 32 [1957]; Heirs of Amparo delos Santos v. Court of Appeals, 186
SCRA 649 [1967]). The pivotal question, thus, is whether there is a finding of such negligence on
the part of the owner in the instant case.
A careful reading of the decision rendered by the trial court in Civil Case No. 144425 (pp. 27-33,
Rollo) as well as the entirety of the records in the instant case will show that there has been no
actual finding of negligence on the part of petitioner. 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 were not lost due to fortuitous event or force
majeure." (p. 32, Rollo)
The same is true of the decision of this Court in G.R. No. 89757 (pp. 71-86, Rollo) affirming
the decision of the Court of Appeals in CA-G.R. CV No. 10609 (pp. 34-50, Rollo) since both
decisions did not make any new and additional finding of fact. Both merely affirmed the
factual findings of the trial court, adding that the cause of the sinking of the vessel was
because of unseaworthiness due to the failure of the crew and the master to exercise
extraordinary diligence. Indeed, there appears to have been no evidence presented sufficient
to form a conclusion that petitioner shipowner itself was negligent, and no tribunal, including
this Court, will add or subtract to such evidence to justify a conclusion to the contrary. LLjur
The qualified nature of the meaning of "unseaworthiness," under the peculiar circumstances of this
case is underscored by the fact that in the Country Bankers case,supra, arising from the same
sinking, the Court sustained the decision of the Court of Appeals that the sinking of the
M/V P. Aboitiz was due to force majeure.

On this point, it should be stressed that unseaworthiness is not a fault that can be laid squarely on
petitioner's lap, absent a factual basis for such a conclusion. The unseaworthiness found in some
cases where the same has been ruled to exist is directly attributable to the vessel's crew and captain,
more so on the part of the latter since Article 612 of the Code of Commerce provides that among
the inherent duties of a captain is to examine a vessel before sailing and to comply with the laws
of navigation. Such a construction would also put matters to rest relative to the decision of the
Board of Marine Inquiry. While the conclusion therein exonerating the captain and crew of the
vessel was not sustained for lack of basis, the finding therein contained to the effect that the vessel
was seaworthy deserves merit. Despite appearances, it is not totally incompatible with the findings
of the trial court and the Court of Appeals, whose finding of "unseaworthiness" clearly did not
pertain to the structural condition of the vessel which is the basis of the BMI's findings, but to the
condition it was in at the time of the sinking, which condition was a result of the acts of the captain
and the crew.
The rights of a vessel owner or agent under the Limited Liability Rule are akin to those of the
rights of shareholders to limited liability under our corporation law. Both are privileges granted by
statute, and while not absolute, must be swept aside only in the established existence of the most
compelling of reasons. In the absence of such reasons, this Court chooses to exercise prudence and
shall not sweep such rights aside on mere whim or surmise, for even in the existence of cause to
do so, such incursion is definitely punitive in nature and must never be taken lightly.
More to the point, the rights of parties to claim against an agent or owner of a vessel may be
compared to those of creditors against an insolvent corporation whose assets are not enough to
satisfy the totality of claims as against it. While each individual creditor may, and in fact shall, be
allowed to prove the actual amounts of their respective claims, this does not mean that they shall
all be allowed to recover fully thus favoring those who filed and proved their claims sooner to the
prejudice of those who come later. In such an instance, such creditors too would not also be able
to gain access to the assets of the individual shareholders, but must limit their recovery to what is
left in the name of the corporation. Thus, in the case of Lipana v. Development Bank of
Rizal earlier cited, We held that:
"In the instant case, the stay of execution of judgment is warranted by the fact
that respondent bank was placed under receivership. To execute the judgment
would unduly deplete the assets of respondent bank to the obvious prejudice of
other depositors and creditors, since, as aptly stated in Central Bank v. Morfe (63
SCRA 114), after the Monetary Board has declared that a bank is insolvent and
has ordered it to cease operations, the Board becomes the trustee of its assets for
the equal benefit of all creditors, and after its insolvency, one cannot obtain an
advantage or preference over another by an attachment, execution or otherwise."
(at p. 261)
In both insolvency of a corporation and the sinking of a vessel, the claimants or creditors are
limited in their recovery to the remaining value of accessible assets. In the case of an
insolvent corporation, these are the residual assets of the corporation left over from its operations.
In the case of a lost vessel, these are the insurance proceeds and pending freightage for the
particular voyage. LLpr
In the instant case, there is, therefore, a need to collate all claims preparatory to their satisfaction
from the insurance proceeds on the vessel M/V P. 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
filed or completed its action earlier than the rest. Thus, execution of judgment in earlier completed
cases, even those already final and executory, must be stayed pending completion of all cases
occasioned by the subject sinking. Then and only then can all such claims be simultaneously
settled, either completely or pro-rata should the insurance proceeds and freightage be not enough
to satisfy all claims.
Finally, the Court notes that petitioner has provided this Court with a list of all pending cases (pp.
175 to 183, Rollo), together with the corresponding claims and the pro-rated share of each. We
likewise note that some of these cases are still with the Court of Appeals, and some still with the
trial courts and which probably are still undergoing trial. It would not, therefore, be entirely correct
to preclude the trial courts from making their own findings of fact in those cases and deciding the
same by allotting shares for these claims, some of which, after all, might not prevail, depending
on the evidence presented in each. We, therefore, rule that the pro-rated share of each claim can
only be found after all the cases shall have been decided.
In fairness to the claimants, and as a matter of equity, the total proceeds of the insurance and
pending freightage should now be deposited in trust. Moreover, petitioner should institute the
necessary limitation and distribution action before the proper admiralty court within 15 days from
the finality of this decision, and thereafter deposit with it the proceeds from the insurance company
and pending freightage in order to safeguard the same pending final resolution of all incidents, for
final pro-rating and settlement thereof.
ACCORDINGLY, the petition is hereby GRANTED, and the Orders of the Regional Trial Court
of Manila, Branch IV dated April 30, 1991 and the Court of Appeals dated June 21, 1991 are
hereby set aside. The trial court is hereby directed to desist from proceeding with the execution of
the judgment rendered in Civil Case No. 144425 pending determination of the totality of claims
recoverable from the petitioner as the owner of the M/V P. Aboitiz. Petitioner is directed to
institute the necessary action and to deposit the proceeds of the insurance of subject vessel as
above-described within fifteen (15) days from finality of this decision. The temporary restraining
order issued in this case dated August 7, 1991 is hereby made permanent.
SO ORDERED.
||| (Aboitiz Shipping Corp. v. General Accident Fire and Life Assurance Corp., Ltd., G.R. No.
100446, [January 21, 1993], 291 PHIL 370-386)

SECOND DIVISION

[G.R. No. 92735. June 8, 2000.]

MONARCH INSURANCE CO., INC.,

TABACALERA INSURANCE CO., INC. and Hon. Judge AMANTE
PURISIMA, petitioners, vs. COURT OF APPEALS and ABOITIZ
SHIPPING CORPORATION, respondents.

[G.R. No. 94867. June 8, 2000.]

ALLIED
GUARANTEE INSURANCE COMPANY, petitioner, vs. COURT OF APP
 EALS, Presiding Judge, RTC Manila, Br. 24 and ABOITIZ SHIPPING
CORPORATION, respondents.

[G.R. No. 95578. June 8, 2000.]

EQUITABLE INSURANCE CORPORATION, petitioner, vs. COURT OF

APPEALS, Former First Division Composed of Hon. Justices RODOLFO
NOCON, PEDRO RAMIREZ, and JESUS ELBINIAS and ABOITIZ
SHIPPING CORPORATION, respondents.

Guevarra Law Office for petitioner in 92735.

Dollete Blanco Ejercito & Associates for petitioners in 94867 & 95578.
Napoleon Rama for private respondent Aboitiz.
Sycip Salazar Hernandez & Gatmaitan for private respondent in 94867 & 95578.

SYNOPSIS

All three cases herein arose from the loss of cargoes of various shippers when the M/V P.
Aboitiz, a common carrier owned and operated by Aboitiz, sank on her voyage from Hong Kong
to Manila in 1980. Seeking indemnification for the loss of their cargoes, the shippers, their
successors-in-interest, and the cargo insurers such as the petitioners herein filed separate suits
against Aboitiz before the Regional Trial Courts. The claims numbered one hundred and ten (110)
for the total amount ofP41,230,115.00 plus earned freight of P500,000.00 according to Aboitiz.
Some of these claims, including those of herein petitioners, had not been settled.
A CourtResolution consolidated these three petitions in 1991 on the ground that the petitioners
had identical causes of action against the same respondent and similar reliefs were prayed for. The
threshold issue in these consolidated petitions is the applicability of the limited liability rule in
maritime law in favor of Aboitiz in order to stay the execution of judgments for full
indemnification of the losses suffered by the petitioners as a result of the sinking of the M/V P.
Aboitiz.
According to the Supreme Court, the failure of Aboitiz to present sufficient evidence to
exculpate itself from the fault and/or negligence in the sinking of its vessel constrained
the Court to hold that Aboitiz was concurrently at fault with the ship captain and crew of the
vessel. However, the failure of Aboitiz to discharge the burdenof proving that the
unseaworthiness of its vessel was not due to its fault and/or negligence should not mean that the
limited liability rule would not be applied to the present cases. The latest ruling should be applied
in these cases wherein the claimants should be treated as creditors in an insolvent corporation
whose assets are not enough to satisfy the totality of claims against it. Hence, the Court affirmed
the decisions of the Court of Appeals. However, because Aboitiz showed bad faith in not seeking
the consolidation of all the claims against it, the Court ordered the payment of petitioners
herein of moral damages, attorney's fees and treble costs. CAIaDT
 SYLLABUS

1. REMEDIAL LAW; ACTIONS; NOMINAL PARTY; JUDGES HAVE NO LEGAL

STANDING TO FILE PETITION IN ANY LITIGATION THEY RESOLVED. —
The Court takes note of the fact that in G.R. No. 92735, Judge Amante Purisima, whose decision
in the Regional Trial Court is sought to be upheld, is named as a co-petitioner.
InCalderon v. Solicitor General, where the petitioner in the special civil
action of certiorari and mandamus was also the judge whose order was being assailed,
the Courtheld that said judge had no standing to file the petition because he was merely a nominal
or formal party-respondent under Section 5 of Rule 65 of the Rules of Court. He should not appear
as a party seeking the reversal of a decision that is unfavorable to the action taken by him.
The Court there said: "Judge Calderon should be reminded of the well-known doctrine that a judge
should detach himself from cases where his decision is appealed to a higher court for review.
The raison d'etre for such doctrine is the fact that a judge is not an active combatant in such
proceeding and must leave the opposing parties to contend their individual positions and for the
appellate court to decide the issues without his active participation. By filing this case, petitioner
in a way ceased to be judicial and has become adversarial instead." While the petition in G.R. No.
92735 does not expressly show whether or not Judge Purisima himself is personally interested in
the disposition of this petition or he was just inadvertently named as petitioner by the real parties
in interest, the fact that Judge Purisima is named as petitioner has not escaped this Court's notice.
Judges and litigants should be reminded of the basic rule that courts or individual judges are not
supposed to be interested "combatants" in any litigation they resolve.
2. ID.; ID.; JUDGMENT; SUSPENSION THEREOF ALLOWED ONLY IN
CASES OF SPECIAL AND EXCEPTIONAL NATURE; CASE AT BAR. — The rule that once
a decision becomes final and executory, it is the ministerial duty of the court to order its execution,
is not an absolute one. The Court has allowed the suspension ofexecution in cases of special and
exceptional nature when it becomes imperative in the higher interest of justice. The unjust and
inequitable effects upon various other claimants against Aboitiz should the Court allow the
execution of judgments for the full indemnification of petitioners' claims impel this court to
uphold the stay ofexecution as ordered by the respondent Court of Appeals. The Court reiterates
its pronouncement in Aboitiz Shipping Corporation vs. General Accident Fire and Life Assurance
Corporation on this very same issue. "This brings us to the primary question herein which is
whether or not respondent court erred in granting execution ofthe full judgment award in Civil
Case No. 14425 (G.R. No. 89757), thus effectively denying the application of the limited liability
enunciated under the appropriate articlesof the Code of Commerce. . . . . Collaterally,
determination of the question of whether execution of judgments which have become final and
executory may be stayed is also an issue. ". . . This Court has always been consistent in its stand
that the very purpose for its existence is to see the accomplishment of the ends of justice.
Consistent with this view, a number of decisions have originated herefrom, the tenor of which is
that no procedural consideration is sacrosanct if such shall result in the subverting of justice. The
right to execution after finality of a decision is certainly no exception to this. Thus,
in Cabrias v. Adil (135 SCRA 355 [1885]), this Court ruled that: '. . . every court having
jurisdiction to render a particular judgment has inherent power to enforce it, and to exercise
equitable control over such enforcement. Thecourt has authority to inquire whether its judgment
has been executed, and will remove obstructions to the enforcement thereof. Such authority
extends not only to such orders and such writs as may be necessary to prevent an improper
enforcement of the judgment. If a judgment is sought to be perverted and made a
medium ofconsummating a wrong the court on proper application can prevent it."
3. ID.; ID.; ID.; JUDGMENT OF DEFAULT; NATURE AND FUNCTION THEREOF.
— It should be noted that Aboitiz was declared as in default not for its failure to file an answer but
for its absence during pre-trial and the trial proper. A judgment of default does not imply a
waiver of rights except that of being heard and presenting evidence in defendant's favor. It does
not imply admission by the defendant of the facts and causes of action of the plaintiff, because the
codal section requires the latter to adduce evidence in support of his allegations as an indispensable
condition before final judgment could be given in his favor. Nor could it be interpreted as an
admission by the defendant that the plaintiff's causes of action find support in the law or that the
latter is entitled to the relief prayed for. This is especially true with respect to a defendant who had
filed his answer but had been subsequently declared in default for failing to appear at the trial since
he has had an opportunity to traverse, via his answer, the material averments contained in the
complaint. Such defendant has a better standing than a defendant who has neither answered nor
appeared at trial. The former should be allowed to reiterate all affirmative defenses pleaded in his
answer before the Court of Appeals. Likewise, the Court of Appealsmay review the
correctness of the evaluation of the plaintiffs evidence by the lower court.
4. COMMERCIAL LAW; CODE OF COMMERCE; PRINCIPLE OF LIMITED
LIABILITY; CONSTRUED. — The principle of limited liability is enunciated in the following
provisions of the Code of Commerce: Art. 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which may arise from the conduct ofthe captain in the
care of 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. Art. 590.
The co-owners of a vessel shall be civilly liable in the proportion of their interests in the common
fund for the results ofthe acts of the captain referred to in Art. 587. Each co-owner may exempt
himself from his liability by the abandonment, before a notary, of the part of the vessel belonging
to him. Art. 837. The civil liability incurred by shipowners in the case prescribed in this section,
shall be understood as limited to the value of the vessel with all its appurtenances and the
freightage served during the voyage. Article 837 applies the principle of limited liability in
cases of collision, hence, Arts. 587 and 590 embody the universal principle of limited liability in
all cases. In Yangco v. Laserna, (73 Phil. 330 [1941]) 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 implication, 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.' It is true
that the article appears 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 deficiency of language and in no way indicates the true extent of such
liability. The consensus of authorities 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 negligent or illicit acts of the
captain." "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 extinguishes maritime liens because
there is no longer any res to which it can attach. This doctrine is based on the real and hypothecary
nature of maritime law which has 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 shipbuilding and maritime commerce, it was
deemed necessary to confine the liability of the owner or agent arising from the operation of a ship
to the vessel, equipment, and freight, orinsurance, if any.
5. ID.; ID.; ID.; EXCEPTIONS. — This is not to say, however, that the limited liability
rule is without exceptions, namely: (1) where the injury or death to a passenger is due either to the
fault of the shipowner, or to the concurring negligence of the shipowner and the captain; (2) where
the vessel is insured; and (3) in workmen's compensation claims.
6. CIVIL LAW; DAMAGES; MORAL DAMAGES; WHEN AWARD THEREOF
PROPER; CASE AT BAR. — Well aware of the 110 claimants against it, Aboitiz preferred to
litigate the claims singly rather than exert effort towards the consolidation of all claims.
Consequently, courts have arrived at conflicting decisions while claimants waited over the years
for a resolution of any of the cases that would lead to the eventual resolution of the rest. Aboitiz
failed to give the claimants their due and to observe honesty and good faith in the exercise of its
rights. Aboitiz' blatant disregard of the order of this Court in Aboitiz Shipping
Corporation v. General Accident Fire and Life Assurance Corporation, Ltd. cannot be anything
but willful on its part. An act is considered willful if it is done with knowledge of its injurious
effect; it is not required that the act be done purposely to produce the injury. Aboitiz is well aware
that by not instituting the said suit, it caused the delay in the resolution of all claims against it.
Having willfully caused loss or injury to the petitioners in a manner that is contrary to morals,
good customs or public policy, Aboitiz is liable for damages to the latter. Thus, for its
contumacious act of defying the order of this Court to file the appropriate action to consolidate all
claims for settlement, Aboitiz must be held liable for moral damages which may be awarded in
appropriate cases under the Chapter on human relations of the Civil Code (Articles 19 to
36). DaTICc

DECISION

DE LEON, JR., J p:

Before us are three consolidated petitions. G.R. No. 92735 is a petition for review filed
under Rule 45 of the Rules of Court assailing the decision of the Court ofAppeals dated March 29,
1990 in CA-G.R. SP. Case No. 17427 which set aside the writ of execution issued by the
lower court for the full indemnification of the claims ofthe
petitioners, Monarch Insurance Company (hereafter "Monarch") and
Tabacalera Insurance Company, Incorporated (hereafter "Tabacalera") against private respondent,
Aboitiz Shipping Corporation (hereafter "Aboitiz") on the ground that the latter is entitled to the
benefit of the limited liability rule in maritime law; G.R. No. 94867 is a petition
for certiorari under Rule 65 of the Rules of Court to annul and set aside the
decision of the Court of Appeals dated August 15, 1990 in CA-G.R. SP No. 20844 which ordered
the lower court to stay the execution of the judgment in favor of the petitioner, Allied
Guarantee Insurance Company (hereafter "Allied") against Aboitiz insofar as it impairs the
rights of the other claimants to their pro-rata share in the insurance proceeds from the
sinking of the M/V P. Aboitiz, in accordance with the rule on limited liability; and G.R. No. 95578
is a petition for review under Rule 45 of the Rules of Court seeking a reversal of the
decision of the Court of Appealsdated August 24, 1990 and its resolution dated October 4, 1990
in C.A. G.R. Civil Case No. 15071 which modified the judgment of the lower court by applying
the hypothecary rule on limited liability to limit the lower court's award of actual damages to
petitioner Equitable Insurance Corporation (hereafter "Equitable") to its pro-rata share in
the insurance proceeds from the sinking of the M/V P. Aboitiz.
All cases arose from the loss of cargoes of various shippers when the M/V P. Aboitiz, a
common carrier owned and operated by Aboitiz, sank on her voyage from Hong Kong to Manila
on October 31, 1980. Seeking indemnification for the loss of their cargoes, the shippers, their
successors-in-interest, and the cargo insurers such as the instant petitioners filed separate suits
against Aboitiz before the Regional Trial Courts. The claims numbered one hundred and ten (110)
for the total amount ofP41,230,115.00 which is almost thrice the
amount of insurance proceeds of P14,500,000.00 plus earned freight of P500,000.00 according to
Aboitiz. To this day, some ofthese claims, including those of herein petitioners, have not yet been
settled.
G.R. No. 92735.
Monarch and Tabacalera are insurance carriers of lost cargoes. They indemnified the
shippers and were consequently subrogated to their rights, interests and actions against Aboitiz,
the cargo carrier. 1 Because Aboitiz refused to compensate Monarch, it filed two complaints
against Aboitiz, docketed as Civil Cases Nos. 82-2767and 82-2770. For its part, Tabacalera also
filed two complaints against the same defendant, docketed as Civil Cases Nos. 82-2768 and 82-
2769. As these four (4) cases had common causes of action, they were consolidated and jointly
tried. 2
In Civil Case No. 82-2767 where Monarch also named Malaysian International Shipping
Corporation and Litonjua Merchant Shipping Agency as Aboitiz's co-defendants, Monarch sought
recovery of P29,719.88 representing the value of three (3) pallets of glass tubing that sank with
the M/V P. Aboitiz, plus attorney's fees ofnot less than P5,000.00, litigation expenses, interest at
the legal rate on all these amounts, and cost of suit. 3 Civil Case No. 82-2770 was a complaint
filed by Monarchagainst Aboitiz and co-defendants Compagnie Maritime des Chargeurs Reunis
and F.E. Zuellig (M), Inc. for the recovery of P39,579.66 representing the value of one
caseof motor vehicle parts which was lost when the M/V P. Aboitiz sank on her way to Manila,
plus attorney's fees of not less than P10,000.00 and cost of suit. 4
Tabacalera sought against Franco Belgian Services, F. E. Zuellig and Aboitiz in Civil Case
No. 82-2768 the recovery of P284,218.00 corresponding to the value ofnine (9) cases of Renault
spare parts, P213,207.00 for the value of twenty-five (25) cases of door closers and P42,254.00
representing the value of eighteen (18) cases ofplastic spangle, plus attorney's fees of not less than
P50,000.00 and cost of suit. 5 In Civil Case No. 82-2769, Tabacalera claimed from Hong Kong
Island Shipping Co., Ltd., Citadel Lines and Aboitiz indemnification in the amount of P75,058.00
for the value of four (4) cartons of motor vehicle parts that foundered with the M/V P. Aboitiz,
plus attorney's fees of not less than P20,000.00 and cost of suit. 6
In its answer with counterclaim, Aboitiz rejected responsibility for the claims on the ground
that the sinking of its cargo vessel was due to force majeure or an actof God. 7 Aboitiz was
subsequently declared as in default for its failure to appear during the pre-trial. Its counsel filed a
motion to set aside the order of default with notice of his withdrawal as such counsel. Before the
motion could be acted upon, Judge Bienvenido Ejercito, the presiding judge of the trial court, was
promoted to the then Intermediate Appellate Court. The cases were thus re-raffled to Branch
VII of the RTC of Manila presided by Judge Amante P. Purisima, the co-petitioner in G.R. No.
92735. Without resolving the pending motion to set aside the order of default, the trial court set
the cases for hearing. However, since Aboitiz had repeatedly failed to appear in court, the
trial court denied the said motion and allowed Monarch and Tabacalera to present evidence ex-
parte. 8
Monarch and Tabacalera proffered in evidence the survey of Perfect Lambert, a surveyor
commissioned to investigate the possible cause of the sinking of the cargo vessel. The survey
established that on her voyage to Manila from Hong Kong, the vessel did not encounter weather
so inclement that Aboitiz would be exculpated from liability for losses. In his note of protest, the
master of M/V P. Aboitiz described the wind force encountered by the vessel as from ten (10) to
fifteen (15) knots, a weather condition classified as typical and moderate in the South China Sea
at that particular time of the year. The survey added that the seaworthiness of the vessel was in
question especially because the breaches of the hull and the serious flooding of two (2) cargo holds
occurred, simultaneously in "seasonal weather." 9
In due course, the trial court rendered judgment against Aboitiz but the complaint against
all the other defendants was dismissed. Aboitiz was held liable for the following: (a) in Civil Case
No. 82-2767, P29,719.88 with legal interest from the filing of the complaint until fully paid plus
attorney's fees of P30,000.00; and cost of suit; (b) in Civil Case No. 82-2768, P539,679.00 with
legal interest of 12% per annum from date of filing of the complaint until fully paid, plus attorney's
fees of P30,000.00, litigation expenses and cost of suit; (c) in Civil Case No. 82-2769, P75,058.00
with legal interest of 12% per annum from date of filing of the complaint until fully paid, plus
P5,000.00 attorney's fees, litigation expenses and cost of suit, and (d) in Civil Case No. 82-2770,
P39,579.66 with legal interest of 12% per annum from date of filing of the complaint until fully
paid, plus attorney's fees of P5,000.00, litigation expenses and cost of suit. CDHcaS
Aboitiz filed a motion for reconsideration of the decision and/or for new trial to lift the
order of default. The court denied the motion on August 27, 1986. 10 Aboitiz appealed to
the Court of Appeals but the appeal was dismissed for its failure to file appellant's brief. It
subsequently filed an urgent motion for reconsideration of the dismissal with prayer for the
admission of its attached appellant's brief. The appellate court denied that motion for lack of merit
in a resolution dated July 8, 1988. 11
Aboitiz thus filed a petition for review before this Court. Docketed as G.R. No. 84158, the
petition was denied in the Resolution of October 10, 1988 for being filed out of time. Aboitiz's
motion for the reconsideration of said Resolution was similarly denied. 12 Entry of judgment was
made in the case. 13
Consequently, Monarch and Tabacalera moved for execution of judgment. The
trial court granted the motion on April 4, 1989 14 and issued separate writs ofexecution. However,
on April 12, 1989, Aboitiz, invoking the real and hypothecary nature of liability in maritime law,
filed an urgent motion to quash the writs ofexecution. 15 According to Aboitiz, since its liability
is limited to the value of the vessel which was insufficient to satisfy the aggregate claims of all
110 claimant, to indemnify Monarch and Tabacalera ahead of the other claimants would be
prejudicial to the latter. Monarch and Tabacalera opposed the motion to quash. 16
On April 17, 1989, before the motion to quash could be heard, the sheriff levied upon five
(5) heavy equipment owned by Aboitiz for public auction sale. At said sale, Monarch was the
highest bidder for one (1) unit FL-151 Fork Lift (big) and one (1) unit FL-25 Fork Lift (small).
Tabacalera was also the highest bidder for one (1) unit TCH TL-251 Hyster Container Lifter, one
(1) unit Hyster Top Lifter (out of order), and one (1) unit ER-353 Crane. The corresponding
certificates of sale 17 were issued toMonarch and Tabacalera.
On April 18, 1989, the day before the hearing of the motion to quash, Aboitiz filed a
supplement to its motion, to add the fact that an auction sale had taken place. On April 19, 1989,
Judge Purisima issued an order denying the motion to quash but freezing execution proceedings
for ten (10) days to give Aboitiz time to secure a restraining order from a
higher court. 18 Execution was scheduled to resume to fully satisfy the judgment when the grace
period shall have lapsed without such restraining order having been obtained by Aboitiz.
Aboitiz filed with the Court of Appeals a petition for certiorari and prohibition with prayer
for preliminary injunction and/or temporary restraining order under CA-G.R. No. SP-
17427. 19 On March 29, 1990, the appellate court rendered a Decision the dispositive
portion of which reads:
"WHEREFORE, the writ of certiorari is hereby granted, annulling the
subject writs of execution, auction sale, certificates of sale, and the assailed
orders ofrespondent Judge dated April 4 and April 19, 1989 insofar as the money
value of those properties of Aboitiz, levied on execution and sold at public
auction, has exceeded the pro-rata shares of Monarch and Tabacalera in
the insurance proceeds of Aboitiz in relation to the pro-rata shares of the 106
other claimants.
"The writ of prohibition is also granted to enjoin respondent
Judge, Monarch and Tabacalera from proceeding further with execution of the
judgments in question insofar as the execution would satisfy the
claims of Monarch and Tabacalera in excess of their pro-rata shares and in effect
reduce the balance of the proceeds for distribution to the other claimants to their
prejudice.
"The question of whether or how much of the claims of Monarch and
Tabacalera against the insurance proceeds has already been settled through the
writ ofexecution and auction sale in question, being factual issues, shall be
threshed out before respondent Judge.
"The writ of preliminary injunction issued in favor of Aboitiz, having
served its purpose, is hereby lifted. No pronouncement as to costs.
"SO ORDERED" 20
Hence, the instant petition for review on certiorari where petitioners Monarch, Tabacalera
and Judge Purisima raise the following assignment of errors:
 1. The appellate court grievously erred in re-opening the Purisima decisions,
already final and executory, on the alleged ground that the issue of real
and hypothecary liability had not been previously resolved by Purisima,
the appellate court, and this Hon. Supreme Court;
2. The appellate court erred when it resolved that Aboitiz is entitled to the limited
real and hypothecary liability of a ship owner, considering the facts on
record and the law on the matter.
3. The appellate court erred when it concluded that Aboitiz does not have to
present evidence to prove its entitlement to the limited real and
hypothecary liability.
4. The appellate court erred in ignoring the case of "Aboitiz Shipping
Corporation v. CA and Allied Guaranty Insurance Co., Inc." (G.R. No.
88159), decided by this Honorable Supreme Court as early as November
13, 1989, considering that said case, now factual and executory, is in pari
materia with the instant case.
5. The appellate court erred in not concluding that irrespective of whether
Aboitiz is entitled to limited hypothecary liability or not, there are enough
funds to satisfy all the claimants.
6. The appellate court erred when it concluded that Aboitiz had made an
"abandonment" as envisioned by Art. 587 of the Code of Commerce.
7. The appellate court erred when it concluded that other claimants would suffer
if Tabacalera and Monarch would be fully paid.
8. The appellate court erred in concluding that certiorari was the proper remedy
for Aboitiz. 21
G.R. NOS. 94867 & 95578
Allied as insurer-subrogee of consignee Peak Plastic and Metal Products Limited, filed a
complaint against Aboitiz for the recovery of P278,536.50 representing the value of 676
bags of PVC compound and 10 bags of ABS plastic lost on board the M/V P. Aboitiz, with legal
interest from the date of filing of the complaint, plus attorney's fees, exemplary damages and
costs. 22 Docketed as Civil Case No. 138643, the case was heard before the Regional
Trial Court of Manila, Branch XXIV, presided by Judge Sergio D. Mabunay.
On the other hand, Equitable, as insurer-subrogee of consignee-assured Axel
Manufacturing Corporation, filed an amended complaint against Franco Belgian Services, F.E.
Zuellig, Inc. and Aboitiz for the recovery of P194,794.85 representing the value of 76
drums of synthetic organic tanning substances and 1,000 kilograms ofoptical bleaching agents
which were also lost on board the M/V P. Aboitiz, with legal interest from the date of filing of the
complaint, plus 25% attorney's fees, exemplary damages, litigation expenses and
costs of suit. 23 Docketed as Civil Case No. 138396, the complaint was assigned to the Regional
Trial Court of Manila, Branch VIII.
In its answer with counterclaim in the two cases, Aboitiz disclaimed responsibility for the
amounts being recovered, alleging that the loss was due to a fortuitous event or an act of God. It
prayed for the dismissal of the cases and the payment of attorney's fees, litigation expenses plus
costs of suit. It similarly relied on the defenses of force majeure, seaworthiness of the vessel and
exercise of due diligence in the carriage of goods as regards the cross-claim of its co-
defendants. 24
In support of its position, Aboitiz presented the testimonies of Capt. Gerry N. Racines,
master mariner of the M/V P. Aboitiz, and Justo C. Iglesias, a meteorologistof the Philippine
Atmospheric Geophysical and Astronomical Services Administration (PAGASA). The gist of the
testimony of Capt. Racines in the two cases follows:
The M/V P. Aboitiz left Hong Kong for Manila at about 7:30 in the evening of October 29,
1980 after securing a departure clearance from the Hong Kong authority. The departure was
delayed for two hours because he (Capt. Racines) was observing the direction of the storm that
crossed the Bicol Region. He proceeded with the voyage only after being informed that the storm
had abated. At about 8:00 o'clock in the morning of October 30, 1980, after more than (12)
hours of navigation, the vessel suddenly encountered rough seas with waves about fifteen to
twenty-five feet high. He ordered his chief engineer to check the cargo holds. The latter found that
sea water had entered cargo hold Nos. 1 and 2. He immediately directed that water be pumped out
by means of the vessel's bilge pump, a device capable of ejecting 180 gallons of water per minute.
They were initially successful in pumping out the water.
At 6:00 a.m. of October 31, 1980, however, Capt. Racines received a report from his chief
engineer that the water level in the cargo holds was rapidly rising. He altered the vessel's course
and veered towards the northern tip of Luzon to prevent the vessel from being continuously
pummeled by the waves. Despite, diligent efforts of the officers and crew, however, the vessel,
which was approximately 250 miles away from the eye of the storm, began to list on starboard
side at 27 degrees. Capt. Racines and his crew were not able to make as much headway as they
wanted because by 12:00 noon of the same day, the cargo holds were already flooded with sea
water that rose from three to twelve feet, disabling the bilge pump from containing the water.
The M/V P. Aboitiz sank at about 7:00 p.m. of October 31, 1980 at latitude 18 degrees
North, longitude 170 degrees East in the South China Sea in between Hong Kong, the Philippines
and Taiwan with the nearest land being the northern tip of Luzon, around 270 miles from Cape
Bojeador, Bangui, Ilocos Norte. Responding to the captain's distress call, the M/V Kapuas
(Capuas) manned by Capt. Virgilio Gonzales rescued the officers and crew of the ill-fated M/V P.
Aboitiz and brought them to Waileen, Taiwan where Capt. Racines lodged his marine protest dated
November 3, 1980.
Justo Iglesias, meteorologist of PAGASA and another witness of Aboitiz, testified in both
cases that during the inclusive dates of October 28-31, 1980, a stormy weather condition prevailed
within the Philippine area of responsibility, particularly along the sea route from Hong Kong to
Manila, because of tropical depression "Yoning." 25 PAGASA issued weather bulletins from
October 28-30, 1980 while the storm was still within Philippine territory. No domestic bulletins
were issued the following day when the storm which hit Eastern Samar, Southern Quezon and
Southern Tagalog provinces, had made its exit to the South China Sea through Bataan.
Allied and Equitable refuted the allegation that the M/V P. Aboitiz and its cargo were lost
due to force majeure, relying mainly on the marine protest filed by Capt. Racines as well as on the
Beaufort Scale of Wind. In his marine protest under oath, Capt. Racines affirmed that the wind
force on October 29-30, 1980 was only ten (10) to fifteen (15) knots. Under the Beaufort
Scale of Wind, said wind velocity falls under scale No. 4 that describes the sea condition as
"moderate breeze," and "small waves becoming longer, fairly frequent white horses." 26
To fortify its position Equitable presented Rogelio T. Barboza who testified that as claims
supervisor and processor of Equitable, he recommended payment to Axel Manufacturing
Corporation as evidenced by the cash voucher, return check and subrogation receipt. Barboza also
presented a letter of demand to Aboitiz which, however, the latter ignored. 27
On April 24, 1984, the trial court rendered a decision that disposed of Civil Case No.
138643 as follows:
"WHEREFORE, judgment is hereby rendered ordering defendant Aboitiz
Shipping Company to pay plaintiff Allied Guarantee Insurance Company, Inc.
the sum ofP278,536.50, with legal interest thereon from March 10, 1981, then
date of the filing of the complaint, until fully paid, plus P30,000.00 as attorney's
fees, with costs ofsuit.
"SO ORDERED." 28
A similar decision was arrived at in Civil Case No. 138396, the dispositive
portion of which reads:
"WHEREFORE, in view of the foregoing, this Court hereby renders
judgment in favor of plaintiff and against defendant Aboitiz Shipping
Corporation, to pay the sum of P194,794.85 with legal rate of interest thereon
from February 27, 1981 until fully paid; attorney's fees of twenty-five (25%)
percent of the total claim, plus litigation expenses and costs of litigation.
SO ORDERED." 29
In Civil Case No. 138643, Aboitiz appealed to the Court of Appeals under CA-G.R. CV
No. 04121. On March 23, 1987, the Court of Appeals affirmed the decision ofthe lower court. A
motion for reconsideration of the said decision was likewise denied by the Court of Appeals on
May 3, 1989. Aggrieved, Aboitiz then filed a petition for review with this Court docketed as G.R.
No. 88159 which was denied for lack merit. Entry of judgment was made and the lower court's
decision in Civil Case No. 138643 became final and executory. Allied prayed for the issuance of a
writ of execution in the lower court which was granted by the latter on April 4, 1990. To stay the
execution of the judgment of the lower court, Aboitiz file a petition for certiorari and prohibition
with preliminary injunction with the Court of Appeals docketed as CA-G.R. SP No. 20844. 30 On
August 15, 1990, the Court of Appeals rendered the assailed decision, the dispositive
portion of which reads as follows: ADaSEH
"WHEREFORE, the challenged order of the respondent Judge dated
April 4, 1990 granting the execution is hereby set aside. The respondent Judge is
further ordered to stay the execution of the judgment insofar as it impairs the
rights of the 100 other claimants to the insurance proceeds including the
rights of the petitioner to pay more than the value of the vessel or
the insurance proceeds and to desist from executing the judgment insofar as it
prejudices the pro-rata share of all claimants to the insurance proceeds. No
pronouncement as to costs.
 "SO ORDERED." 31
Hence, Allied filed the instant petition for certiorari, mandamus and injunction with
preliminary injunction and/or restraining order before this Court alleging the following
assignment of errors:
1. Respondent Court of Appeals gravely erred in staying the immediate
execution of the judgment of the lower court as it has no authority nor
jurisdiction to directly or indirectly alter, modify, amend, reverse or
invalidate a final judgment as affirmed by the Honorable
Supreme Court in G.R. No. 88159.
2. Respondent Court of Appeals with grave abuse of discretion amounting to
lack or excess of jurisdiction, brushed aside the doctrine in G.R. No.
88159 which is now the law of the case and observance of time honored
principles of stare decisis, res adjudicata and estoppel by judgment.
3. Real and hypothecary rule under Articles 587, 590 and 837 of the
Code of Commerce which is the basis of the questioned decision (Annex
"C" hereof) is without application in the face of the facts found by the
lower court, sustained by the Court of Appeals in CA-G.R. No. 04121
and affirmedin toto by the Supreme Court in G.R. No. 88159.
4. Certiorari as a special remedy is unavailing for private respondent as there was
no grave abuse of discretion nor lack or excess of jurisdiction for Judge
Mabunay to issue the order of April 4, 1990 which was in accord with law
and jurisprudence, nor were there intervening facts and/or supervening
events that will justify respondent court to issue a writ of certiorari or a
restraining order on a final and executory judgment of the Honorable
Supreme Court. 32
From the decision of the trial court in Civil Case No. 138396 that favored Equitable,
Aboitiz likewise appealed to the Court of Appeals through CA-G.R. CV No. 15071. On August
24, 1990, the Court of Appeals rendered the Decision quoting extensively its Decision in CA-G.R.
No. SP-17427 (now G.R. No. 92735) and disposing ofthe appeal as follows:
"WHEREFORE, we hereby affirm the trial court's awards of actual
damages, attorney's fees and litigation expenses, with the exception of legal
interest, in favor ofplaintiff-appellee Equitable Insurance Corporation as
subrogee of the consignee for the loss of its shipment aboard the M/V 'P. Aboitiz'
and against defendant-appellant Aboitiz Shipping Corporation. However, the
amount and payment of those awards shall be subject to a determination of the
pro-rata share of said appellee in relation to the pro-rata shares of the 109 other
claimants, which determination shall be made by the trial court. This case is
therefore hereby ordered remanded to the trialcourt which shall reopen the case
and receive evidence to determine appellee's pro-rata share as aforesaid. No
pronouncement as to costs.
"SO ORDERED." 33
 On September 12, 1990, Equitable moved to reconsider the Court of Appeals' Decision.
The Court of Appeals denied the motion for reconsideration on October 4, 1990. 34 Consequently,
Equitable filed with this Court a petition for review alleging the following assignment of errors:
1. Respondent Court of Appeals, with grave abuse of discretion amounting to
lack or excess of jurisdiction, erroneously brushed aside the doctrine in
G.R. No. 88159 which is now the law of the case as held in G.R. No.
89757 involving the same and identical set of facts and cause of action
relative to the sinking of the M/V 'P. Aboitiz' and observance of the time
honored principles of stare decisis, and estoppel by judgment.
2. Real and hypothecary rule under Articles 587, 590 and 837 of the
Code of Commerce which is the basis of the assailed decision and
resolution is without application in the face of the facts found by the
trial court which conforms to the conclusion and finding of facts arrived
at in a similar and identical case involving the same incident and parties
similarly situated in G.R. No. 88159 already declared as the 'law of the
case' in a subsequent decision of this Honorable Court in G.R. No. 89757
promulgated on August 6, 1990.
3. Respondent Court of Appeals gravely erred in concluding that limited liability
rule applies in case of loss of cargoes when the law itself does not
distinguish; faultof the shipowner or privity thereto constitutes one of the
exceptions to the application of limited liability under Article 587, 590
and 837 of the Code ofCommerce, Civil Code provisions on common
carriers for breach of contract of carriage prevails. 35
These three petitions in G.R. Nos. 92735, 94867 and 95578 were consolidated in the
Resolution of August 5, 1991 on the ground that the petitioners "have identical causes of action
against the same respondent and similar reliefs are prayed for." 36
The threshold issue in these consolidated petitions is the applicability of the limited
liability rule in maritime law in favor of Aboitiz in order to stay the execution ofthe judgments for
full indemnification of the losses suffered by the petitioners as a result of the sinking of the M/V P.
Aboitiz. Before we can address this issue, however, there are procedural matters that need to be
threshed out.
First. At the outset, the Court takes note of the fact that in G.R. No. 92735, Judge Amante
Purisima, whose decision in the Regional Trial Court is sought to be upheld, is named as a co-
petitioner. In Calderon v. Solicitor General, 37 where the petitioner in the special civil
action of certiorari and mandamus was also the judge whose order was being assailed,
the Court held that said judge had no standing to file the petition because he was merely a nominal
or formal party-respondent underSection 5 of Rule 65 of the Rules of Court. He should not appear
as a party seeking the reversal of a decision that is unfavorable to the action taken by him.
The Courtthere said:
"Judge Calderon should be reminded of the well-known doctrine that a
judge should detach himself from cases where his decision is appealed to a
higher courtfor review. The raison d'etre for such doctrine is the fact that a judge
is not an active combatant in such proceeding and must leave the opposing parties
 to contend their individual positions and for the appellate court to decide the
issues without his active participation. By filing this case, petitioner in a way
ceased to be judicial and has become adversarial instead." 38
While the petition in G.R. No. 92735 does not expressly show whether or not Judge
Purisima himself is personally interested in the disposition of this petition or he was just
inadvertently named as petitioner by the real parties in interest, the fact that Judge Purisima is
named as petitioner has not escaped this Court's notice. Judges and litigants should be
reminded of the basic rule that courts or individual judges are not supposed to be interested
"combatants" in any litigation they resolve.
Second. The petitioners contend that the inapplicability of the limited liability rule to
Aboitiz has already been decided on by no less than this Court in G.R. No. 88159 as early as
November 13, 1989 which was subsequently declared as "law of the case" in G.R. No. 89757 on
August 6, 1990. Herein petitioners cite the aforementioned cases in support of their theory that the
limited liability rule based on the real and hypothecary nature of maritime law has no application
in the cases at bar.
The existence of what petitioners insist is already the "law of the case" on the
matter of limited liability is at best illusory. Petitioners are either deliberately misleading
this Court or profoundly confused. As elucidated in the case of Aboitiz Shipping Corporation vs.
General Accident Fire and Life Assurance Corporation, 39
"An examination of the November 13, 1989 Resolution in G.R. No.
88159 (pp. 280-282, Rollo) shows that the same settles two principal matters,
first of which is that the doctrine of primary administrative jurisdiction is not
applicable therein; and second is that a limitation of liability in said case would
render inefficacious the extraordinary diligence required by law of common
carriers.
"It should be pointed out, however, that the limited liability discussed in
said case is not the same one now in issue at bar, but an altogether different aspect.
The limited liability settled in G.R. No. 88159 is that which attaches to cargo by
virtue of stipulations in the Bill of Lading, popularly known as package limitation
clauses, which in that case was contained in Section 8 of the Bill of Lading and
which limited the carrier's liability to US$500.00 for the cargo whose value was
therein sought to be recovered. Said resolution did not tackle the matter of the
Limited Liability Rule arising out of the real and hypothecary nature of maritime
law, which was not raised therein, and which is the principal bone of contention
in this case. While the matters threshed out in G.R. No. 88159, particularly those
dealing with the issues on primary administrative jurisdiction and the package
liability limitation provided in the Bill of Lading are now settled and should no
longer be touched, the instant case raises a completely different issue." 40
Third. Petitioners asseverate that the judgments of the lower courts, already final and
executory, cannot be directly or indirectly altered, modified, amended, reversed or invalidated.
The rule that once a decision becomes final and executory, it is the ministerial
duty of the court to order its execution, is not an absolute one. We have allowed the
suspension of execution in cases of special and exceptional nature when it becomes imperative in
the higher interest of justice. 41 The unjust and inequitable effects upon various other claimants
against Aboitiz should we allow the execution of judgments for the full
indemnification of petitioners' claims impel us to uphold the stay ofexecution as ordered by the
respondent Court of Appeals. We reiterate our pronouncement in Aboitiz Shipping
Corporation vs. General Accident Fire and Life Assurance Corporation on this very same issue.
"This brings us to the primary question herein which is whether or not
respondent court erred in granting execution of the full judgment award in Civil
Case No. 14425 (G.R. No. 89757), thus effectively denying the application of the
limited liability enunciated under the appropriate articles of the
Code of Commerce. . . . . Collaterally, determination of the question of whether
execution of judgments which have become final and executory may be stayed is
also an issue.
"We shall tackle the latter issue first. This Court has always been
consistent in its stand that the very purpose for its existence is to see the
accomplishment of the ends of justice. Consistent with this view, a
number of decisions have originated herefrom, the tenor of which is that no
procedural consideration is sacrosanct if such shall result in the
subverting of justice. The right to execution after finality of a decision is certainly
no exception to this. Thus, in Cabrias v. Adil (135 SCRA 355 [1885]).
this Court ruled that:
'xxx xxx xxx
' . . . every court having jurisdiction to render a particular judgment
has inherent power to enforce it, and to exercise equitable control over
such enforcement. The court has authority to inquire whether its judgment
has been executed, and will remove obstructions to the enforcement
thereof. Such authority extends not only to such orders and such writs as
may be necessary to prevent an improper enforcement of the judgment. If
a judgment is sought to be perverted and made a
medium of consummating a wrong the court on proper application can
prevent it." 42
Fourth. Petitioners in G.R. No. 92735 aver that it was error for the
respondent Court of Appeals to allow Aboitiz the benefit of the limited liability rule despite its
failure to present evidence to prove its entitlement thereto in the court below.
Petitioners Monarch and Tabacalera remind this Court that from the inception of G.R. No. 92735
in the lower court and all the way to the Supreme Court, Aboitiz had not presented an
iota of evidence to exculpate itself from the charge of negligence for the simple reason that it was
declared as in default. 43
It is true that for having been declared in default, Aboitiz was precluded from presenting
evidence to prove its defenses in the court a quo. We cannot, however, agree with petitioners that
this circumstance prevents the respondent Court of Appeals from taking cognizance of Aboitiz'
defenses on appeal.
It should be noted that Aboitiz was declared as in default not for its failure to file an answer
but for its absence during pre-trial and the trial proper. In Aboitiz' answer with counterclaim, it
claimed that the sinking of the M/V P. Aboitiz was due to an act of God or unforeseen event and
that the said ship had been seaworthy and fit for the voyage. Aboitiz also alleged that it exercised
the due diligence required by law, and that considering the real and hypothecary nature of maritime
trade, the sinking justified the extinguishment of its liability for the lost shipment. 44
A judgment of default does not imply a waiver of rights except that of being heard and
presenting evidence in defendant's favor. It does not imply admission by the defendant of the facts
and causes of action of the plaintiff, because the codal Section 45 requires the latter to adduce
evidence in support of his allegations as an indispensable condition before final judgment could
be given in his favor. Nor could it be interpreted as an admission by the defendant that the plaintiff's
causes ofaction find support in the law or that the latter is entitled to the relief prayed for. 46 This
is especially true with respect to a defendant who had filed his answer but had been subsequently
declared in default for failing to appear at the trial since he has had an opportunity to
traverse, via his answer, the material averments contained in the complaint. Such defendant has a
better standing than a defendant who has neither answered nor appeared at trial. 47 The former
should be allowed to reiterate all affirmative defenses pleaded in his answer before
the Court of Appeals. Likewise, the Court of Appeals may review the correctness of the
evaluation of the plaintiffs evidence by the lower court.
It should also be pointed out that Aboitiz is not raising the issue of its entitlement to the
limited liability rule for the first time on appeal thus, the respondentCourt of Appeals may properly
rule on the same.
However, whether or not the respondent Court of Appeals erred in finding, upon review,
that Aboitiz is entitled to the benefit of the limited liability rule is an altogether different matter
which shall be discussed below.
Rule on Limited Liability. The petitioners assert in common that the vessel M/V P. Aboitiz
did not sink by reason of force majeure 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.
The principle of limited liability is enunciated in the following provisions of the
Code of Commerce:
ARTICLE 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 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.
ARTICLE 590. The co-owners of a vessel shall be civilly liable in the
proportion of their interests in the common fund for the results of the acts of the
captain referred to in Art. 587. EHDCAI
Each co-owner may exempt himself from his liability by the
abandonment, before a notary, of the part of the vessel belonging to him.
ARTICLE 837. The civil liability incurred by shipowners in the case
prescribed in this section, shall be understood as limited to the value of the vessel
with all its appurtenances and the freightage served during the voyage.
 Article 837 applies the principle of limited liability in cases of collision, hence, Arts. 587
and 590 embody the universal principle of limited liability in all cases. InYangco v.
Laserna, 48 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 implication, his liability is confined to that which he is entitled
as ofright to abandon — 'the vessel with all her equipments and the freight it may
have earned during the voyage.' It is true that the article appears 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 deficiency of language and in no way indicates the true
extent of such liability. The consensus of authorities 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 negligent or illicit acts of the captain." 49
"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 extinguishes maritime liens because
there is no longer any res to which it can attach. 50 This doctrine is based on the real and
hypothecary nature of maritime law which has 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 shipbuilding and maritime
commerce, it was deemed necessary to confine the liability of the owner or agent arising from the
operation of a ship to the vessel, equipment, and freight, orinsurance, if any. 51
Contrary to the petitioners' theory that the limited liability rule has been rendered obsolete
by the advances in modern technology which considerably lessen the risks involved in maritime
trade, this Court continues to apply the said rule in appropriate cases. This is not to say, however,
that the limited liability rule is without exceptions, namely: (1) where the injury or death to a
passenger is due either to the fault of the shipowner, or to the concurring negligence of the
shipowner and the captain; 52 (2) where the vessel is insured; and (3) in workmen's compensation
claims. 53
We have categorically stated that Article 587 speaks only of situations where the fault or
negligence is committed solely by the captain. In cases where the ship owner is likewise to be
blamed, Article 587 does not apply. Such a situation will be covered by the provisions of the Civil
Code on common carriers. 54
A finding that a fortuitous event was the sole cause of the loss of the M/V P. Aboitiz would
absolve Aboitiz from any and all liability pursuant to Article 1734(1) ofthe 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, earthquake, lightning,
or other natural disaster or calamity. On the other hand, a finding that the M/V P. Aboitiz sank by
reason of fault and/or negligenceof Aboitiz, the ship captain and crew of the M/V P. 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 Court of Appeals and even this Court.
 In Civil Cases Nos. 82-2767-82-2770 (now G.R. No. 92735), after receiving Monarch's
and Tabacalera's evidence, the trial court found that the complete loss of the shipment on board
the M/V P. Aboitiz when it sank was neither due to a fortuitous event nor a storm or natural cause.
For Aboitiz' failure to present controverting evidence, the trial court also upheld petitioners'
allegation that the M/V P. Aboitiz was unseaworthy. 55 However, on appeal,
respondent Court of Appeals exculpated Aboitiz from fault or negligence and ruled that:
" . . . even if she (M/V P. Aboitiz) was found to be unseaworthy,
this fault (distinguished from civil liability) cannot be laid on the shipowner's
door. Such fault was directly attributable to the captain. This is so, because under
Art. 612 of the Code of Commerce, among the inherent duties of a captain, are to
examine the vessel before sailing and to comply with the laws on navigation." 56 ;
and that:
" . . . although the shipowner may be held civilly liable for the captain's
fault . . . having abandoned the vessel in question, even if the vessel was
unseaworthy due to the captain's fault, Aboitiz is still entitled to the benefit under
the rule of limited liability accorded to shipowners by the
Code of Commerce." 57
Civil Case No. 138396 (now G.R. No. 95578) was similarly resolved by the trial court,
which found that the sinking of the M/V P. Aboitiz was not due to an act of God or force majeure.
It added that the evidence presented by the petitioner Equitable demonstrated the
negligence of Aboitiz Shipping Corporation in the management and operation of its vessel M/V P.
Aboitiz. 58
However, Aboitiz' appeal was favorably acted upon by the
respondent Court of Appeals which reiterated its ruling in G.R. No. 92735 that the
seaworthiness of the M/V P. Aboitiz was not a fault directly attributable to Aboitiz but to the
captain, and that Aboitiz is entitled to the benefit of the limited liability rule for having abandoned
its ship. 59
Finally, in Civil Case No. 138643 (now G.R. No. 94867), the trial court held that the
M/V P. Aboitiz was not lost due to a fortuitous event or force majeure, and that Aboitiz had failed
to satisfactorily establish that it had observed extraordinary diligence in the vigilance over the
goods transported by it. 60
In CA-G.R. CV No. 04121, the Court of Appeals initially ruled against Aboitiz and found
that the sinking of the vessel was due to its unseaworthiness and the failureof its crew and master
to exercise extraordinary diligence. 61 Subsequently, however, Aboitiz' petition before
the Court of Appeals, docketed as CA-G.R. SP No. 20844 (now G.R. No. 94867) to annul and set
aside the order of execution issued by the lower court was resolved in favor of Aboitiz.
The Court of Appeals brushed aside the issue of Aboitiz' negligence and/or fault and proceeded to
allow the application of the limited liability rule "to accomplish the aims of justice." 62 It
elaborated thus: "To execute 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. 63
 It should be pointed out that the issue of whether or not the M/V P. Aboitiz sank by
reason of force majeure is not a novel one for that question has already been the
subject of conflicting pronouncements by the Supreme Court. In Aboitiz Shipping
Corporation v. Court of Appeals, 64 this Court approved the findings of the trialcourt and the
appellate court that the sinking of the M/V P. Aboitiz was not due to the waves caused by tropical
storm "Yoning" but due to the fault and negligence ofAboitiz, its master and crew. 65 On the other
hand, in the later case of Country
Bankers Insurance Corporation v. Court of Appeals, 66 this Court issued a Resolution on August
28, 1991 denying the petition for review on the ground that the Court of Appeals committed no
reversible error, thereby affirming and adopting as its own, the
findings of the Court of Appeals that force majeure had caused the M/V P. Aboitiz to founder.
In view of these conflicting pronouncements, we find that now is the opportune time to
settle once and for all the issue of whether or not force majeure had indeed caused the M/V P.
Aboitiz to sink. After reviewing the records of the instant cases, we categorically state that by the
facts on record, the M/V P. Aboitiz did not go under water because of the storm "Yoning."
It is true that as testified by Justo Iglesias, meteorologist of Pag-Asa, during the inclusive
dates of October 28-31, 1980, a stormy weather condition prevailed within the Philippine
area of responsibility, particularly along the sea route from Hong Kong to Manila,
because of tropical depression "Yoning." 67 But even Aboitiz' own evidence in the form of the
marine protest filed by Captain Racines affirmed that the wind force when the M/V P. Aboitiz
foundered on October 31, 1980 was only ten (10) to fifteen (15) knots which, under the Beaufort
Scale of Wind, falls within scale No. 4 that describes the wind velocity as "moderate breeze," and
characterizes the waves as "small . . . becoming longer, fairly frequent white horses." 68 Captain
Racines also testified in open court that the ill-fated M/V P. Aboitiz was two hundred (200) miles
away from storm "Yoning" when it sank. 69
The issue of negligence on the part of Aboitiz, and the captain and crew of the M/V P.
Aboitiz has also been subject of conflicting rulings by this Court. In G.R. No. 100373, Country
Bankers Insurance Corporation v. Court of Appeals, this Court found no error in the
findings of the Court of Appeals that the M/V P. Aboitiz sank by reason of force majeure, and that
there was no negligence on the part of it officers and crew. In direct contradiction is this Court's
categorical declaration in Aboitiz Shipping Corporation v. Court of Appeals, 70 to wit:
"The trial court and the appellate court found that the sinking of the
M/V P. Aboitiz was not due to the waves caused by tropical storm "Yoning" but
due to the fault and negligence of petitioner, its master and crew.
The court reproduces with approval said findings . . . . " 71
However, in the subsequent case of Aboitiz Shipping Corporation v. General Accident Fire
and Life Assurance Corporation, Ltd., 72 this Court exculpated Aboitiz from fault and/or
negligence while holding that the unseaworthiness of the M/V P. Aboitiz was only attributable to
the negligence of its captain and crew. Thus,
"On this point, it should be stressed that unseaworthiness is not a fault that
can be laid squarely on petitioner's lap, absent a factual basis for such conclusion.
The unseaworthiness found in some cases where the same has been ruled to exist
is directly attributable to the vessel's crew and captain, more so on the part of the
 latter since Article 612 of the Code of Commerce provides that among the
inherent duties of a captain is to examine a vessel before sailing and to comply
with the lawsof navigation. Such a construction would also put matters to rest
relative to the decision of the Board of Marine Inquiry. While the conclusion
therein exonerating the captain and crew of the vessel was not sustained for
lack of basis, the finding therein contained to the effect that the vessel was
seaworthy deserves merit. Despite appearances, it is not totally incompatible with
the findings of the trial court and the Court of Appeals, whose
finding of "unseaworthiness" clearly did not pertain to the structural
condition of the vessel which is the basis of the BMI's findings, but to the
condition it was in at the time of the sinking, which condition was a result of the
actsof the captain and the crew." 73
It therefore becomes incumbent upon this Court to answer with finality the nagging
question of whether or not it was the concurrent fault and/or negligence ofAboitiz and the captain
and crew of the ill-fated vessel that had caused it to go under water.
Guided by our previous pronouncements and illuminated by the evidence now on record,
we reiterate our findings in Aboitiz Shipping Corporation v. General Accident Fire and Life
Assurance Corporation, Ltd., 74 that the unseaworthiness of the M/V P. Aboitiz had caused it to
founder. We, however, take exception to the pronouncement therein that said unseaworthiness
could not be attributed to the ship owner but only to the negligent acts of the captain and
crew of the M/V P. Aboitiz. On the matter of Aboitiz' negligence, we adhere to our ruling
in Aboitiz Shipping Corporation v. Court of Appeals, 75 that found Aboitiz, and the captain and
crew of the M/V P. Aboitiz to have been concurrently negligent.
During the trial of Civil Case Nos. 82-2767-82-2770 (now G.R. No. 92735)
petitioners Monarch and Tabacalera presented a survey from Perfect Lambert, a surveyor based in
Hong Kong that conducted an investigation on the possible cause of the sinking of the vessel. The
said survey established that the cause of the sinking of the vessel was the leakage of water into the
M/V P. Aboitiz which probably started in the forward part of the No. 1 hull, although no
explanation was proffered as to why the No. 2 hull was likewise flooded. Perfect Lambert surmised
that the flooding was due to a leakage in the shell plating or a defect in the water tight bulk head
between the Nos. 1 and 2 holds which allowed the water entering hull No. 1 to pass through hull
No. 2. The surveyor concluded that whatever the cause of the leakage of water into these hulls, the
seaworthiness of the vessel was definitely in question because the breaches of the hulls and serious
flooding of the two cargo holds occurred simultaneously in seasonal weather. 76
We agree with the uniform finding of the lower courts that Aboitiz had failed to prove that
it observed the extraordinary diligence required of it as a common carrier. We therefore reiterate
our pronouncement in Aboitiz Corporation v. Court of Appeals 77 on the issue of Aboitiz' liability
in the sinking of its vessel, to wit:
"In accordance with Article 1732 of the Civil Code, the defendant
common carrier from the nature of its business and for reasons of public policy,
is bound to observe extraordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by it according to all
circumstances of the case. While the goods are in the possession of the carrier, it
is but fair that it exercise 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 . . . . In the case at bar, the defendant failed to prove that
the loss of the subject cargo was not due to its fault or negligence." 78
The failure of Aboitiz to present sufficient evidence to exculpate itself from fault and/or
negligence in the sinking of its vessel in the face of the foregoing expert testimony constrains us
to hold that Aboitiz was concurrently at fault and/or negligent with the ship captain and crew of the
M/V P. Aboitiz. This is in accordance with the rule that in cases involving the limited
liability of shipowners, the initial burden of proof of negligence or unseaworthiness rests on the
claimants. However, 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. 79 This burden, Aboitiz had unfortunately
failed to discharge. That Aboitiz failed to discharge the burden of proving that the
unseaworthiness of its vessel was not due to its fault and/or negligence should not however mean
that the limited liability rule will not be applied to the present cases. The peculiar circumstances
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 Corporation, Ltd., 80 promulgated on January 21, 1993, that claimants be treated
as "creditors in an insolvent corporation whose assets are not enough to satisfy the
totality of claims against it." 81 To do so, the Court set out in that case the procedural guidelines:
"In the instant case, there is, therefore, a need to collate all claims
preparatory to their satisfaction from the insurance proceeds on the vessel M/V P.
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. Thus, execution of judgment in earlier completed
cases, even those already final and executory must be stayed pending
completion of all cases occasioned by the subject sinking. Then and only then can
all such claims be simultaneously settled, either completely or pro-rata should
the insurance proceeds and freightage be not enough to satisfy all
claims. cDHAaT
xxx xxx xxx
"In fairness to the claimants, and as a matter of equity, the total
proceeds of the insurance and pending freightage should now be deposited in
trust. Moreover, petitioner should institute the necessary limitation and
distribution action before the proper admiralty court within 15 days from
finality of this decision, and thereafter deposit with it the proceeds from
the insurance company and pending freightage in order to safeguard the same
pending final resolution of all incidents, for final pro-rating and settlement
thereof." 82 (emphasis supplied.).
There is no record that Aboitiz has instituted such action or that it has deposited in trust
the insurance proceeds and freightage earned. The pendency of the instant cases before
the Court is not a reason for Aboitiz to disregard the aforementioned order of the Court. In fact,
had Aboitiz complied therewith, even these cases could have been terminated earlier. We are
inclined to believe that instead of filing the suit as directed by this Court, Aboitiz tolerated the
situation of several complainants waiting to get hold of its insurance proceeds, which, if correctly
handled must have multiplied in amount by now. By its failure to abide by the order of thisCourt,
it had caused more damage to the claimants over and above that which they have endured as a
direct consequence of the sinking of the M/V P. Aboitiz. It was obvious that from among the many
cases filed against it over the years, Aboitiz was waiting for a judgment that might prove favorable
to it, in blatant violation of the basic provisions of the Civil Code on abuse of rights.
Well aware of the 110 claimants against it, Aboitiz preferred to litigate the claims singly
rather than exert effort towards the consolidation of all claims. Consequently, courts have arrived
at conflicting decisions while claimants waited over the years for a resolution of any of the cases
that would lead to the eventual resolution of the rest. Aboitiz failed to give the claimants their due
and to observe honesty and good faith in the exercise of its rights. 83
Aboitiz' blatant disregard of the order of this Court in Aboitiz Shipping Corporation v.
General Accident Fire and Life Assurance Corporation, Ltd. 84 cannot be anything but willful on
its part. An act is considered willful if it is done with knowledge of its injurious effect; it is not
required that the act be done purposely to produce the injury. 85 Aboitiz is well aware that by not
instituting the said suit, it caused the delay in the resolution of all claims against it. Having
willfully caused loss or injury to the petitioners in a manner that is contrary to morals, good
customs or public policy, Aboitiz is liable for damages to the latter. 86
Thus, for its contumacious act of defying the order of this Court to file the appropriate
action to consolidate all claims for settlement, Aboitiz must be held liable for moral damages which
may be awarded in appropriate cases under the chapter on human relations of the Civil Code
(Articles 19 to 36). 87
On account of Aboitiz' refusal to satisfy petitioners' claims in accordance with the
directive of the Court in Aboitiz Shipping Corporation v. General Accident Fire and Life
Assurance Corporation, Ltd., it acted in gross and evident bad faith. Accordingly, pursuant to
Article 2208 of the Civil Code, 88 petitioners should be granted attorney's fees.
WHEREFORE, the petitions in G.R. Nos. 92735, 94867, and 95578 are DENIED. The
decisions of the Court of Appeals in CA-G.R. No. SP-17427 dated March 29, 1990, CA-G.R. SP
No. 20844 dated August 15, 1990, and CA-G.R. CV No. 15071 dated August 24, 1990 are
AFFIRMED with the MODIFICATION that respondent Aboitiz Shipping Corporation is ordered
to pay each of the respective petitioners the amounts of P100,000.00 as moral damages and
P50,000.00 as attorney's fees, and treble the cost ofsuit.
Respondent Aboitiz Shipping Corporation is further directed to comply with the Order
promulgated by this Court on January 21, 1993 in Aboitiz Shipping Corporation v. General
Accident Fire and Life Assurance Corporation, Ltd., G.R. No. 100446, January 21, 1993, to (a)
institute the necessary limitation and distribution action before the proper Regional Trial Court,
acting as admiralty court, within fifteen (15) days from the finality of this decision, and (b)
thereafter to deposit with the said court the insurance proceeds from the loss of the vessel, M/V P.
Aboitiz, and the freightage earned in order to safeguard the same pending final resolution of all
incidents relative to the final pro-rating thereof and to the settlement of all claims.
SO ORDERED.
||| (Monarch Insurance Co., Inc. v. Court of Appeals, G.R. Nos. 92735, 94867 & 95578, [June 8,
2000], 388 PHIL 725-762)

FIRST DIVISION

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

LUZON STEVEDORING CORPORATION, petitioner, vs. COURT OF

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

DECISION

GANCAYCO, J p:

On May 30, 1968 at past 6:00 in the morning a maritime collision occurred within the vicinity of
the entrance to the North Harbor, Manila between the tanker LSCO "Cavite" owned by Luzon
Stevedoring Corporation and MV "Fernando Escano" a passenger ship owned by Hijos de F.
Escano, Inc. as a result of which said passenger ship sunk. An action in admiralty was filed by
Hijos de F. Escano, Inc. and Domestic Insurance Company of the Philippines against the Luzon
Stevedoring Company (LSC) in the Court of First Instance of Cebu. In the course of the trial, the
trial court appointed two commissioners representing the plaintiffs and defendant to determine
the value of the LSCO "CAVITE." Said commissioners found the value thereof to be
P180,000.00.
After trial on the merits, a decision was rendered on January 24, 1974 finding that LSCO
"Cavite" was solely to blame for the collision, thus its dispositive portion reads as follows:
"WHEREFORE, based on all the foregoing considerations, the Court renders
judgment in favor of the plaintiffs and against the defendant ordering the latter
to pay to the plaintiff Domestic Insurance Company of the Philippines the sum
of P514,000.00, and to the plaintiff Hijos de F. Escano, Inc. the sum of
P68,819.00, with interest on both sums at the legal rate, from the date the
complaint was filed and the further sum of P252,346.70, with interest at the
legal rate from August 7, 1972 and the sum of P163,721.91, without interest in
trust for, and with direction that it pay the same to, the claimants concerned.
With costs against the defendant." 1
In the penultimate paragraph of the decision the trial court held:
 "With respect to the defense that defendant's liability is limited to the value of
the LSCO "Cavite" and freight earned, invoking Art. 837 of the Code of
Commerce, the Court believes and so holds that the defense has not been
established. Moreover, the evidence is such that in principle Art. 837 does not
apply here. The counterclaim of the defendant is likewise ordered dismissed for
lack of merit." 2
Not satisfied therewith the defendant interposed an appeal therefrom to the Court of Appeals
wherein in due course a decision was rendered on June 30, 1981 affirming the decision of the
court a quo in toto with costs against appellant. The motion for reconsideration filed by the
defendant of the decision was denied in a resolution of the Court of Appeals of November 7,
1981. Hence said defendant filed a petition for certiorari in this Court based on the following
grounds:
"I
THE LOWER COURT ERRED IN FINDING THAT THE LSCO "CAVITE"
WAS THE VESSEL AT FAULT IN THE COLLISION.
II
THE LOWER COURT ERRED IN NOT FINDING THAT THE COLLISION
BETWEEN THE M/V "FERNANDO ESCANO" AND THE LSCO "CAVITE"
WAS DUE SOLELY AND EXCLUSIVELY TO THE FAULT, NEGLIGENCE
AND LACK OF SKILL OF THE MASTER OF THE FORMER VESSEL.
III
THE LOWER COURT ERRED IN NOT RULING THAT THE CIVIL
LIABILITY OF THE PETITIONER, IF ANY THERE BE, SHOULD BE
LIMITED TO THE VALUE OF THE LSCO "CAVITE " WITH ALL ITS
APPURTENANCES AND FREIGHTAGE WHEN THE COLLISION TOOK
PLACE." 3
In a resolution of February 26, 1982 this Court denied the petition for lack of merit.
A motion for reconsideration of said resolution was filed by petitioner limiting the issue to the
legal question of whether under Art. 837 of the Code of Commerce abandonment of vessel at
fault is necessary in order that the liability of owner of said vessel shall be limited only to the
extent of the value thereof, its appurtenances and freightage earned in the voyage, After
respondents submitted their comment to the motion as required, on September 29, 1982 this
Court denied the motion for reconsideration for lack of merit.
With leave of court petitioner filed a second motion for reconsideration of said resolution raising
the following issues: cdll
"1. Whether abandonment is required under Article 837 of the Code of
Commerce. The decisions of this Honorable Court cited by the parties in
support of their respective positions only imply the answer to the question, and
the implied answers are contradictory.
 2. If abandonment is required under Article 837 of the Code of Commerce,
when should it be made? The Code of Commerce is silent on the matter. The
decision of this Honorable Court in Yangco v. Laserna, 73 Phil. 330, left the
question open and no other decision, as far as petitioner can ascertain, has
resolved the question.
3. Is the decision of this Honorable Court in Manila Steamship Co., Inc. v.
Abdulhaman, 100 Phil. 32, wherein it was held that '(t)he international rule to
the effect that the right of abandonment of vessels, as a legal limitation of a
shipowner's own fault,' invoked by private respondents and apparently a major
consideration in the denial of the motion for reconsideration, applicable to
petitioner under the circumstances of the case at bar? 4
The respondents were required to comment thereto and after said comment was submitted
petitioners submitted a reply thereto to which the respondents filed a rejoinder.
On November 28, 1983, the Court gave due course to the petition for review and considered the
respondents' comment thereto as the Answer. The parties were required to file their briefs. Both
parties having filed their briefs the case is now submitted for decision.
Articles 587, 590, and 837 of the Code of Commerce provide as follows:
"ART. 587. The ship agent shall also be civilly liable for the indemnities in
favor of third persons which arise from the conduct of the captain in the
vigilance over the goods which the vessel carried; but he may exempt himself
therefrom by abandoning the vessel with all her equipment and the freight he
may have earned during the voyage."
xxx xxx xxx
"ART. 590. The co-owners of the vessel shall be civilly liable in the proportion
of their contribution to the common fund for the results of the acts of the
captain, referred to in Article 587.
Each co-owner may exempt himself from this liability by the abandonment,
before a notary, of that part of the vessel belonging to him.
xxx xxx xxx
"ART. 837. The civil liability incurred by the shipowners in the cases prescribed
in this section, shall be understood as limited to the value of the vessel with all
her appurtenances and freight earned during the voyage." 5
In the case of Philippine Shipping Company vs. Garcia, 6 which is an action for damages
instituted by the Philippine Shipping Company for the loss of Steamship "Ntra. Sra. de Lourdes"
as a result of the collision with the Steamship "Navarra" of Garcia, it was found that the
"Navarra" was responsible for the collision. The claim of the Philippine Shipping is that the
defendant should pay P18,000.00, the value of the "Navarra" at the time of its loss, in accordance
with the provision of Article 837 of the Code of Commerce, and that it was immaterial that the
"Navarra" had been entirely lost provided the value could be ascertained since the extent of
liability of the owner of the colliding vessel resulting from the collision is to be determined by its
value.
This Court speaking through the then Chief Justice Arellano held:
"Article 837 of the Code of Commerce provides: 'The civil liability contracted
by the shipowners in the cases prescribed in this section shall be understood as
limited to the value of the vessel with all her equipment and all the freight
money earned during the voyage.'
'This section is a necessary consequence of the right to abandon the vessel given
to the shipowner in article 587 of the code, and it is one of the many
superfluities contained in the code.' (Lorenzo Benito, 'Lecciones,' 352.)
'ART. 587. The agent shall also be civilly liable for the indemnities in favor of
third persons which arise from the conduct of the captain in the care of the
goods which the vessel carried but he may exempt himself therefrom by
abandoning the vessel with all her equipments and the freight he may have
earned during the trip.
'ART. 590. The part owners of a vessel shall be civilly liable, in the proportion
of their contribution to the common fund, for the results of the acts of the
captain referred to in Article 587. Each part owner may exempt himself from
this liability by the abandonment, before a notary, of the part of the vessel
belonging to him.'
The 'Exposicion de motivos' of the Code of Commerce contains the following:
'The present code (1829) does not determine the juridical status of the agent
where such agent is not himself the owner of the vessel. This omission is
supplied by the proposed code, which provides in accordance with the
principles of maritime law that by agent it is to be understood the person
intrusted with the provisioning of the vessel, or the one who represents her in
the port in which she happens to be. This person is the only one who represents
the vessel — that is to say, the only one who represents the interests of the
owner of the vessel. This provision has therefore cleared the doubt which
existed as to the extent of the liability, both of the agent and of the owner of the
vessel. Such liability is limited by the proposed code to the value of the vessel
and other things appertaining thereto.'
There is no doubt that if the Navarra had not been entirely lost, the agent,
having been held liable for the negligence of the captain of the vessel, could
have abandoned her with all her equipment and the freight money earned during
the voyage, thus bringing himself within the provisions of article 837 in so far
as the subsidiary civil liability is concerned. This abandonment which would
have amounted to an offer of the value of the vessel, of her equipment, and
freight money earned could not have been refused, and the agent could not have
been personally compelled, under such circumstances, to pay the 18,000 pesos,
the estimated value of the vessel at the time of the collision.

This is the difference which exists between the lawful acts and lawful
obligations of the captain and the liability which he incurs on account of any
unlawful act committed by him. In the first case, the lawful acts and obligations
of the captain beneficial to the vessel may be enforced as against the agent for
the reason that such obligations arise from the contract of agency (provided,
however, that the captain does not exceed his authority), while as to any liability
incurred by the captain through his unlawful acts, the ship agent is simply
subsidiarily civilly liable. This liability of the agent is limited to the vessel and it
does not extend further. For this reason the Code of Commerce makes the agent
liable to the extent of the value of the vessel, as the codes of the principal
maritime nations provide, with the vessel, and not individually. Such is also the
spirit of our code.
The spirit of our code is accurately set forth in a treatise on maritime law, from
which we deem proper to quote the following as the basis of this decision:
'That which distinguishes the maritime from the civil law and even from the
mercantile law in general is the real and hypothecary nature of the former, and
the many securities of a real nature that maritime customs from time
immemorial the laws, the codes, and the later jurisprudence, have provided for
the protection of the various and conflicting interests which are ventured and
risked in maritime expeditions, such as the interests of the vessel and of the
agent, those of the owners of the cargo and consignees, those who salvage the
ship, those who make loans upon the cargo, those of the sailors and members of
the crew as to their wages, and those of a constructor as to repairs made to the
vessel.
'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.
'This repeals the civil law to such an extent that, in certain cases, where the
mortgaged property is lost no personal action lies against the owner or agent of
the vessel. For instance, where the vessel is lost the sailors and members of the
crew can not recover their wages; in case of collision, the liability of the agent is
limited as aforesaid, and in case of shipwreck, those who loan their money on
the vessel and cargo lose all their rights and can not claim reimbursement under
the law.
'There are two reasons why it is impossible to do away with these privileges, to
wit: (1) The risk to which the thing is exposed, and (2) the "real" nature of the
maritime law, exclusively "real," according to which the liability of the parties
is limited to a thing which is at the mercy of the waves. If the agent is only
 liable with the vessel and freight money and both may be lost through the
accidents of navigation it is only just that the maritime creditor have some
means of obviating this precarious nature of his rights by detaining the ship, his
only security, before it is lost.
'The liens, tacit or legal, which may exist upon the vessel and which a purchaser
of the same would be obliged to respect and recognize are — in addition to
those existing in favor of the State by virtue of the privileges which are granted
to it by all the laws — pilot, tonnage, and port dues and other similar charges,
the wages of the crew earned during the last voyage as provided in article 646 of
the Code of Commerce, salvage dues under article 842, the indemnification due
to the captain of the vessel in case his contract is terminated on account of the
voluntary sale of the ship and the insolvency of the owner as provided in article
608, and all other liabilities arising from collisions under Articles 837 and 838.'
(Madariaga, pp. 60, 62, 63, 85.)
We accordingly hold that the defendant is liable for the indemnification to
which the plaintiff is entitled by reason of the collision, but he is not required to
pay such indemnification for the reason that the obligation thus incurred has
been extinguished on account of the loss of the thing bound for the payment
thereof, and in this respect the judgment of the court below is affirmed except in
so far as it requires the plaintiff to pay the costs of this action, which is not
exactly proper. No special order is made as to costs of this appeal. After the
expiration of twenty days let judgment be entered in accordance herewith and
ten days thereafter the record be remanded to the Court of First Instance for
execution. So ordered." 7
From the foregoing the rule is that in the case of collision, abandonment of the vessel is
necessary in order to limit the liability of the shipowner or the agent to the value of the vessel, its
appurtenances and freightage earned in the voyage in accordance with Article 837 of the Code of
Commerce. The only instance where such abandonment is dispensed with is when the vessel was
entirely lost. In such case, the obligation is thereby extinguished.
In the case of Government of the Philippines vs. Maritime this Court citing Philippine
Shipping stated the exception thereto in that while "the total destruction of the vessel
extinguishes a maritime lien, as there is no longer any risk to which it can attach, but the total
destruction of the vessel does not affect the liability of the owner for repairs of the vessel
completed before its loss, 8 interpreting the provision of Article 591 of the Code of Commerce in
relation with the other Articles of the same Code.
In Ohta Development Company vs. Steamship "Pompey" 9 it appears that at the pier sunk and
the merchandise was lost due to the fault of the steamship "Pompey" that was then docked at said
pier. This Court ruled that the liability of the owner of "Pompey" may not be limited to its value
under Article 587 of the Code of Commerce as there was no abandonment of the ship. We also
held that Article 837 cannot apply as it refers to collisions which is not the case here. 10
In the case of Guison vs. Philippine Shipping Company 11 involving the collision at the mouth
of the Pasig river between the motor launches Martha and Manila H in which the latter was
found to be at fault, this Court, applying Article 837 of the Code of Commerce limited the
liability of the agent to its value.
In the case of Yangco vs. Laserna 12 which involved the steamers SS "Negros" belonging to
Yangco which after two hours of sailing from Romblon to Manila encountered rough seas as a
result of which it capsized such that many of its passengers died in the mishap, several actions
for damages were filed against Yangco for the death of the passengers in the Court of First
Instance of Capiz. After rendition of the judgment for damages against Yangco, by a verified
pleading, he sought to abandon the vessel to the plaintiffs in the three cases together with all the
equipment without prejudice to the right to appeal. This Court in resolving the issue held as
follows: cdll
"Brushing aside the incidental issues, the fundamental question here raised is:
May the shipowner or agent, notwithstanding the total loss of the vessel as a
result of the negligence of its captain, be properly held liable in damages for the
consequent death of its passengers? We are of the opinion and so hold that this
question is controlled by the provision of article 587 of the Code of Commerce.
Said article reads:
'The agent shall also be civilly liable for the indemnities in favor of third
persons which arise from the conduct of the captain in the care of the goods
which the vessel carried; but he may exempt himself therefrom by abandoning
the vessel with all her equipments and the freight he may have earned during the
voyage.'
The provision accords a shipowner or agent the right of abandonment; and by
necessary implication 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.' It is true that 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 goods which the vessel carries, but
this is a mere deficiency of language and in no way indicates the true extent of
such liability. The consensus of authorities is to the effect that notwithstanding
the language of the afore-quoted 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 negligent or illicit acts of the captain. Dr. Jose
Ma. Gonzalez de Echavarri y Vivanco, commenting on said article, said:
'La letra del Codigo, en el articulo 587, presenta una gravisima cuestion. El
derecho de abandono, si se atiende a lo escrito, solo se refiere a las
indemnizaciones a que diere lugar la conducta del Capitan en la custodia de los
efectos que cargo en el buque.
'Es ese el espiritu del legislador? No; habra derecho de abandono en las
responsabilidades nacidas de obligaciones contraidas por el Capitan y de otros
actos de este? Lo reputamos evidente y, para fortalecer nuestra opinion, basta
copiar el siguiente parrafo de la Exposicion de motivos:
'El proyecto, al aplicar estos principios, se inspira tambien en los intereses del
comercio maritimo, que quedaran mas asegurados of reciendo a todo el que
 contrata con el naviero o Capitan del buque, la garantia real del mismo,
cualesquiera que sean las facultades o atribuciones de que se hallen investidos.'
(Echavarri, Codigo de Comercio, Tomo 4, 2. ed., pags. 483-484.)

A cursory examination will disclose that the principle of limited liability of a

shipowner or agent is provided for in but three articles of the Code of
Commerce — Article 587 aforequoted and articles 590 and 837. Article 590
merely reiterates the principle embodied in article 587, where the vessel is
owned by several person Article 837 applies the same principle in cases of
collision, and it has been observed that said article is but 'a necessary
consequence of the right to abandon the vessel given to the shipowner in Article
587 to the Code, and it is one of the many superfluities contained in the Code.'
(Lorenzo Benito, Lecciones 352, quoted in Philippine Shipping Co. vs. Garcia,
6 Phil. 281, 282.) In effect, therefore, only Articles 587 and 590 are the
provisions contained in our Code of Commerce on the matter, and the framers
of said code had intended those provisions to embody the universal principle of
limited liability in all cases. . . ." 13
In the said case We invoked our ruling in Philippine Shipping and concluded as follows:
"In the light of all the foregoing, we therefore hold that if the shipowner 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. In arriving at this
conclusion, we have not been unmindful of the fact that the ill-fated steamship
Negros, as a vessel engaged in interisland trade, is a common carrier (De Villata
v. Stanely, 32 Phil. 541), 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.
Whether the abandonment of the vessel sought by the petitioner in the 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." 14
In the case of Abueg vs. San Diego, 15 which involves a claim of compensation under the
Workmen's Compensation Act for the deceased members of the crew of the MS "San Diego II"
and MS "Bartolome" which were caught by a typhoon in the vicinity of Mindoro Island and as a
consequence of which they were sunk and totally lost, this Court held as follows:
"Counsel for the appellant cite article 587 of the Code of Commerce which
provides that if the vessel together with all her tackle and freight money earned
during the voyage are abandoned, the agent's liability to third persons for
tortious acts of the captain in the care of the goods which the ship carried is
extinguished (Yangco vs. Laserna, 73 Phil. 330) Article 837 of the same Code
which provides that in cases of collision, the shipowners' liability is limited to
the value of the vessel with all her equipment and freight earned during the
voyage (Philippine Shipping Company vs. Garcia, 6 Phil. 281); and Article 643
of the same Code which provides that if the vessel and freight are totally lost,
the agent's liability for wages of the crew is extinguished. From these premises
counsel draw the conclusion that appellant's liability, as owner of the two motor
ships lost or sunk as a result of the typhoon that lashed the island of Mindoro on
October 1, 1941, was extinguished.
The real and hypothecary nature of the liability of the shipowner or agent
embodied in the provisions of the Maritime Law, Book III, Code of Commerce,
had its origin in the prevailing 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 shipbuilding and maritime
commerce it was deemed necessary to confine the liability of the owner or agent
arising from the operation of a ship to the vessel, equipment, and freight, or
insurance, if any, so that if the shipowner or agent abandoned the ship,
equipment and freight, his liability was extinguished.
But the provisions of the Code of Commerce invoked by appellant have no
room in the application of the Workmen's Compensation Act which seeks to
improve, and aims at the amelioration of, the condition of laborers and
employees. It is not the liability for the damage or loss of the cargo or injury to,
or death of, a passenger by or through the misconduct of the captain or master
of the ship; nor the liability for the loss of the ship as a result of collision; nor
the responsibility for wages of the crew, but a liability created by a statute to
compensate employees and laborers in cases of injury received by or inflicted
upon them, while engaged in the performance of their work or employment, or
the heirs and dependents of such laborers and employees in the event of death
caused by their employment. Such compensation has nothing to do with the
provisions of the Code of Commerce regarding maritime commerce. It is an
item in the cost of production which must be included in the budget of any well-
managed industry.
Appellant's assertion that in the case of Enciso vs. Dy-Liaco (57 Phil. 446), and
Murillo vs. Mendoza (66 Phil. 689), the question of the extinction of the
shipowner's liability due to abandonment of the ship by him was not fully
discussed, as in the case of Yangco vs. Laserna, supra, is not entirely correct. In
the last mentioned case, the limitation of the shipowner's liability to the value of
the ship, equipment, freight, and insurance, if any, was the lis mota. In the case
of Enciso vs. Dy-Liaco, supra, the application of the Workmen's Compensation
Act to a master or patron who perished as a result of the sinking of the
motorboat of which he was the master, was the controversy submitted to the
court for decision. This Court held in that case that 'It has been repeatedly
stated that the Workmen's Compensation Act was enacted to abrogate the
common law and our Civil Code upon culpable acts and omissions, and that the
employer need not be guilty of neglect or fault, in order that responsibility may
attach to him' (pp. 449-450); and that the shipowner was liable to pay
 compensation provided for in the Workmen's Compensation Act,
notwithstanding the fact that the motorboat was totally lost. In the case of
Murillo vs. Mendoza, supra, this Court held that 'The rights and responsibilities
defined in said Act must be governed by its own peculiar provisions in complete
disregard of other similar provisions of the Civil as well as the mercantile law.
If an accident is compensable under the Workmen's Compensation Act, it must
be compensated even when the workman's right is not recognized by or is in
conflict with other provisions of the Civil Code or of the Code of Commerce.
The reason behind this principle is that the Workmen's Compensation Act was
enacted by the Legislature in abrogation of the other existing laws.' This quoted
part of the decision is in answer to the contention that it was not the intention of
the Legislature to repeal Articles 643 and 837 of the Code of Commerce with
the enactment of the Workmen's Compensation Act." 16
In said case the Court reiterated that the liability of the shipowner or agent under the provision of
Articles 587 and 837 of the Code of Commerce is limited to the value of the vessel with all her
equivalent and freight earned during the voyage if the shipowner or agent abandoned the ship
with all the equipment and freight. However, it does not apply to the liability under the
Workmen's Compensation Act where even as in said case the vessel was lost the liability
thereunder is still enforceable against the employer or shipowner.
The case of Manila Steamship Company, Inc. vs. Insa Abdulhaman and Lim Hong To 17 is a
case of collision of the ML "Consuelo V" and MS "Bowline Knot" as a result of which the ML
"Consuelo V" capsized and was lost where nine (9) passengers died or were missing and all its
cargoes were lost. In the action for damages arising from the collision, applying Article 837 of
the Code of Commerce, this Court held that in such case where the collision was imputable to
both of them, each vessel shall suffer her own damages and both shall be solidarily liable for the
damages occasioned to their cargoes. 18 Thus, We held:
"In fact, it is a general principle, well established maritime law and custom, that
shipowners and ship agents are civilly liable for the acts of the captain (Code of
Commerce, Article 586) and for the indemnities due the third persons (Article
587); so that injured parties may immediately look for reimbursement to the
owner of the ship, it being universally recognized that the ship master or captain
is primarily the representative of the owner (Standard Oil Co. vs. Lopez Castelo,
42 Phil. 256, 260).This direct liability, moderated and limited by the owner's
right of abandonment of the vessel and earned freight /Article 587) has been
declared to exist not only in case of breached contracts, but also in cases of
tortious negligence (Yu Biao Sontua vs. Osorio, 43 Phil. 511; 515):
xxx xxx xxx
It is easy to see that to admit the defense of due diligence of a bonus
paterfamilias (in the selection and vigilance of the officers and crew) as
exempting the shipowner from any liability for their faults, would render
nugatory the solidary liability established by Article 827 of the Code of
Commerce for the greater protection of injured parties. Shipowners would be
able to escape liability in practically every case, considering that the
qualifications and licensing of ship masters and officers are determined by the
 State, and that vigilance is practically impossible to exercise over officers and
crew of vessels at sea. To compel the parties prejudiced to look to the crew for
indemnity and redress would be an illusory remedy for almost always its
members are, from captains down, mere wage earners.

We, therefore, find no reversible error in the refusal of the Court of Appeals to
consider the defense of the Manila Steamship Co., that it is exempt from
liability for the collision with the M/L "Consuelo V" due to the absence of
negligence on its part in the selection and supervision of the officers and crew
of the M/S "Bowline Knot." 19
However, insofar as respondent Lim Hong To, owner of M/L "Consuelo V" who admittedly
employed an unlicensed master and engineer and who in his application for permission to
operate expressly assumed full risk and responsibility thereby (Exh. 2) this Court held that
the liability of Lim Hong To cannot be limited to the value of his motor launch by
abandonment of the vessel as invoked in Article 587 of the Code of Commerce, We said:
"The international rule is to the effect that the right of abandonment of vessels,
as a legal limitation of a shipowner's liability, does not apply to cases where the
injury or the average is due to shipowner's own fault. Farina (Derecho
Commercial Maritimo, Vol. I, pp. 122-123), on the authority of judicial
precedents from various nations, sets the rule to be as follows:
xxx xxx xxx" 20
From the foregoing, it is clear that in case of collision of vessels, in order to avail of the benefits
of Article 837 of the Code of Commerce the shipowner or agent must abandon the vessel. In
such case the civil liability shall be limited to the value of the vessel with all the appurtenances
and freight earned during the voyage. However, where the injury or average is due to the ship-
owner's fault as in said case, the shipowner may not avail of his right to limited liability by
abandoning the vessel.
We reiterate what We said in previous decisions that the real and hypothecary nature of the
liability of the shipowner or agent is embodied in the provisions of the Maritime Law, Book III,
Code of Commerce. 21 Articles 587, 590 and 837 of the same code are precisely intended to
limit the liability of the shipowner or agent to the value of the vessel, its appurtenances and
freightage earned in the voyage, provided that owner or agent abandons the vessel. Although it is
not specifically provided for in Article 837 of the same code that in case of collision there should
be such abandonment to enjoy such limited liability, said article on collision of vessels is a mere
amplification of the provisions of Articles 587 and 590 of same code where abandonment of the
vessel is a pre-condition. Even without said article, the parties may avail of the provisions of
Articles 587 and 590 of same code in case of collision. This is the reason why Article 837 of the
same code is considered a superfluity. 22
Hence the rule is that in case of collision there should be abandonment of the vessel by the
shipowner or agent in order to enjoy the limited liability provided for under said Article 837. llcd
The exception to this rule is when the vessel is totally lost in which case there is no vessel to
abandon so abandonment is not required. Because of such total loss the liability of the shipowner
or agent for damages is extinguished. Nevertheless, the shipowner or agent is personally liable
for claims under the Workmen's Compensation Act and for repairs of the vessel before its
loss. 23
In case of illegal or tortious acts of the captain the liability of the shipowner and agent is
subsidiary. In such instance the shipowner or agent may avail of the provisions of Article 837 of
the Code by abandoning the vessel. 24
However, if the injury or damage is caused by the shipowner's fault as where he engages the
services of an inexperienced and unlicensed captain or engineer, he cannot avail of the
provisions of Article 837 of the Code by abandoning the vessel. 25 He is personally liable for the
damages arising thereby.
In the case now before the Court there is no question that the action arose from a collision and
the fault is laid at the doorstep of LSCO "Cavite" of petitioner. Undeniably petitioner has not
abandoned the vessel. Hence petitioner can not invoke the benefit of the provisions of Article
837 of the Code of Commerce to limit its liability to the value of the vessel, all the appurtenances
and freightage earned during the voyage.
In the light of the foregoing conclusion, the issue as to when abandonment should be made need
not be resolved. LexLib
WHEREFORE, the petition is DENIED with costs against petitioner.
SO ORDERED.
||| (Luzon Stevedoring Corp. v. Court of Appeals, G.R. No. L-58897, [December 3, 1987], 240
PHIL 173-191)

FIRST DIVISION

[G.R. No. 51165. June 21, 1990.]

HEIRS OF AMPARO DE LOS SANTOS, HEIRS OF ERNANIE DELOS

SANTOS, HEIRS OF AMABELLA DELOS SANTOS, HEIRS OF LENNY
DELOS SANTOS, HEIRS OF MELANY DELOS SANTOS, HEIRS OF
TERESA PAMATIAN, HEIRS OF DIEGO SALEM, AND RUBEN
REYES, petitioners, vs. HONORABLE COURT OF APPEALS AND
COMPANIA MARITIMA, respondents.

Severino Z. Macavinta, Jr. for petitioners.

Dinglasan Law Office for private respondent.
 SYLLABUS

1. COMMERCIAL LAW; MARITIME COMMERCE; LIABILITY OF SHIP AGENT; RULE

AND EXCEPTION. — Under Art. 587 of the Code of Commerce, a shipowner or agent has the
right of abandonment; and by necessary implication, his liability is confined to that which he is
entitled as of right to abandon — "the vessel with all her equipment's and the freight it may have
earned during the voyage" (Yangco v. Laserna, et al., 73 Phil. 330, 332). Notwithstanding the
passage of the New Civil Code, Article 587 of the Code of Commerce is still good law. The
reason lies in the peculiar nature of maritime law is which is "exclusively real and hypothecary
that operates to limit such liability to the value of the vessel, or to the insurance thereon, if any
(Yangco v. Laserna, ibid). As correctly stated by the appellate court, "(t)his rule is found
necessary to offset against the innumerable hazards and perils of a sea voyage and to encourage
shipbuilding and marine commerce. (Decision, Rollo, p. 29). Contrary to the petitioners'
supposition, the limited liability doctrine applies not only to the goods but also in all cases like
death or injury to passengers wherein the shipowner or agent may properly be held liable for the
negligent or illicit acts of the captain (Yangco v. Laserna, ibid). It must be stressed at this point
that Article 587 speaks only of situations where the fault or negligence is committed solely by
the captain.
2. CIVIL LAW; COMMON CARRIER; TASKED TO OBSERVE EXTRA-ORDINARY
DILIGENCE IN THE VIGILANCE OVER THE GOODS AND SAFETY OF ITS
PASSENGERS. — In cases where the shipowner is likewise to be blamed, Article 587 does not
apply (see Manila Steamship Co., Inc. v. Abdulhanan, et al., 100 Phil. 32, 38). Such a situation
will be covered by the provisions of the New Civil Code on Common Carriers. Owing to the
nature of their business and for reasons of public policy, common carriers are tasked to observe
extraordinary diligence in the vigilance over the goods and for the safety of its passengers
(Article 1733, New Civil Code). Further, they are bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious persons, with
a due regard for all the circumstances (Article 1755, New Civil Code). Whenever death or injury
to a passenger occurs, common carriers are presumed to have been at fault or to have acted
negligently unless they prove that they observed extraordinary diligence as prescribed by
Articles 1733 and 1755 (Article 1756, New Civil Code).
3. ID.; ID.; ID.; NOT OBSERVED IN CASE AT BAR. — Maritime presents evidence of the
seaworthy condition of the ship prior to its departure to prove that it exercised extraordinary
diligence in this case. M/V Mindoro was dry-docked for about a month. Necessary repairs were
made on the ship. Life saving equipment and navigational instruments were installed. While
indeed it is true that all these things were done on the vessel, Maritima, however, could not
present evidence that it specifically installed a radar which could have allowed the vessel to
navigate safely for shelter during a storm. Consequently, the vessel was left at the mercy of
'Welming' in the open sea because although it was already in the vicinity of the Aklan river, it
was unable to enter the mouth of Aklan River to get into New Washington, Aklan due to
darkness and the Floripon Lighthouse at the entrance of the Aklan River was not functioning or
could not be seen at all (Exh. 3-H, Index of Exhibits, p. 192-195; see also Exh. 2-A, ibid, p. 160).
Storms and typhoons are not strange occurrences. In 1967 alone before 'Welming,' there were
about 17 typhoons that hit the country (Exh. M, Index of Exhibits, p. 115), the latest of which
was typhoon Uring which occurred on October 20-25, which cost so much damage to lives and
properties. With the impending threat of 'Welming,' an important device such as the radar could
have enabled the ship to pass through the river and to safety. The foregoing clearly demonstrates
that Maritima's lack of extraordinary diligence coupled with the negligence of the captain as
found by the appellate court were the proximate causes of the sinking of M/V Mindoro. Hence,
Maritima is liable for the deaths and injury of the victims.
4. ID.; MORAL DAMAGES; RECOVERY THEREOF IN AN ACTION BASED ON BREACH
OF CONTRACT OF TRANSPORTATION; RULE AND EXCEPTION; CASE AT BAR. —
Reyes' claim for moral damages cannot be granted inasmuch as the same is not recoverable in
damage action based on the breach of contract of transportation under Articles 2219 and 2220 of
the New Civil Code except (1) where the mishap resulted in the death of a passenger and (2)
where it is proved that the carrier was guilty of fraud or bad faith, even if death does not result
(Rex Taxicab Co., Inc. v. Bautista, 109 Phil. 712). The exceptions do not apply in this case since
Reyes survived the incident and no evidence was presented to show that Maritima was guilty of
bad faith. Mere carelessness of the carrier does not per se constitute or justify an inference of
malice or bad faith on its part (Rex Taxicab Co., Inc. v. Bautista, supra).

DECISION

MEDIALDEA, J p:

This petition for review on certiorari seeks to set aside the decision of the Court of Appeals in
CA-G.R. No. 58118-R affirming the decision in Civil Case No. 74593 of the then Court of First
Instance (now Regional Trial Court), Branch XI, Manila which dismissed the petitioners' claim
for damages against Compania Maritima for the injury to and death of the victims as a result of
the sinking of M/V Mindoro on November 4, 1967.
The trial court found the antecedent facts to be as follows:
"This is a complaint originally filed on October 21, 1968 (p. 1, rec.) and
amended on October 24, 1968 (p. 16 rec.) by the heirs of Delos Santos and
others as pauper litigants against the Compania Maritima, for damages due to
the death of several passengers as a result of the sinking of the vessel of
defendant, the M/V 'Mindoro', on November 4, 1967.
"There is no dispute in the record that the M/V 'Mindoro' sailed from pier 8
North Harbor, Manila, on November 2, 1967 at about 2:00 (should have been
6:00 p.m.) in the afternoon bound for New Washington, Aklan, with many
passengers aboard. It appears that said vessel met typhoon 'Welming' on the
Sibuyan Sea, Aklan, at about 5:00 in the morning of November 4, 1967 causing
the death of many of its passengers, although about 136 survived.
"Mauricio delos Santos declared that on November 2, 1967 he accompanied his
common-law wife, Amparo delos Santos, and children, namely: Romeo, Josie,
Hernani, who was 10 years old, Abella, 7 years old, Maria Lemia, 5 years old
and Melany, 5 months old, to pier 8, North Harbor, Manila, to board the M/V
'Mindoro' bound for Aklan. It appears that Amparo delos Santos and the
aforesaid children brought all their belongings, including household utensils
valued at P1,000.00, with the intention of living in Aklan permanently.
"As already stated, the boat met typhoon 'Welming' and due to the strong waves
it sank causing the drowning of many passengers among whom were Amparo
delos Santos and all the aforesaid children. It appears also that Teresa Pamatian
and Diego Salim, who were also passengers also drowned. Plaintiff Ruben
Reyes was one of the survivors.
"The plaintiffs presented the birth and death certificates of Amparo delos Santos
and the children (Exhs. I, I-1, J, J-1, K, K-1, L, L-1, O to S, pp. 180 to 194 rec.).
They also presented copies of the manifest of passengers of the M/V 'Mindoro'
on November 2, 1967 (Exhs. B & C, pp. 163 to 161 rec.).
"Eliadora Crisostomo de Justo, one of the survivors, corroborated the testimony
of Mauricio delos Santos that he accompanied Amparo delos Santos and her
children to the port to board the M/V Mindoro. She is a cousin of Amparo delos
Santos' husband. According to her, when she boarded the second deck of the
vessel, she saw about 200 persons therein. She tried to see whether she could be
accommodated in the third deck or first deck because the second deck was very
crowded. She admitted that she was not included in the manifest because she
boarded the boat without a ticket, but she purchased one in the vessel. She
testified further that the boat was not able to reach its destination due to its
sinking. During the typhoon before the vessel sunk, she was able to board a
'balsa.'
"Ruben Reyes, the other survivor, declared that he paid for his ticket before
boarding the M/V Mindoro. At that time he had with him personal belongings
and cash all in the amount of P2,900.00. It appears that Felix Reyes Jakusalem,
Teresa Pamatian and Amparo delos Santos drowned during the sinking of the
vessel. He was able to swim on (sic) an island and was with the others, rescued
later on and brought to the hospital. The survivors were then taken ashore (Exh.
M, p. 188, rec.).
"Dominador Salim declared that Teresa Pamatian, his aunt and Diego Salim, his
father, drowned along with the sinking of the M/V Mindoro. This witness
declared that he accompanied both his father and his aunt to the pier to board
the boat and at the time Teresa Pamatian was bringing cash and personal
belongings of about P250.00 worth. His father brought with him P200.00 in
cash plus some belongings. He admitted that when his father boarded the vessel
he did not have yet a ticket.
"The plaintiffs further submitted in evidence a copy of a Radio-gram stating
among other things that the M/V Mindoro was loaded also with 3,000 cases of
beer, one dump truck and 292 various goods (Exhs. D and D-1, p. 162 rec).
"In alleging negligence on the part of the vessel, plaintiffs introduced in
evidence a letter sent to the Department of Social Welfare concerning the
resurvey of the M/V 'Mindoro' victims (Exh. F, p. 169 rec.) and a telegram to
the Social Welfare Administration (Exh. G, p. 170 rec.), are survey of the M/V
'Mindoro' victims (Exh. H, p. 171 rec.), a complete list of the M/V 'Mindoro'
victims (Exhs. H-1 to H-8, pp. 172-179 rec.), a certified true copy of the Special
Permit to the Compania Maritima issued by the Bureau of Customs limiting the
vessel to only 193 passengers (Exh. X, p. 318 rec.).
"It appears that in a decision of the Board of Marine Inquiry, dated February 2,
1970, it was found that the captain and some officers of the crew were negligent
in operating the vessel and imposed upon them a suspension and/or revocation
of their license certificates. It appears, however, that this decision cannot be
executed against the captain who perished with the vessel (Exhs. E, E-1, E-1-A,
E-2 to E-9, pp. 163-168 rec.).
"Upon agreement of the parties, the plaintiffs also introduced in evidence the
transcript of stenographic notes of the testimony of Boanerjes Prado before
Branch I of this Court (Exh. U, pp. 203-220) and that of Felimon Rebaño in the
same branch (Exh. V, pp. 225-260 rec.).
"The defendant alleges that no negligence was ever established and, in fact, the
ship owners and their officers took all the necessary precautions in operating the
vessel. Furthermore, the loss of lives as a result of the drowning of some
passengers, including the relatives of the herein plaintiffs, was due to force
majeure because of the strong typhoon 'Welming.' It appears also that there was
a note of marine protest in connection with the sinking of the vessel as
substantiated by affidavits (Exhs. 3, 3-A, 3-B, 3-C, 3-D, 3-E, 3-F and 3-G rec.).
On this score Emer Saul, member of the PC Judge Advocate General's Office,
brought to Court records of this case which were referred to their office by the
Board of Marine Inquiry. According to him the decision referred to by the
plaintiffs was appealed to the Department of National Defense, although he did
not know the result of the appeal. At any rate, he knew that the Department of
National Defense remanded the case to the Board of Marine Inquiry for further
investigation. In the second indorsement signed by Efren I. Plana,
Undersecretary of National Defense, it is stated, among other things, that the
hearings of the Board of Marine Inquiry wherein the Philippine Coast Guard
made the decision lacked the necessary quorum as required by Section 827 of
the Tariff and Customs Code. Moreover, the decision of the Commandant of the
Philippine Coast Guard relied principally on the findings reached by the Board
of Officers after an ex-parte investigation especially in those aspects
unfavorable to the captain (Exh. 1, folder of exhibits).
"It appears also that there were findings and recommendations made by the
Board of Marine Inquiry, dated March 5, 1968, recommending among other
things that the captain of the M/V 'Mindoro,' Felicito Irineo, should be
exonerated. Moreover, Captain Irineo went down with the vessel and his lips are
forever sealed and could no longer defend himself. This body also found that
 the ship's compliment (sic) and crew were all complete and the vessel was in
seaworthy condition. If the M/V 'Mindoro' sank, it was through force
majeure (Exhs. 2 & 2-A, folder of exhibits).
"Defendant also introduced in evidence the transcripts of stenographic notes of
the testimony of Francisco Punzalan, marine officer, as well as of Abelardo F.
Garcia, Harbor Pilot in Zamboanga City, in Civil Case No. Q-12473 of Branch
XXVIII, Court of First Instance of Rizal, Quezon City Branch (Exhs. 3-H & 10-
H, folder of exhibits), and of Arturo Ilagan, boat captain, in Civil Case No. Q-
15962 of Branch V, of the same Court (Exh. 9 folder of exhibits).
"It appears that five other vessels left the pier at Manila on November 2, 1967,
aside from the M/V 'Mindoro' (Exhs 4 & 4-A). A certification of the Weather
Bureau indicated the place of typhoon 'Welming' on November 2, 1967 (Exh.
6). A certification of the shipyard named El Varadero de Manila stated among
other things that the M/V 'Mindoro' was dry-docked from August 25 to
September 6, 1967 and was found to be in a seaworthy condition (Exh. 5), and
that the said M/V 'Mindoro' was duly inspected by the Bureau of Customs
(Exhs. 7, 7-A & 7-B). Another certification was introduced stating among other
things that the Bureau of Customs gave a clearance to the M/V 'Mindoro' after
inspection (Exh. 8 folder of exhibits)." (CFI Decision, Records, pp. 468-471)
On the basis of these facts, the trial court sustained the position of private respondent Compania
Maritima (Maritima, for short) and issued a decision on March 27, 1974, to wit:
"WHEREFORE, the Court finds that in view of lack of sufficient evidence, the
case be, as it is hereby DISMISSED.
For lack of evidence, the counterclaim is also hereby DISMISSED.
IT IS SO ORDERED." (Records, p. 474)
Forthwith, the petitioners' heirs and Reyes brought an appeal to the Court of Appeals. As earlier
mentioned, the appellate court affirmed the decision on appeal. While it found that there was
concurring negligence on the part of the captain which must be imputable to Maritima, the Court
of Appeals ruled that Maritima cannot be held liable in damages based on the principle of limited
liability of the shipowner or ship agent under Article 587 of the Code of Commerce.
The heirs and Reyes now come to Us with the following assignment of errors:
"ERROR I
THE HONORABLE RESPONDENT COURT OF APPEALS ERRED IN NOT
CONCENTRATING TO (sic) THE PROVISION OF LAW IN THE NEW
CIVIL CODE AS EXPRESSED IN, —
'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.'
ERROR II
 RESPONDENT COURT OF APPEALS ERRED IN NOT REVERSING THE
DECISION OF THE LOWER COURT OF ORIGIN AFTER FINDING A
SERIES OF FAULTS AND NEGLIGENCE AND IN NOT ORDERING ITS
CO-RESPONDENT COMPANIA MARITIMA TO PAY THE DAMAGES IN
ACCORDANCE WITH THE LAW.
ERROR III
THE HONORABLE RESPONDENT COURT OF APPEALS ERRED TO
NOTE, OBSERVE AND COMPREHEND THAT ART. 587 OF THE CODE
OF COMMERCE IS ONLY FOR THE GOODS WHICH THE VESSEL
CARRIED AND DO NOT INCLUDE PERSONS." (Rollo, p.8).
The petition has merit. At the outset, We note that there is no dispute as to the finding of the
captain's negligence in the mishap. The present controversy centers on the questions of
Maritima's negligence and of the application of Article 587 of the Code of Commerce. The said
article provides:
"Art. 587. The ship agent shall also be civilly liable for indemnities in favor of
third persons which may arise from the conduct of the captain in the care of the
goods which he loaded on the vessel, but he may exempt himself therefrom by
abandoning the vessel with all her equipment's and the freight it may have
earned during the voyage."
Under this provision, a shipowner or agent has the right of abandonment; and by necessary
implication, his liability is confined to that which he is entitled as of right to abandon — "the
vessel with all her equipment's and the freight it may have earned during the voyage"
(Yangco v. Laserna, et al., 73 Phil. 330, 332). Notwithstanding the passage of the New Civil
Code, Article 587 of the Code of Commerce is still good law. The reason lies in the peculiar
nature of maritime law is which is "exclusively real and hypothecary that operates to limit
such liability to the value of the vessel, or to the insurance thereon, if any (Yangco v.
Laserna, ibid). As correctly stated by the appellate court, "(t)his rule is found necessary to
offset against the innumerable hazards and perils of a sea voyage and to encourage
shipbuilding and marine commerce. (Decision, Rollo, p. 29). Contrary to the petitioners'
supposition, the limited liability doctrine applies not only to the goods but also in all cases
like death or injury to passengers wherein the shipowner or agent may properly be held liable
for the negligent or illicit acts of the captain (Yangco v. Laserna, ibid). It must be stressed at
this point that Article 587 speaks only of situations where the fault or negligence is
committed solely by the captain. In cases where the shipowner is likewise to be blamed,
Article 587 does not apply (see Manila Steamship Co., Inc. v. Abdulhanan, et al., 100 Phil.
32, 38). Such a situation will be covered by the provisions of the New Civil Code on
Common Carriers. Owing to the nature of their business and for reasons of public policy,
common carriers are tasked to observe extraordinary diligence in the vigilance over the
goods and for the safety of its passengers (Article 1733, New Civil Code). Further, they are
bound to carry the passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with a due regard for all the circumstances
(Article 1755, New Civil Code). Whenever death or injury to a passenger occurs, common
carriers are presumed to have been at fault or to have acted negligently unless they prove that
 they observed extraordinary diligence as prescribed by Articles 1733 and 1755 (Article 1756,
New Civil Code).
Guided by the above legal provisions, We painstakingly reviewed the records of the case and
found imprints of Maritima's negligence which compel Us to reverse the conclusion of the
appellate court.
Maritima claims that it did not have any information about typhoon 'Welming' until after the boat
was already at sea. Modern technology belie such contention. The Weather Bureau is now
equipped with modern apparatus which enables it to detect any incoming atmospheric
disturbances. In his summary report on tropical cyclone 'Welming' which occurred within the
Philippine Area of Responsibility, Dr. Roman L. Kintanar, Weather Bureau Director, stated that
during the periods of November 1-5, 1967, the Bureau issued a total of seventeen (17) warnings
or advisories of typhoon 'Welming' to shipping companies. Additionally, he reported that:

"By 11:15 a.m. of November 1st, or in less than twenty four hours, the storm
intensified into a typhoon. It was by then located at 8.7 N 137.3 E with sea level
pressure of 978 millibars, an eye diameter of about 18.53 kilometers and a
maximum surface wind of 139 kilometers per hour.
"As it moved along in the open sea, it intensified further and by 11:07 a.m. of
November 2, when its center was at 103 N 131.4 E, it had attained surface winds
of about 240 kilometers per hour . . ." (Exh. Z, p. 131, Index of Exhibits, p.
115, emphasis ours).
Considering the above report and the evidence on record showing the late departure of the
ship at 6:00 p.m. (instead of the scheduled 2:00 p.m. departure) on November 2, 1967, We
find it highly improbable that the Weather Bureau had not yet issued any typhoon bulletin at
any time during the day to the shipping companies. Maritima submitted no convincing
evidence to show this omission. It's evidence showing the Weather Bureau's forecast of
November 3, 1967 is not persuasive. It merely indicated the weather bulletin of that day.
Nowhere could We find any statement therein from the Weather Bureau that it had not issued
any forecast on November 1 and 2, 1967 (Exh. 6, Records, p. 257). Significantly, the
appellate court found that the ship's captain through his action showed prior knowledge of
the typhoon. The court said:
". . . It cannot be true that he was apprised of the typhoon only at about 11:00
o'clock the following morning on November 3, 1967 when the Weather report
was transmitted to him from the Weather Bureau at which time he plotted its
position. For in his radiogram sent to defendant-appellee's office in Manila as
early as 8:07 in the morning of November 3, 1967 (Exh. D) he states in the
concluding portion 'still observing weather condition.' thereby implicitly
suggesting that he had known even before departure of the unusual weather
condition . . ." (Decision, Rollo, p. 26)
If the captain knew of the typhoon beforehand, it is inconceivable for Maritima to be totally
in the dark of 'Welming.' In allowing the ship to depart late from Manila despite the typhoon
 advisories, Maritima displayed lack of foresight and minimum concern for the safety of its
passengers taking into account the surrounding circumstances of the case.
While We agree with the appellate court that the captain was negligent for overloading the ship,
We, however, rule that Maritima shares equally in his negligence. We find that while M/V
Mindoro was already cleared by the Bureau of Customs and the Coast Guard for departure at
2:00 p.m. the ship's departure was, however, delayed for four hours. Maritima could not account
for the delay because it neither checked from the captain the reasons behind the delay nor sent its
representative to inquire into the cause of such delay. It was due to this interim that the appellate
court noted that "(i)indeed there is a great probability that unmanifested cargo (such as dump
truck, 3 Toyota cars, steel bars, and 6,000 beer cases) and passengers (about 241 more than the
authorized 193 passengers) were loaded during the four (4) hour interval" (Decision, p. 13,
Rollo, p. 26). Perchance, a closer supervision could have prevented the overloading of the ship.
Maritima could have directed the ship's captain to immediately depart in view of the fact that as
of 11:07 in the morning of November 2, 1967, the typhoon had already attained surface winds of
about 240 kilometers per hour. As the appellate court stated, "(v)erily, if it were not for this
delay, the vessel could have reached (its) destination and thereby have avoided the effects of the
storm" (Decision, Rollo p. 26). This conclusion was buttressed by evidence that another ship,
M/V Mangaren, an inter island vessel, sailed for New Washington, Aklan on November 2, 1967,
ahead of M/V Mindoro and took the same route as the latter but it arrived safely (Exh. BB-2,
Index of Exhibits, pp. 143-144 and Exh. 4-A, ibid, p. 254).
Maritima presents evidence of the seaworthy condition of the ship prior to its departure to prove
that it exercised extraordinary diligence in this case. M/V Mindoro was dry-docked for about a
month. Necessary repairs were made on the ship. Life-saving equipment and navigational
instruments were installed.
While indeed it is true that all these things were done on the vessel, Maritima, however, could
not present evidence that it specifically installed a radar which could have allowed the vessel to
navigate safely for shelter during a storm. Consequently, the vessel was left at the mercy of
'Welming' in the open sea because although it was already in the vicinity of the Aklan river, it
was unable to enter the mouth of Aklan River to get into New Washington, Aklan due to
darkness and the Floripon Lighthouse at the entrance of the Aklan River was not functioning or
could not be seen at all (Exh. 3-H, Index of Exhibits, p. 192-195; see also Exh. 2-A, ibid, p. 160).
Storms and typhoons are not strange occurrences. In 1967 alone before 'Welming,' there were
about 17 typhoons that hit the country (Exh. M, Index of Exhibits, p. 115), the latest of which
was typhoon Uring which occurred on October 20-25, which cost so much damage to lives and
properties. With the impending threat of 'Welming,' an important device such as the radar could
have enabled the ship to pass through the river and to safety.
The foregoing clearly demonstrates that Maritima's lack of extraordinary diligence coupled with
the negligence of the captain as found by the appellate court were the proximate causes of the
sinking of M/V Mindoro. Hence, Maritima is liable for the deaths and injury of the victims.
With the above finding, We now come to the amount of damages due to the petitioners.
Ordinarily, We would remand the case to the trial court for the reception of evidence.
Considering however, that this case has been pending for almost twenty-three (23) years now
and that since all the evidence had already been presented by both parties and received by the
trial court, We resolve to decide the corresponding damages due to petitioners (see Samal v.
Court of Appeals, 99 Phil. 230; Del Castillo v. Jaymalin, L-28256, March 17, 1982, 112 SCRA
629).
In their complaint filed with the Court of First Instance, petitioners prayed for moral, actual and
exemplary damages, as well as for attorney's fees plus costs.
Under Article 1764 in relation to Article 2206 of the New Civil Code, the amount of damages for
the death of a passenger caused by the breach of contract by a common carrier is at least three
thousand pesos (P3,000.00). The prevailing jurisprudence has increased the amount of P3,000.00
to P30,000.00 (De Lima v. Laguna Tayabas Co., L-35697-99, April 15, 1988, 160 SCRA 70).
Consequently, Maritima should pay the civil indemnity of P30,000.00 to the heirs of each of the
victims. For mental anguish suffered due to the deaths of their relatives, Maritima should also
pay to the heirs the sum of P10,000.00 each as moral damages.
In addition, it was proven at the trial that at the time of death, (1) Amparo delos Santos had with
her cash in the sum of P1,000.00 and personal belongings valued at P500.00; (2) Teresa
Pamatian, cash in the sum of P250.00 and personal belongings worth P200.00; and (3) Diego
Salem, cash in the sum of P200.00 and personal belongings valued at P100.00. Likewise, it was
established that the heirs of Amparo delos Santos and her deceased children incurred
transportation and incidental expenses in connection with the trial of this case in the amount of
P500.00 while Dominador Salem, son of victim Diego Salem and nephew of victim Teresa
Pamatian spent about P100.00 for expenses at the trial. With respect to petitioner Reyes, the
evidence shows that at the time of the disaster, he had in his possession cash in the sum of
P2,900.00 and personal belongings worth P100.00. Further, due to the disaster, Reyes was
unable to work for three months due to shock and he was earning P9.50 a day or in a total sum of
P855.00. Also, he spent about P100.00 for court expenses. For such losses and incidental
expenses at the trial of this case, Maritima should pay the aforestated amounts to the petitioners
as actual damages.
Reyes' claim for moral damages cannot be granted inasmuch as the same is not recoverable in
damage action based on the breach of contract of transportation under Articles 2219 and 2220 of
the New Civil Code except (1) where the mishap resulted in the death of a passenger and (2)
where it is proved that the carrier was guilty of fraud or bad faith, even if death does not result
(Rex Taxicab Co., Inc. v. Bautista, 109 Phil. 712). The exceptions do not apply in this case since
Reyes survived the incident and no evidence was presented to show that Maritima was guilty of
bad faith. Mere carelessness of the carrier does not per se constitute or justify an inference of
malice or bad faith on its part (Rex Taxicab Co., Inc. v. Bautista, supra).
Anent the claim for exemplary damages, We are not inclined to grant the same in the absence of
gross or reckless negligence in this case.
As regards the claim for attorney's fees, the records reveal that the petitioners engaged the
services of a lawyer and agreed to pay the sum of P3,000.00 each on a contingent basis (see
TSN's, July 21, 1971, p. 24; November 3, 1971, pp. 18 and 29). In view hereof, We find the sum
of P10,000.00 as a reasonable compensation for the legal services rendered.
ACCORDINGLY, the appealed decision is hereby REVERSED and judgment is hereby
rendered sentencing the private respondent to pay the following: (1) P30,000.00 as indemnity for
death to the heirs of each of the victims; (2) P10,000.00 as moral damages to the heirs of each of
the victims; (3) P6,805.00 as actual damages divided among the petitioners as follows: heirs of
Amparo Delos Santos and her deceased children, P2,000.00; heirs of Teresa Pamatian, P450.00;
heirs of Diego Salem, P400.00; and Ruben Reyes, P2,955.00; (4) P10,000.00 as attorney's fees;
and (5) the costs.

SO ORDERED.
||| (Heirs of De los Santos v. Court of Appeals, G.R. No. 51165, [June 21, 1990], 264 PHIL 1039-
1053)