Aboitiz Shipping Corporation vs General Accident Fire and Life Assurance

Corporation, Ltd. (GAFLAC)

(Note: This is the second case between Aboitiz and GAFLAC which reached the SC.
The first case is regarding the full merits of the case which the SC ruled in favor of
GAFLAC. This present case is about enforcing that SC ruling. Aboitiz wants to apply the
limited liability rule, while GAFLAC wants Aboitiz to be fully liable for the entire amount
owing to it as subrogee.)
Melo, J.
Facts:
Aboitiz is a corporation engaged in the business of maritime trade as a carrier. It
owns M/V P. Aboitiz which sank on a voyage from Hong Kong to the Philippines.

GAFLAC is a foreign insurance company pursuing its remedies as a subrogee of

several cargo consignees whose respective cargo sank with the said vessel.

The Board of Marine Inquiry (BMI) found that such sinking was due to force
majeure and that subject vessel, at the time of the sinking was seaworthy. This
report notwithstanding, the trial court found for GAFLAC on the basis that the
loss was not due to force majeure, this was upheld by the SC (please see note
above).

Now moving for execution, GAFLAC moved for the full amount of P1,072,611.20
plus legal interest which the RTC approved. Aboitiz filed a petition for certiorari
questioning the RTC decision in the CA which the latter dismissed.

Issue:
1)

W/N execution of judgments which have become final and executory may be
stayed (procedural). Yes.

2)

W/N the CA erred in granting execution of the full judgment award thus
denying the application of the limited liability rule arising out of the real and
hypothecary nature of maritime law. Yes.

Execution of final judgements may be stayed.

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.

The Limited Liability Rule arising out of the real and hypothecary nature of
maritime law is applicable. (hypothecate, transitive verb: to pledge as security without
delivery of title or possession)
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 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.
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. In this case, there has been no
actual finding of negligence on the part of Aboitiz.
The trial court finding against Aboitiz 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."
According to the decision that found against Aboitiz, the sinking was because of
unseaworthiness due to the failure of the crew and the master to exercise extraordinary
diligence. No evidence was presented sufficient to form a conclusion that Aboitiz itself
was negligent. Unseaworthiness is not a fault that can be laid squarely on Aboitiz'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. In this case, the finding of
"unseaworthiness" was not about the structural condition of the vessel, but was about
the condition it was in at the time of the sinking, which was a result of the acts of the
captain and the crew.

As regards the liability of Aboitiz

The rights of parties to claim against an owner of a vessel may be compared to those of
creditors against an insolvent corporation. 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.

Disposition

Collate all claims against Aboitiz. Wait until all cases against it, including those in the
CA and trial court, are finished. Pay pro-rated share of all claimants out of the insurance
and pending freightage which should be deposited in trust.