ABOITIZ SHIPPING CORPORATION, petitioners,

vs.
COURT OF APPEALS, MALAYAN INSURANCE COMPANY, INC., COMPAGNIE MARITIME DES
CHARGEURS REUNIS, and F.E. ZUELLIG (M), INC., respondents.
x-----------------------------------------x
G.R. No. 130752

G.R. No. 121833

Respondent Malayan Insurance Company, Inc. (Malayan) filed five separate actions against several
defendants for the collection of the amounts of the cargoes allegedly paid by Malayan under various
marine cargo policies2 issued to the insurance claimants. The five civil cases, namely, Civil Cases
No. 138761, No. 139083, No. 138762, No. R-81-526 and No. 138879, were consolidated and heard
before the Regional Trial Court (RTC) of Manila, Branch 54.

October 17, 2008

ABOITIZ SHIPPING CORPORATION, petitioners,

vs.
COURT OF APPEALS, THE HON. JUDGE REMEGIO E. ZARI, in his capacity as Presiding Judge
of the RTC, Branch 20; ASIA TRADERS INSURANCE CORPORATION, and ALLIED GUARANTEE
INSURANCE CORPORATION, respondents.

The defendants in Civil Case No. 138761 and in Civil Case No. 139083 were Malayan International
Shipping Corporation, a foreign corporation based in Malaysia, its local ship agent, Litonjua
Merchant Shipping Agency (Litonjua), and Aboitiz. The defendants in Civil Case No. 138762 were
Compagnie Maritime des Chargeurs Reunis (CMCR), its local ship agent, F.E. Zuellig (M), Inc.
(Zuellig), and Aboitiz. Malayan also filed Civil Case No. R-81-526 only against CMCR and Zuellig.
Thus, defendants CMCR and Zuellig filed a third-party complaint against Aboitiz. In the fifth
complaint docketed as Civil Case No. 138879, only Aboitiz was impleaded as defendant.

x-----------------------------------------x
G.R. No. 137801

October 17, 2008

ABOITIZ SHIPPING CORPORATION, petitioners,

vs.
EQUITABLE INSURANCE CORPORATION, respondents.

The shipments were supported by their respective bills of lading and insured separately by Malayan
against the risk of loss or damage. In the five consolidated cases, Malayan sought the recovery of
amounts totaling P639,862.02.
Aboitiz raised the defenses of lack of jurisdiction, lack of cause of action and prescription. It also
claimed that M/V P. Aboitiz was seaworthy, that it exercised extraordinary diligence and that the loss
was caused by a fortuitous event.

DECISION
TINGA, J.:
Before this Court are three consolidated Rule 45 petitions all involving the issue of whether the real
and hypothecary doctrine may be invoked by the shipowner in relation to the loss of cargoes
occasioned by the sinking of M/V P. Aboitiz on 31 October 1980. The petitions filed by Aboitiz
Shipping Corporation (Aboitiz) commonly seek the computation of its liability in accordance with the
Courts pronouncement in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance
Corporation, Ltd.1 (hereafter referred to as "the 1993 GAFLAC case").
The three petitions stemmed from some of the several suits filed against Aboitiz before different
regional trial courts by shippers or their successors-in-interest for the recovery of the monetary
value of the cargoes lost, or by the insurers for the reimbursement of whatever they paid. The trial
courts awarded to various claimants the amounts of P639,862.02, P646,926.30, and P87,633.81 in
G.R. Nos. 121833, 130752 and 137801, respectively.
ANTECEDENTS
GFLAC CASES- TRANSPORTATION LAWS

After trial on the merits, the RTC of Manila rendered a Decision dated 27 November 1989,
adjudging Aboitiz liable on the money claims. The decretal portion reads:
WHEREFORE, judgment is hereby rendered as follows:
1. In Civil Case No. 138072 (R-81-526-CV), the defendants are adjudged liable and ordered to
pay to the plaintiffs jointly and severally the amount of P128,896.79; the third-party defendant
Aboitiz is adjudged liable to reimburse and ordered to pay the defendants or whosoever of them
paid the plaintiff up to the said amount;
2. In Civil Case No. 138761, Aboitiz is adjudged liable and ordered to pay plaintiff the amount of
One Hundred Sixty Three-Thousand Seven Hundred Thirteen Pesos and Thirty-Eight Centavos
(P163,713.38).
3. In Civil Case No. 138762, defendant Aboitiz is adjudged liable and ordered to pay plaintiff the
sum of Seventy Three Thousand Five Hundred Sixty-Nine Pesos and Ninety-Four Centavos
(P73,569.94); and Sixty-Four Thousand Seven Hundred Four Pesos and Seventy-Seven Centavos
(P64,704.77);
Page 1 of 15

4. In Civil Case No. 139083, defendant Aboitiz is adjudged liable and ordered to pay plaintiff the
amount of One Hundred Fifty-Six Thousand Two Hundred Eighty-Seven Pesos and Sixty-Four
Centavos (P156,287.64);
In Civil Case No. 138879, defendant Aboitiz is adjudged liable and ordered to pay plaintiff the
amount of Fifty-Two Thousand Six Hundred Eighty-Nine Pesos and Fifty Centavos (P52,689.50).
All the aforesaid award shall bear interest at the legal rate from the filing of the respective
complaints. Considering that there is no clear showing that the cases fall under Article 2208, Nos. 4
and 5, of the Civil Code, and in consonance with the basic rule that there be no penalty (in terms of
attorneys fees) imposed on the right to litigate, no damages by way of attorneys fees are awarded;
however, costs of the party/parties to whom judgment awards are made shall be made by the party
ordered to pay the said judgment awards.
SO ORDERED.3
Aboitiz, CMCR and Zuellig appealed the RTC decision to the Court of Appeals. The appeal was
docketed as CA-G.R. SP No. 35975-CV. During the pendency of the appeal, the Court promulgated
the decision in the 1993 GAFLAC case.
On 31 March 1995, the Court of Appeals (Ninth Division) affirmed the RTC decision. It disregarded
Aboitizs argument that the sinking of the vessel was caused by a force majeure, in view of this
Courts finding in a related case, Aboitiz Shipping Corporation v. Court of Appeals, et al. (the 1990
GAFLAC case).4 In said case, this Court affirmed the Court of Appeals finding that the sinking of
M/V P. Aboitiz was caused by the negligence of its officers and crew. It is one of the numerous
collection suits against Aboitiz, which eventually reached this Court in connection with the sinking of
M/V P. Aboitiz.

On 4 December 1995, the Court issued a Resolution9 denying the petition. Aboitiz moved for
reconsideration, arguing that the limited liability doctrine enunciated in the 1993 GAFLAC case
should be applied in the computation of its liability. In the Resolution10 dated 6 March 1996, the
Court granted the motion and ordered the reinstatement of the petition and the filing of a comment.
G.R. No. 130752
Respondents Asia Traders Insurance Corporation (Asia Traders) and Allied Guarantee Insurance
Corporation (Allied) filed separate actions for damages against Aboitiz to recover by way of
subrogation the value of the cargoes insured by them and lost in the sinking of the vessel M/V P.
Aboitiz. The two actions were consolidated and heard before the RTC of Manila, Branch 20.
Aboitiz reiterated the defense of force majeure. The trial court rendered a decision11 on 25 April
1990 ordering Aboitiz to pay damages in the amount of P646,926.30. Aboitiz sought
reconsideration, arguing that the trial court should have considered the findings of the Board of
Marine Inquiry that the sinking of the M/V P. Aboitiz was caused by a typhoon and should have
applied the real and hypothecary doctrine in limiting the monetary award in favor of the claimants.
The trial court denied Aboitizs motion for reconsideration.
Aboitiz elevated the case to the Court of Appeals. While the appeal was pending, this Court
promulgated the decision in the 1993 GAFLAC case. The Court of Appeals subsequently rendered a
decision on 30 May 1994, affirming the RTC decision.12
Aboitiz appealed the Court of Appeals decision to this Court.13 In a Resolution dated 20 September
1995,14 the Court denied the petition for raising factual issues and for failure to show that the Court
of Appeals committed any reversible error. Aboitizs motion for reconsideration was also denied in a
Resolution dated 22 November 1995.15

As to the computation of Aboitizs liability, the Court of Appeals again based its ruling on the 1990
GAFLAC case that Aboitizs liability should be based on the declared value of the shipment in
consonance with the exceptional rule under Section 4(5)5 of the Carriage of Goods by Sea Act.

The 22 November 1995 Resolution became final and executory. On 26 February 1996, Asia Traders
and Allied filed a motion for execution before the RTC of Manila, Branch 20. Aboitiz opposed the
motion. On 16 August 1996, the trial court granted the motion and issued a writ of execution.

Aboitiz moved for reconsideration6 to no avail. Hence, it filed this petition for review on certiorari
docketed as G.R. No. 121833.7 The instant petition is based on the following grounds:

Alleging that it had no other speedy, just or adequate remedy to prevent the execution of the
judgment, Aboitiz filed with the Court of Appeals a petition for certiorari and prohibition with an
urgent prayer for preliminary injunction and/or temporary restraining order docketed as CA-G.R. SP
No. 41696.16 The petition was mainly anchored on this Courts ruling in the 1993 GAFLAC case.

THE COURT OF APPEALS SHOULD HAVE LIMITED THE RECOVERABLE AMOUNT FROM
ASC TO THAT AMOUNT STIPULATED IN THE BILL OF LADING.
IN THE ALTERNATIVE, THE COURT OF APPEALS SHOULD HAVE FOUND THAT THE TOTAL
LIABILITY OF ASC IS LIMITED TO THE VALUE OF THE VESSEL OR THE INSURANCE
PROCEEDS THEREOF.8
GFLAC CASES- TRANSPORTATION LAWS

On 8 August 1997, the Court of Appeals (Special Seventeenth Division) rendered the assailed
decision dismissing the petition.17 Based on the trial courts finding that Aboitiz was actually
negligent in ensuring the seaworthiness of M/V P. Aboitiz, the appellate court held that the real and
hypothecary doctrine enunciated in the 1993 GAFLAC case may not be applied in the case.
Page 2 of 15

In view of the denial of its motion for reconsideration,18 Aboitiz filed before this Court the instant
petition for review on certiorari docketed as G.R. No. 130752.19 The petition attributes the following
errors to the Court of Appeals:
THE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT THE LOWER COURT
HAD MADE AN EXPRESS FINDING OF THE ACTUAL NEGLIGENCE OF ABOITIZ IN THE
SINKING OF THE M/V P. ABOITIZ THEREBY DEPRIVING ABOITIZ OF THE BENEFIT OF THE
DOCTRINE OF THE REAL AND HYPOTHECARY NATURE OF MARITIME LAW.20
THE COURT OF APPEALS ERRED IN NOT GIVING WEIGHT TO THE GAFLAC CASE
DECIDED BY THE HONORABLE COURT WHICH SUPPORTS THE APPLICABILITY OF THE
REAL AND HYPOTHECARY NATURE OF MARITIME LAW IN THE PRESENT CASE.21
G.R. No. 137801
On 27 February 1981, Equitable Insurance Corporation (Equitable) filed an action for damages
against Aboitiz to recover by way of subrogation the value of the cargoes insured by Equitable that
were lost in the sinking of M/V P. Aboitiz.22 The complaint, which was docketed as Civil Case No.
138395, was later amended to implead Seatrain Pacific Services S.A. and Citadel Lines, Inc. as
party defendants.23 The complaint against the latter defendants was subsequently dismissed upon
motion in view of the amicable settlement reached by the parties.
On 7 September 1989, the RTC of Manila, Branch 7, rendered judgment24 ordering Aboitiz to pay
Equitable the amount of P87,633.81, plus legal interest and attorneys fees.25 It found that Aboitiz
was guilty of contributory negligence and, therefore, liable for the loss.
In its appeal, docketed as CA-G.R. CV No. 43458, Aboitiz invoked the doctrine of limited liability and
claimed that the typhoon was the proximate cause of the loss. On 27 November 1998, the Court of
Appeals rendered a decision, affirming the RTC decision.26
The Court of Appeals (Fifteenth Division) ruled that the loss of the cargoes and the sinking of the
vessel were due to its unseaworthiness and the failure of the crew to exercise extraordinary
diligence. Said findings were anchored on the 1990 GAFLAC case and on this Courts resolution
dated November 13, 1989 in G.R. No. 88159, dismissing Aboitizs petition and affirming the findings
of the appellate court on the vessels unseaworthiness and the crews negligence.
Its motion for reconsideration27 having been denied,28 Aboitiz filed before this Court a petition for
review on certiorari, docketed as G.R. No. 137801,29 raising this sole issue, to wit:
WHETHER OR NOT THE DOCTRINE OF REAL AND HYPOTHECARY NATURE OF MARITIME
LAW (ALSO KNOWN AS THE "LIMITED LIABILITY RULE") APPLIES.30
GFLAC CASES- TRANSPORTATION LAWS

ISSUES
The principal issue common to all three petitions is whether Aboitiz can avail limited liability on the
basis of the real and hypothecary doctrine of maritime law. Corollary to this issue is the
determination of actual negligence on the part of Aboitiz.
These consolidated petitions similarly posit that Aboitizs liability to respondents should be limited to
the value of the insurance proceeds of the lost vessel plus pending freightage and not correspond to
the full insurable value of the cargoes paid by respondents, based on the Courts ruling in the 1993
GAFLAC case.
Respondents in G.R. No. 121833 counter that the limited liability rule should not be applied because
there was a finding of negligence in the care of the goods on the part of Aboitiz based on this
Courts Resolution dated 4 December 1995 in G.R. No. 121833, which affirmed the trial courts
finding of negligence on the part of the vessels captain. Likewise, respondent in G.R. No. 137801
relies on the finding of the trial court, as affirmed by the appellate court, that Aboitiz was guilty of
negligence.
Respondents in G.R No. 130752 argue that this Court had already affirmed in toto the appellate
courts finding that the vessel was not seaworthy and that Aboitiz failed to exercise extraordinary
diligence in the handling of the cargoes. This being the law of the case, Aboitiz should not be
entitled to the limited liability rule as far as this petition is concerned, respondents contend.
RULING of the COURT
These consolidated petitions are just among the many others elevated to this Court involving
Aboitizs liability to shippers and insurers as a result of the sinking of its vessel, M/V P. Aboitiz, on 31
October 1980 in the South China Sea. One of those petitions is the 1993 GAFLAC case, docketed
as G.R. No. 100446.31
The 1993 GAFLAC case was an offshoot of an earlier final and executory judgment in the 1990
GAFLAC case, where the General Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC), as
judgment obligee therein, sought the execution of the monetary award against Aboitiz. The trial
court granted GAFLACs prayer for execution of the full judgment award. The appellate court
dismissed Aboitizs petition to nullify the order of execution, prompting Aboitiz to file a petition with
this Court.
In the 1993 GAFLAC case, Aboitiz argued that the real and hypothecary doctrine warranted the
immediate stay of execution of judgment to prevent the impairment of the other creditors shares.
Invoking the rule on the law of the case, private respondent therein countered that the 1990
GAFLAC case had already settled the extent of Aboitizs liability.
Page 3 of 15

Following the doctrine of limited liability, however, the Court declared in the 1993 GAFLAC case that
claims against Aboitiz arising from the sinking of M/V P. Aboitiz should be limited only to the extent
of the value of the vessel. Thus, the Court held that the execution of judgments in cases already
resolved with finality must be stayed pending the resolution of all the other similar claims arising
from the sinking of M/V P. Aboitiz. Considering that the claims against Aboitiz had reached more
than 100, the Court found it necessary to collate all these claims before their payment from the
insurance proceeds of the vessel and its pending freightage. As a result, the Court exhorted the trial
courts before whom similar cases remained pending to proceed with trial and adjudicate these
claims so that the pro-rated share of each claim could be determined after all the cases shall have
been decided.32
In the 1993 GAFLAC case, the Court applied the limited liability rule in favor of Aboitiz based on the
trial courts finding therein that Aboitiz was not negligent. The Court explained, thus:
x x x 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 x x x. The
pivotal question, thus, is whether there is 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 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. x x x
The same is true of the decision of this Court in G.R. No. 89757 affirming the decision of the
Court of Appeals in CA-G.R. CV No. 10609 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.33 (Citations entitled) (Emphasis supplied)
The ruling in the 1993 GAFLAC case cited the real and hypothecary doctrine in maritime law that
the shipowner or agents liability is merely co-extensive with his interest in the vessel such that a
total loss thereof results in its extinction. "No vessel, no liability" expresses in a nutshell the limited
liability rule.34
In this jurisdiction, the limited liability rule is embodied in Articles 587, 590 and 837 under Book III of
the Code of Commerce, thus:
GFLAC CASES- TRANSPORTATION LAWS

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 the 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, shall be
understood as limited to the value of the vessel with all its appurtenances and freightage served
during the voyage.
These articles precisely intend 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 the owner or agent
abandons the vessel.35 When the vessel is totally lost in which case there is no vessel to abandon,
abandonment is not required. Because of such total loss the liability of the shipowner or agent for
damages is extinguished.36 However, despite the total loss of the vessel, its insurance answers for
the damages for which a shipowner or agent may be held liable.37
Nonetheless, there are exceptional circumstances wherein the ship agent could still be held
answerable despite the abandonment of the vessel, as where the loss or injury was due to the fault
of the shipowner and the captain. The international rule is to the effect that the right of abandonment
of vessels, as a legal limitation of a shipowners liability, does not apply to cases where the injury or
average was occasioned by the shipowners own fault.38 Likewise, the shipowner may be held
liable for injuries to passengers notwithstanding the exclusively real and hypothecary nature of
maritime law if fault can be attributed to the shipowner.39
As can be gleaned from the foregoing disquisition in the 1993 GAFLAC case, the Court applied the
doctrine of limited liability in view of the absence of an express finding that Aboitizs negligence was
the direct cause of the sinking of the vessel. The circumstances in the 1993 GAFLAC case,
however, are not obtaining in the instant petitions.
A perusal of the decisions of the courts below in all three petitions reveals that there is a categorical
finding of negligence on the part of Aboitiz. For instance, in G.R. No. 121833, the RTC therein
expressly stated that the captain of M/V P. Aboitiz was negligent in failing to take a course of action
that would prevent the vessel from sailing into the typhoon. In G.R. No. 130752, the RTC concluded
that Aboitiz failed to show that it had exercised the required extraordinary diligence in steering the
vessel before, during and after the storm. In G.R. No. 137801, the RTC categorically stated that the
Page 4 of 15

sinking of M/V P. Aboitiz was attributable to the negligence or fault of Aboitiz. In all instances, the
Court of Appeals affirmed the factual findings of the trial courts.
The finding of actual fault on the part of Aboitiz is central to the issue of its liability to the
respondents. Aboitizs contention, that with the sinking of M/V P. Aboitiz, its liability to the cargo
shippers and shippers should be limited only to the insurance proceeds of the vessel absent any
finding of fault on the part of Aboitiz, is not supported by the record. Thus, Aboitiz is not entitled to
the limited liability rule and is, therefore, liable for the value of the lost cargoes as so duly alleged
and proven during trial.
Events have supervened during the pendency of the instant petitions. On two other occasions, the
Court ruled on separate petitions involving monetary claims against Aboitiz as a result of the 1980
sinking
of the vessel M/V P. Aboitiz. One of them is the consolidated petitions of Monarch Ins. Co., Inc v.
Court of Appeals,40 Allied Guarantee Insurance Company v. Court of Appeals41 and Equitable
Insurance Corporation v. Court of Appeals42 (hereafter collectively referred to as Monarch
Insurance) promulgated on 08 June 2000. This time, the petitioners consisted of claimants against
Aboitiz because either the execution of the judgment awarding full indemnification of their claims
was stayed or set aside or the lower courts awarded damages only to the extent of the claimants
proportionate share in the insurance proceeds of the vessel.
In Monarch Insurance, the Court deemed it fit to settle once and for all this factual issue by
declaring that the sinking of M/V P. Aboitiz was caused by the concurrence of the unseaworthiness
of the vessel and the negligence of both Aboitiz and the vessels crew and master and not because
of force majeure. Notwithstanding this finding, the Court did not reverse but reiterated instead the
pronouncement in GAFLAC to the effect that the claimants be treated as "creditors in an insolvent
corporation whose assets are not enough to satisfy the totality of claims against it."43 The Court
explained that the peculiar circumstances warranted that procedural rules of evidence be set aside
to prevent frustrating the just claims of shippers/insurers. Thus, the Court in Monarch Insurance
ordered Aboitiz to institute the necessary limitation and distribution action before the proper RTC
and to deposit with the said court the insurance proceeds of and the freightage earned by the illfated ship.
However, on 02 May 2006, the Court rendered a decision in Aboitiz Shipping Corporation v. New
India Assurance Company, Ltd.44 (New India), reiterating the well-settled principle that the
exception to the limited liability doctrine applies when the damage is due to the fault of the
shipowner or to the concurrent negligence of the shipowner and the captain. Where the shipowner
fails to overcome the presumption of negligence, the doctrine of limited liability cannot be applied.45
In New India, the Court clarified that the earlier pronouncement in Monarch Insurance was not an
abandonment of the doctrine of limited liability and that the circumstances therein still made the
doctrine applicable.46
GFLAC CASES- TRANSPORTATION LAWS

In New India, the Court declared that Aboitiz failed to discharge its burden of showing that it
exercised extraordinary diligence in the transport of the goods it had on board in order to invoke the
limited liability doctrine. Thus, the Court rejected Aboitizs argument that the award of damages to
respondent therein should be limited to its pro rata share in the insurance proceeds from the sinking
of M/V P. Aboitiz.
The instant petitions provide another occasion for the Court to reiterate the well-settled doctrine of
the real and hypothecary nature of maritime law. As a general rule, a ship owners liability is merely
co-extensive with his interest in the vessel, except where actual fault is attributable to the shipowner.
Thus, as an exception to the limited
liability doctrine, a shipowner or ship agent may be held liable for damages when the sinking of the
vessel is attributable to the actual fault or negligence of the shipowner or its failure to ensure the
seaworthiness of the vessel. The instant petitions cannot be spared from the application of the
exception to the doctrine of limited liability in view of the unanimous findings of the courts below that
both Aboitiz and the crew failed to ensure the seaworthiness of the M/V P. Aboitiz.
WHEREFORE, the petitions in G.R. Nos. 121833, 130752 and 137801 are DENIED. The decisions
of the Court of Appeals in CA-G.R. SP No. 35975-CV, CA-G.R. SP No. 41696 and CA-G.R. CV No.
43458 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

G.R. No. 89757 August 6, 1990

ABOITIZ SHIPPING CORPORATION, petitioner,
vs.
COURT OF APPEALS AND GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION,
LTD., respondents.
Sycip, Salazar, Hernandez & Gatmaitan for petitioner.
Dollete, Blanco, Ejercito & Associates for private respondent.

Page 5 of 15

GANCAYCO, J.:
The extent of the liability of a carrier of goods is again brought to the fore in this case.
On October 28, 1980, the vessel M/V "P. Aboitiz" took on board in Hongkong for shipment to Manila
some cargo consisting of one (1) twenty (20)-footer container holding 271 rolls of goods for apparel
covered by Bill of Lading No. 515-M and one (1) forty (40)-footer container holding four hundred
forty- seven (447) rolls, ten (10) bulk and ninety-five (95) cartons of goods for apparel covered by
Bill of Lading No. 505-M. The total value, including invoice value, freightage, customs duties, taxes
and similar imports amounts to US$39,885.85 for the first shipment while that of the second
shipment amounts to US$94,190.55. Both shipments were consigned to the Philippine Apparel, Inc.
and insured with the General Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC for
short). The vessel is owned and operated by Aboitiz Shipping Corporation (Aboitiz for short).
On October 31, 1980 on its way to Manila the vessel sunk and it was declared lost with all its
cargoes. GAFLAC paid the consignee the amounts US$39,885.85 or P319,086.80 and
US$94,190.55 or P753,524.40 for the lost cargo. As GAFLAC was subrogated to all the rights,
interests and actions of the consignee against Aboitiz, it filed an action for damages against Aboitiz
in the Regional Trial Court of Manila alleging that the loss was due to the fault and negligence of
Aboitiz and the master and crew of its vessel in that they did not observe the extraordinary diligence
required by law as regards common carriers.
After the issues were joined and the trial on the merits a decision was rendered by the trial court on
June 29, 1985, the dispositive part of which reads as follows:

1. The Court of Appeals held that "findings of administrative bodies are not always binding on court .
This is especially so in the case at bar where GAFLAC was not a party in the BMI proceedings and
which proceedings was not adversary in characther." This ruling is contrary to the principle
established in Vasquez vs. Court of Appeals (138 SCRA 559), where it was held that since the BMI
possesses the required expertise in shipping matters and is imbued with quasi-judicial powers, its
factual findings are conclusive and binding on the court. Likewise, the case of Timber Export Inc. vs.
Retla Steamship Co. (CA-G.R. No. 66143-R) also established the rule that decision of BMI must be
given "great materiality and weight to the determination and resolution of the case."
2. The Court of Appeals also held that the trial court did not err when it fixed the liability of Aboitiz
not on the basis of the stipulation in the bills of lading at US$500.00 per package/container but on
the actual value of the shipment lost notwithstanding the long line of cases decided by this
Honorable Supreme Court holding a contrary opinion, as shown below.
3. The Court of Appeals also held that the trial court did not abuse its discretion in granting
GAFLAC's motion for execution pending appeal notwithstanding the absence of reasonable and
justifiable grounds to support the same. 3
Under the first issue petitioner state that the sinking of the vessel M/V "P. Aboitiz" was the subject of
an administrative investigation conducted by the Board of Marine Inquiry (BMI) whereby in a
decision dated December 26, 1984, it was found that the sinking of the vessel may be attributed to
force majeure on account of a typhoon. Petitioner contends that these findings are conclusive on
the courts.
In rejecting the evidence offered by the petitioner the appellate court ruled

PREMISES CONSIDERED, the Court finds in favor of the plaintiff and against the defendant,
ordering the latter to pay the former actual damages in the sum of P1,072,611.20 plus legal interest
from the date of the filing of the complaint on October 28, 1981, until full payment thereof, attorney's
fees in the amount of 20% of the total claim and to pay the costs.

But over and above all these considerations, the trial court did not err in not giving weight to the
finding of the BMI that the vessel sank due to a fortuitous event. Findings of administrative bodies
are not always binding on courts. This is especially so in the case at bar where plaintiff was not a
party in the BMI proceedings and which proceeding was not adversary in character. 4

SO ORDERED. 1
Not satisfied therewith, Aboitiz appealed to the Court of Appeals wherein in due course a decision
was rendered on March 9, 1989 affirming in toto the appealed decision, with costs against
defendant Aboitiz . 2
A motion for reconsideration of said decision filed by Aboitiz was denied in a resolution dated August
15, 1989.
Hence the herein petition for review alleging that the Court of Appeals decided the case not in
accordance with law when
GFLAC CASES- TRANSPORTATION LAWS

As a general rule, administrative findings of facts are not disturbed by the courts when supported by
substantial evidence unless it is tainted with unfairness or arbitrariness that would amount to abuse
of discretion or lack of jurisdiction. 5 Even in Vasquez vs. Court of Appeals, 6 which is cited by
petitioner, this Court ruled that We nevertheless disagree with the conclusion of the BMI exonerating
the captain from any negligence "since it obviously had not taken into account the legal
responsibility of a common carrier towards the security of the passengers involved."
This case was brought to court on October 28, 1981. The trial court was never informed of a parallel
administrative investigation that was being conducted by the BMI in any of the pleadings of the
petitioner. It was only on March 22, 1985 when petitioner revealed to the trial court the decision of
Page 6 of 15

the BMI dated December 26, 1984 (one day after Christmas day). 7 The said decision appears to
have been rendered over three (3) years after the case was brought to court.

Q. In the layman's language how do you interpret this white horses?

A. It means white forms. At the top of the crest they were beginning to form white foams.

Moreover, said administrative investigation was conducted unilaterally. Private respondent GAFLAC
was not notified or given an opportunity to participate therein. It cannot thereby be bound by said
findings and conclusions of the BMI.
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
xxx xxx xxx
After a careful examination of the evidence, the Court is convinced in the plaintiffs claim that the
M/V "Aboitiz" and its cargo were not lost due to fortuitous event or force majeure.

Q. How about this moderate breeze as described under this Force 4 of the Beaufort Scale, how will
you interpret that?
A. Moderate breeze will only give winds of 29 kilometers per hour which is equivalent to just
extending your hand out of a running car at that speed.
Q. This weather condition between October 28 and November 1, 1980, will you classify this as
extraordinary or ordinary?
A. It was ordinary.
Q. When you said ordinary, was it usual or unusual?

To begin with, paragraph 4 of the marine protest (Exh. "4", also Exhibit "M"), which is defendant's
own evidence, shows that the wind force when the ill-fated ship foundered was 10 to 15 knots.
According to the Beaufort Scale (Exhibit "I"), which is admittedly an accurate reference for
measuring wind velocity, the wind force of 10 to 15 knots is classified as scale No. 4 and described
as "moderate breeze," small waves, becoming longer, fairly frequent white horses. Meteorologist
Justo Iglesias, Jr. himself affirms the above description of a wind force of 10 to 15 knots and adds
that the weather condition prevailing under said wind force is usual and forseeable. Thus Iglesias,
Jr. testified:

A. It is usual.
Q. When you said it is usual it is foreseeable and predictable?
A. For an experienced meteorologist like a ship captain, it is foreseeable.
Q. When it is foreseeable, necessarily it follows that the weather could be predicted based on the
weather bulletin or report?

Q. In the marine protest of the master of the vessel of Aboitiz, there is reference to wind force from
ten to 15 knots. In this Beaufort Scale, will you be able to clarify what this wind force of 10 to 15 as
stated in the marine protest?

A. Yes, sir.

A. It will be under Force 4 of the Beaufort Scale.

Q. And usually the bulletin states the condition in other words, this weather condition which you
testified to and reflected in your Exhibit "7" is an ordinary occurrence within that area of Philippine
responsibility?

Q. What is the basis of your answer?

A. Yes, sir.
A. 10 to 15 falls within this scale of the Beaufort Scale, Force 4.
Atty. Dollete:
May I read into the records, Your Honor. Force 4, descriptive term moderate breeze. Near velocity in
knots 11-16 meters per second, 5.5-7.9 in kilometers per hour to 20 to 28 kilometers per hour and
13 to 18 miles per hour. Sea the description of this will be small waves becoming longer fairly
frequent white horse (sic).
GFLAC CASES- TRANSPORTATION LAWS

Q. And in fact this weather condition is to be anticipated at that time of the year with respect to
weather condition which is reflected in Exhibit "7"?
A. It is a regular occurrence.
xxx xxx xxx

Page 7 of 15

Moreover, Capt. Racines again admitted in Court that his ill-fated vessel was 200 miles away from
the storm 'Yoning when it sank. Said Capt. Racines:
Q. How far were you from this depression or weather disturbance on October 30, 1980?
A. Two hundred miles.
xxx xxx xxx
Q. In other words, this depression was far from your route because it took a northern approach
whereas you were towards the south approach?
A. As I have said, I was 200 miles away from the disturbance.
xxx xxx xxx
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.
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 the
circumstances of each case. While the goods are in the possession of the carrier, it is but fair that it
exercise extra ordinary diligence in protecting them from loss or damage, and if its 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 (Article 1756, Civil Code; Anuran vs. Puno, 17
SCRA 224; Nocum vs. Laguna Tayabas Bus Co., 30 SCRA 69; Landigan vs. Pangasinan
Transportation Company, 88 SCRA 284). 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. 8
The said factual findings of the appellate court and the trial court are finding on this Court. Its
conclusion as to the negligence of the petitioner is supported by the evidence.
The second issue raised to the effect that the liability of the petitioner should be fixed at US$500.00
per package/container, as stipulated in the bill of lading and not at the actual value of the cargo,
should be resolved against petitioner.
While it is true that in the bill of lading there is such stipulation that the liability of the carrier is
US$500.00 per package/container/customary freight, there is an exception, that is, when the nature
and value of such goods have been declared by the shipper before shipment and inserted in the bill
of lading. This is provided for in Section 4(5) of the Carriage of Goods by Sea Act to wit
GFLAC CASES- TRANSPORTATION LAWS

(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to
or in connection with the transportation of goods in an amount exceeding $500 per package of
lawful money of the United States, or in case of goods not shipped in packages, per customary
freight unit, or the equivalent of that sum in other currency, unless the nature and value of such
goods have been inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall
be prima facie evidence, but shall not be conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier, and the shipper another maximum
amount than that mentioned in this paragraph may be fixed: Provided, that such maximum shall not
be less than the figure above named. In no event shall the carrier be liable for more than the
amount of damage actually sustained.
Neither the carrier nor the ship shall be responsible in any event for loss or damage to or in
connection with the transportation of the goods if the nature or value thereof has been knowingly
and fraudulently mis-stated by the shipper in the bill of lading. (Emphasis supplied.)
In this case the description of the nature and the value of the goods shipped are declared and
reflected in the bills of lading. Thus, it is the basis of the liability of the carrier as the actual value of
the loss.
Moreover, it is absurd to interpret "container," as provided in the bill of lading to be valued at
US$500.00 each, to refer to the container which is the modern substitute for the hold of the vessel.
9 The package/container contemplated by the law to limit the liability of the carrier should be
sensibly related to the unit in which the shipper packed the goods and described them, not a large
metal object, functionally a part of the ship, in which the carrier used them to be contained. 10 Such
"container" must be given the same meaning and classification as a "package" and "customary
freight unit."
The appellate court in disposing this issue quoted its decision in Allied Guarantee Insurance Co. Inc.
vs. Aboitiz Shipping Corporation, CA GR. CV No. 04121, March 23, 1987, viz;
Third. Still it is contended that the carrier's liability is limited to $500.00, pursuant to section 8 of the
Bill of Lading which provides that 'The liability of the Carrier for any loss or damage to the goods
shall in no case exceed the sum of U.S. $500.00 per package/container/customary freight unit,
unless the value of the goods has been correctly declared and extra freight paid, prior to the
shipment and a signed declaration to this effect appears in the bill of lading, duly confirmed by the
Carrier. ... It is contended that the Bill of Lading does not indicate the value of the goods. Nor was
the corresponding freight ... paid prior to shipment.
Generally speaking a stipulation, limiting the common carrier's liability to the value of the goods
appearing in the bill of lading, unless the shipper or owner declares a greater value, is valid. (Civil
Code, Art. 1749). Such stipulation, however, must be reasonable and just under the circumstances
Page 8 of 15

and must have been fairly and freely agreed upon. (St. Paul Fire & Marine Insurance Co. vs.
Macondray Co., 70 SCRA 122, 126-127 (1976) In the case at bar, the goods shipped on the M/V "P.
Aboitiz" were insured for P278,530.50, which may be taken as their value. To limit the liability of the
carrier to $500.00 would obviously put it in its power to have taken the whole cargo. In Juan Ysmael
& Co. vs. Gabino Barreto & Co., 51 Phil. 90 (1927), it was held that a stipulation limiting the carrier's
liability to $500.00 per package of silk when the value of such package was P2,500.00 unless the
true value had been declared and the corresponding freight paid was "void as against public policy."
That ruling applies to this case.
Moreover, by the weight of modern authority, a carrier cannot limit its liability for injury or loss of
goods shipped where such injury or loss was caused by its own negligence. (Juan Ysmael & Co. v.
Gabino Barreto & Co., supra) Here to limit the liability of Aboitiz Shipping to $500.00 would nullify
the policy of the law imposing on common carriers the duty to observe extraordinary diligence in the
carriage of goods.
Indeed, it is even doubtful whether the word "container" in section 8 of the Bill of Lading includes
containers which are a substitute for the hold of a vessel. This provision limits the carrier's liability to
"the sum of US$500.00 per package /container customary freight unit." By the rule of noscitur a
sociis the word "container" must be given the same meaning as package and customary freight unit
and therefore cannot possibly refer to modern containers which are used for shipment of goods in
bulk. 11
In the same light, the third issue questioning the order of execution pending appeal of the trial court
must be resolved against petitioner as well.
The averments in the motion for execution pending appeal dated December 8, 1985 are as follows

Aside from the fact that petitioner can easily post a supersedeas bond to stay execution, still other
circumstances are present peculiar in the incident of the sinking of M/V P. Aboitiz which would justify
the issuance of execution pending appeal. There are other decided cases adjudging petitioner liable
in the lower court in the same incident. Other cases are on appeal, upcoming and about to be
decided. The value of cargo loss caused by the sinking of petitioner's vessel is in the tune of no less
than fifty million pesos inclusive of interests fees and all claims. Its insurer has gone bankrupt and
petitioner alone must face and answer for all these claims. In one branch of the Regional Trial Court
of Manila alone there are twenty five (25) cases pending against petitioner involving the same loss
of cargoes aboard M/V "P. Aboitiz" as per certification herewith attached as Annex "A". This claim do
not include others, pending in various courts in Metro Manila which would have to be satisfied
ultimately by petitioner, it being a common carrier which failed to exercise extraordinary diligence
over the goods lost. The judgment sought to be enforced may indeed be rendered imminently
ineffectual in the ultimate analysis.
GFLAC CASES- TRANSPORTATION LAWS

The purpose of Sec. 2 Rule 39 would not be achieved or execution pending appeal would not be
achieved if insolvency would still be awaited. The remedy is available to petitioner under Sec. 3
Rule 39 of the Rules of Court but to place insolvency as a condition to issuance of a writ of
execution pending appeal would render it illusory and ineffectual.
Justice and equity therefore dictates, that as a consequence of the bond posted by private
respondent and there being several other cases against petitioner, decided as well as pending, the
totality of which claims may render the appealed decision imminently ineffectual and the further fact
that the appeal being interposed is evidently for delay as a consequence of the several adverse
decisions against it as a common carrier in the lower court, a reconsideration of the decision dated
November 25, 1985 of the Honorable Court will be in consonance with law, jurisprudence and
equity.
In order to erase all apprehensions that the aforesaid judgment award will wind up ineffectual when
not immediately executed, it is most respectfully prayed that herein respondent be required to post a
supersedeas bond. The statutory undertaking of posting a bond will then achieve a three-pronged
direction of justice, (1) it will cast no doubt on the solvency of the herein petitioner; (2) it will not
defeat or render phyrric a just resolution of the case whichever party prevails in the end or in the
main case on appeal, since both of their claims are secured by their corresponding bonds; and (3) it
will put to equitable operation Sec. 3 Rule 39 of the Revised Rules of Court. 12
The foregoing allegations which were not traversed that petitioner is facing many law suits arising
from said sinking of its vessel involving cargo loss of no less than 50 million pesos, in some cases of
which judgment had been rendered against Aboitiz, and considering that its insurer is now bankrupt,
leaving Aboitiz alone to face and answer the suits, which may render any judgment for GAFLAC
ineffectual, that the appeal is interposed manifestly for delay and the willingness of GAFLAC to put
up a bond certainly are cogent bases for the issuance of an order of execution pending appeal.
Finally, in a similar case for damages arising from the same incident entitled Aboitiz Shipping
Corporation vs. Honorable Court of Appeals and Allied Guaranteed Insurance Company, Inc., G.R.
No. 88159, this Court in a resolution dated November 13, 1989 dismissed the petition for lack of
merit. Therein this Court held in part
The appellate court affirmed the decision of the lower court based on its findings that the cause of
sinking of the vessel was due to its unseaworthiness and the failure of its crew and the master to
exercise extraordinary diligence.
The petitioner, however, contends that the appellate court erred on this matter and insists that the
contrary findings of the Board of Marine Inquiry (BMI), which conducted a separate investigation to
the effect that the proximate cause of the sinking of the vessel was due to force majeure and that
the officers and crew had exhausted all preventive measures to save the vessel and her cargo but
Page 9 of 15

to no avail, should prevail. This, according to the petitioner is based on the doctrine of primary
administrative jurisdiction.

The motion for reconsideration of said resolution filed by petitioner was denied with finality in a
resolution dated January 8, 1990. Said resolution of the case had become final and executory, entry
of judgment having been made and the records remanded for execution on March 22, 1990.

This argument is untenable.

Said case is now the law of the case applicable to the present petition.
A cursory reading of the decision and resolution of the appellate court shows that the same took into
consideration not only the findings of the lower court but also the findings of the BMI. Thus, the
appellate court stated:

WHEREFORE, the petition is dismissed with costs against petitioner.

SO ORDERED.

Indeed, the decision of the Board was based simply on its finding that the Philippine Coast Guard
had certified the vessel to be seaworthy and that it sank because it was exposed later to an
oncoming typhoon plotted within the radius where the vessel was positioned. This generalization
certainly cannot prevail over the detailed explanation of the trial court in this case as basis for its
contrary conclusion. (Rollo, at p. 42)
We find no cogent reason to deviate from the factual findings of the appellate court and rule that the
doctrine of primary administrative jurisdiction is not applicable in the case at bar.
The other issue raised is whether or not the carrier's liability is limited to $500.00 pursuant to section
8 of the Bill of Lading. The petitioner claims that the appellate court erred in disregarding the
limitation of liability stipulated in the bill of lading. It argues that the consignee agreed to this amount
(and) therefore is bound by this rate and that there is no basis for the appellate court's finding that
the rate is unreasonable.
The argument is not well-taken. As aptly stated by the appellate court:
Generally speaking any stipulation, limiting the common carrier's liability to the value of the goods
appearing in the bill of lading, unless the shipper or owner declares a greater value is valid. (Civil
Code, Art. 1749) Such stipulation, however, must be reasonable and just under the circumstances
and must have been fairly and freely agreed upon. (St. Paul Fire & Marine Insurance Co. v.
Macondray & Co., 70 SCRA 122, 126-127 [1976] In the case at bar, the goods shipped on the M/V
"P. Aboitiz" were insured for P278,536.50, which may be taken as their value. To limit the liability of
the carrier to $500.00 would obviously put in its power to have taken the whole cargo. In Juan
Ysmael & Co. v. Gabino Barretto & Co., 51 Phil. 90 [1927], it was held that a stipulation limiting the
carrier's liability to P300.00 per package of silk, when the value of such package was P2,500.00,
unless the true value had been declared and the corresponding freight paid; was void as against
public policy. That ruling applies to this case.
As argued by the respondent, a limitation of liability in this case would render inefficacious the
extraordinary diligence required by law of common carriers. 13

GFLAC CASES- TRANSPORTATION LAWS

Page 10 of 15

ABOITIZ SHIPPING CORPORATION, petitioner,

vs.
GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, LTD., respondent.

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 of 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 illfated 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.

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

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

MELO, J.:
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.

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 M/V 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

The basic facts are not disputed.

3 The principle of "Law of the Case" is not applicable to the present petition. (pp. 2-26, Rollo.)
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 Accident Fire 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
GFLAC CASES- TRANSPORTATION LAWS

On the other hand, private respondent opposes the foregoing contentions, arguing that:
1. There is no limited liability to speak of or applicable real and hypothecary rule under Article 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 Shipping, Corporation vs. The Honorable
Page 11 of 15

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 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. 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 appropriate 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:
. . . 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
GFLAC CASES- TRANSPORTATION LAWS

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.
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
Page 12 of 15

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;
Sec. 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).

(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:
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. (Emphasis supplied)

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;

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).

(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.

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.

(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.

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.

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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.
The qualified nature of the meaning of "unseaworthiness," under the peculiar circumstances of this
case is underscored by the fact that in the Country Banker's 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.

GFLAC CASES- TRANSPORTATION LAWS

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 the 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.
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.

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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 abovedescribed 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.

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