*

G.R. No. 156978. May 2, 2006.

ABOITIZ SHIPPING CORPORATION, petitioner, vs. NEW

INDIA ASSURANCE COMPANY, LTD., respondent.
Common Carriers; Ships and Shipping; Doctrine of Limited
Liability; An exception to the limited liability doctrine is when the
damage is due to the fault of the shipowner or to the concurrent
negligence of the shipowner and the captain.It bears stressing
that this Court has variedly applied the doctrine of limited liability
to the same incidentthe sinking of M/V P. Aboitiz on October 31,
1980. Monarch, the latest ruling, tried to settle the conflicting
pronouncements of this Court relative to the sinking of M/V P.
Aboitiz. In Monarch, we said that the sinking of the vessel was not
due to force

_______________
*

THIRD DIVISION.

564

564

SUPREME COURT REPORTS ANNOTATED

Aboitiz Shipping Corporation vs. New India Assurance Company,

Ltd.
majeure, but to its unseaworthy condition. Therein, we found
petitioner concurrently negligent with the captain and crew. But the
Court stressed that the circumstances therein still made the
doctrine of limited liability applicable. Our ruling in Monarch may
appear inconsistent with the exception of the limited liability
doctrine, as explicitly stated in the earlier part of the Monarch
decision. An exception to the limited liability doctrine is when the
damage is due to the fault of the shipowner or to the concurrent
negligence of the shipowner and the captain. In which case, the

shipowner shall be liable to the full-extent of the damage. We thus

find it necessary to clarify now the applicability here of the decision
in Monarch.
Same; Same; Same; From the nature of their business and for
reasons of public policy, common carriers are bound to observe
extraordinary diligence over the goods they transport according to
all the circumstances of each case.From the nature of their
business and for reasons of public policy, common carriers are
bound to observe extraordinary diligence over the goods they
transport according to all the circumstances of each case. In the
event of loss, destruction or deterioration of the insured goods,
common carriers are responsible, unless they can prove that the
loss, destruction or deterioration was brought about by the causes
specified in Article 1734 of the Civil Code. In all other cases,
common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed
extraordinary diligence. Moreover, where the vessel is found
unseaworthy, the shipowner is also presumed to be negligent since
it is tasked with the maintenance of its vessel. Though this duty can
be delegated, still, the shipowner must exercise close supervision
over its men.
Same; Same; Same; To limit itself to the amount of insurance
proceeds, the shipowner has the burden of proving that the
unseawor-thiness of its vessel was not due to its fault or negligence.
In the present case, petitioner has the burden of showing that it
exercised extraordinary diligence in the transport of the goods it
had on board in order to invoke the limited liability doctrine.
Differently put, to limit its liability to the amount of the insurance
proceeds, petitioner has the burden of proving that the
unseaworthiness of its vessel was not due to its fault or negligence.
Considering the evidence presented and the circumstances
obtaining in this case, we find that petitioner failed to discharge
this burden. It initially attributed the sinking to the typhoon and
relied on the BMI findings that it was not at fault.
565

VOL. 488, MAY 2, 2006

565

Aboitiz Shipping Corporation vs. New India Assurance Company,

Ltd.
However, both the trial and the appellate courts, in this case, found

that the sinking was not due to the typhoon but to its
unseaworthiness. Evidence on record showed that the weather was
moderate when the vessel sank. These factual findings of the Court
of Appeals, affirming those of the trial court are not to be disturbed
on appeal, but must be accorded great weight. These findings are
conclusive not only on the parties but on this Court as well.
Same; Same; Same; Board of Marine Inquiry (BMI); The
findings of the Board of Marine Inquiry (BMI) are not deemed
always binding on the courts.In contrast, the findings of the BMI
are not deemed always binding on the courts. Besides, exoneration
of the vessels officers and crew by the BMI merely concerns their
respective administrative liabilities. It does not in any way operate
to absolve the common carrier from its civil liabilities arising from
its failure to exercise extraordinary diligence, the determination of
which properly belongs to the courts.
Same; Same; Same; Where the shipowner fails to overcome the
presumption of negligence, the doctrine of limited liability cannot be
applied.Where the shipowner fails to overcome the presumption
of negligence, the doctrine of limited liability cannot be applied.
Therefore, we agree with the appellate court in sustaining the trial
courts ruling that petitioner is liable for the total value of the lost
cargo.

PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Sycip, Salazar, Hernandez & Gatmaitan for
petitioner.
Dollete, Blanco, Ejercito & Associates for respondent.
QUISUMBING, J.:
1

For review on certiorari are the Decision dated August 29,

2002 of the Court of Appeals in CA-G.R. CV No. 28770 and
its
_______________
1

Rollo, pp. 84-97. Penned by Associate Justice Romeo J. Callejo, Sr.

(now a member of this Court), with Associate Justices Remedios SalazarFernando, and Danilo B. Pine concurring.
566

566

SUPREME COURT REPORTS ANNOTATED

Aboitiz Shipping Corporation vs. New India Assurance

Company, Ltd.
2

Resolution
dated
January
23,
2003
denying
reconsideration.
The Court of Appeals affirmed the
3
Decision dated November 20, 1989 of the Regional Trial
Court of Manila in Civil Case No. 82-1475, in favor of
respondent New India Assurance Company, Ltd.
This petition stemmed from the action for damages
against petitioner, Aboitiz Shipping Corporation, arising
from the sinking of its vessel, M/V P. Aboitiz, on October 31,
1980.
The pertinent facts are as follows:
Societe Francaise Des Colloides loaded a cargo of textiles
and auxiliary chemicals from France on board a vessel
owned by Franco-Belgian Services, Inc. The cargo was
consigned to General Textile, Inc., in Manila and insured
by respondent New India Assurance Company, Ltd. While
in Hongkong, the cargo was4 transferred to M/V P. Aboitiz
for transshipment to Manila.
Before departing, the vessel was advised by the
Japanese Meteorological
Center that it was safe to travel to
5
its destination. But while at sea, the vessel received a
report of a typhoon moving within its general path. To
avoid the typhoon, the vessel changed its course. However,
it was still at the fringe of the typhoon when its hull
leaked. On October 31, 1980, the vessel sank, but the
captain and his crew were saved.
On November 3, 1980, the captain of M/V P. Aboitiz filed
his Marine Protest, stating that the wind force was at 10
to 15 knots at the time the ship foundered and described
the
_______________
2

Id., at p. 99. Penned by Associate Justice Danilo B. Pine, with

Associate Justices Godardo A. Jacinto, and Remedios Salazar-Fernando

concurring.
3

Id., at pp. 149-166.

Id., at pp. 84-85, 150.

Id., at p. 65.
567

VOL. 488, MAY 2, 2006

567

Aboitiz Shipping Corporation vs. New India Assurance

Company, Ltd.
weather as moderate breeze, small
waves, becoming
6
longer, fairly frequent white horses.
7
Thereafter, petitioner notified the consignee, General
Textile, of the total loss of the vessel and all of its cargoes.
General Textile, lodged a claim with respondent for the
amount of its loss. Respondent paid General
Textile and
8
was subrogated to the rights of the latter.
Respondent hired a surveyor, Perfect, Lambert and
Company,
to investigate the cause of the sinking. In its
9
report, the surveyor concluded that the cause was the
flooding of the holds brought about by the vessels
questionable seaworthiness. Consequently, respondent filed
a complaint for damages against petitioner Aboitiz, FrancoBelgian Services and the latters local agent, F.E. Zuellig,
Inc. (Zuellig). Respondent alleged that the proximate cause
of the loss of the shipment was the fault or negligence of
the master and crew of the vessel, its unseaworthiness, and
the failure of defendants therein to exercise extraordinary
diligence in the transport of the goods. Hence, respondent
added, defendants
therein breached their contract of
10
carriage.
Franco-Belgian Services and Zuellig responded, claiming
that they exercised extraordinary diligence in handling the
shipment while it was in their possession; its vessel was
seaworthy; and the proximate cause of the loss of cargo was
a fortuitous event. They also filed a cross-claim against
petitioner alleging that the loss occurred during the
transshipment with petitioner and so liability should rest
with petitioner.
For its part, petitioner also raised the same defense that
the ship was seaworthy. It alleged that the sinking of M/V
P.
_______________
6

Id., at pp. 163-164.

Exhibit F-1, folder of exhibits, p. 8.

Exhibits G, G-1, G-2, Id., at p. 11.

Records, pp. 562-580.

10

Id., at pp. 5-6.

568

568

SUPREME COURT REPORTS ANNOTATED

Aboitiz Shipping Corporation vs. New India Assurance

Company, Ltd.
Aboitiz was due to an unforeseen event and without fault
or negligence on its part. It also alleged that in accordance
with the real and hypothecary nature of maritime law, the
sinking of M/V P. 11Aboitiz extinguished its liability on the
loss of the cargoes.
Meanwhile, the Board of Marine Inquiry (BMI)
conducted its own investigation to determine whether the
captain and crew were administratively liable. However,
petitioner neither informed respondent nor the trial court
of the investigation. The BMI exonerated the captain and
crew of any administrative liability; and declared the vessel
seaworthy and concluded that the sinking was due to the
vessels exposure to the approaching typhoon.
On November 20, 1989, the trial court, citing the Court
of Appeals decision in General Accident Fire and Life
12
Assurance Corporation v. Aboitiz Shipping Corporation
involving the same incident, ruled in favor of respondent. It
held petitioner liable for the total value of the lost cargo
plus legal interest, thus:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby
rendered in favor of New India and against Aboitiz ordering the
latter to pay unto the former the amount of P142,401.60, plus legal
interest thereon until the same is fully paid, attorneys fees
equivalent to fifteen [percent] (15%) of the total amount due and the
costs of suit.
The complaint with respect to Franco and Zuellig is dismissed
and their counterclaim against New India is likewise dismissed.
13
SO ORDERED.

Petitioner elevated the case to the Court of Appeals and

presented the findings of the BMI. However, on August 29,
_______________
11

Id., at pp. 18-19, 23-24.

12

CA-G.R. C.V. No. 10609, March 9, 1989 (Now SC G.R No. 89757,

August 6, 1990, 188 SCRA 387).

13

Records, p. 859.

569

VOL. 488, MAY 2, 2006

569

Aboitiz Shipping Corporation vs. New India Assurance

Company, Ltd.
2002, the appellate court affirmed in toto the trial courts
decision. It held that the proceedings before the BMI was
only for the administrative liability of the captain and crew,
and was unilateral in nature, hence not binding on the
courts. Petitioner moved for reconsideration but the same
was denied on January 23, 2003.
Hence, this petition for review, alleging that the Court of
Appeals gravely erred in:
I.
x x x DISREGARDING THE RULINGS OF THE HONORABLE
SUPREME COURT ON THE APPLICATION OF THE RULE ON
LIMITED LIABILITY UNDER ARTICLE 587, 590 AND 837 OF
THE CODE OF COMMERCE TO CASES INVOLVING THE
SINKING OF THE M/V P. ABOITIZ;
A.
x x x NOT APPLYING THE RULINGS IN THE CASES OF MONARCH
INSURANCE CO., INC., ET AL. V. COURT OF APPEALS, ET AL. AND
ABOITIZ SHIPPING CORPORATION V. GENERAL ACCIDENT FIRE
AND LIFE ASSURANCE CORPORATION, LTD.;
B.
x x x RULING THAT THE ISSUE ON THE APPLICATION OF THE
RULE ON LIMITED LIABILITY UNDER ARTICLES 587, 590 AND 837
OF THE CODE OF COMMERCE HAD BEEN CONSIDERED AND
PASSED UPON IN ITS DECISION;

II.
x x x NOT LIMITING THE AWARD OF DAMAGES TO
RESPONDENT TO ITS PRO RATA SHARES IN THE
INSURANCE PROCEEDS FROM THE SINKING OF THE M/V P.
14
ABOITIZ.

Stated simply, we are asked to resolve whether the limited

liability doctrine, which limits respondents award of
damages

_______________
14

Rollo, pp. 68-69.

570

570

SUPREME COURT REPORTS ANNOTATED

Aboitiz Shipping Corporation vs. New India Assurance

Company, Ltd.
to its pro rata share in the insurance proceeds, applies in
this case.
Petitioner,
citing Monarch Insurance Co., Inc. v. Court of
15
Appeals, contends that respondents claim for damages
should only be against the insurance proceeds and limited
to its pro rata share in view of the doctrine of limited
liability.
Respondent counters that the doctrine of real and
hypothecary nature of maritime law is not applicable in the
present case because petitioner was found to have been
negligent. Hence, according to respondent, petitioner
should be held liable for the total value of the lost cargo.
It bears stressing that this Court has variedly applied
the doctrine of limited liability to the same incidentthe
sinking of M/V P. Aboitiz on October 31, 1980. Monarch, the
latest ruling, tried to settle the conflicting pronouncements
of this Court relative to the sinking of M/V P. Aboitiz. In
Monarch, we said that the sinking of the vessel was not
16
due to force majeure, but to its unseaworthy condition.
Therein, we found petitioner
concurrently negligent with
17
the captain and crew. But the Court stressed that the
circumstances therein
still made the doctrine of limited
18
liability applicable.
Our ruling in Monarch may appear inconsistent with
the exception of the limited liability doctrine, as explicitly
stated in the earlier part of the Monarch decision. An
exception to the limited liability doctrine is when the
damage is due to the fault of the shipowner or to the
concurrent negligence of the shipowner and the captain. In
which case, the19shipowner shall be liable to the full-extent
of the damage. We thus find it necessary to clarify now
the applicability here of the decision in Monarch.
_______________

15

G.R. No. 92735, June 8, 2000, 333 SCRA 71.

16

Id., at pp. 98-99.

17

Id., at p. 101.

18

Id., at p. 103.

19

Id., at p. 97.
571

VOL. 488, MAY 2, 2006

571

Aboitiz Shipping Corporation vs. New India Assurance

Company, Ltd.
From the nature of their business and for reasons of public
policy, common carriers are bound to observe extraordinary
diligence over the goods they transport
according to all the
20
circumstances of each case.
In the event of loss,
destruction or deterioration of the insured goods, common
carriers are responsible, unless they can prove that the
loss, destruction or deterioration was brought about21 by the
causes specified in Article 1734 of the Civil Code. In all
other cases, common carriers are presumed to have been at
fault or to have acted negligently, unless
they prove that
22
they observed extraordinary diligence. Moreover, where
the vessel is found unseaworthy, the shipowner is also
presumed to be negligent since
_______________
20

CIVIL CODE, Art. 1733. Common carriers, from the nature of their

business and for reasons of public policy, are bound to observe

extraordinary diligence in the vigilance over the goods and for the safety
of

the

passengers

transported

by

them,

according

to

all

the

circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further
expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of the passengers is further set
forth in articles 1755 and 1756.
21

Id., at Art. 1734. Common carriers are responsible for the loss,

destruction, or deterioration of the goods, unless the same is due to any

of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the

containers;
(5) Order or act of competent public authority.
22

Id., at Art. 1735. In all cases other than those mentioned in Nos. 1,

2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or

deteriorated, common carriers are presumed to have been at fault or to
have

acted

negligently,

unless

they

prove

that

they

observed

extraordinary diligence as required in article 1733.

572

572

SUPREME COURT REPORTS ANNOTATED

Aboitiz Shipping Corporation vs. New India Assurance

Company, Ltd.
it is tasked with the maintenance of its vessel. Though this
duty can be delegated, still, the
shipowner must exercise
23
close supervision over its men.
In the present case, petitioner has the burden of
showing that it exercised extraordinary diligence in the
transport of the goods it had on board in order to invoke
the limited liability doctrine. Differently put, to limit its
liability to the amount of the insurance proceeds, petitioner
has the burden of proving that the unseaworthiness of its
vessel was not due to its fault or negligence. Considering
the evidence presented and the circumstances obtaining in
this case, we find that petitioner failed to discharge this
burden. It initially attributed the sinking to the typhoon
and relied on the BMI findings that it was not at fault.
However, both the trial and the appellate courts, in this
case, found that the sinking was not due to the typhoon but
to its unseaworthiness. Evidence on record showed that the
weather was moderate when the vessel sank. These factual
findings of the Court of Appeals, affirming those of the trial
court are not to be disturbed on appeal, but must be
accorded great weight. These findings are 24conclusive not
only on the parties but on this Court as well.
In contrast, the findings of
the BMI are not deemed
25
always binding on the courts. Besides, exoneration of the
vessels officers and crew by the BMI26merely concerns their
respective administrative liabilities. It does not in any
way operate to absolve the common carrier from its civil
liabilities arising

_______________
23

Philippine American General Insurance Co., Inc. v. Court of Appeals,

G.R. No. 116940, June 11, 1997, 273 SCRA 262, 272.
24

Prudential Bank v. Chonney Lim, G.R. No. 136371, November 11,

2005, 474 SCRA 485, 491.

25

See Aboitiz Shipping Corporation v. Court of Appeals, G.R. No.

89757, August 6, 1990, 188 SCRA 387, 390-391.

26

Delsan Transport Lines, Inc. v. Court of Appeals, G.R. No. 127897,

November 15, 2001, 369 SCRA 24, 33.

573

VOL. 488, MAY 2, 2006

573

Aboitiz Shipping Corporation vs. New India Assurance

Company, Ltd.
from its failure to exercise extraordinary diligence,27 the
determination of which properly belongs to the courts.
Where the shipowner fails to overcome the presumption
of negligence,
the doctrine of limited liability cannot be
28
applied. Therefore, we agree with the appellate court in
sustaining the trial courts ruling that petitioner is liable
for the total value of the lost cargo.
WHEREFORE, the petition is DENIED for lack of merit.
The Decision dated August 29, 2002 and Resolution dated
January 23, 2003 of the Court of Appeals in CA-G.R. CV
No. 28770 are AFFIRMED.
Costs against petitioner.
SO ORDERED.
Carpio, Carpio-Morales, Tinga and Velasco, Jr., JJ.,
concur.
Petition denied, judgment and resolution affirmed.
Notes.Benefits of limited liability are subject to
waiver such as when the air carrier failed to raise timely
objections during the trial when questions and answers
regarding the actual claims and damages sustained by the
passenger were asked. (British Airways vs. Court of
Appeals, 285 SCRA 450 [1998])
The COGSA, which is suppletory to the provisions of the
Civil Code, supplements the latter by establishing a
statutory provision limiting the carriers liability in the
absence of a shippers declaration of a higher value in the

bill of ladingthe provisions on limited liability are as

much a part of the bill of lading as though physically in it
and as though placed
_______________
27
28

Id., at pp. 33-34.

Central Shipping Company, Inc. v. Insurance Company of North

America, G.R. No. 150751, September 20, 2004, 438 SCRA 511, 523-524.
574

574

SUPREME COURT REPORTS ANNOTATED

Office of the Ombudsman vs. Laja

there by agreement of the parties. (Belgian Overseas

Chartering and Shipping N.V. vs. Philippine First
Insurance Co., Inc., 383 SCRA 23 [2002])
o0o

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