1990 CASE

ABOITIZ vs. CA & GAFLAC (GR NO. 89757)

FACTS:

October 28, 1980 M/V P. ABOITIZ, a vessel owned and operated by Aboitiz Shipping
Corporation, took on board in HK for shipment to Manila some cargo, insured with the
General Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC).
October 31, 1980 On its way to Manila, the vessel sunk and was declared lost with all its
cargoes.
GAFLAC paid the consignee and was subrogated to all the rights, interests and actions
of the consignee against Aboitiz. It filed an action for damages against Aboitiz, alleging
that the loss was due to the fault and negligence of Aboitiz and the master and crew of
the vessel, that they did not observe extraordinary diligence.
RTC: Ruled in favor of GAFLAC, ordered Aboitiz to pay.
CA: Affirmed in toto the RTC decision. MR was denied.

ISSUES:

Whether findings of administrative bodies are always binding on the court

Whether the liability of Aboitiz should be fixed 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
Whether GAFLACs motion for execution pending appeal should be granted
notwithstanding the absence of reasonable and justifiable grounds to support the same

RULING:
I.

FIRST ISSUE

Aboitiz:

The sinking of the vessel was subject of an administrative investigation conducted by the
Board of Marine Inquiry (BMI) wherein it was found that the sinking of the vessel may be
attributed to force majeure on account of a typhoon these findings should be
conclusive on the courts!

Court:

NO. Findings of administrative bodies are not always binding on courts. This is especially
so in the case at bar where GAFLAC was not a party in the BMI proceedings and which
proceeding was not adversary in character.
o The trial court was never informed of a parallel administrative investigation that
was being conducted by the BMI in any of Aboitizs pleadings.
o The administrative investigation was conducted unilaterally. GAFLAC was not
notified nor given an opportunity to participate. It cannot thereby be bound by it.
The RTC and CA found that the sinking of the vessel was NOT due to the waves caused
by the tropical storm but due to the fault and negligence of Aboitiz, its master and crew.

II.

SECOND ISSUE

Aboitiz:

Liability 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.

Court:

NO. While it is true that in the BL, there is such stipulation, there is an exception: when the
nature and value of such goods have been declared by the shipper before shipment
and inserted in the BL.
SEC. 4(5), COGSA:
(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 declared by the shipper
before shipment and 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 damage to or in connection with the
transportation of the goods if the nature or value thereof has been knowingly and fraudulently misstated by the
shipper in the bill of lading.

In this case, the description of the nature and the value of the goods shipped are
declared and reflected in the BL. Thus, it is the basis of the liability of the carrier as the
actual value of the loss.
The package/ container contemplated by the law should be related to the unit in which
the shipper packed the goods and described them and NOT a large metal object
functionally a part of the ship.
Moreover, a carrier cannot limit its liability for injury or loss of goods shipped where such
injury or loss was caused by its own negligence.

III.

THIRD ISSUE

GAFLAC:

There are circumstances present which would justify the issuance of execution pending
appeal there are decided cases adjudging Aboitiz liable in the lower courts; other
cases are on appeal; its insurer has gone bankrupt and Aboitiz alone must face and
answer for all these claims. The judgment will end up ineffectual when not immediately
executed.

Court:

Execution pending appeal GRANTED.

PETITION DISMISSED.

1993 CASE
ABOITIZ vs. GAFLAC (GR NO. 100446)
FACTS: Recap!
ABOITIZ SHIPPING CORPORATION a corporation organized and operating under Philippine
laws and engaged in the business of maritime trade as a carrier
GAFLAC a foreign insurance company pursuing its remedies as a subrogee of several cargo
consignees whose respective cargo sank with Aboitizs vessel

Sinking of the vessel was initially investigated by BMI, which found that the sinking was
due to force majeure and that at the time of sinking, the vessel was seaworthy.
Notwithstanding this administrative finding, the RTC held that the loss was not a result of
force majeure. It ruled in favor of GAFLAC.
The decision was elevated up to the SC in GR No. 89757 (1990 case). The attempted
execution of the judgment in that case has given rise to this instant petition.
Meanwhile, other cases have resulted in findings upholding the BMI conclusion.

ISSUE:

Whether the Limited Liability Rule arising out of the real and hypothecary nature of
maritime law should apply in this and related cases

RULING:
YES.1

The real and hypothecary nature of maritime law 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.
o It was designed to offset the adverse conditions and to encourage people and
entities to venture into maritime commerce despite the risks and prohibitive cost
of shipbuilding.
o Thus, liability of the vessel owner and agent arising from the operation of the
vessel are confined to the vessel itself, its equipment, freight, and insurance, if
any.

LIMITED LIABILITY RULE --- BOOK III, CODE OF COMMERCE, ARTICLES 587, 590, 837
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. Injuries to third parties
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. Acts of the captain

The Limited Liability Rule was never in issue in all prior cases. 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.
1

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. Collisions

The only time the Limited Liability Rule DOES NOT APPLY is when there is an actual finding
of negligence on the part of the vessel owner or agent.
In this case, there is no actual finding of negligence on the part of Aboitiz. There was no
evidence presented sufficient to form a conclusion that the shipowner itself was
negligent.
Unseaworthiness is not a fault that can be laid squarely on Aboitizs lap, absent a factual
basis for such a conclusion.

LIMITED LIABILITY RULE

Rights of a vessel owner under this rule are akin to those of shareholders under the
Corporation Law.
o Though not absolute, they must be swept aside only in the established existence
of the most compelling of reasons.
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.
o Claimants or creditors are limited in their recovery to the remaining value of
accessible assets.
o 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 a need to collate all claims preparatory to their satisfaction from the
insurance proceeds on the vessel and its pending freightage at the time of its loss. Execution of
judgment must be stayed pending completion of all cases on the sinking of the vessel. Then and
only then can all claims be simultaneously settled, either completely or pro-rata should the
insurance proceeds and freightage be not enough to satisfy all claims.

PETITION GRANTED.
Trial court ordered to desist from proceeding with the execution of judgment.
Aboitiz directed to institute the necessary action and to deposit the proceeds of the
insurance of the vessel

2008 CASE
ABOITIZ vs. CA, MALAYAN INSURANCE, CAMPAGNIE MARITIME DES CHARGEURS REUNIS, and FE ZEULLIG (GR NO. 121833)
ABOITIZ vs. CA, HON. JUDGE REMEGIO ZARI, ASIA TRADERS INSURANCE, ALLIED GUARANTEE INSURANCE (GR NO. 130752)
ABOITIZ vs. EQUITABLE INSURANCE CORPORATION (GR NO. 137801)

GR NO. 121833:

Malayan Insurance Company Inc. filed actions for the collection of the amounts of the cargoes
allegedly paid by it under various marine cargo policies.
DEFENSES of Aboitiz:

Lack of jurisdiction, lack of cause of action, prescription

M/V P. Aboitiz was seaworthy, that it exercised extraordinary diligence, that loss was caused by a
fortuitous event

RTC held Aboitiz liable. CA affirmed RTC.

o Sinking was NOT caused by force majeure based decision in 1990 case wherein the SC
affirmed the CAs finding that the sinking was caused by the negligence of its officers and
crew
o CA based ruling on liability on the 1990 case too that it should be based on declared
value of the shipment in consonance with Sec. 4(5), COGSA
Aboitiz filed petition for review.
CA should have limited the recoverable amount to that stipulated in the BL.
In the alternative, total liability should be limited to the value of the vessel or the insurance
proceeds thereof.

GR NO. 130752:

Asia Traders Insurance Corporation and Allied Guarantee Insurance Corporation 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 M/V P. Aboitiz.
DEFENSE of Aboitiz: Force majeure
RTC held Aboitiz liable. CA affirmed the RTC. MR denied. Resolution became final and executory.
Asia Traders and Allied filed motion for execution before the RTC. RTC granted the motion and
issued a writ of execution.
Aboitiz filed with CA a petition for certiorari and prohibition with urgent prayer for PI/ TRO. CA
dismissed petition.
o Based on trial courts finding that Aboitiz was negligent, the real and hypothecary doctrine
in the 1993 case may not be applied in this case.
Aboitiz filed petition for review.
CA erred when it ruled that the lower court had made an express finding of actual
negligence on its part in the sinking of the vessel.
CA erred in not giving weight to the 1993 case.

GR NO. 137801:

Equitable Insurance Corporation filed an action for damages against Aboitiz to recover by way of
subrogation the value of the cargoes insured by it that were lost in the sinking of M/V P. Aboitiz.
RTC held Aboitiz liable.
o Aboitiz was guilty of contributory negligence and therefore liable for the loss.
Aboitiz appealed to the CA.
DEFENSES of Aboitiz: Doctrine of limited liability; claimed that the typhoon was the proximate cause
of the loss
CA affirmed RTC.
o Loss of cargoes and sinking of vessel was due to unseaworthiness and failure of the crew to
exercise extraordinary diligence based on 1990 case
Aboitiz filed petition for review.
Whether doctrine of real and hypothecary nature of maritime law applies

ISSUE:

WHETHER ABOITIZ CAN AVAIL LIMITED LIABILITY ON THE BASIS OF THE REAL AND
HYPOTHECARY DOCTRINE OF MARITIME LAW

RULING:

In the 1993 Case, the SC applied the limited liability rule in favor of Aboitiz based on the
trial courts finding that Aboitiz was NOT NEGLIGENT.

GR: 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.
XPN: Where the loss or injury was due to the fault of the shipowner and the captain agent/
owner could still be held answerable despite abandonment of the vessel

In this case, all three petitions reveal that there is a categorical finding of negligence on
the part of Aboitiz.
o Captain was negligent in failing to take a course of action that would prevent
the vessel from sailing into the typhoon
o Aboitiz failed to show that it exercised the required extraordinary diligence in
steering the vessel before, during and after the storm
o Sinking was attributable to the negligence/ fault of Aboitiz
Thus, Aboitiz is NOT entitled to the limited liability rule and is therefore liable for the value
of the lost cargoes.

PETITION DENIED.