G..R. No.

156978 May 2, 2006

ABOITIZ SHIPPING CORPORATION, Petitioner,
vs.
NEW INDIA ASSURANCE COMPANY, LTD., Respondent.

FACTS:
Societe Francaise Des Colloides loaded a cargo of textiles and auxiliary chemicals from France. The cargo was
consigned to General Textile, Inc., in Manila and insured by respondent New India Assurance Company, Ltd.
While in Hongkong, the cargo was transferred to M/V P. Aboitiz for transshipment to Manila.4
The vessel was advised by the Japanese Meteorological Center that it was safe to travel to its destination. the
vessel received a report of a typhoon. To avoid the typhoon, the vessel changed its course. However, it was
still at the fringe of the typhoon. The vessel sank, but the captain and his crew were saved.
The captain of M/V P. Aboitiz filed his "Marine Protest". Thereafter, petitioner notified7 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
Respondent hired a surveyor, to investigate the cause of the sinking. In its report, 9the surveyor concluded that
the cause was the vessels questionable seaworthiness. Consequently, respondent filed a complaint for
damages against petitioner 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. Petitioner also raised the same defense that the ship was
seaworthy.
Meanwhile, the Board of Marine Inquiry (BMI) conducted its own 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, ruled in favor of respondent. It held petitioner liable for the total value of
the lost cargo. Petitioner elevated the case to the Court of Appeals and presented the findings of the BMI.
However, on August 29, 2002, the appellate court affirmed in toto the trial courts decision

ISSUE:
W/N Doctrine of Limited Liability applies in this case.

Held
NO.

Doctrine of Limited Liability, Also called the no vessel, no liability doctrine, it provides that liability of ship
owner is limited to ship owners interest over the vessel. Consequently, in case of loss, the ship owners liability
is also extinguished. Limited liability likewise extends to ships appurtenances, equipment, freightage, and
insurance proceeds. The ship owners or agents liability is merely co-extensive with his interest in the vessel,
such that a total loss of the vessel results in the liabilitys extinction. The vessels total destruction extinguishes
maritime liens because there is no longer any res to which they can attach.

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. 20 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 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.

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 conclusive not only on the parties but on this Court as well.24