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G.R. No.

L-74811 December 14, 1988

CHUA YEK HONG, petitioner,


vs.
INTERMEDIATE APPELLATE COURT, MARIANO GUNO and DOMINADOR
OLIT, respondents.

Francisco D. Estrada for petitioner.

Purita Hostanosas-Cortes for private respondents.

MELENCIO-HERRERA, J.:

Before us is a Motion for Reconsideration of our Decision dated 30 September 1988 affirming the
judgment of the Court of Appeals dismissing the complaint against private respondents and
absolving them from any and all liability arising from the loss of 1000 sacks of copra shipped by
petitioner aboard private respondents' vessel. Private respondents filed an opposition thereto.

Petitioner argues that this Court failed to consider the Trial Court's finding that the loss of the vessel
with its cargo was due to the fault of the shipowner or to the concurring negligence of the shipowner
and the captain.

The Appellate Court Decision, however, mentions only the ship captain as having been negligent in
the performance of his duties (p. 3, Court of Appeals Decision, p. 15, Rollo). This is a factual finding
binding on this Court. For the exception to the limited liability rule (Article 587, Code of Commerce)
to apply, the loss must be due to the fault of the shipowner, or to the concurring negligence of the
shipowner and the captain. As we held, there is nothing in the records showing such negligence (p. 6,
Decision.)

The invocation by petitioners of Articles 1733 and 1735 of the Civil Code is misplaced. As was stated
in the Decision sought to be reconsidered, while the primary law governing the instant case is the
Civil Code, in all matters not regulated by said Code, the Code of Commerce and other special laws
shall govern. Since the Civil Code contains no provisions regulating liability of shipowners or agents
in the event of total loss or destruction of the vessel, it is the provisions of the Code of Commerce,
particularly Article 587, that governs.

Petitioner further contends that the ruling laid down in Eastern Shipping Lines vs. IAC, et al. (150 SCRA
464 [1987]) should be made to apply in the instant case. That case, however, involved foreign
maritime trade while the present case involves local
inter-island shipping. The environmental set-up in the two cases, therefore, is not on all fours.

ACCORDINGLY, petitioner's Motion for Reconsideration is hereby DENIED and this denial is
FINAL.

SO ORDERED.
G.R. No. 92735 June 8, 2000

MONARCH INSURANCE CO., INC., TABACALERA INSURANCE CO., INC and Hon. Judge
AMANTE PURISIMA, petitioners,
vs.
COURT OF APPEALS and ABOITIZ SHIPPING CORPORATION, respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 94867

ALLIED GUARANTEE INSURANCE COMPANY, petitioner,


vs.
COURT OF APPEALS, Presiding Judge, RTC Manila, Br. 24 and ABOITIZ SHIPPING
CORPORATION,respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 95578

EQUITABLE INSURANCE CORPORATION, petitioner,


vs.
COURT OF APPEALS, Former First Division Composed of Hon. Justices RODOLFO NOCON,
PEDRO RAMIREZ, and JESUS ELBINIAS and ABOITIZ SHIPPING
CORPORATION, respondents.

DE LEON, JR., J.:

Before us are three consolidated petitions. G.R. No. 92735 is a petition for review filed under Rule 45
of the Rules of Court assailing the decision of the Court of Appeals dated March 29, 1990 in CA-G.R.
SP. Case No. 17427 which set aside the writ of execution issued by the lower court for the full
indemnification of the claims of the petitioners, Monarch Insurance Company (hereafter "Monarch")
and Tabacalera Insurance Company, Incorporated (hereafter "Tabacalera") against private
respondent, Aboitiz Shipping Corporation (hereafter "Aboitiz") on the ground that the latter is
entitled to the benefit of the limited liability rule in maritime law; G.R. No. 94867 is a petition
for certiorari under Rule 65 of the Rules of Court to annul and set aside the decision of the Court of
Appeals dated August 15, 1990 in CA-G.R. SP No. 20844 which ordered the lower court to stay the
execution of the judgment in favor of the petitioner, Allied Guarantee Insurance Company (hereafter
"Allied") against Aboitiz insofar as it impairs the rights of the other claimants to their pro-rata share
in the insurance proceeds from the sinking of the M/V P. Aboitiz, in accordance with the rule on
limited liability; and G.R. No. 95578 is a petition for review under Rule 45 of the Rules of Court
seeking a reversal of the decision of the Court of Appeals dated August 24, 1990 and its resolution
dated October 4, 1990 in C.A. G.R. Civil Case No. 15071 which modified the judgment of the lower
court's award of actual damages to petitioner Equitable Insurance Corporation (hereafter "Equitable")
to its pro-rata share in the insurance proceeds from the sinking of the M/V P. Aboitiz.

All cases arose from the loss of cargoes of various shippers when the M/V P. Aboitiz, a common
carrier owned and operated by Aboitiz, sank on her voyage from Hong Kong to Manila on October
31, 1980. Seeking indemnification for the loss of their cargoes, the shippers, their successors-in-
interest, and the cargo insurers such as the instant petitioners filed separate suits against Aboitiz
before the Regional Trial Courts. The claims numbered one hundred and ten (110) for the total
amount of P41,230,115.00 which is almost thrice the amount of the insurance proceeds of
P14,500,000.00 plus earned freight of 500,000.00 according to Aboitiz. To this day, some of these
claims, including those of herein petitioners, have not yet been settled.

G.R. No. 92735.


Monarch and Tabacalera are insurance carriers of lost cargoes. They indemnified the shippers and
were consequently subrogated to their rights, interests and actions against Aboitiz, the cargo
carrier. 1 Because Aboitiz refused to compensate Monarch, it filed two complaints against Aboitiz,
docketed as Civil Cases Nos. 82-2767 and 82-2770. For its part, Tabacalera also filed two complaints
against the same defendant, docketed as Civil Cases Nos. 82-2768 and 82-2769. As these four (4) cases
had common causes of action, they were consolidated and jointly tried. 2

In Civil Case No. 82-2767 where Monarch also named Malaysian International Shipping Corporation
and Litonja Merchant Shipping Agency as Aboitiz's co-defendants, Monarch sough recovery of
P29,719.88 representing the value of three (3) pallets of glass tubing that sank with the M/V P.
Aboitiz, plus attorney's fees of not less than P5,000.00, litigation expenses, interest at the legal rate on
all these amounts, and the cost of suit. 3 Civil Case. No. 82-2770 was a complaint filed by Monarch
against Aboitiz and co-defendants Compagnie Maritime des Chargeurs Reunis and F.E. Zuellig (M), Inc.
for the recovery of P39,597.00 representing the value of the one case motor vehicle parts which was
lost when the M/V P. Aboitiz sank on her way to Manila, plus Attorney's fees of not less than
P10,000.00 and cost of suit. 4

Tabacalera sought against Franco Belgian Services, F.E. Zuellig and Aboitiz in Civil Case No. 82-2768
the recovery of P284,218.00 corresponding to the value of nine (9) cases of Renault spare parts,
P213,207.00 for the value of twenty-five (25) cases of door closers and P42,254.00 representing the
value of eighteen (18) cases of plastic spangle, plus attorney's fees of not less than P50,000.00 and cost
of suit. 5 In Civil Case No. 82-2769, Tabacalera claimed from Hong Kong Island Shipping Co., Ltd.,
Citadel Lines and Aboitiz indemnification in the amount of P75,058.00 for the value of four (4)
cartons of motor vehicle parts foundered with the M/V P. Aboitiz, plus attorney's fees of not less
than P20,000.00 and cost of suit. 6

In its answer with counterclaim, Aboitiz rejected responsibility for the claims on the ground that the
sinking of its cargo vessel was due to force majeure or an act of God. 7 Aboitiz was subsequently
declared as in default for its failure to appear during the pre-trial. Its counsel fried a motion to set
aside the order of default with notice of his withdrawal as such counsel. Before the motion could be
acted upon, Judge Bienvenido Ejercjto, the presiding judge of the trial court, was promoted to the
then intermediate Appellate Court. The cases were thus re-raffled to Branch VII of the RTC of Manila
presided by Judge Amante P. Purisima, the co-petitioner in G.R. No. 92735. Without resolving the
pending motion to set aside the order of default, the trial court set the cases for hearing. However,
since Aboitiz had repeatedly failed to appear in court, the trial court denied the said motion and
allowed Monarch and Tabacalera to present evidence ex-parte. 8

Monarch and Tabacalera proffered in evidence the survey of Perfect Lambert, a surveyor
commissioned to investigate the possible cause of the sinking of the cargo vessel. The survey
established that on her voyage to Manila from Hong Kong, the vessel did not encounter weather so
inclement that Aboitiz would be exculpated from liability for losses. In his note of protest, the master
of M/V P. Aboitiz described the wind force encountered by the vessel as from ten (10) to fifteen (15)
knots, a weather condition classified as typical and moderate in the South China Sea at that particular
time of the year. The survey added that the seaworthiness of the vessel was in question especially
because the breaches of the hull and the serious flooding of two (2) cargo holds occurred
simultaneously in "seasonal weather." 9

In due course, the trial court rendered judgment against Aboitiz but the complaint against all the
other defendants was dismissed. Aboitiz was held liable for the following: (a) in Civil Case No. 82-
2767, P29,719.88 with legal interest from the filing of the complaint until fully paid plus attorney's
fees of P30,000.00 and cost of suit; (b) in Civil Case No. 82-2768, P539,679.00 with legal interest of
12% per annum from date of filing of the complaint until fully paid, plus attorney's fees of P30,000.00,
litigation expenses and cost of suit; (c) in Civil Case No. 82-2769, P75,058.00 with legal interest of
12% per annum from date of filing of the complaint until-fully paid, plus P5,000.00 attorney's fees,
litigation expenses and cost of suit, and (d) in Civil Case No. 82-2770, P39,579.66 with legal interest of
12%per annum from date of filing of the complaint until fully paid, plus attorney's fees of P5,000.00,
litigation expenses and cost of suit.
Aboitiz filed a motion for reconsideration of the decision and/or for new trial to lift the order of
default. The court denied the motion on August 27, 1986. 10 Aboitiz appealed to the Court of Appeals
but the appeal was dismissed for its failure to file appellant's brief. It subsequently filed an urgent
motion for reconsideration of the dismissal with prayer for the admission of its attached appellant's
brief. The appellate court denied that motion for lack of merit in a Resolution dated July 8, 1988. 11

Aboitiz thus filed a petition for review before this Court. Docketed as G.R. No. 84158, the petition was
denied in the Resolution of October 10, 1988 for being filed out of time. Aboitiz's motion for the
reconsideration of said Resolution was similarly denied. 12 Entry of judgment was made in the case. 13

Consequently, Monarch and Tabacalera moved for execution of judgment. The trial court granted the
motion on April 4, 1989 14 and issued separate writs of execution. However, on April 12, 1989,
Aboitiz, invoking the real and hypothecary nature of liability in maritime law, filed an urgent motion
to quash the writs of execution. 15 According to Aboitiz, since its liability is limited to the value of the
vessel which was insufficient to satisfy the aggregate claims of all 110 claimants, to indemnify
Monarch and Tabacalera ahead of the other claimants would be prejudicial to the latter. Monarch and
Tabacalera opposed the motion to quash. 16

On April 17, 1989, before the motion to quash could be heard, the sheriff levied upon five (5) heavy
equipment owned by Aboitiz for the public auction sale. At said sale, Monarch was the highest
bidder for one (1) unit FL-151 Fork Lift (big) and one (1) unit FL-25 Fork Lift (small). Tabacalera was
also the highest bidder for one (1) unit TCH TL-251 Hyster Container Lifter, one (1) unit Hyster Top
Lifter (out of order), and one (1) unit ER-353 Crane. The corresponding certificates of sale 17 were
issued to Monarch and Tabacalera.

On April 18, 1989, the day before the hearing of the motion to quash, Aboitiz filed a supplement to its
motion, to add the fact that an auction sale had taken place. On April 19, 1989, Judge Purisima issued
an order denying the motion to quash but freezing execution proceedings for ten (10) days to give
Aboitiz time to secure a restraining order from a higher court. 18 Execution was scheduled to resume
to fully satisfy the judgment when the grace period shall have lapsed without such restraining order
having been obtained by Aboitiz.

Aboitiz filed with the Court of Appeals a petition for certiorari and prohibition with prayer for
preliminary injunction and/or temporary restraining order under CA-G.R. No. SP-17427. 19 On March
29, 1990, the appellate court rendered a Decision the dispositive portion of which reads:

WHEREFORE, the writ of certiorari is hereby granted, annulling the subject writs of execution,
auction sale, certificates of sale, and the assailed orders of respondent Judge dated April 4 and
April 19, 1989 insofar as the money value of those properties of Aboitiz, levied on execution
and sold at public auction, has exceeded the pro-rata shares of Monarch and Tabacalera in the
insurance proceeds of Aboitiz in relation to the pro-rata shares of the 106 other claimants.

The writ of prohibition is also granted to enjoin respondent Judge, Monarch and Tabacalera
from proceeding further with execution of the judgments in question insofar as the execution
would satisfy the claims of Monarch and Tabacalera in excess of their pro-rata shares and in
effect reduce the balance of the proceeds for distribution to the other claimants to their
prejudice.

The question of whether or how much of the claims of Monarch and Tabacalera against the
insurance proceeds has already been settled through the writ of execution and auction sale in
question, being factual issues, shall be threshed out before respondent judge.

The writ of preliminary injunction issued in favor of Aboitiz, having served its purpose, is
hereby lifted. No pronouncement as to costs.

SO ORDERED. 20
Hence, the instant petition for review on certiorari where petitioners Monarch, Tabacalera and Judge
Purisima raise the following assignment of errors:

1. The appellate court grievously erred in re-opening the Purisima decisions, already final and
executory, on the alleged ground that the issue of real and hypothecary liability had not been
previously resolved by Purisima, the appellate court, and this Hon. Supreme Court;

2. The appellate court erred when it resolved that Aboitiz is entitled to the limited real and
hypothecary liability of a ship owner, considering the facts on record and the law on the
matter.

3. The appellate court erred when it concluded that Aboitiz does not have to present evidence
to prove its entitlement to the limited real and hypothecary liability.

4. The appellate court erred in ignoring the case of "Aboitiz Shipping Corporation v. CA and
Allied Guaranty Insurance Co., Inc. (G.R. No. 88159), decided by this Honorable Supreme
Court as early as November 13, 1989, considering that said case, now factual and executory, is
in pari materia with the instant case.

5. The appellate court erred in not concluding that irrespective of whether Aboitiz is entitled to
limited hypothecary liability or not, there are enough funds to satisfy all the claimants.

6. The appellate court erred when it concluded that Aboitiz had made an "abandonment" as
envisioned by Art. 587 of the Code of Commerce.

7. The appellate court erred when it concluded that other claimants would suffer if Tabacalera
and Monarch would be fully paid.

8. The appellate court erred in concluding that certiorari was the proper remedy for Aboitiz. 21

G.R. NOS. 94867 & 95578

Allied as insurer-subrogee of consignee Peak Plastic and Metal Products Limited, filed a complaint
against Aboitiz for the recovery of P278,536.50 representing the value of 676 bags of PVC compound
and 10 bags of ABS plastic lost on board the M/V P. Aboitiz, with legal interest from the date of filing
of the complaint, plus attorney's fees, exemplary damages and costs. 22 Docketed as Civil Case No.
138643, the case was heard before the Regional Trial Court of Manila, Branch XXIV, presided by
Judge Sergio D. Mabunay.

On the other hand, Equitable, as insurer-subrogee of consignee-assured Axel Manufacturing


Corporation, filed an amended complaint against Franco Belgian Services, F.E. Zuellig, Inc. and
Aboitiz for the recovery of P194,794.85 representing the value of 76 drums of synthetic organic
tanning substances and 1,000 kilograms of optical bleaching agents which were also lost on board the
M/V P. Aboitiz, with legal interest from the date of filing of the complaint, plus 25% attorney's fees,
exemplary damages, litigation expenses and costs of suit.23 Docketed as Civil Case No. 138396, the
complaint was assigned to the Regional Trial Court of Manila, Branch VIII.

In its answer with counterclaim in the two cases, Aboitiz disclaimed responsibility for the amounts
being recovered, alleging that the loss was due to a fortuitous event or an act of God. It prayed for the
dismissal of the cases and the payment of attorney's fees, litigation expenses plus costs of suit. It
similarly relied on the defenses of force mejeure, seaworthiness of the vessel and exercise of due
diligence in the carriage of goods as regards the cross-claim of its co-defendants. 24

In support of its position, Aboitiz presented the testimonies of Capt. Gerry N. Racines, master
mariner of the M/V P. Aboitiz, and Justo C. Iglesias, a meteorologist of the Philippine Atmospheric
Geophysical and Astronomical Services Administration (PAGASA). The gist of the testimony of Capt.
Racines in the two cases follows:
The M/V P. Aboitiz left Hong Kong for Manila at about 7:30 in the evening of October 29, 1980 after
securing a departure clearance from the Hong Kong Port Authority. The departure was delayed for
two hours because he (Capt. Racines) was observing the direction of the storm that crossed the Bicol
Region. He proceeded with the voyage only after being informed that the storm had abated. At about
8:00 o'clock in the morning of October 30, 1980, after more than twelve (12) hours of navigation, the
vessel suddenly encountered rough seas with waves about fifteen to twenty-five feet high. He
ordered his chief engineer to check the cargo holds. The latter found that sea water had entered cargo
hold Nos. 1 and 2. He immediately directed that water be pumped out by means of the vessel's bilge
pump, a device capable of ejecting 180 gallons of water per minute. They were initially successful in
pumping out the water.

At 6:00 a.m. of October 31, 1980, however, Capt. Racines received a report from his chief engineer that
the water level in the cargo holds was rapidly rising. He altered the vessel's course and veered
towards the northern tip of Luzon to prevent the vessel from being continuously pummeled by the
waves. Despite diligent efforts of the officers and crew, however, the vessel, which was
approximately 250 miles away from the eye of the storm, began to list on starboard side at 27 degrees.
Capt. Racines and his crew were not able to make as much headway as they wanted because by 12:00
noon of the same day, the cargo holds were already flooded with sea water that rose from three to
twelve feet, disabling the bilge pump from containing the water.

The M/V P. Aboitiz sank at about 7:00 p.m. of October 31, 1980 at latitude 18 degrees North,
longitude 170 degrees East in the South China Sea in between Hong Kong, the Philippines and
Taiwan with the nearest land being the northern tip of Luzon, around 270 miles from Cape Bojeador,
Bangui, Ilocos Norte. Responding to the captain's distress call, the M/V Kapuas (Capuas) manned by
Capt. Virgilio Gonzales rescued the officers and crew of the ill-fated M/V P. Aboitiz and brought
them to Waileen, Taiwan where Capt. Racines lodged his marine protest dated November 3, 1980.

Justo Iglesias, meteorologist of PAGASA and another witness of Aboitiz, testified in both cases that
during the inclusive dates of October 28-31, 1980, a stormy weather condition prevailed within the
Philippine area of responsibility, particularly along the sea route from Hong Kong to Manila, because
of tropical depression "Yoning." 25PAGASA issued weather bulletins from October 28-30, 1980 while
the storm was still within Philippine territory. No domestic bulletins were issued the following day
when the storm which hit Eastern Samar, Southern Quezon and Southern Tagalog provinces, had
made its exit to the South China Sea through Bataan.

Allied and Equitable refuted the allegation that the M/V P. Aboitiz and its cargo were lost due
to force majeure, relying mainly on the marine protest filed by Capt. Racines as well as on the Beaufort
Scale of Wind. In his marine protest under oath, Capt. Racines affirmed that the wind force an
October 29-30, 1980 was only ten (10) to fifteen (15) knots. Under the Beaufort Scale of Wind, said
wind velocity falls under scale No. 4 that describes the sea condition as "moderate breeze," and "small
waves becoming longer, fairly frequent white horses." 26

To fortify its position, Equitable presented Rogelio T. Barboza who testified that as claims supervisor
and processor of Equitable, he recommended payment to Axel Manufacturing Corporation as
evidenced by the cash voucher, return check and subrogation receipt. Barboza also presented a letter
of demand to Aboitiz which, however, the latter ignored. 27

On April 24, 1984, the trial court rendered a decision that disposed of Civil Case No. 138643 as
follows:

WHEREFORE, judgment is hereby rendered ordering defendant Aboitiz Shipping Company


to pay plaintiff Allied Guarantee Insurance Company, Inc. the sum of P278,536.50, with legal
interest thereon from March 10, 1981, then date of the filing of the complaint, until fully paid,
plus P30,000.00 as attorney's fees, with costs of suit.

SO ORDERED. 28

A similar decision was arrived at in Civil Case No. 138396, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, this Court hereby renders judgment in favor of
plaintiff and against defendant Aboitiz Shipping Corporation, to pay the sum of P194,794.85
with legal rate of interest thereon from February 27, 1981 until fully paid; attorney's fees of
twenty-five (25%) percent of the total claim, plus litigation expenses and costs of litigation.

SO ORDERED. 29

In Civil Case No. 138643, Aboitiz appealed to the Court of Appeals under CA-G.R. CV No. 04121. On
March 23, 1987, the Court of Appeals affirmed the decision of the lower court. A motion for
reconsideration of the said decision was likewise denied by the Court of Appeals on May 3, 1989.
Aggrieved, Aboitiz then filed a petition for review with this Court docketed as G.R. No. 88159 which
was denied for lack merit. Entry of judgment was made and the lower court's decision in Civil Case
No. 138643 became final and executory. Allied prayed for the issuance of a writ of execution in the
lower court which was granted by the latter on April 4, 1990. To stay the execution of the judgment of
the lower court, Aboitiz filed a petition for certiorari and prohibition with preliminary injunction with
the Court of Appeals docketed as CA-G.R. SP No. 20844. 30 On August 15, 1990, the Court of Appeals
rendered the assailed decision, the dispositive portion of which reads as follows.

WHEREFORE, the challenged order of the respondent Judge dated April 4, 1990 granting the
execution is hereby set aside. The respondent Judge is further ordered to stay the execution of
the judgment insofar as it impairs the rights of the 100 other claimants to the insurance
proceeds including the rights of the petitioner to pay more than the value of the vessel or the
insurance proceeds and to desist from executing the judgment insofar as it prejudices the pro-
rata share of all claimants to the insurance proceeds. No pronouncement as to costs.

SO ORDERED. 31

Hence, Allied filed the instant petition for certiorari, mandamus and injunction with preliminary
injunction and/or restraining order before this Court alleging the following assignment of errors:

1. Respondent Court of Appeals gravely erred in staying the immediate execution of the
judgment of the lower court as it has no authority nor jurisdiction to directly or indirectly alter,
modify, amend, reverse or invalidate a final judgment as affirmed by the Honorable Supreme
Court in G.R. No. 88159.

2. Respondent Court of Appeals with grave abuse of discretion amounting to lack or excess of
jurisdiction, brushed aside the doctrine in G.R. No. 88159 which is now the law of the case and
observance of time honored principles of stare decisis, res adjudicata and estoppel by judgment.

3. Real and hypothecary rule under Articles 587, 590 and 837 of the Code of Commerce which
is the basis of the questioned decision (Annex "C" hereof) is without application in the face of
the facts found by the lower court, sustained by the Court of Appeals in CA-G.R. No. 04121
and affirmed in toto by the Supreme Court in G.R. No. 88159.

4. Certiorari as a special remedy is unavailing for private respondent as there was no grave
abuse of discretion nor lack or excess of jurisdiction for Judge Mabunay to issue the order of
April 4, 1990 which was in accord with law and jurisprudence, nor were there intervening
facts and/or supervening events that will justify respondent court to issue a writ of certiorari or
a restraining order on a final and executory judgment of the Honorable Supreme Court. 32

From the decision of the trial court in Civil Case No. 138396 that favored Equitable, Aboitiz likewise
appealed to the Court of Appeals through CA-G.R. CV No. 15071. On August 24, 1990, the Court of
Appeals rendered the Decision quoting extensively its Decision in CA-G.R. No. SP-17427 (now G.R.
No. 92735) and disposing of the appeal as follows:

WHEREFORE, we hereby affirm the trial court's awards of actual damages, attorney's fees and
litigation expenses, with the exception of legal interest, in favor of plaintiff-appellee Equitable
Insurance Corporation as subrogee of the consignee for the loss of its shipment aboard the
M/V "P. Aboitiz" and against defendant-appellant Aboitiz Shipping Corporation. However,
the amount and payment of those awards shall be subject to a determination of the pro-rata
share of said appellee in relation to the pro-rata shares of the 109 other claimants, which
determination shall be made by the trial court. This case is therefore hereby ordered remanded
to the trial court which shall reopen the case and receive evidence to determine appellee's pro-
rata share as aforesaid. No pronouncement as to costs.

SO ORDERED. 33

On September 12, 1990, Equitable moved to reconsider the Court of Appeals' Decision. The Court of
Appeals denied the motion for reconsideration on October 4, 1990. 34 Consequently, Equitable filed
with this Court a petition for review alleging the following assignment of errors:

1. Respondent Court of Appeals, with grave abuse of discretion amounting to lack or excess of
jurisdiction, erroneously brushed aside the doctrine in G.R. No. 88159 which is now the law of
the case as held in G.R. No. 89757 involving the same and identical set of facts and cause of
action relative to the sinking of the M/V "P. Aboitiz" and observance of the time honored
principles of stare decisis, and estoppel by judgment.

2. Real and hypothecary rule under Articles 587, 590 and 837 of the Code of Commerce which
is the basis of the assailed decision and resolution is without application in the face of the facts
found by the trial court which conforms to the conclusion and finding of facts arrived at in a
similar and identical case involving the same incident and parties similarly situated in G.R.
No. 88159 already declared as the "law of the case" in a subsequent decision of this Honorable
Court in G.R. No. 89757 promulgated on August 6, 1990.

3. Respondent Court of Appeals gravely erred in concluding that limited liability rule applies
in case of loss of cargoes when the law itself does not distinguish; fault of the shipowner or
privity thereto constitutes one of the exceptions to the application of limited liability under
Article 587, 590 and 837 of the Code of Commerce, Civil Code provisions on common carriers
for breach of contract of carriage prevails. 35

These three petitions in G.R. Nos. 92735, 94867 and 95578 were consolidated in the Resolution of
August 5, 1991 on the ground that the petitioners "have identical causes of action against the same
respondent and similar reliefs are prayed for." 36

The threshold issue in these consolidated petitions is the applicability of the limited liability rule in
maritime law in favor of Aboitiz in order to stay the execution of the judgments for full
indemnification of the losses suffered by the petitioners as a result of the sinking of the M/V P.
Aboitiz. Before we can address this issue, however, there are procedural matters that need to be
threshed out.

First. At the outset, the Court takes note of the fact that in G.R. No. 92735, Judge Amante Purisima,
whose decision in the Regional Trial Court is sought to be upheld, is named as a co-petitioner.
In Calderon v. Solicitor General, 37where the petitioner in the special civil action
of certiorari and mandamus was also the judge whose order was being assailed, the Court held that
said judge had no standing to file the petition because he was merely a nominal or formal party-
respondent under Section 5 of Rule 65 of the Rules of Court. He should not appear as a party seeking
the reversal of a decision that is unfavorable to the action taken by him. The Court there said:

Judge Calderon should be-reminded of the well-known doctrine that a judge should detach
himself from cases where his decision is appealed to a higher court for review. The raison
d'etre for such doctrine is the fact that a judge is not an active combatant in such proceeding
and must leave the opposing parties to contend their individual positions and for the appellate
court to decide the issues without his active participation. By filing this case, petitioner in a
way ceased to be judicial and has become adversarial instead. 38
While the petition in G.R. No. 92735 does not expressly show whether or not Judge Purisima himself
is personally interested in the disposition of this petition or he was just inadvertently named as
petitioner by the real parties in interest, the fact that Judge Purisima is named as petitioner has not
escaped this Court's notice. Judges and litigants should be reminded of the basic rule that courts or
individual judges are not supposed to be interested "combatants" in any litigation they resolve.

Second. The petitioners contend that the inapplicability of the limited liability rule to Aboitiz has
already been decided on by no less than this Court in G.R. No. 88159 as early as November 13, 1989
which was subsequently declared as "law of the case" in G.R. No. 89757 on August 6, 1990. Herein
petitioners cite the aforementioned cases in support of their theory that the limited liability rule based
on the real and hypothecary nature of maritime law has no application in the cases at bar.

The existence of what petitioners insist is already the "law of the case" on the matter of limited
liability is at best illusory. Petitioners are either deliberately misleading this Court or profoundly
confused. As elucidated in the case of Aboitiz Shipping Corporation vs. General Accident Fire and Life
Assurance Corporation, 39

An examination of the November 13, 1989 Resolution in G.R. No. 88159 (pp. 280-282, 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. 40

Third. Petitioners asseverate that the judgments of the lower courts, already final and executory,
cannot be directly or indirectly altered, modified, amended, reversed or invalidated.

The rule that once a decision becomes final and executory, it is the ministerial duty of the court to
order its execution, is not an absolute one: We have allowed the suspension of execution in cases of
special and exceptional nature when it becomes imperative in the higher interest of justice. 41 The
unjust and inequitable effects upon various other claimants against Aboitiz should we allow the
execution of judgments for the full indemnification of petitioners' claims impel us to uphold the stay
of execution as ordered by the respondent Court of Appeals. We reiterate our pronouncement
in Aboitiz Shipping Corporation vs. General Accident Fire and Life Assurance Corporation on this very same
issue.

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. . . . . 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 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 sancrosanct if such shall result in the subverting of justice. The
right to execution after finality of a decision is certainly no exception to this. Thus, in Cabrias v.
Adil (135 SCRA 355 [1885]), this Court ruled that:

xxx xxx xxx

. . . 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 authority extends not only 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. 42

Fourth. Petitioners in G.R. No. 92735 ever that it was error for the respondent Court of Appeals to
allow Aboitiz the benefit of the limited liability rule despite its failure to present evidence to prove its
entitlement thereto in the court below. Petitioners Monarch and Tabacalera remind this Court that
from the inception of G.R. No. 92735 in the lower court and all the way to the Supreme Court, Aboitiz
had not presented an iota of evidence to exculpate itself from the charge of negligence for the simple
reason that it was declared as in default. 43

It is true that for having been declared in default, Aboitiz was precluded from presenting evidence to
prove its defenses in the court a quo. We cannot, however, agree with petitioners that this
circumstance prevents the respondent Court of Appeals from taking cognizance of Aboitiz' defenses
on appeal.

It should be noted that Aboitiz was declared as in default not for its failure to file an answer but for
its absence during pre-trial and the trial proper. In Aboitiz' answer with counterclaim, it claimed that
the sinking of the M/V P. Aboitiz was due to an act of God or unforeseen event and that the said ship
had been seaworthy and fit for the voyage. Aboitiz also alleged that it exercised the due diligence
required by law, and that considering the real and hypothecary nature of maritime trade, the sinking
justified the extinguishment of its liability for the lost shipment. 44

A judgment of default does not imply a waiver of rights except that of being heard and presenting
evidence in defendant's favor. It does not imply admission by the defendant of the facts and causes of
action of the plaintiff, because the codal section 45 requires the latter to adduce evidence in support of
his allegations as an indispensable condition before final judgment could be given in his favor. Nor
could it be interpreted as an admission by the defendant that the plaintiff's causes of action find
support in the law or that the latter is entitled to the relief prayed for. 46 This is especially true with
respect to a defendant who had filed his answer but had been subsequently declared in default for
failing to appear at the trial since he has had an opportunity to traverse, via his answer, the material
averments contained in the complaint. Such defendant has a better standing than a defendant who
has neither answered nor appeared at trial. 47 The former should be allowed to reiterate all affirmative
defenses pleaded in his answer before the Court of Appeals. Likewise, the Court of Appeals may
review the correctness of the evaluation of the plaintiffs evidence by the lower court.

It should also be pointed out that Aboitiz is not raising the issue of its entitlement to the limited
liability rule for the first time on appeal thus, the respondent Court of Appeals may properly rule on
the same.

However, whether or not the respondent Court of Appeals erred in finding, upon review, that
Aboitiz is entitled to the benefit of the limited liability rule is an altogether different matter which
shall be discussed below.1awphi1

Rule on Limited Liability. The petitioners assert in common that the vessel M/V P. Aboitiz did not
sink by reason offorce majeure but because of its unseaworthiness and the concurrent fault and/or
negligence of Aboitiz, the captain and its crew, thereby barring Aboitiz from availing of the benefit of
the limited liability rule.
The principle of limited liability is enunciated in the following provisions of the Code of Commerce:

Art. 587. The shipagent 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 goods which he loaded on the
vessel; but he may exempt himself therefrom by abandoning the vessel with all the
equipments 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 his 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 the
freightage served during the voyage.

Art. 837 appeals the principle of limited liability in cases of collision hence, Arts. 587 and 590 embody
the universal principle of limited liability in all cases. In Yangco v. Laserna, 48 this Court elucidated on
the import of Art. 587 as follows:

The provision accords a shipowner or agent the right of abandonment; and by necessary
implication, his liability is confined to that which he is entitled as of right to abandon-"the
vessel with all her equipments and the freight it may have earned during the voyage." It is true
that the article appears to deal only with the limited liability of the shipowners or agents for
damages arising from the misconduct of the captain in the care of the goods which the vessel
carries, but this is a mere deficiency of language and in no way indicates the true extent of
such liability. The consensus of authorities is to the effect that notwithstanding the language of
the aforequoted provision, the benefit of limited liability therein provided for, applies in all
cases wherein the shipowner or agent may properly be held liable for the negligent or illicit
acts of the captain. 49

"No vessel, no liability," expresses in a nutshell the limited liability rule. The shipowner's or agent's
liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its
extinction. The total destruction of the vessel extinguishes maritime liens because there is no longer
any res to which it can attach. 50 This doctrine is based on the real and hypothecary nature of maritime
law which has its origin in the prevailing conditions of the maritime trade and sea voyages during
the medieval ages, attended by innumerable hazards and perils. To offset against these adverse
conditions and to encourage shipbuilding and maritime commerce, it was deemed necessary to
confine the liability of the owner or agent arising from the operation of a ship to the vessel,
equipment, and freight, or insurance, if any. 51

Contrary to the petitioners' theory that the limited liability rule has been rendered obsolete by the
advances in modern technology which considerably lessen the risks involved in maritime trade, this
Court continues to apply the said rule in appropriate cases. This is not to say, however, that the
limited liability rule is without exceptions, namely: (1) where the injury or death to a passenger is due
either to the fault of the shipowner, or to the concurring negligence of the shipowner and the
captain; 52 (2) where the vessel is insured; and (3) in workmen's compensation claims. 53

We have categorically stated that Article 587 speaks only of situations where the fault or negligence is
committed solely by the captain. In cases where the ship owner is likewise to be blamed, Article 587
does not apply. Such a situation will be covered by the provisions of the Civil Code on common
carriers. 54

A finding that a fortuitous event was the sole cause of the loss of the M/V P. Aboitiz would absolve
Aboitiz from any and all liability pursuant to Article 1734(1) of the Civil Code which provides in part
that common carriers are responsible for the loss, destruction, or deterioration of the goods they
carry, unless the same is due to flood, storm, earthquake, lightning, or other natural disaster or
calamity. On the other hand, a finding that the M/V P. Aboitiz sank by reason of fault and/or
negligence of Aboitiz, the ship captain and crew of the M/V P. Aboitiz would render inapplicable the
rule on limited liability. These issues are therefore ultimately questions of fact which have been
subject of conflicting determinations by the trial courts, the Court of Appeals and even this Court.

In Civil Cases Nos. 82-2767-82-2770 (now G.R. No. 92735), after receiving Monarch's and Tabacalera's
evidence, the trial court found that the complete loss of the shipment on board the M/V P. Aboitiz
when it sank was neither due to a fortuitous event nor a storm or natural cause. For Aboitiz' failure to
present controverting evidence, the trial court also upheld petitioners' allegation that the M/V P.
Aboitiz was unseaworthy. 55 However, on appeal, respondent Court of Appeals exculpated Aboitiz
from fault or negligence and ruled that:

. . ., even if she (M/V P. Aboitiz) was found to be unseaworthy, this fault (distinguished
from civil liability) cannot be laid on the shipowner's door. Such fault was directly attributable
to the captain. This is so, because under Art. 612 of the Code of Commerce, among the inherent
duties of a captain, are to examine the vessel before sailing and to comply with the laws on
navigation. 56

and that:

. . . although the shipowner may be held civilly liable for the captain's fault . . . having
abandoned the vessel in question, even if the vessel was unseaworthy due to the captain's
fault, Aboitiz is still entitled to the benefit under the rule of limited liability accorded to
shipowners by the Code of Commerce. 57

Civil Case No. 138396 (now G.R. No. 95578) was similarly resolved by the trial court, which found
that the sinking of the M/V P. Aboitiz was not due to an act of God or force majeure. It added that the
evidence presented by the petitioner Equitable demonstrated the negligence of Aboitiz Shipping
Corporation in the management and operation of its, vessel M/V P. Aboitiz. 58

However, Aboitiz' appeal was favorably acted upon by the respondent Court of Appeals which
reiterated its ruling in G.R. No. 92735 that the unseaworthiness of the M/V P. Aboitiz was not a fault
directly attributable to Aboitiz but to the captain, and that Aboitiz is entitled to the benefit of the
limited liability rule for having abandoned its ship. 59

Finally, in Civil Case No. 138643 (now G.R. No. 94867), the trial court held that the M/V P. Aboitiz
was not lost due to a fortuitous event or force majeure, and that Aboitiz had failed to satisfactorily
establish that it had observed extraordinary diligence in the vigilance over the goods transported by
it. 60

In CA-G.R. CV No. 04121, the Court of Appeals initially ruled against Aboitiz and found that the
sinking of the vessel was due to its unseaworthiness and the failure of its crew and master to exercise
extraordinary diligence. 61Subsequently, however, Aboitiz' petition before the Court of Appeals,
docketed as CA-G.R. SP No. 20844 (now G.R. No. 94867) to annul and set aside the order of execution
issued by the lower court was resolved in favor of Aboitiz. The Court of Appeals brushed aside the
issue of Aboitiz' negligence and/or fault and proceeded to allow the application of the limited
liability rule "to accomplish the aims of justice." 62 It elaborated thus: "To execute the judgment in this
case would prejudice the substantial right of other claimants who have filed suits to claim their
cargoes that was lost in the vessel that sank and also against the petitioner to be ordered to pay more
than what the law requires." 63

It should be pointed out that the issue of whether or not the M/V P. Aboitiz sank by reason of force
majeure is not a novel one for that question has already been the subject of conflicting
pronouncements by the Supreme Court. In Aboitiz Shipping Corporation v. Court of Appeals, 64 this
Court approved the findings of the trial court and the appellate court 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 Aboitiz, its master and crew. 65 On the other hand, in the later case of Country Bankers
Insurance Corporation v. Court of Appeals, 66 this Court issued a Resolution on August 28, 1991 denying
the petition for review on the ground that the Court of Appeals committed no reversible error,
thereby affirming and adopting as its own, the findings of the Court of Appeals that force majeure had
caused the M/V P. Aboitiz to founder.

In view of these conflicting pronouncements, we find that now is the opportune time to settle once
and for all the issue or whether or not force mejeure had indeed caused the M/V P. Aboitiz to sink.
After reviewing the records of the instant cases, we categorically state that by the facts on record, the
M/V P. Aboitiz did not go under water because of the storm "Yoning."

It is true that as testified by Justo Iglesias, meteorologist of Pag-Asa, during the inclusive dates of
October 28-31, 1980, a stormy weather condition prevailed within the Philippine area of
responsibility, particularly along the sea route from Hong Kong to Manila, because of tropical
depression "Yoning". 67 But even Aboitiz' own evidence in the form of the marine protest filed by
Captain Racines affirmed that the wind force when the M/V P. Aboitiz foundered on October 31,
1980 was only ten (10) to fifteen (15) knots which, under the Beaufort Scale or Wind, falls within scale
No. 4 that describes the wind velocity as "moderate breeze," and characterizes the waves as "small . . .
becoming longer, fairly frequent white horses." 68 Captain Racines also testified in open court that the
ill-fated M/V P. Aboitiz was two hundred (200) miles away from storm "Yoning" when it sank. 69

The issue of negligence on the part of Aboitiz, and the captain and crew of the M/V P. Aboitiz has
also been subject of conflicting rulings by this Court. In G.R. No. 100373, Country Bankers Insurance
Corporation v. Court of Appeals, this Court found no error in the findings of the Court of Appeals that
the M/V P. Aboitiz sank by reason of force majeure, and that there was no negligence on the part of its
officers and crew. In direct contradiction is this Court's categorical declaration in Aboitiz Shipping
Corporation v. Court of Appeals," 70 to wit:

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 . . . . 71

However, in the subsequent case of Aboitiz Shipping Corporation v. General Accident Fire and Life
Assurance Corporation, Ltd., 72 this Court exculpated Aboitiz from fault and/or negligence while
holding that the unseaworthiness of the M/V P. Aboitiz was only attributable to the negligence of its
captain and crew. Thus,

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 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. 73

It therefore becomes incumbent upon this Court to answer with finality the nagging question of
whether or not it was the concurrent fault and/or negligence of Aboitiz and the captain and crew of
the ill-fated vessel that had caused it to go under water.

Guided by our previous pronouncements and illuminated by the evidence now on record, we
reiterate our findings in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance
Corporation, Ltd. 74 , that the unseaworthiness of the M/V P. Aboitiz had caused it to founder. We,
however, take exception to the pronouncement therein that said unseaworthiness could not be
attributed to the ship owner but only to the negligent acts of the captain and crew of the M/V P.
Aboitiz. On the matter of Aboitiz' negligence, we adhere to our ruling in Aboitiz Shipping Corporation
v. Court of Appeals, 75 that found Aboitiz, and the captain and crew of the M/V P. Aboitiz to have been
concurrently negligent.

During the trial of Civil Case Nos. 82-2767-82-2770 (now G.R. No. 92735), petitioners Monarch and
Tabacalera presented a survey from Perfect Lambert, a surveyor based in Hong Kong that conducted
an investigation on the possible cause of the sinking of the vessel. The said survey established that the
cause of the sinking of the vessel was the leakage of water into the M/V P. Aboitiz which probably
started in the forward part of the No. 1 hull, although no explanation was proffered as to why the No.
2 hull was likewise flooded. Perfect Lambert surmised that the flooding was due to a leakage in the
shell plating or a defect in the water tight bulk head between the Nos. 1 and 2 holds which allowed
the water entering hull No. 1 to pass through hull No. 2. The surveyor concluded that whatever the
cause of the leakage of water into these hulls, the seaworthiness of the vessel was definitely in
question because the breaches of the hulls and serious flooding of the two cargo holds occurred
simultaneously in seasonal weather. 76

We agree with the uniform finding of the lower courts that Aboitiz had failed to prove that it
observed the extraordinary diligence required of it as a common carrier. We therefore reiterate our
pronouncement in Aboitiz Corporation v. Court of Appeals 77 on the issue of Aboitiz' liability in the
sinking of its vessel, to wit:

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 circumstances of the case. While the goods are in the possession of the carrier,
it is but fair that it exercise extraordinary diligence in protecting them from loss or damage,
and if loss 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 . . . In the
case at bar, the defendant failed to prove hat the loss of the subject cargo was not due to its
fault or negligence. 78

The failure of Aboitiz to present sufficient evidence to exculpate itself from fault and/or negligence in
the sinking of its vessel in the face of the foregoing expert testimony constrains us to hold that Aboitiz
was concurrently at fault and/or negligent with the ship captain and crew of the M/V P. Aboitiz.
This is in accordance with the rule that in cases involving the limited liability of shipowners, the
initial burden of proof of negligence or unseaworthiness rests on the claimants. However, once the
vessel owner or any party asserts the right to limit its liability, the burden of proof as to lack of privity
or knowledge on its part with respect to the matter of negligence or unseaworthiness is shifted to
it. 79 This burden, Aboitiz had unfortunately failed to discharge. That Aboitiz failed to discharge the
burden of proving that the unseaworthiness of its vessel was not due to its fault and/or negligence
should not however mean that the limited liability rule will not be applied to the present cases. The
peculiar circumstances here demand that there should be no strict adherence to procedural rules on
evidence lest the just claims of shippers/insurers be frustrated. The rule on limited liability should be
applied in accordance with the latest ruling in Aboitiz Shipping Corporation v. General Accident Fire and
Life Assurance Corporation, Ltd., 80 promulgated on January 21, 1993, that claimants be treated as
"creditors in an insolvent corporation whose assets are not enough to satisfy the totality of claims
against it." 81 To do so, the Court set out in that case the procedural guidelines:

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 completed its action earlier than the rest. Thus, execution of
judgment in earlier completed cases, even these 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.

xxx xxx xxx


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 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. 82 (Emphasis supplied.)

There is no record that Aboitiz. has instituted such action or that it has deposited in trust the
insurance proceeds and freightage earned. The pendency of the instant cases before the Court is not a
reason for Aboitiz to disregard the aforementioned order of the Court. In fact, had Aboitiz complied
therewith, even these cases could have been terminated earlier. We are inclined to believe that instead
of filing the suit as directed by this Court, Aboitiz tolerated the situation of several claimants waiting
to gel hold of its insurance proceeds, which, if correctly handled must have multiplied in amount by
now. By its failure to abide by the order of this Court, it had caused more damage to the claimants
over and above that which they have endured as a direct consequence of the sinking of the M/V P.
Aboitiz. It was obvious that from among the many cases filed against it over the years, Aboitiz was
waiting for a judgment that might prove favorable to it, in blatant violation of the basic provisions of
the Civil Code on abuse of rights.

Well aware of the 110 claimants against it, Aboitiz preferred to litigate the claims singly rather than
exert effort towards the consolidation of all claims. Consequently, courts have arrived at conflicting
decisions while claimants waited over the years for a resolution of any of the cases that would lead to
the eventual resolution of the rest. Aboitiz failed to give the claimants their due and to observe
honesty and good faith in the exercise of its rights. 83

Aboitiz' blatant disregard of the order of this Court in Aboitiz Shipping Corporation v. General Accident
Fire and Life Assurance Corporation, Ltd. 84 cannot be anything but, willful on its part. An act is
considered willful if it is done with knowledge of its injurious effect; it is not required that the act be
done purposely to produce the injury. 85 Aboitiz is well aware that by not instituting the said suit, it
caused the delay in the resolution of all claims against it. Having willfully caused loss or injury to the
petitioners in a manner that is contrary to morals, good customs or public policy, Aboitiz is liable for
damages to the latter. 86

Thus, for its contumacious act of defying the order of this Court to file the appropriate action to
consolidate all claims for settlement, Aboitiz must be held liable for moral damages which may be
awarded in appropriate cases under the Chapter on human relations of the Civil Code (Articles 19 to
36). 87

On account of Aboitiz' refusal to satisfy petitioners' claims in accordance with the directive of the
Court in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance Corporation, Ltd., it
acted in gross and evident bad faith. Accordingly, pursuant to Article 2208 of the Civil
Code, 88 petitioners should be granted attorney's fees.

WHEREFORE, the petitions in G.R. Nos. 92735, 94867, and 95578 are DENIED. The decisions of the
Court of Appeals in CA-G.R. No. SP-17427 dated March 29, 1990, CA-G.R. SP No. 20844 dated
August 15, 1990, and CA-G.R. CV No. 15071 dated August 24, 1990 are AFFIRMED with the
MODIFICATION that respondent Aboitiz Shipping Corporation is ordered to pay each of the
respective petitioners the amounts of P100,000.00 as moral damages and P50,000.00 as attorney's fees,
and treble the cost of suit.

Respondent Aboitiz Shipping Corporation is further directed to comply with the Order promulgated
by this Court on January 21, 1993 in Aboitiz Shipping Corporation v. General Accident Fire and Life
Assurance Corporation, Ltd., G.R. No. 100446, January 21, 1993, to (a) institute the necessary
limitation and distribution action before the proper Regional Trial Court, acting as admiralty court,
within fifteen (15) days from the finality of this decision, and (b) thereafter to deposit with the said
court the insurance proceeds from the loss of the vessel, M/V P. Aboitiz, and the freightage earned in
order to safeguard the same pending final resolution of all incidents relative to the final pro-rating
thereof and to the settlement of all claims.1âwphi1.nêt
SO ORDERED.
G.R. No. 116940 June 11, 1997

THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., petitioner,


vs.
COURT OF APPEALS and FELMAN SHIPPING LINES, respondents.

BELLOSILLO, J.:

This case deals with the liability, if any, of a shipowner for loss of cargo due to its failure to observe
the extraordinary diligence required by Art. 1733 of the Civil Code as well as the right of the insurer
to be subrogated to the rights of the insured upon payment of the insurance claim.

On 6 July 1983 Coca-Cola Bottlers Philippines, Inc., loaded on board "MV Asilda," a vessel owned and
operated by respondent Felman Shipping Lines (FELMAN for brevity), 7,500 cases of 1-liter Coca-
Cola softdrink bottles to be transported from Zamboanga City to Cebu City for consignee Coca-Cola
Bottlers Philippines, Inc., Cebu.1 The shipment was insured with petitioner Philippine American
General Insurance Co., Inc. (PHILAMGEN for brevity), under Marine Open Policy No. 100367-PAG.

"MV Asilda" left the port of Zamboanga in fine weather at eight o'clock in the evening of the same
day. At around eight forty-five the following morning, 7 July 1983, the vessel sank in the waters of
Zamboanga del Norte bringing down her entire cargo with her including the subject 7,500 cases of 1-
liter Coca-Cola softdrink bottles.

On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc., Cebu plant, filed a claim with
respondent FELMAN for recovery of damages it sustained as a result of the loss of its softdrink
bottles that sank with "MV Asilda." Respondent denied the claim thus prompting the consignee to file
an insurance claim with PHILAMGEN which paid its claim of P755,250.00.

Claiming its right of subrogation PHILAMGEN sought recourse against respondent FELMAN which
disclaimed any liability for the loss. Consequently, on 29 November 1983 PHILAMGEN sued the
shipowner for sum of money and damages.

In its complaint PHILAMGEN alleged that the sinking and total loss of "MV Asilda" and its cargo
were due to the vessel's unseaworthiness as she was put to sea in an unstable condition. It further
alleged that the vessel was improperly manned and that its officers were grossly negligent in failing
to take appropriate measures to proceed to a nearby port or beach after the vessel started to list.

On 15 February 1985 FELMAN filed a motion to dismiss based on the affirmative defense that no
right of subrogation in favor of PHILAMGEN was transmitted by the shipper, and that, in any event,
FELMAN had abandoned all its rights, interests and ownership over "MV Asilda" together with her
freight and appurtenances for the purpose of limiting and extinguishing its liability under Art. 587 of
the Code of Commerce.2

On 17 February 1986 the trial court dismissed the complaint of PHILAMGEN. On appeal the Court of
Appeals set aside the dismissal and remanded the case to the lower court for trial on the merits.
FELMAN filed a petition for certiorari with this Court but it was subsequently denied on 13 February
1989.

On 28 February 1992 the trial court rendered judgment in favor of FELMAN.3 It ruled that "MV
Asilda" was seaworthy when it left the port of Zamboanga as confirmed by certificates issued by the
Philippine Coast Guard and the shipowner's surveyor attesting to its seaworthiness. Thus the loss of
the vessel and its entire shipment could only be attributed to either a fortuitous event, in which case,
no liability should attach unless there was a stipulation to the contrary, or to the negligence of the
captain and his crew, in which case, Art. 587 of the Code of Commerce should apply.
The lower court further ruled that assuming "MV Asilda" was unseaworthy, still PHILAMGEN could
not recover from FELMAN since the assured (Coca-Cola Bottlers Philippines, Inc.) had breached its
implied warranty on the vessel's seaworthiness. Resultantly, the payment made by PHILAMGEN to
the assured was an undue, wrong and mistaken payment. Since it was not legally owing, it did not
give PHILAMGEN the right of subrogation so as to permit it to bring an action in court as a subrogee.

On 18 March 1992 PHILAMGEN appealed the decision to the Court of Appeals. On 29 August 1994
respondent appellate court rendered judgment finding "MV Asilda" unseaworthy for being top-heavy
as 2,500 cases of Coca-Cola softdrink bottles were improperly stowed on deck. In other words, while
the vessel possessed the necessary Coast Guard certification indicating its seaworthiness with respect
to the structure of the ship itself, it was not seaworthy with respect to the cargo. Nonetheless, the
appellate court denied the claim of PHILAMGEN on the ground that the assured's implied warranty
of seaworthiness was not complied with. Perfunctorily, PHILAMGEN was not properly subrogated
to the rights and interests of the shipper. Furthermore, respondent court held that the filing of notice
of abandonment had absolved the shipowner/agent from liability under the limited liability rule.

The issues for resolution in this petition are: (a) whether "MV Asilda" was seaworthy when it left the
port of Zamboanga; (b) whether the limited liability under Art. 587 of the Code of Commerce should
apply; and, (c) whether PHILAMGEN was properly subrogated to the rights and legal actions which
the shipper had against FELMAN, the shipowner.

"MV Asilda" was unseaworthy when it left the port of Zamboanga. In a joint statement, the captain as
well as the chief mate of the vessel confirmed that the weather was fine when they left the port of
Zamboanga. According to them, the vessel was carrying 7,500 cases of 1-liter Coca-Cola softdrink
bottles, 300 sacks of seaweeds, 200 empty CO2 cylinders and an undetermined quantity of empty
boxes for fresh eggs. They loaded the empty boxes for eggs and about 500 cases of Coca-Cola bottles
on deck.4 The ship captain stated that around four o'clock in the morning of 7 July 1983 he was
awakened by the officer on duty to inform him that the vessel had hit a floating log. At that time he
noticed that the weather had deteriorated with strong southeast winds inducing big waves. After
thirty minutes he observed that the vessel was listing slightly to starboard and would not correct
itself despite the heavy rolling and pitching. He then ordered his crew to shift the cargo from
starboard to portside until the vessel was balanced. At about seven o'clock in the morning, the master
of the vessel stopped the engine because the vessel was listing dangerously to portside. He ordered
his crew to shift the cargo back to starboard. The shifting of cargo took about an hour afterwhich he
rang the engine room to resume full speed.

At around eight forty-five, the vessel suddenly listed to portside and before the captain could decide
on his next move, some of the cargo on deck were thrown overboard and seawater entered the engine
room and cargo holds of the vessel. At that instance, the master of the vessel ordered his crew to
abandon ship. Shortly thereafter, "MV Asilda" capsized and sank. He ascribed the sinking to the entry
of seawater through a hole in the hull caused by the vessel's collision with a partially submerged log.5

The Elite Adjusters, Inc., submitted a report regarding the sinking of "MV Asilda." The report, which
was adopted by the Court of Appeals, reads —

We found in the course of our investigation that a reasonable explanation for the series
of lists experienced by the vessel that eventually led to her capsizing and sinking, was
that the vessel was top-heavy which is to say that while the vessel may not have been
overloaded, yet the distribution or stowage of the cargo on board was done in such a
manner that the vessel was in top-heavy condition at the time of her departure and
which condition rendered her unstable and unseaworthy for that particular voyage.

In this connection, we wish to call attention to the fact that this vessel was designed as a
fishing vessel . . . and it was not designed to carry a substantial amount or quantity of
cargo on deck. Therefore, we believe strongly that had her cargo been confined to those
that could have been accommodated under deck, her stability would not have been
affected and the vessel would not have been in any danger of capsizing, even given the
prevailing weather conditions at that time of sinking.
But from the moment that the vessel was utilized to load heavy cargo on its deck, the
vessel was rendered unseaworthy for the purpose of carrying the type of cargo because
the weight of the deck cargo so decreased the vessel's metacentric height as to cause it
to become unstable.

Finally, with regard to the allegation that the vessel encountered big waves, it must be
pointed out that ships are precisely designed to be able to navigate safely even during
heavy weather and frequently we hear of ships safely and successfully weathering
encounters with typhoons and although they may sustain some amount of damage, the
sinking of ship during heavy weather is not a frequent occurrence and is not likely to
occur unless they are inherently unstable and unseaworthy . . . .

We believe, therefore, and so hold that the proximate cause of the sinking of the M/V
"Asilda" was her condition of unseaworthiness arising from her having been top-heavy
when she departed from the Port of Zamboanga. Her having capsized and eventually
sunk was bound to happen and was therefore in the category of an inevitable
occurrence (emphasis supplied).6

We subscribe to the findings of the Elite Adjusters, Inc., and the Court of Appeals that the proximate
cause of the sinking of "MV Asilda" was its being top-heavy. Contrary to the ship captain's allegations,
evidence shows that approximately 2,500 cases of softdrink bottles were stowed on deck. Several
days after "MV Asilda" sank, an estimated 2,500 empty Coca-Cola plastic cases were recovered near
the vicinity of the sinking. Considering that the ship's hatches were properly secured, the empty
Coca-Cola cases recovered could have come only from the vessel's deck cargo. It is settled that
carrying a deck cargo raises the presumption of unseaworthiness unless it can be shown that the deck
cargo will not interfere with the proper management of the ship. However, in this case it was
established that "MV Asilda" was not designed to carry substantial amount of cargo on deck. The
inordinate loading of cargo deck resulted in the decrease of the vessel's metacentric height 7 thus
making it unstable. The strong winds and waves encountered by the vessel are but the ordinary
vicissitudes of a sea voyage and as such merely contributed to its already unstable and unseaworthy
condition.

On the second issue, Art. 587 of the Code of Commerce is not applicable to the case at bar.8 Simply
put, the ship agent is liable for the negligent acts of the captain in the care of goods loaded on the
vessel. This liability however can be limited through abandonment of the vessel, its equipment and
freightage as provided in Art. 587. Nonetheless, there are exceptional circumstances wherein the ship
agent could still be held answerable despite the abandonment, as where the loss or injury was due to
the fault of the shipowner and the captain.9 The international rule is to the effect that the right of
abandonment of vessels, as a legal limitation of a shipowner's liability, does not apply to cases where
the injury or average was occasioned by the shipowner's own fault. 10 It must be stressed at this point
that Art. 587 speaks only of situations where the fault or negligence is committed solely by the
captain. Where the shipowner is likewise to be blamed, Art. 587 will not apply, and such situation
will be covered by the provisions of the Civil Code on common carrier. 11

It was already established at the outset that the sinking of "MV Asilda" was due to its
unseaworthiness even at the time of its departure from the port of Zamboanga. It was top-heavy as
an excessive amount of cargo was loaded on deck. Closer supervision on the part of the shipowner
could have prevented this fatal miscalculation. As such, FELMAN was equally negligent. It cannot
therefore escape liability through the expedient of filing a notice of abandonment of the vessel by
virtue of Art. 587 of the Code of Commerce.

Under Art 1733 of the Civil Code, "(c)ommon 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 . . ." In the event of loss of goods, common carriers are presumed to have acted negligently.
FELMAN, the shipowner, was not able to rebut this presumption.
In relation to the question of subrogation, respondent appellate court found "MV Asilda"
unseaworthy with reference to the cargo and therefore ruled that there was breach of warranty of
seaworthiness that rendered the assured not entitled to the payment of is claim under the policy.
Hence, when PHILAMGEN paid the claim of the bottling firm there was in effect a "voluntary
payment" and no right of subrogation accrued in its favor. In other words, when PHILAMGEN paid
it did so at its own risk.

It is generally held that in every marine insurance policy the assured impliedly warrants to the
assurer that the vessel is seaworthy and such warranty is as much a term of the contract as if
expressly written on the face of the policy. 12 Thus Sec. 113 of the Insurance Code provides that "(i)n
every marine insurance upon a ship or freight, or freightage, or upon anything which is the subject of
marine insurance, a warranty is implied that the ship is seaworthy." Under Sec. 114, a ship is
"seaworthy when reasonably fit to perform the service, and to encounter the ordinary perils of the
voyage, contemplated by the parties to the policy." Thus it becomes the obligation of the cargo owner
to look for a reliable common carrier which keeps its vessels in seaworthy condition. He may have no
control over the vessel but he has full control in the selection of the common carrier that will
transport his goods. He also has full discretion in the choice of assurer that will underwrite a
particular venture.

We need not belabor the alleged breach of warranty of seaworthiness by the assured as painstakingly
pointed out by FELMAN to stress that subrogation will not work in this case. In policies where the
law will generally imply a warranty of seaworthiness, it can only be excluded by terms in writing in
the policy in the clearest language. 13 And where the policy stipulates that the seaworthiness of the
vessel as between the assured and the assurer is admitted, the question of seaworthiness cannot be
raised by the assurer without showing concealment or misrepresentation by the assured. 14

The marine policy issued by PHILAMGEN to the Coca-Cola bottling firm in at least two (2) instances
has dispensed with the usual warranty of worthiness. Paragraph 15 of the Marine Open Policy No.
100367-PAG reads "(t)he liberties as per Contract of Affreightment the presence of the Negligence
Clause and/or Latent Defect Clause in the Bill of Lading and/or Charter Party and/or Contract of
Affreightment as between the Assured and the Company shall not prejudice the insurance. The
seaworthiness of the vessel as between the Assured and the Assurers is hereby admitted."15

The same clause is present in par. 8 of the Institute Cargo Clauses (F.P.A.) of the policy which states
"(t)he seaworthiness of the vessel as between the Assured and Underwriters in hereby admitted . . .
." 16

The result of the admission of seaworthiness by the assurer PHILAMGEN may mean one or two
things: (a) that the warranty of the seaworthiness is to be taken as fulfilled; or, (b) that the risk of
unseaworthiness is assumed by the insurance company. 17 The insertion of such waiver clauses in
cargo policies is in recognition of the realistic fact that cargo owners cannot control the state of the
vessel. Thus it can be said that with such categorical waiver, PHILAMGEN has accepted the risk of
unseaworthiness so that if the ship should sink by unseaworthiness, as what occurred in this case,
PHILAMGEN is liable.

Having disposed of this matter, we move on to the legal basis for subrogation. PHILAMGEN's action
against FELMAN is squarely sanctioned by Art. 2207 of the Civil Code which provides:

Art. 2207. If the plaintiff's property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach of
contract complained of, the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated the contract. If the
amount paid by the insurance company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency from the person causing the
loss or injury.

In Pan Malayan Insurance Corporation v. Court of Appeals, 18 we said that payment by the assurer to the
assured operates as an equitable assignment to the assurer of all the remedies which the assured may
have against the third party whose negligence or wrongful act caused the loss. The right of
subrogation is not dependent upon, nor does it grow out of any privity of contract or upon payment
by the insurance company of the insurance claim. It accrues simply upon payment by the insurance
company of the insurance claim.

The doctrine of subrogation has its roots in equity. It is designed to promote and to accomplish justice
and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice,
equity and good conscience ought to pay. 19 Therefore, the payment made by PHILAMGEN to Coca-
Cola Bottlers Philippines, Inc., gave the former the right to bring an action as subrogee against
FELMAN. Having failed to rebut the presumption of fault, the liability of FELMAN for the loss of the
7,500 cases of 1-liter Coca-Cola softdrink bottles is inevitable.

WHEREFORE, the petition is GRANTED. Respondent FELMAN SHIPPING LINES is ordered to pay
petitioner PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC., Seven Hundred Fifty-five
Thousand Two Hundred and Fifty Pesos (P755,250.00) plus legal interest thereon counted from 29
November 1983, the date of judicial demand, pursuant to Arts. 2212 and 2213 of the Civil Code. 20

SO ORDERED.
G.R. No. L-10195 December 29, 1916

YU CON, plaintiff-appellee,
vs.
GLICERIO IPIL, NARCISO LAURON, and JUSTO SOLAMO, defendants-appellants.

Felix Sevilla y Macam for appellants.


Juan Singson and Dionisio Jakosalem for appellee.

ARAULLO, J.:

The purpose of the action brought in these proceedings is to enable the plaintiff to recover from the
defendants jointly and severally the sum of P450, which had been delivered by the plaintiff to the first
and third of the above-named defendants, master and supercargo, respectively, of
a banca named Maria belonging to the second defendant, to be carried, together with various
merchandise belonging to the plaintiff, from the port of Cebu to the town of Catmon of the Province
of Cebu. By virtue of the contract executed between the said second defendant and the plaintiff, the
money and merchandise were to be transported by the said craft between the points above-named in
consideration of the payment of a certain sum for each voyage. The money disappeared from said
craft during the night of October 18, 1911, while it was anchored in the port of Cebu and ready to sail
for its destination, Catmon, and was not afterwards found. The plaintiff based his action on the
charge that the disappearance of said sum was due to the abandonment, negligence, or voluntary
breach, on the part of the defendants, of the duty they had in respect to the safe-keeping of the
aforementioned sum.

The defendants, besides denying the allegations of the complaint, pleaded in special defense that the
plaintiff, at his own expense and under his exclusive responsibility, chartered the said banca, the
property of the defendant Lauron, for the fixed period of three days, at the price of P10 per diem, and
that, through the misfortune, negligence, or abandonment of the plaintiff himself, the loss
complained of occurred, while said banca was at anchor in the port of Cebu, and was caused by theft
committed by unknown thieves. They further alleged that said defendant Lauron, the owner of
the banca merely placed this craft at the disposal of the plaintiff for the price and period agreed upon,
and did not go with the banca on its voyage from Catmon to Cebu. As a counterclaim, the defendants
also asked that the plaintiff be ordered to pay the freight agreed upon, which had not yet been paid,
amounting to P80, plus the sum of P70, as an indemnity for the losses and damages caused them by
the attachment of the banca, issued at the instance of the plaintiff upon filing his complaint. They also
prayed for the additional sum of P100, for the deterioration of the said banca, and also that of P200 for
other deterioration suffered by the same since November, 1911, and which had not bee paid for.
Finally, the defendants asked to be absolved from the complaint.

Before commencing the hearing of this case, the defendants made a verbal motion asking that the
plaintiff be declared in default, with respect to the counterclaim filed by them in their answer. On the
same date, the plaintiff presented his answer to said counter claim, denying each and all of the
allegations thereof and of the defendants' special defense. The aforementioned motion was overruled
by the court, and the defendants excepted.

At the termination of the trial, the court, in view of the evidence adduced, held that there was no
room to doubt that the sole cause of the disappearance of the money from the said banca was the
negligence of the master and the supercargo, the defendants Ipil and Solamo, respectively, and that
the defendant Narciso Lauron was responsible for that negligence, as owner of the banca, pursuant to
articles 589, 587, and 618 of the Code of Commerce, the plaintiff therefore being entitled to recover the
amount lost. Judgment was rendered on April 20, 1914, in favor of the plaintiff and against the
defendants jointly and severally for the sum of P450, with interest thereon at the rage of 6 per cent per
annum from the date of filing of the complaint, October 24, 1911, with costs. The plaintiff was
absolved from the defendant's counterclaim. From this judgment the defendants excepted and at the
same time moved for a new trial. Their motion was denied, to which ruling they also excepted, and,
through the proper bill of exceptions, entered and appeal to this Supreme Court. In their brief they
allege that the trial court erred:

1. In applying articles 586, 587, and 618 of the Code of Commerce in favor of the plaintiff;

2. In overruling the motion for default presented by the defendants and in sentencing the
defendants jointly and severally to pay the plaintiff the amount mentioned in the judgment;
and

3. In absolving the plaintiff from the defendant's counterclaim.

The evidence shows that the plaintiff Yu Con, a merchant and a resident of the town of San Nicolas,
of the city of Cebu, engaged in the sale of cloth and domestic articles and having a share in a shop, or
small store, situated in the town of Catmon, of said province, had several times chartered from the
defendant Narciso Lauron, a banca named Maria belonging to the latter, of which Glicerio Ipil was
master and Justo Solamo, supercargo, for the transportation of certain merchandise and some money
to and from the said town and the port of Cebu, that, on or about the 17th of October, 1911, the
plaintiff chartered the said banca from the defendant Lauron for the transportation of various
merchandise from the port of Cebu to Catmon, at the price of P45 for the round trip, which
merchandise was loaded on board the said craft which was then at anchor in front of one of the
graded fills of the wharf of said port; that in the afternoon of the following day, he delivered to the
other two defendants, Ipil, and Solamo, master and supercargo, respectively, of the afore-
named banca, the sum of P450, which was in a trunk belonging to the plaintiff and was taken charge
of by said two defendants, who received this money from the plaintiff, for the purpose of its delivery
to the latter's shop in Catmon for the purchase of corn in this town; that while the money was still in
said truck abroad the vessel, on the night of the said 18th of October, the time scheduled for the
departure of the Maria from the port of Cebu, said master and said supercargo transferred the P450
from the plaintiff's trunk, where it was, to theirs, which was in a stateroom of the banca, from which
stateroom both the trunk and the money disappeared during that same night, and that the
investigations, made to ascertain their whereabouts, produced no result.

The facts are also admitted by the aforementioned master and supercargo, two of the defendants, that
they received from the plaintiff said P450, which sum was in the latter's own trunk which was placed
outside the stateroom of the banca, for the reason, as they said, that there was no room for it inside the
stateroom; that these defendants therefore transferred said money to their trunk, which was inside
the stateroom, and that this trunk and the P450 therein contained disappeared from the boat during
the night of that same day; that said sum had not been found or returned to the plaintiff; that the
plaintiff, being on the banca in the afternoon of that day, when his trunk containing the P450 was
carried aboard, and seeing that said two defendants, who had the key of the trunk, has removed said
sum to their trunk inside the stateroom, charged them to take special care of the money; that the
master Ipil assured the plaintiff that there was no danger of the money being lost; and that, final,
during the night in question, both the master and the supercargo and four cabin-boys were aboard
the banca.

It was likewise proven by the affidavits made by the master Ipil, the supercargo Solamo, and the
cabin-boys of said vessel, Juan Quiamco and Gabriel Basang, before the provincial fiscal of Cebu on
the day following the commission of the theft, which affidavits were presented at the trial as Exhibits
A, 3, 4, and 5, and by the testimony given at the trial by the defendants Ipil and Solamo, that both
said cabin-boys and the other two, Simeon Solamo, and said cabin-boys ad the other two, Simeon
Solamo, and Eulalio Quiamco, knew of the existence of the money in the trunk inside the stateroom
and witnessed its removal to said trunk from the plaintiff's; that the last two cabin- boys above-
named, in company with the master and the supercargo, conveyed the plaintiff's trunk, in which the
money was previously contained, from the plaintiff's shop to the banca; and that no person not
belonging to the vessel knew that the money was in the trunk inside said stateroom.

According to the testimony of the master Ipil himself he slept outside the stateroom that night, but a
cabin-boy named Gabriel slept inside. The latter, however, was not presented by the defendants to be
examined in regard to this point, nor does it appear that he testified in respect thereto in his affidavit,
Exhibit 5, before referred to, presented by the defendant's own counsel. The master Ipil and the
supercargo Solamo also testified that they left the cabin-boy Simeon Solamo on guard that night; but
this affirmation was not corroborated by Solamo at the trial, for he was not introduced as a witness,
and only his affidavit, Exhibit 2, taken before the fiscal of Cebu on the day following the commission
of the crime, was presented by the defendants. This affidavit, which should have been admitted and
not rejected, as was done by the court and excepted to by the defendants, shows that Simeon Solamo
stated that he was not designated to do guard duty that night, but that on the morning of the said
19th of October, that is, the next day, all agreed that affiant should say that he was on guard, though
it was not true that he was.

Finally, said two defendants, the master and the supercargo, gave no satisfactory explanation in
regard to the disappearance of the trunk and the money therein contained, from the stateroom in
which the trunk was, nor as to who stole or might have stolen it. The master of the banca merely
testified that they, he and the supercargo, did to know who the robbers were, for, when the robbery
was committed, they were sound asleep, as they were tired, and that he believed that the guard
Simeon also fell asleep because he, too, was tired. The second defendant gave the same testimony.
Both of them testified that the small window of the stateroom had been broken, and the first of
them, i.e., the master, stated that all the window-blinds had been removed from the windows, as well
as part of the partition in which they were, and that the trunk in which the money was contained
could have been passed through said small window, because, as this witness himself had verified, the
Chinaman's trunk, which differed but a little from the one stolen, could be passed through the same
opening. The chief pilot of the harbor of Cebu, Placido Sepeda, who officially visited the
said banca, also stated that the small wooden window of the stateroom was broken, and that he
believed that in breaking it much noise must have been produced. However, no evidence whatever
was offered by counsel for the defendants to prove that it might have been possible to remove the
trunk from the stateroom through the opening made by the breaking of the small window, neither
was the size of the trunk proven, in relation to the Chinaman's to which the defendant master
referred in his testimony, so that it might be verified whether the statement made by the latter was
true, viz., that it might have been possible to remove from the stateroom through said opening the
trunk in which the P450 were contained, which sum, the same as the trunk, its container, had not
been found, in spite of the investigation made for the purpose. Furthermore, it was not proven, nor is
there any circumstantial evidence to show, that the robbery in question was committed by persons
not belonging to the craft.

It is therefore beyond all doubt that the loss or disappearance, on the night aforementioned, of the
P450, the property of the plaintiff, which, were in the possession of the defendants, the master and
the supercargo of the banca Maria, occurred through the manifest fault and negligence of said
defendants, for, not only did they fail to take the necessary precautions in order that the stateroom
containing the trunk in which they kept the money should be properly guarded by members of the
crew and put in such condition that it would be impossible to steal the trunk from it or that persons
not belonging to the vessel might force an entrance into the stateroom from the outside, but also they
did not expressly station some person inside the stateroom for the guarding and safe-keeping of the
trunk, for it was not proven that the cabin-boy Gabriel slept there, as the master of the vessel, Ipil,
stated, nor that the other Cabin-boy, Simeon Solamo, was on guard that night, for the latter
contradicted the statements made by the two defendants on this point. On the contrary, it was proven
by the master's own statement that all the people of the vessel, including himself and the supercargo
Solamo, slept soundly that night; which fact cannot, in any manner, serve them as an excuse, nor can
it be accepted as an explanation of the statement that they were not aware of what was then occuring
on board, if the trunk was actually stolen by outsiders and removed through the small window of the
stateroom, a detail which also was not proven, but, on the contrary, increases their liability, because it
is very strange that none of them, who were six and were around or near the stateroom, should have
heard the noise which the robbers must have made in breaking its window. All of these
circumstances, together with that of its having been impossible to know who took the trunk and the
money and the failure to recover the one or the other make the conduct of the two defendants and of
the other members of the crew of banca, eminently supicious and prevent our holding that the
disappearance or loss of the money was due to a fortuitous event, to force majeure, or that it was an
occurrence which could not have been foreseen, or which, if foreseen, was inevitable.
It is unquestionable that the defendants Glicerio Ipil and Justo Solamo were the carriers of the said
P450 belonging to the plaintiff, and that they received this sum from the latter for the purpose of
delivering it to the store of the town of Catmon, to which it had been consigned. Under such
circumstances, said defendants were the depositaries of the money.lawphi1.net

Manresa, in his Commentaries on the Civil Code (Vol. 10, p. 773), in treating of the provisions of the
said code concerning transportation by sea and by land of both persons and things, says:

Liability of carriers. — In order that a thing may be transported, it must be delivered to the
carrier, as the Code says. From the time it is delivered to the carrier or shipper until it is
received by the consignee, the carrier has it in his possession, as a necessary condition for its
transportation, and is obliged to preserve and guard it; wherefore it is but natural and logical
that he should be responsible for it.

The Code discovers in the relation of all these elements the factors which go to make up the
conception of a trust, and, taking into account that the delivery of the thing on the part of the
shipper is unavoidable, if the transportation is to take place, esteem that, at least in certain
respects, such trusts are necessary.

The said two defendants being the depositaries of the sum in question, and they having failed to
exercise for its safe-keeping the diligence required by the nature of the obligation assumed by them
and by the circumstances of the time and the place, it is evident that, in pursuance of the provisions
of articles 1601 and 1602, in their relation to articles 1783 and 1784, and as prescribed in articles 1770,
of the Civil Code, they are liable for its loss or misplacement and must restore it to the plaintiff,
together with the corresponding interest thereon as an indemnity for the losses and damages caused
him through the loss of the said sum.

With respect to the other defendant, Narciso Lauron, as he was the owner of the vessel in which the
loss or misplacement of the P450 occurred, of which vessel, as aforestated, Glicerio Ipil was master
and Justo Solamo, supercargo, both of whom were appointed to, or chosen for, the positions they
held, by the defendant himself, and, as the aforementioned sum was delivered to the said master,
Ipil, and the merchandise to be transported by means of said vessel from the port of Cebu to the town
of Catmon was laden by virtue of a contract executed by and between the plaintiff and the owner of
the vessel, Narciso Lauron, it behooves us to examine whether the latter, also, should be held to be
liable, as requested by the plaintiff in his complaint.

Said vessel was engaged in the transportation of merchandise by sea and made voyages to and from
the port of Cebu to Catmon, and had been equipped and victualed for this purpose by its owner,
Narciso Lauron, with whom, as aforesaid, the plaintiff contracted for the transportation of the
merchandise which was to be carried, on the date hereinabove mentioned, from the port of Cebu to
the town of Catmon.

For legal purposes, that is, for the determination of the nature and effect of the relations created
between the plaintiff, as owner of the merchandise laden on said craft and of the money that was
delivered to the master, Ipil, and the defendant Lauron, as owner of the craft, the latter was a vessel,
according to the meaning and construction given to the word vessel in the Mercantile Code, in
treating of maritime commerce, under Title 1,
Book 3.

The word vessel serves to designate every kind of craft by whatever particular or technical
name it may now be known or which nautical advancements may give it in the future.
(Commentaries on the Code of Commerce, in the General Review of Legislation and
Jurisprudence, founded by D. Jose Reus y Garcia, Vol., 2 p. 136.)

According to the Dictionary of Legislation and Jurisprudence by Escriche, a vessel is any kind of craft,
considering solely the hull.
Blanco, the commentator on mercantile law, in referring to the grammatical meaning of the word
"ship" and "vessels," says, in his work aforecited, that these terms designate every kind of craft, large
or small, whether belonging to the merchant marine or to the navy. And referring to their juridical
meaning, he adds: "This does not differ essentially from the grammatical meaning; the words "ship"
and "vessel" also designate every craft, large or small, so long as it be not an accessory of another,
such as the small boat of a vessel, of greater or less tonnage. This definition comprises both the craft
intended for ocean or for coastwise navigation, as well as the floating docks, mud lighters, dredges,
dumpscows or any other floating apparatus used in the service of an industry or in that of maritime
commerce. . . ." (Vol. 1, p. 389.)

According to the foregoing definitions, then, we should that the banca called Maria, chartered by the
plaintiff Yu Con from the defendant Narciso Lauron, was a "vessel", pursuant to the meaning this
word has in mercantile law, that is, in accordance with the provisions of the Code of Commerce in
force.

Glicerio Ipil, the master of the said banca Maria, must also be considered as its captain, in the legal
acceptation of this word.

The same Code of Commerce in force in these Islands compares, in its article 609, masters with
captains. It is to be noted that in the Code of Commerce of Spain the denomination of arraeces is not
included in said article as equivalent to that of masters, as it is in the Code of these Islands.

Commenting on said article, the aforementioned General Review of Legislation and Jurisprudence
says:

The name of captain or master is given, according to the kind of vessel, to the person in charge
of it.

The first denomination is applied to those who govern vessels that navigate the high seas or
ships of large dimensions and importance, although they be engaged in the coastwise trade.

Masters are those who command smaller ships engaged exclusively in the coastwise trade.

For the purposes of maritime commerce, the words "captain" and "master" have the same
meaning; both being the chiefs or commanders of ships. (Vol. 2, p. 168.)

Article 587 of the Code of Commerce in force provides:

The agent shall be civilly liable for the indemnities in favor of third persons which arise from
the conduct of the captain in the care of the goods which the vessel carried; but he may exempt
himself therefrom by abandoning the vessel with all her equipments and the freight he may
have earned during the trip.

Article 618 of the same Code also prescribes:

The captain shall be civilly liable to the agent and the latter to the third persons who may have
made contracts with the former —

1. For all the damages suffered by the vessel and its cargo by reason of want of skill or
negligence on his part, If a misdemeanor or crime has been committed he shall be liable in
accordance with the Penal Code.

2. For all the thefts committed by the crew, reserving his right of action against the guilty
parties.

The Code of Commerce previous to the one now in force, to wit, that of 1829, in its article 624,
provided that the agent or shipowner should not be liable for any excesses which, during the
navigation, might be committed by the captain and crew, and that, for the reason of such excesses, it
was only proper to bring action against the persons and property of those found guilty.

Estasen, in his work on the Institutes of Mercantile Law (Vol. 4, p. 280), makes the following remarks,
in referring to the exposition of reasons presented by the Code Commission which prepared and
presented for approval the Code of Commerce now in force, in which exposition of reasons were set
forth the fundamental differences between the provisions contained in both codes, with respect to the
subject-matter now under discussion. He says:

Another very important innovation introduced by the Code is that relative to the liability for
misdemeanors and crimes committed by the captain or by members of the crew. This is a
matter of the greatest importance on which a variety of opinions has been expressed by
different juris-consults.

The old code declares the captain civilly liable for all damage sustained by the vessel or its
cargo through lack of skill or care on his part, through violations of the law, or through
unlawful acts committed by the crew. As regards the agent or shipowners, it declares in
unmistakeable terms that he shall in no wise be liable for any excesses which, during the
navigation, may be committed by the captain and the crew.

Upon an examination, in the light of the principles of modern law, of the standing legal
doctrine on the non-liability of the shipowner for the unlawful acts, that is, the crimes or quasi
crimes, committed by the captain and the crew, it is observed that it cannot be maintained in
the absolute and categorical terms in which it is formulated.

It is well and good that the shipowner be not held criminally liable for such crimes or quasi
crimes; but the cannot be excused from liability for the damage and harm which, in
consequence of those acts, may be suffered by the third parties who contracted with the
captain, in his double capacity of agent and subordinate of the shipowner himself. In maritime
commerce, the shippers and passengers in making contracts with the captain do so through
the confidence they have in the shipowner who appointed him; they presume that the owner
made a most careful investigation before appointing him, and, above all, they themselves are
unable to make such an investigation, and even though they should do so, they could not
obtain complete security, inasmuch as the shipowner can, whenever he sees fir, appoint
another captain instead.

The shipowner is in the same case with respect to the members of the crew, for, though he
does not appoint directly, yet, expressly or tacitly, he contributes to their appointment.

On the other hand, if the shipowner derives profits from the results of the choice of the captain
and the crew, when the choice turns out successful, it is also just that he should suffer the
consequences of an unsuccessful appointment, by application of the rule of natural law
contained in the Partidas, viz., that he who enjoys the benefits derived from a thing must likewise
suffer the losses that ensue therefrom.

Moreover, the Penal Code contains a general principle that resolves the question under
consideration, for it declares that such persons as undertake and carry on any iondustry shall
be civilly liable, in default of those who may be criminally liable, for the misdemeanors and
crimes committed by their subordinates in the discharge of their duties.

The Code of Commerce in force omits the declaration of non-liability contained in the old
code, and clearly makes the shipowner liable civilly for the loss suffered by those who
contracted with the captain, in consequence of the misdemeanors and crimes committed by the
latter or by the members of the crew.

It is therefore evident that, in accordance with the provisions of the Code of Commerce in force,
which are applicable to the instance case, the defendant Narciso Lauron, as the proprietor and owner
of the craft of which Glicerio Ipil was the master and in which, through the fault and negligence of
the latter and of the supercago Justo Solamo, there occurred the loss, theft, or robbery of the P450 that
belonged to the plaintiff and were delivered to said master and supercargo, a theft which, on the
other hand, as shown by the evidence, does not appear to have been committed by a person not
belonging to the craft, should, for said loss or theft, be held civilly liable to the plaintiff, who executed
with said defendant Lauron the contract for the transportation of the merchandise and money
aforementioned between the port of Cebu and the town of Catmon, by means of the said craft.

Therefore, the trial court did not err in so holding in the judgement appealed from.

The plaintiff having filed his answer to the cross-complaint as soon as the defendant presented their
motion for] a declaration of the plaintiff's default in connection with said cross-complaint, and it
being optional with the court to make in such cases the declaration of default, as provided in section
129 of the Code of Civil Procedure, the said court did not incur the second error assigned by the
appellants in their brief.

Lastly, as the banca Maria did not make the trip she should have made from the port of Cebu to the
town of Catmon, on the occasion in question, through cases chargeable, as has been seen, to the
captain and the supercargo of said banca, to wit, because of the loss, theft of robbery of the P450
belonging to the plaintiff, and as a contract was made for the transportation of the said sum and the
merchandise from one of said points to the other, for the round trip, and not through payment by the
plaintiff of the wages due the crew for each day, as alleged by the defendants, for the proofs
presented by the latter in regard to this point were insufficient, as the trial court so held, neither did
the latter incur error in overruling the cross-complaint formulated by the defendants in their answer
against the plaintiff.

Therefore, and for all the reasons above set forth, we affirm the judgment appealed from, with the
costs of this instance against the appellants. So ordered.
G.R. No. 130068 October 1, 1998

FAR EASTERN SHIPPING COMPANY, petitioner,


vs.
COURT OF APPEALS and PHILIPPINE PORTS AUTHORITY, respondents.

G.R. No. 130150 October, 1998

MANILA PILOTS ASSOCIATION, petitioner,


vs.
PHILIPPINE PORTS AUTHORITY and FAR EASTERN SHIPPING COMPANY, respondents.

REGALADO, J.:

These consolidated petitions for review on certiorari seek in unison to annul and set aside the
decision1 of respondent Court of Appeals of November 15, 1996 and its resolution 2 dated July 31,
1997 in CA-G.R. CV No. 24072, entitled "Philippine Ports Authority, Plaintiff-Appellee vs. Far
Eastern Shipping Company, Senen C. Gavino and Manila Pilots' Association, Defendants-
Appellants," which affirmed with modification the judgment of the trial court holding the
defendants-appellants therein solidarily liable for damages in favor of herein private respondent.

There is no dispute about the facts as found by the appellate court,


thus —

. . . On June 20, 1980, the M/V PAVLODAR, flying under the flagship of the USSR,
owned and operated by the Far Eastern Shipping Company (FESC for brevity's sake),
arrived at the Port of Manila from Vancouver, British Columbia at about 7:00 o'clock
in the morning. The vessel was assigned Berth 4 of the Manila International Port, as
its berthing space. Captain Roberto Abellana was tasked by the Philippine Port
Authority to supervise the berthing of the vessel. Appellant Senen Gavino was
assigned by the Appellant Manila Pilots' Association (MPA for brevity's sake) to
conduct docking maneuvers for the safe berthing of the vessel to Berth No. 4.

Gavino boarded the vessel at the quarantine anchorage and stationed himself in the
bridge, with the master of the vessel, Victor Kavankov, beside him. After a briefing
of Gavino by Kavankov of the particulars of the vessel and its cargo, the vessel lifted
anchor from the quarantine anchorage and proceeded to the Manila International
Port. The sea was calm and the wind was ideal for docking maneuvers.

When the vessel reached the landmark (the big church by the Tondo North Harbor)
one-half mile from the pier, Gavino ordered the engine stopped. When the vessel
was already about 2,000 feet from the pier, Gavino ordered the anchor dropped.
Kavankov relayed the orders to the crew of the vessel on the bow. The left anchor,
with two (2) shackles, were dropped. However, the anchor did not take hold as
expected. The speed of the vessel did not slacken. A commotion ensued between the
crew members. A brief conference ensued between Kavankov and the crew members.
When Gavino inquired what was all the commotion about, Kavankov assured
Gavino that there was nothing to it.

After Gavino noticed that the anchor did not take hold, he ordered the engines half-
astern. Abellana, who was then on the pier apron, noticed that the vessel was
approaching the pier fast. Kavankov likewise noticed that the anchor did not take
hold. Gavino thereafter gave the "full-astern" code. Before the right anchor and
additional shackles could be dropped, the bow of the vessel rammed into the apron
of the pier causing considerable damage to the pier. The vessel sustained damage too,
(Exhibit "7-Far Eastern Shipping). Kavankov filed his sea protest (Exhibit "1-Vessel").
Gavino submitted his report to the Chief Pilot (Exhibit "1-Pilot") who referred the
report to the Philippine Ports Authority (Exhibit 2-Pilot"). Abellana likewise
submitted his report of the incident (Exhibit "B").

Per contract and supplemental contract of the Philippine Ports Authority and the
contractor for the rehabilitation of the damaged pier, the same cost the Philippine
Ports Authority the amount of P1,126,132.25 (Exhibits "D" and "E").3

On January 10, 1983, the Philippine Ports Authority (PPA, for brevity), through the Solicitor
General, filed before the Regional Trial Court of Manila, Branch 39, a complaint for a sum of
money against Far Eastern Shipping Co., Capt. Senen C. Gavino and the Manila Pilots'
Association, docketed as Civil Case No. 83-14958,4 praying that the defendants therein be held
jointly and severally liable to pay the plaintiff actual and exemplary damages plus costs of suit. In
a decision dated August 1, 1985, the trial court ordered the defendants therein jointly and severally
to pay the PPA the amount of P1,053,300.00 representing actual damages and the costs of suit.5

The defendants appealed to the Court of Appeals and raised the following issues: (1) Is the pilot of
a commercial vessel, under compulsory pilotage, solely liable for the damage caused by the vessel
to the pier, at the port of destination, for his negligence? and (2) Would the owner of the vessel be
liable likewise if the damage is caused by the concurrent negligence of the master of the vessel
and the pilot under a compulsory pilotage?

As stated at the outset, respondent appellate court affirmed the findings of the court a quo except
that if found no employer-employee relationship existing between herein private respondents
Manila Pilots' Association (MPA, for short) and Capt. Gavino.6 This being so, it ruled instead that
the liability of MPA is anchored, not on Article 2180 of the Civil Code, but on the provisions of
Customs Administrative Order No. 15-65, 7 and accordingly modified said decision of the trial
court by holding MPA, along with its co-defendants therein, still solidarily liable to PPA but
entitled MPA to reimbursement from Capt. Gavino for such amount of the adjudged pecuniary
liability in excess of the amount equivalent to seventy-five percent (75%) of its prescribed reserve
fund. 8

Neither Far Eastern Shipping Co. (briefly, FESC) nor MPA was happy with the decision of the
Court of Appeals and both of them elevated their respective plaints to us via separate petitions for
review oncertiorari.

In G. R. No. 130068, which was assigned to the Second Division of this Court, FESC imputed that
the Court of Appeals seriously erred:

1. in not holding Senen C. Gavino and the Manila Pilots' Association as the parties
solely responsible for the resulting damages sustained by the pier deliberately
ignoring the established jurisprudence on the matter;

2. in holding that the master had not exercised the required diligence demanded from
him by the circumstances at the time the incident happened;

3. in affirming the amount of damages sustained by the respondent Philippine Ports


Authority despite a strong and convincing evidence that the amount is clearly
exorbitant and unreasonable;

4. in not awarding any amount of counterclaim prayed for by the petitioner in its
answer; and

5. in not granting herein petitioner's claim against pilot Senen C. Gavino and Manila
Pilots' Association in the event that it be held
liable. 9

Petitioner asserts that since the MV PAVLODAR was under compulsory pilotage at the time of the
incident, it was the compulsory pilot, Capt. Gavino, who was in command and had complete
control in the navigation and docking of the vessel. It is the pilot who supersedes the master for
the time being in the command and navigation of a ship and his orders must be obeyed in all
respects connected with her navigation. Consequently, he was solely responsible for the damage
caused upon the pier apron, and not the owners of the vessel. It claims that the master of the boat
did not commit any act of negligence when he failed to countermand or overrule the orders of the
pilot because he did not see any justifiable reason to do so. In other words, the master cannot be
faulted for relying absolutely on the competence of the compulsory pilot. If the master does not
observe that a compulsory pilot is incompetent or physically incapacitated, the master is justified
in relying on the pilot. 10

Respondent PPA, in its comment, predictably in full agreement with the ruling of respondent
court on the solidary liability of FESC, MPA and Capt. Gavino, stresses the concurrent negligence
of Capt. Gavino, the harbor pilot, and Capt. Viktor Kabankov, * shipmaster of MV Pavlodar, as the
basis of their solidary liability for damages sustained by PPA. It posits that the vessel was being
piloted by Capt. Gavino with Capt. Kabankov beside him all the while on the bridge of the vessel,
as the former took over the helm of MV Pavlodar when it rammed and damaged the apron of the
pier of Berth No. 4 of the Manila International Port. Their concurrent negligence was the
immediate and proximate cause of the collision between the vessel and the pier — Capt. Gavino,
for his negligence in the conduct of docking maneuvers for the safe berthing of the vessel; and
Capt. Kabankov, for failing to countermand the orders of the harbor pilot and to take over and
steer the vessel himself in the face of imminent danger, as well as for merely relying on Capt.
Gavino during the berthing procedure. 11

On the other hand, in G.R. No. 130150, originally assigned to the Court's First Division and later
transferred to the Third Division. MPA, now as petitioner in this case, avers that respondent
court's errors consisted in disregarding and misinterpreting Customs Administrative Order No. 15-
65 which limits the liability of MPA. Said pilots' association asseverates that it should not be held
solidarily liable with Capt. Gavino who, as held by respondent court is only a member, not an
employee, thereof. There being no employer-employee relationship, neither can MPA be held
liable for any vicarious liability for the respective exercise of profession by its members nor be
considered a joint tortfeasor as to be held jointly and severally liable. 12 It further argues that there
was erroneous reliance on Customs Administrative Order No. 15-65 and the constitution and by-
laws of MPA, instead of the provisions of the Civil Code on damages which, being a substantive
law, is higher in category than the aforesaid constitution and by-laws of a professional
organization or an administrative order which bears no provision classifying the nature of the
liability of MPA for the negligence its member pilots. 13

As for Capt. Gavino, counsel for MPA states that the former had retired from active pilotage
services since July 28, 1994 and has ceased to be a member of petitioner pilots' association. He is
not joined as a petitioner in this case since his whereabouts are unknown. 14

FESC's comment thereto relied on the competence of the Court of Appeals in construing
provisions of law or administrative orders as bases for ascertaining the liability of MPA, and
expressed full accord with the appellate court's holding of solidary liability among itself, MPA
and Capt. Gavino. It further avers that the disputed provisions of Customs Administrative Order
No. 15-65 clearly established MPA's solidary liability. 15

On the other hand, public respondent PPA, likewise through representations by the Solicitor
General, assumes the same supportive stance it took in G.R. No. 130068 in declaring its total accord
with the ruling of the Court of Appeals that MPA is solidarily liable with Capt. Gavino and FESC
for damages, and in its application to the fullest extent of the provisions of Customs
Administrative Order No. 15-65 in relation to MPA's constitution and by-laws which spell out the
conditions of and govern their respective liabilities. These provisions are clear and unambiguous
as regards MPA's liability without need for interpretation or construction. Although Customs
Administrative Order No. 15-65 is a mere regulation issued by an administrative agency pursuant
to delegated legislative authority to fix details to implement the law, it is legally binding and has
the same statutory force as any valid statute. 16

Upon motion 17 by FESC dated April 24, 1998 in G.R. No. 130150, said case was consolidated with
G.R. No. 130068. 18
Prefatorily, on matters of compliance with procedural requirements, it must be mentioned that the
conduct of the respective counsel for FESC and PPA leaves much to be desired, to the displeasure
and disappointment of this Court.

Sec. 2, Rule 42 of the 1997 Rules of Civil Procedure 19 incorporates the former Circular No. 28-91
which provided for what has come to be known as the certification against forum shopping as an
additional requisite for petitions filed with the Supreme Court and the Court of Appeals, aside
from the other requirements contained in pertinent provisions of the Rules of Court therefor, with
the end in view of preventing the filing of multiple complaints involving the same issues in the
Supreme Court, Court of Appeals or different divisions thereof or any other tribunal or agency.

More particularly, the second paragraph of Section 2, Rule 42 provides:

xxx xxx xxx

The petitioner shall also submit together with the petition a certification under oath
that he has not theretofore commenced any other action involving the same issues in
the Supreme Court, the Court of Appeals or different divisions thereof, or any other
tribunal or agency; if there is such other action or proceeding, he must state the status
of the same; and if he should thereafter learn that a similar action or proceeding has
been filed or is pending before the Supreme Court, the Court of Appeals or different
divisions thereof, or any other tribunal or agency, he undertakes to promptly inform the
aforesaid courts and other tribunal or agency thereof within five (5) days therefrom.
(Emphasis ours.)

For petitions for review filed before the Supreme Court, Section 4(e), Rule 45 specifically
requires that such petition shall contain a sworn certification against forum shopping as
provided in the last paragraph of Section 2, Rule 42.

The records show that the law firm of Del Rosario and Del Rosario through its associate, Atty.
Herbert A. Tria, is the counsel of record for FESC in both G.R. No. 130068 and G.R. No. 130150.

G.R. No. 130068, which is assigned to the Court's Second Division, commenced with the filing by
FESC through counsel on August 22, 1997 of a verified motion for extension of time to file its
petition for thirty (30) days from August 28, 1997 or until September 27, 1997. 20 Said motion
contained the following certification against forum shopping 21 signed by Atty. Herbert A. Tria as
affiant:

CERTIFICATION

AGAINST FORUM SHOPPING

I/we hereby certify that I/we have not commenced any other action or proceeding
involving the same issues in the Supreme Court, the Court of Appeals, or any other
tribunal or agency; that to the best of my own knowledge, no such action or
proceeding is pending in the Supreme Court, the Court of Appeals, or any other
tribunal or agency; that if I/we should thereafter learn that a similar action or
proceeding has been filed or is pending before the Supreme Court, the Court of
Appeals, or any other tribunal or agency, I/we undertake to report that fact within
five (5) days therefrom to this Honorable Court.

This motion having been granted, FESC subsequently filed its petition on September 26,
1997, this time bearing a "verification and certification against forum-shopping" executed
by one Teodoro P. Lopez on September 24, 1997, 22 to wit:

VERIFICATION AND CERTIFICATION

AGAINST FORUM SHOPPING

in compliance with Section 4(e), Rule 45 in relation


to Section 2, Rule 42 of the Revised Rules of Civil Procedure

I, Teodoro P. Lopez, of legal age, after being duly sworn, depose and state:

1. That I am the Manager, Claims Department of Filsov Shipping Company, the local
agent of petitioner in this case.

2. That I have caused the preparation of this Petition for Review on Certiorari.

3. That I have read the same and the allegations therein contained are true and correct
based on the records of this case.

4. That I certify that petitioner has not commenced any other action or proceeding
involving the same issues in the Supreme Court or Court of Appeals, or any other
tribunal or agency, that to the best of my own knowledge, no such action or proceeding
is pending in the Supreme Court, the Court of Appeals or any other tribunal or agency,
that if I should thereafter learn that a similar action or proceeding has been filed or is
pending before the Supreme Court, the Court of Appeals, or any other tribunal or
agency, I undertake to report the fact within five (5) days therefrom to this Honorable
Court. (Italics supplied for emphasis.)

Reviewing the records, we find that the petition filed by MPA in G.R. No. 130150 then pending
with the Third Division was duly filed on August 29, 1997 with a copy thereof furnished on the
same date by registered mail to counsel for FESC. 23 Counsel of record for MPA. Atty. Jesus P.
Amparo, in his verification accompanying said petition dutifully revealed to the Court that —

xxx xxx xxx

3. Petitioner has not commenced any other action or proceeding involving the same
issues in this Honorable Court, the Court of Appeals or different Divisions thereof,
or any other tribunal or agency, but to the best of his knowledge, there is an action or
proceeding pending in this Honorable Court, entitled Far Eastern Shipping Co.,
Petitioner, vs. Philippine Ports Authority and Court of Appeals with a Motion for
Extension of time to file Petition For Review by Certiorari filed sometime on August
18, 1987. If undersigned counsel will come to know of any other pending action or
claim filed or pending he undertakes to report such fact within five (5) days to this
Honorable Court.24 (Emphasis supplied.)

Inasmuch as MPA's petition in G.R. No. 130150 was posted by registered mail on August 29, 1997
and taking judicial notice of the average period of time it takes local mail to reach its destination,
by reasonable estimation it would be fair to conclude that when FESC filed its petition in G.R. No.
130068 on September 26, 1997, it would already have received a copy of the former and would then
have knowledge of the pendency of the other petition initially filed with the First Division. It was
therefore incumbent upon FESC to inform the Court of that fact through its certification against
forum shopping. For failure to make such disclosure, it would appear that the aforequoted
certification accompanying the petition in G.R. No. 130068 is defective and could have been a
ground for dismissal thereof.

Even assuming that FESC had not yet received its copy of MPA's petition at the time it filed its
own petition and executed said certification, its signatory did state "that if I should thereafter learn
that a similar action or proceeding has been filed or is pending before the Supreme Court, the
Court of Appeals or any other tribunal or agency, I undertake to report the fact within five (5) days
therefrom to this Honorable Court." 25Scouring the records page by page in this case, we find that
no manifestation concordant with such undertaking was then or at any other time thereafter ever
filed by FESC nor was there any attempt to bring such matter to the attention of the Court.
Moreover, it cannot feign non-knowledge of the existence of such other petition because FESC
itself filed the motion for consolidation in G.R. No. 130150 of these two cases on April 24, 1998.

It is disturbing to note that counsel for FESC, the law firm of Del Rosario and Del Rosario,
displays an unprofessional tendency of taking the Rules for granted, in this instance exemplified
by its pro forma compliance therewith but apparently without full comprehension of and with less
than faithful commitment to its undertakings to this Court in the interest of just, speedy and
orderly administration of court proceedings.

As between the lawyer and the courts, a lawyer owes candor, fairness and good faith to the
court. 26 He is an officer of the court exercising a privilege which is indispensable in the
administration of justice. 27Candidness, especially towards the courts, is essential for the
expeditious administration of justice. Courts are entitled to expect only complete honesty from
lawyers appearing and pleading before them. 28 Candor in all dealings is the very essence of
honorable membership in the legal profession. 29 More specifically, a lawyer is obliged to observe
the rules of procedure and not to misuse them to defeat the ends of justice. 30 It behooves a lawyer,
therefore, to exert every effort and consider it his duty to assist in the speedy and efficient
administration of justice. 31 Being an officer of the court, a lawyer has a responsibility in the
proper administration of justice. Like the court itself, he is an instrument to advance its ends —
the speedy, efficient, impartial, correct and inexpensive adjudication of cases and the prompt
satisfaction of final judgments. A lawyer should not only help attain these objectives but should
likewise avoid any unethical or improper practices that impede, obstruct or prevent their
realization, charged as he is with the primary task of assisting in the speedy and efficient
administration of justice.32

Sad to say, the members of said law firm sorely failed to observe their duties as responsible
members of the Bar. Their actuations are indicative of their predisposition to take lightly the
avowed duties of officers of the Court to promote respect for law and for legal processes. 33 We
cannot allow this state of things to pass judicial muster.

In view of the fact that at around the time these petitions were commenced, the 1997 Rules of Civil
Procedure had just taken effect, the Court treated infractions of the new Rules then with relative
liberality in evaluating full compliance therewith. Nevertheless, it would do well to remind all
concerned that the penal provisions of Circular No. 28-91 which remain operative provides, inter
alia:

3. Penalties. —

xxx xxx xxx

(c) The submission of a false certification under Par. 2 of the Circular shall likewise
constitute contempt of court, without prejudice to the filing of criminal action against
the guilty party. The lawyer may also be subjected to disciplinary proceedings.

It must be stressed that the certification against forum shopping ordained under the Rules is to be
executed by the petitioner, and not by counsel. Obviously it is the petitioner, and not always the
counsel whose professional services have been retained for a particular case, who is in the best
position to know whether he or it actually filed or caused the filing of a petition in that case.
Hence, a certification against forum shopping by counsel is a defective certification. It is clearly
equivalent to non-compliance with the requirement under Section 2, Rule 42 in relation to Section
4, Rule 45, and constitutes a valid cause for dismissal of the petition.

Hence, the initial certification appended to the motion for extension of time to file petition in G.R.
No. 130068 executed in behalf of FESC by Atty. Tria is procedurally deficient. But considering that
it was a superfluity at that stage of the proceeding, it being unnecessary to file such a certification
with a mere motion for extension, we shall disregard such error. Besides, the certification
subsequently executed by Teodoro P. Lopez in behalf of FESC cures that defect to a certain extent,
despite the inaccuracies earlier pointed out. In the same vein, we shall consider the verification
signed in behalf of MPA by its counsel, Atty. Amparo, in G.R. No. 130150 as substantial
compliance inasmuch as it served the purpose of the Rules of informing the Court of the pendency
of another action or proceeding involving the same issues.

It bears stressing that procedural rules are instruments in the speedy and efficient administration
of justice. They should be used to achieve such end and not to derail it. 34
Counsel for PPA did not make matters any better. Despite the fact that, save for the Solicitor
General at the time, the same legal team of the Office of the Solicitor General (OSG, for short)
composed of Assistant Solicitor General Roman G. Del Rosario and Solicitor Luis F. Simon, with
the addition of Assistant Solicitor General Pio C. Guerrero very much later in the proceedings,
represented PPA throughout the appellate proceedings in both G.R. No. 130068 and G.R. No.
130150 and was presumably fully acquainted with the facts and issues of the case, it took the OSG
an inordinately and almost unreasonably long period of time to file its comment, thus unduly
delaying the resolution of these cases. It took several changes of leadership in the OSG — from
Silvestre H. Bello III to Romeo C. dela Cruz and, finally, Ricardo P. Galvez — before the comment
in behalf of PPA was finally filed.

In G.R. No. 130068, it took eight (8) motions for extension of time totaling 210 days, a warning that
no further extensions shall be granted, and personal service on the Solicitor General himself of the
resolution requiring the filing of such comment before the OSG indulged the Court with the long
required comment on July 10, 1998. 35 This, despite the fact that said office was required to file its
comment way back on November 12, 1997. 36 A closer scrutiny of the records likewise indicates
that petitoner FESC was not even furnished a copy of said comment as required by Section 5, Rule
42. Instead, a copy thereof was inadvertently furnished to MPA which, from the point of view of
G.R. No. 130068, was a non-party. 37 The OSG fared slightly better in G.R. No. 130150 in that it
took only six (6) extensions, or a total of 180 days, before the comment was finally filed. 38 And
while it properly furnished petitioner MPA with a copy of its comment, it would have been more
desirable and expedient in this case to have furnished its therein co-respondent FESC with a copy
thereof, if only as a matter of professional courtesy. 39

This undeniably dilatory disinclination of the OSG to seasonably file required pleadings
constitutes deplorable disservice to the tax-paying public and can only be categorized as
censurable inefficiency on the part of the government law office. This is most certainly
professionally unbecoming of the OSG.

Another thing that baffles the Court is why the OSG did not take the inititive of filing a motion
for consolidation in either G.R. No. 130068 or G.R. No. 130150, considering its familiarity with the
background of the case and if only to make its job easier by having to prepare and file only one
comment. It could not have been unaware of the pendency of one or the other petition because,
being counsel for respondent in both cases, petitioner is required to furnish it with a copy of the
petition under pain of dismissal of the petition for failure otherwise. 40

Besides, in G.R. 130068, it prefaces its discussions thus —

Incidentally, the Manila Pilots' Association (MPA), one of the defendants-appellants


in the case before the respondent Court of Appeals, has taken a separate appeal from
the said decision to this Honorable Court, which was docketed as G.R. No. 130150
and entitled "Manila Pilots' Association, Petitioner, versus Philippine Ports
Authority and Far Eastern Shipping Co., Respondents." 41

Similarly, in G.R. No. 130150, it states —

Incidentally, respondent Far Eastern Shipping Co. (FESC) had also taken an appeal
from the said decision to this Honorable Court, docketed as G.R. No. 130068, entitled
"Far Eastern Shipping Co. vs. Court of Appeals and Philippine Ports Authority." 42

We find here a lackadaisical attitude and complacency on the part of the OSG in the handling of
its cases and an almost reflexive propensity to move for countless extensions, as if to test the
patience of the Court, before favoring it with the timely submission of required pleadings.

It must be emphasized that the Court can resolve cases only as fast as the respective parties in a
case file the necessary pleadings. The OSG, by needlessly extending the pendency of these cases
through its numerous motions for extension, came very close to exhausting this Court's
forbearance and has regrettably fallen short of its duties as the People's Tribune.
The OSG is reminded that just like other members of the Bar, the canons under the Code of
Professional Responsibility apply with equal force on lawyers in government service in the
discharge of their official tasks. 43 These ethical duties are rendered even more exacting as to them
because, as government counsel, they have the added duty to abide by the policy of the State to
promote a high standard of ethics in public service. 44 Furthermore, it is incumbent upon the OSG,
as part of the government bureaucracy, to perform and discharge its duties with the highest degree
of professionalism, intelligence and skill 45 and to extend prompt, courteous and adequate service
to the public. 46

Now, on the merits of the case. After a judicious examination of the records of this case, the
pleadings filed, and the evidence presented by the parties in the two petitions, we find no cogent
reason to reverse and set aside the questioned decision. While not entirely a case of first
impression, we shall discuss the issues seriatim and, correlatively by way of a judicial once-over,
inasmuch as the matters raised in both petitions beg for validation and updating of well-worn
maritime jurisprudence. Thereby, we shall write finis to the endless finger-pointing in this
shipping mishap which has been stretched beyond the limits of judicial tolerance.

The Port of Manila is within the Manila Pilotage District which is under compulsory pilotage
pursuant to Section 8, Article III of Philippine Ports Authority Administrative Order No. 03-
85, 47 which provides that:

Sec. 8. Compulsor Pilotage Service. — For entering a harbor and anchoring thereat, or
passing through rivers or straits within a pilotage district, as well as docking and
undocking at any pier/wharf, or shifting from one berth or another, every vessel
engaged in coastwise and foreign trade shall be under compulsory pilotage. . . .

In case of compulsory pilotage, the respective duties and responsibilities of the compulsory pilot
and the master have been specified by the same regulation in this wise:

Sec. 11. Control of vessels and liability for damage. — On compulsory pilotage
grounds, the Harbor Pilot providing the service to a vessel shall be responsible for
the damage caused to a vessel or to life and property at ports due to his negligence or
fault. He can only be absolved from liability if the accident is caused by
force majeure or natural calamities provided he has exercised prudence and extra
diligence to prevent or minimize damage.

The Master shall retain overall command of the vessel even on pilotage grounds
whereby he can countermand or overrule the order or command of the Harbor Pilot
on beard. In such event, any damage caused to a vessel or to life and property at ports
by reason of the fault or negligence of the Master shall be the responsibility and
liability of the registered owner of the vessel concerned without prejudice to recourse
against said Master.

Such liability of the owner or Master of the vessel or its pilots shall be determined by
competent authority in appropriate proceedings in the light of the facts and
circumstances of each particular case.

Sec. 32. Duties and responsibilities of the Pilot or Pilots' Association. — The duties
and responsibilities of the Harbor Pilot shall be as follows:

xxx xxx xxx

f) a pilot shall be held responsible for the direction of a vessel from the time he
assumes his work as a pilot thereof until he leaves it anchored or berthed
safely; Provided, however, that his responsibility shall cease at the moment the
Master neglects or refuses to carry out hisorder.

Customs Administrative Order No. 15-65 issued twenty years earlier likewise provided in Chapter
I thereof for the responsibilities of pilots:
Par. XXXIX. — A Pilot shall be held responsible for the direction of a vessel from the
time he assumes control thereof until he leaves it anchored free from shoal: Provided,
That his responsibility shall cease at the moment the master neglects or refuses to
carry out his instructions.

xxx xxx xxx

Par. XLIV. — Pilots shall properly and safely secure or anchor vessels under their
control when requested to do so by the master of such vessels.

I. G.R. No. 130068

Petitioner FESC faults the respondent court with serious error in not holding MPA and Capt.
Gavino solely responsible for the damages cause to the pier. It avers that since the vessel was
under compulsory pilotage at the time with Capt. Gavino in command and having exclusive
control of the vessel during the docking maneuvers, then the latter should be responsible for
damages caused to the pier. 48 It likewise holds the appellate court in error for holding that the
master of the ship, Capt. Kabankov, did not exercise the required diligence demanded by the
circumstances. 49

We start our discussion of the successive issues bearing in mind the evidentiary rule in American
jurisprudence that there is a presumption of fault against a moving vessel that strikes a stationary
object such as a dock or navigational aid. In admiralty, this presumption does more than merely
require the ship to go forward and produce some evidence on the presumptive matter. The moving
vessel must show that it was without fault or that the collision was occasioned by the fault of the
stationary object or was the result of inevitable accident. It has been held that such vessel must
exhaust every reasonable possibility which the circumstances admit and show that in each, they
did all that reasonable care required. 50 In the absence of sufficient proof in rebuttal, the
presumption of fault attaches to a moving vessel which collides with a fixed object and makes
a prima facie case of fault against the vessel. 51 Logic and experience support this presumption:

The common sense behind the rule makes the burden a heavy one. Such accidents
simply do not occur in the ordinary course of things unless the vessel has been
mismanaged in some way. It is nor sufficient for the respondent to produce witnesses
who testify that as soon as the danger became apparent everything possible was done
to avoid an accident. The question remains, How then did the collision occur? The
answer must be either that, in spite of the testimony of the witnesses, what was done
was too little or too late or, if not, then the vessel was at fault for being in a position
in which an unavoidable collision would occur. 52

The task, therefore, in these cases is to pinpoint who was negligent — the master of the
ship, the harbor pilot or both.

A pilot, in maritime law, is a person duly qualified, and licensed, to conduct a vessel into or out of
ports, or in certain waters. In a broad sense, the term "pilot" includes both (1) those whose duty it
is to guide vessels into or out of ports, or in particular waters and (2) those entrusted with the
navigation of vessels on the high seas. 53 However, the term "pilot" is more generally understood
as a person taken on board at a particular place for the purpose of conducting a ship through a
river, road or channel, or from a port. 54

Under English and American authorities, generally speaking, the pilot supersedes the master for
the time being in the command and navigation of the ship, and his orders must be obeyed in all
matters connected with her navigation. He becomes the master pro hac vice and should give all
directions as to speed, course, stopping and reversing anchoring, towing and the like. And when a
licensed pilot is employed in a place where pilotage is compulsory, it is his duty to insist on
having effective control of the vessel, or to decline to act as pilot. Under certain systems of foreign
law, the pilot does not take entire charge of the vessel, but is deemed merely the adviser of the
master, who retains command and control of the navigation even in localities where pilotage is
compulsory. 55
It is quite common for states and localities to provide for compulsory pilotage, and safety laws
have been enacted requiring vessels approaching their ports, with certain exceptions, to take on
board pilots duly licensed under local law. The purpose of these laws is to create a body of seamen
thoroughly acquainted with the harbor, to pilot vessels seeking to enter or depart, and thus protect
life and property from the dangers of navigation. 56

In line with such established doctrines, Chapter II of Customs Administrative Order No. 15-65
prescribes the rules for compulsory pilotage in the covered pilotage districts, among which is the
Manila Pilotage District,
viz. —

PARAGRAPH I. — Pilotage for entering a harbor and anchoring thereat, as well as


docking and undocking in any pier or shifting from one berth to another shall be
compulsory, except Government vessels and vessels of foreign governments entitled
to courtesy, and other vessels engaged solely in river or harbor work, or in a daily
ferry service between ports which shall be exempt from compulsory pilotage
provisions of these regulations: provided, however, that compulsory pilotage shall
not apply in pilotage districts whose optional pilotage is allowed under these
regulations.

Pursuant thereto, Capt. Gavino was assigned to pilot MV Pavlodar into Berth 4 of the Manila
International Port. Upon assuming such office as compulsory pilot, Capt. Gavino is held to the
universally accepted high standards of care and diligence required of a pilot, whereby he assumes
to have skill and knowledge in respect to navigation in the particular waters over which his
license extends superior to and more to be trusted than that of the master. 57 A pilot 57 should have
a thorough knowledge of general and local regulations and physical conditions affecting the
vessel in his charge and the waters for which he is licensed, such as a particular harbor or river.

He is not held to the highest possible degree of skill and care, but must have and exercise the
ordinary skill and care demanded by the circumstances, and usually shown by an expert in his
profession. Under extraordinary circumstancesm, a pilot must exercise extraordinary care. 58

In Atlee vs. The Northwesrern Union Packet Company. 59 Mr. Justice Miller spelled out in great
detail the duties of a pilot:

. . . (T)he pilot of a river steamer, like the harbor pilot, is selected for his personal
knowledge of the topography through which he steers his vessel. In the long course
of a thousand miles in one of these rivers, he must be familiar with the appearance of
the shore on each side of the river as he goes along. Its banks, towns, its landings, its
houses and trees, are all landmarks by which he steers his vessel. The compass is of
little use to him. He must know where the navigable channel is, in its relation to all
these external objects, especially in the night. He must also be familiar with all
dangers that are permanently located in the course of the river, as sand-bars, snags,
sunken rocks or trees or abandoned vessels orbarges. All this he must know and
remember and avoid. To do this, he must be constantly informed of the changes in
the current of the river, of the sand-bars newly made,of logs or snags, or other objects
newly presented, against which his vessel might be injured.

xxx xxx xxx

It may be said that this is exacting a very high order of ability in a pilot. But when we
consider the value of the lives and property committed to their control, for in this
they are absolute masters, the high compensation they receive, the care which
Congress has taken to secure by rigid and frequent examinations and renewal of
licenses, this very class of skill, we do not think we fix the standard too high.

Tested thereby, we affirm respondent court's finding that Capt. Gavino failed to measure up to
such strict standard of care and diligence required of pilots in the performance of their duties.
Witness this testimony of Capt. Gavino:
Court: You have testified before that the reason why the vessel bumped
the pier was because the anchor was not released immediately or as
soon as you have given the order. Do you remember having srated that?

A Yes, your Honor.

Q And you gave this order to the captain of the vessel?

A Yes, your Honor.

Q By that testimony, you are leading the Court to understand that if that
anchor was released immediately at the time you gave the order, the
incident would not have happened. Is that correct?

A Yes, sir, but actually it was only a presumption on my part because


there was a commotion between the officers who are in charge of the
dropping of the anchor and the captain. I could not understand their
language, it was in Russian, so I presumed the anchor was not dropped
on time.

Q So, you are not sure whether it was really dropped on time or not?

A I am not sure, your Honor.

xxx xxx xxx

Q You are not even sure what could have caused the incident. What
factor could have caused the incident?

A Well, in this case now, because either the anchor was not dropped on
time or the anchor did not hold, that was the cause of the incident, your
Honor. 60

It is disconcertingly riddled with too much incertitude and manifests a seeming indifference for
the possibly injurious consequences his commands as pilot may have. Prudence required that he,
as pilot, should have made sure that his directions were promptly and strictly followed. As
correctly noted by the trial court —

Moreover, assuming that he did indeed give the command to drop the anchor on
time, as pilot he should have seen to it that the order was carried out, and he could
have done this in a number of ways, one of which was to inspect the bow of the
vessel where the anchor mechanism was installed. Of course, Captain Gavino makes
reference to a commotion among the crew members which supposedly caused the
delay in the execution of the command. This account was reflected in the pilot's
report prepared four hours later, but Capt. Kavankov, while not admitting whether or
not such a commotion occurred, maintained that the command to drop anchor was
followed "immediately and precisely." Hence, the Court cannot give much weight or
consideration to this portion of Gavino's testimony." 61

An act may be negligent if it is done without the competence that a reasonable person in the
position of the actor would recognize as necessary to prevent it from creating an unreasonable risk
of harm to another. 62Those who undertake any work calling for special skills are required not
only to exercise reasonable care in what they do but also possess a standard minimum of special
knowledge and ability. 63

Every man who offers his services to another, and is employed, assumes to exercise in the
employment such skills he possesses, with a reasonable degree of diligence. In all these
employments where peculiar skill is requisite, if one offers his services he is understood as
holding himself out to the public as possessing the degree of skill commonly possessed by others
in the same employment, and if his pretensions are unfounded he commits a species of fraud on
every man who employs him in reliance on his public profession. 64

Furthermore, there is an obligation on all persons to take the care which, under ordinary
circumstances of the case, a reasonable and prudent man would take, and the omission of that care
constitutes negligence. 65Generally, the degree of care required is graduated according to the
danger a person or property attendant upon the activity which the actor pursues or the
instrumentality which he uses. The greater the danger the greater the degree of care required.
What is ordinary under extraordinary of conditions is dictated by those conditions; extraordinary
risk demands extraordinary care. Similarly, the more imminent the danger, the higher the degree
of care. 66

We give our imprimatur to the bases for the conclusion of the Court of Appeals that Capt. Gavino
was indeed negligent in the performance of his duties:

xxx xxx xxx

. . . As can be gleaned from the logbook, Gavino ordered the left anchor and two (2)
shackles dropped at 8:30 o'clock in the morning. He ordered the engines of the vessel
stopped at 8:31 o'clock. By then,Gavino must have realized that the anchor did not hit
a hard object and was not clawed so as to reduce the momentum of the vessel. In
point of fact, the vessel continued travelling towards the pier at the same speed.
Gavino failed to react, At 8:32 o'clock, the two (2) tugboats began to push the stern
part of the vessel from the port side bur the momentum of the vessel was not
contained. Still, Gavino did not react. He did not even order the other anchor and two
(2) more shackles dropped to arrest the momentum of the vessel. Neither did he order
full-astern. It was only at 8:34 o'clock, or four (4) minutes, after the anchor was
dropped that Gavino reacted. But his reaction was even (haphazard) because instead
of arresting fully the momentum of the vessel with the help of the tugboats, Gavino
ordered merely "half-astern". It took Gavino another minute to order a "full-astern".
By then, it was too late. The vessel's momentum could no longer be arrested and,
barely a minute thereafter, the bow of the vessel hit the apron of the pier. Patently,
Gavino miscalculated. He failed to react and undertake adequate measures to arrest
fully the momentum of the vessel after the anchor failed to claw to the seabed. When
he reacted, the same was even (haphazard). Gavino failed to reckon the bulk of the
vessel, its size and its cargo. He erroneously believed that only one (1) anchor would
suffice and even when the anchor failed to claw into the seabed or against a hard
object in the seabed, Gavino failed to order the other anchor dropped immediately.
His claim that the anchor was dropped when the vessel was only 1,000 feet from the
pier is but a belated attempt to extricate himself from the quagmire of his own
insouciance and negligence. In sum, then, Appellants' claim that the incident was
caused by "force majeure" is barren of factual basis.

xxx xxx xxx

The harbor pilots are especially trained for this job. In the Philippines, one may not
be a harbor pilot unless he passed the required examination and training conducted
then by the Bureau of Custom, under Customs Administrative Order No. 15-65, now
under the Philippine Ports Authority under PPA Administrative Order 63-85,
Paragraph XXXIX of the Customs Administrative Order No. 15-65 provides that "the
pilot shall be held responsible for the direction of the vessel from the time he
assumes control thereof, until he leaves it anchored free from shoal: Provided, that
his responsibility shall cease at the.moment the master neglects or refuse(s) to carry
out his instructions." The overall direction regarding the procedure for docking and
undocking the vessel emanates from the harbor pilot. In the present recourse, Gavino
failed to live up to his responsibilities and exercise reasonable care or that degree of
care required by the exigencies of the occasion. Failure on his part to exercise the
degree of care demanded by the circumstances is negligence (Reese versus
Philadelphia & RR Co. 239 US 363, 60 L ed. 384, 57 Am Jur, 2d page 418). 67
This affirms the findings of the trial court regarding Capt. Gavino's negligence:

This discussion should not however, divert the court from the fact that negligence in
manuevering the vessel must be attributed to Capt. Senen Gavino. He was an
experienced pilot and by this time should have long familiarized himself with the
depth of the port and the distance he could keep between the vessel and port in order
to berth safely. 68

The negligence on the part of Capt. Gavino is evident; but Capt. Kabancov is no less responsible
for the allision. His unconcerned lethargy as master of the ship in the face of troublous exigence
constitutes negligence.

While it is indubitable that in exercising his functions a pilot is in sole command of the ship 69 and
supersedes the master for the time being in the command and navigation of a ship and that he
becomes master pro hac vice of a vessel piloted by him, 70 there is overwhelming authority to the
effect that the master does not surrender his vessel to the pilot and the pilot is not the master. The
master is still in command of the vessel notwithstanding the presence of a pilot. There are
occasions when the master may and should interfere and even displace the pilot, as when the pilot
is obviously incompetent or intoxicated and the circumstances may require the master to displace
a compulsory pilot because of incompetency or physical incapacity. If, however, the master does
nor observe that a compulsory pilot is incompetent or physically incapacitated, the master is
justified in relying on the pilot, but not blindly. 71

The master is not wholly absolved from his duties while a pilot is on board his vessel, and may
advise with or offer suggestions to him. He is still in command of the vessel, except so far as her
navigation is concerned, and must cause the ordinary work of the vessel to be properly carried on
and the usual precaution taken. Thus, in particular, he is bound to see that there is sufficient
watch on deck, and that the men are attentive to their duties, also that engines are stopped,
towlines cast off, and the anchors clear and ready to go at the pilot's order. 72

A perusal of Capt. Kabankov's testimony makes it apparent that he was remiss in the discharge of
his duties as master of the ship, leaving the entire docking procedure up to the pilot, instead of
maintaining watchful vigilance over this risky maneuver:

Q Will you please tell us whether you have the right to intervene in
docking of your ship in the harbor?

A No sir, I have no right to intervene in time of docking, only in case


there is imminent danger to the vessel and to the pier.

Q Did you ever intervene during the time that your ship was being
docked by Capt. Gavino?

A No sir, I did not intervene at the time when the pilot was docking my
ship.

Q Up to the time it was actually docked at the pier, is that correct?

A No sir, I did not intervene up to the very moment when the vessel was
docked.

xxx xxx xxx

Atty. Del Rosario (to the witness)

Q Mr. Witness, what happened, if any, or was there anything unusual


that happened during the docking?

A Yes sir, our ship touched ihe pier and the pier was damaged.
Court (to the witness)

Q When you said touched the pier, are you leading the court to
understand that your ship bumped the pier?

A I believe that my vessel only touched the pier but the impact was very
weak.

Q Do you know whether the pier was damaged as a result of that slight
or weak impact?

A Yes sir, after the pier was damaged.

xxx xxx xxx

Q Being most concerned with the safety of your vessel, in the


maneuvering of your vessel to the port, did you observe anything
irregular in the maneuvering by Capt. Gavino at the time he was trying
to cause the vessel to be docked at the pier?

A You mean the action of Capt. Gavino or his condition?

Court:

Q Not the actuation that conform to the safety maneuver of the ship to
the harbor?

A No sir, it was a usual docking.

Q By that statement of yours, you are leading the court to understand


that there was nothing irregular in the docking of the ship?

A Yes sir, during the initial period of the docking, there was nothing
unusual that happened.

Q What about in the last portion of the docking of the ship, was there
anything unusual or abnormal that happened?

A None Your Honor, I believe that Capt. Gavino thought that the anchor
could keep or hold the vessel.

Q You want us to understand, Mr. Witness, that the dropping of the


anchor of the vessel was nor timely?

A I don't know the depth of this port but I think, if the anchor was
dropped earlier and with more shackles, there could not have been an
incident.

Q So you could not precisely tell the court that the dropping of the
anchor was timery because you are not well aware of the seabed, is that
correct?

A Yes sir, that is right.

xxx xxx xxx

Q Alright, Capt. Kavankov, did you come to know later whether the
anchor held its ground so much so that the vessel could not travel?
A It is difficult for me to say definitely. I believe that the anchor did not
hold the ship.

Q You mean you don't know whether the anchor blades stuck to the
ground to stop the ship from further moving?

A Yes sir, it is possible.

Q What is possible?

A I think, the 2 shackles were not enough to hold the vessel.

Q Did you know that the 2 shackles were dropped?

A Yes sir, I knew that.

Q If you knew that the shackles were not enough to hold the ship, did
you not make any protest to the pilot?

A No sir, after the incident, that was my assumption.

Q Did you come to know later whether that presumption is correct?

A I still don't know the ground in the harbor or the depths.

Q So from the beginning, you were not competent whether the 2


shackles were also dropped to hold the ship?

A No sir, at the beginning, I did not doubt it because I believe Capt.


Gavino to be an experienced pilot and he should be more aware as to
the depths of the harbor and the ground and I was confident in his
actions.

xxx xxx xxx

Solicitor Abad (to the witness)

Q Now, you were standing with the pilot on the bridge of the vessel
before the inicident happened, were you not?

A Yes sir, all the time, I was standing with the pilot.

Q And so whatever the pilot saw, you could also see from that point of
view?

A That is right.

Q Whatever the piler can read from the panel of the bridge, you also
could read, is that correct?

A What is the meaning of panel?

Q All indications necessary for men on the bridge to be informed of the


movements of the ship?

A That is right.

Q And whatever sound the captain . . . Capt. Gavino would hear from
the bridge, you could also hear?
A That is right.

Q Now, you said that when the command to lower the anchor was
given, it was obeyed, is that right?

A This command was executed by the third mate and boatswain.

Court (to the witness)

Q Mr. Witness, earlier in today's hearing, you said that you did not
intervene with the duties of the pilot and that, in your opinion, you can
only intervene if the ship is placed in imminent danger, is that correct?

A That is right, I did say that.

Q In your observation before the incident actually happened, did you


observe whether or not the ship, before the actual incident, the ship was
placed in imminent danger?

A No sir, I did not observe.

Q By that answer, are you leading the court to understand that because
you did not intervene and because you believed that it was your duty to
intervene when the vessel is placed in imminent danger to which you
did not observe any imminent danger thereof, you have not intervened
in any manner to the command of the pilot?

A That is right, sir.

xxx xxx xxx

Q Assuminp that you disagreed with the pilot regarding the step being
taken by the pilot in maneuvering the vessel, whose command will
prevail, in case of imminent danger to the vessel?

A I did nor consider the situation as having an imminent danger. I


believed that the vessel will dock alongside the pier.

Q You want us to understand that you did not see an imminent danger
to your ship, is that what you mean?

A Yes sir, up to the very last moment, I believed that there was no
imminent danger.

Q Because of that, did you ever intervene in the command of the pilot?

A Yes sir, I did not intervene because I believed that the command of
the pilot to be correct.

Solicitor Abad (to the witness)

Q As a captain of M/V Pavlodar, you consider docking maneuvers a


serious matter, is it not?

A Yes sir, that is right.

Q Since it affects not only the safety of the port or pier, but also the
safety of the vessel and the cargo, is it not?

A That is right.
Q So that, I assume that you were watching Capt. Gavino very closely at
the time he was making his commands?

A I was close to him, I was hearing his command and being executed.

Q And that you were also alert for any possible mistakes he might
commit in the maneuvering of the vessel?

A Yes sir, that is right.

Q But at no time during the maneuver did you issue order contrary to
the orders Capt. Gavino made?

A No sir.

Q So that you were in full accord with all of Capt. Gavino's orders?

A Yes sir.

Q Because, otherwise, you would have issued order that would


supersede his own order?

A In that case, I should t,ke him away from his command or remove the
command from him.

Court (to the witness)

Q You were in full accord with the steps being taken by Capt. Gavino
because you relied on his knowledge, on his familiarity of the seabed
and shoals and other surroundings or conditions under the sea, is that
correct?

A Yes sir, that is right.

xxx xxx xxx

Solicitor Abad (to the witness)

Q And so after the anchors were ordered dropped and they did not take
hold of the seabed, you were alerted that there was danger already on
hand?

A No sir, there was no imminent danger to the vessel.

Q Do you mean to tell us that even if the anchor was supposed to take
hold of the bottom and it did not, there was no danger to the ship?

A Yes sir, because the anchor dragged on the ground later.

Q And after a few moments when the anchor should have taken hold
the seabed bur not done (sic), as you expected, you already were alerted
that there was danger to the ship, is that correct?

A Yes sir, I was alerted but there was no danger.

Q And you were alerted that somebody was wrong?

A Yes sir, I was alerted.


Q And this alert vou assumed was the ordinary alertness that you have
for normal docking?

A Yes sir, I mean that it was usual condition of any man in time of
docking to be alert.

Q And that is the same alertness when the anchor did not hold onto the
ground, is that correct?

A Yes sir, me and Capt. Gavino (thought) that the anchor will hold the
ground.

Q Since, as you said that you agreed all the while with the orders of
Capt. Gavino, you also therefore agreed with him in his failure to take
necessary precaution against the eventuality that the anchor will not
hold as expected?

Atty. Del Rosario:

May I ask that the question . . .

Solicitor Abad:

Never mind, I will reform the question.

xxx xxx xxx

Solicitor Abad (to the witness)

Q Is it not a fact that the vessel bumped the pier?

A That is right, it bumped the pier.

Q For the main reason that the anchor of the vessel did not hold the
ground as expected?

A Yes sir, that is my opinion. 73

Further, on redirect examination, Capt. Kabankov fortified his apathetic assessment of the
situation:

Q Now, after the anchor was dropped, was there any point in time that
you felt that the vessel was in imminent danger.

A No, at that time, the vessel was not in imminent, danger, sir. 74

This cavalier appraisal of the event by Capt. Kabankov is disturbingly antipodal to Capt. Gavino's
anxious assessment of the situation:

Q When a pilot is on board a vessel, it is the piler's command which


should be followed at that moment until the vessel is, or goes to port or
reaches port?

A Yes, your Honor, but it does not take away from the Captain his
prerogative to countermand the pilot.

Q In what way?

A In any case, which he thinks the pilot is not maneuvering correctly,


the Captain always has the prerogative to countermand the pilot's order.
Q But insofar as competence, efficiency and functional knowledee of
the seabed which are vital or decisive in the safety (sic) bringing of a
vessel to the port, he is not competent?

A Yes, your Honor. That is why they hire a pilot in an advisory capacity,
but still, the safety of the vessel rest(s) upon the Captain, the Master of
the vessel.

Q In this case, there was not a disagreement between you and the
Captain of the vessel in the bringing of the vessel to port?

A No, your Honor.

Court:

May proceed.

Atty. Catris:

In fact, the Master of the vessel testified here that he was all along in
conformity with the orders you, gave to him, and, as matter of fact, as he
said, he obeyed all your orders. Can you tell, if in the course of giving
such normal orders for the saf(e) docking of the MV Pavlodar, do you
remember of any instance that the Master of the vessel did not obey
your command for the safety docking of the MV Pavlodar?

Atty. del Rosario:

Already answered, he already said yes sir.

Court:

Yes, he has just answered yes sir to the Court that there was no
disagreement insofar as the bringing of the vessel safely to the port.

Atty. Catris:

But in this instance of docking of the MV Pavlodar, do you remember of


a time during the course of the docking that the MV Pavlodar was in
imminent danger of bumping the pier?

A When we were about more than one thousand meters from the pier, I
think, the anchor was not holding, so I immediately ordered to push the
bow at a fourth quarter, at the back of the vessel in order to swing the
bow away from the pier and at the same time, I ordered for a full astern
of the engine. 75

These conflicting reactions can only imply, at the very least, unmindful disregard or, worse,
neglectful relinquishment of duty by the shipmaster, tantamount to negligence.

The findings of the trial court on this aspect is noteworthy:

For, while the pilot Gavino may indeed have been charged with the task of docking
the vessel in the berthing space, it is undisputed that the master of the vessel had the
corresponding duty to countermand any of the orders made by the pilot, and even
maneuver the vessel himself, in case of imminent danger to the vessel and the port.

In fact, in his testimony, Capt. Kavankov admitted that all throughour the
man(eu)vering procedures he did not notice anything was going wrong, and even
observed that the order given to drop the anchor was done at the proper time. He
even ventured the opinion that the accident occurred because the anchor failed to
take hold but that this did not alarm him because.there was still time to drop a
second anchor.

Under normal circumstances, the abovementioned facts would have caused the
master of a vessel to take charge of the situation and see to the man(eu)vering of the
vessel himself. Instead, Capt. Kavankov chose to rely blindly upon his pilot, who by
this time was proven ill-equipped to cope with the situation.

xxx xxx xxx

It is apparent that Gavino was negligent but Far Eastern's employee Capt. Kavankov
was no lesss responsible for as master of the vessel he stood by the pilot during the
man(eu)vering procedures and was privy to every move the latter made, as well as
the vessel's response to each of the commands. His choice to rely blindly upon the
pilot's skills, to the point that despite being appraised of a notice of alert he
continued to relinquish control of the vessel to Gavino, shows indubitably that he
was not performing his duties with the diligence required of him and therefore may
be charged with negligence along with defend;int Gavino. 76

As correctly affirmed by the Court of Appeals —

We are in full accord with the findings and disquisitions of the Court a quo.

In the present recourse, Captain Viktor Kavankov had been a mariner for thirty-two
years before the incident. When Gavino was (in) the command of the vessel,
Kavankov was beside Gavino, relaying the commands or orders of Gavino to the
crewmembers-officers of the vessel concerned. He was thus fully aware of the
docking maneuvers and procedure Gavino undertook to dock the vessel.
Irrefragably, Kavankov was fully aware of the bulk and size of the vessel and its
cargo as well as the weight of the vessel. Kavankov categorically admitted that, when
the anchor and two (2) shackles were dropped to the sea floor, the claws of the anchor
did not hitch on to any hard object in the seabed. The momentum of the vessel was
not arrested. The use of the two (2) tugboats was insufficient. The momentum of the
vessel, although a little bit arrested, continued (sic) the vessel going straightforward
with its bow towards the port (Exhibit "A-1 ). There was thus a need for the vessel to
move "full-astern" and to drop the other anchor with another shackle or two (2), for
the vessel to avoid hitting the pier. Kavankov refused to act even as Gavino failed to
act. Even as Gavino gave mere "half-astern" order, Kavankov supinely stood by. The
vessel was already about twenty (20) meters away from the pier when Gavino gave
the "full-astern" order. Even then, Kavankov did nothing to prevent the vessel from
hitting the pier simply because he relied on the competence and plan of Gavino.
While the "full-astern'' maneuver momentarily arrested the momentum of the vessel,
it was, by then, too late. All along, Kavankov stood supinely beside Gavino, doing
nothing but relay the commands of Gavino. Inscrutably, then, Kavankov was
negligent.

xxx xxx xxx

The stark incompetence of Kavankov is competent evidence to prove the


unseaworthiness of the vessel. It has been held that the incompetence of the
navigator, the master of the vessel or its crew makes the vessel unseaworthy (Tug
Ocean Prince versus United States of America, 584 F. 2nd, page 1151). Hence, the
Appellant FESC is likewise liable for the damage sustained by the Appellee. 77

We find strong and well-reasoned support in time-tested American maritime jurisprudence, on


which much of our laws and jurisprudence on the matter are based, for the conclusions of the
Court of Appeals adjudging both Capt. Gavino and Capt. Kabankov negligent.
As early as 1869, the U.S. Supreme Court declared, through Mr. Justice Swayne, in The Steamship
China vs. Walsh, 78 that it is the duty of the master to interfere in cases of the pilot's intoxication or
manifest incapacity, in cases of danger which he does not foresee, and in all cases of great
necessity. The master has the same power to displace the pilot that he has to remove any
subordinate officer of the vessel, at his discretion.

In 1895, the U.S. Supreme Court, this time through Mr. Justice Brown, emphatically ruled that:

Nor are rye satisfied with the conduct of the master in leaving the pilot in sole charge
of the vessel. While the pilot doubtless supersedes the master for the time being in
the command and navigation of the ship, and his orders must be obeyed in all
matters connected with her navigation, the master is not wholly absolved from his
duties while the pilot is on board, and may advise with him, and even displace him
in case he is intoxicated or manifestly incompetent. He is still in command of the
vessel, except so far as her navigation is concerned, and bound to see that there is a
sufficient watch on deck, and that the men are attentive to their duties.

. . . (N)orwithstanding the pilot has charge, it is the duty of the master to prevent
accident, and not to abandon the vessel entirely to the pilot; but that there are certain
duties he has to discharge (notwithstanding there is a pilot on board) for the benefit
of the owners. . . . that in well conducted ships the master does not regard the presence
of a duly licensed pilot in compulsory pilot waters as freeing him from every,
obligation to attend to the safety of the vessel; but that, while the master sees that his
officers and crew duly attend to the pilot's orders, he himself is bound to keep a
vigilant eye on the navigation of the vessel, and, when exceptional circumstances exist,
not only to urge upon the pilot to use every precaution, but to insist upon such being
taken. 79 (Italics for emphasis.)

In Jure vs. United Fruit Co., 80 which, like the present petitions, involved compulsory pilotage, with
a similar scenario where at and prior to the time of injury, the vessel was in the charge of a pilot
with the master on the bridge of the vessel beside said pilot, the court therein ruled:

The authority of the master of a vessel is not in complete abeyance while a pilot, who
is required by law to be accepted, is in discharge of his functions. . . . It is the duty of
the master to interfere in cases of the pilot's intoxication or manifest incapacity, in
cases of danger which he does not foresee, and in all cases of great necessity. The
master has the same power to displace the pilot that he has to remove any
subordinate officer of the vessel. He may exercise it, or not, according to his
discretion. There was evidence to support findings that piaintiff's injury was due to
the negligent operation of the Atenas, and that the master of that vessel was
negligent in failing to take action to avoid endangering a vessel situated as the City
of Canton was and persons or property thereon.

A phase of the evidence furnished support for the inferences . . . that he negligently
failed to suggest to the pilot the danger which was disclosed, and means of avoiding
such danger; and that the master's negligence in failing to give timelt admonition to
the pilot proximately contributed to the injury complained of. We are of opinion that
the evidence mentioned tended to prove conduct of the pilot, known to the master,
giving rise to a case of danger or great necessity, calling for the intervention of the
master. A master of a vessel is not without fault in acquiescing in canduct of a pilot
which involves apparent and avoidable danger, whether such danger is to the vessel
upon which the pilot is, or to another vessel, or persons or property thereon or on
shore. (Emphasis ours.)

Still in another case involving a nearly identical setting, the captain of a vessel alongside the
compulsory pilot was deemed to be negligent, since, in the words of the court, "he was in a
position to exercise his superior authority if he had deemed the speed excessive on the occasion in
question. I think it was clearly negligent of him not to have recognized the danger to any craft
moored at Gravell Dock and that he should have directed the pilot to reduce his speed as required
by the local governmental regulations. His failure amounted to negligence and renders the
respondent liable." 81 (Emphasis supplied.) Though a compulsory pilot might be regarded as an
independent contractor, he is at all times subject to the ultimate control of the ship's master. 82

In sum, where a compulsory pilot is in charge of a ship, the master being required to permit him to
navigate it, if the master observes that the pilot is incompetent or physically incapable, then it is
the dury of the master to refuse to permit the pilot to act. But if no such reasons are present,
then the master is justified in relying upon the pilot, but not blindly. Under the circumstances of
this case, if a situation arose where the master, exercising that reasonable vigilance which the
master of a ship should exercise, observed, or should have observed, that the pilot was so
navigating the vessel that she was going, or was likely to go, into danger, and there was in the
exercise of reasonable care and vigilance an opportunity for the master to intervene so as to save
the ship from danger, the master should have acted accordingly. 83 The master of a vessel must
exercise a degree of vigilance commensurate with the circumstances. 84

Inasmuch as the matter of negligence is a question of fact, 85 we defer to the findings of the trial
court, especially as this is affirmed by the Court of Appeals. 86 But even beyond that, our own
evaluation is that Capt. Kabankov's shared liability is due mainly to the fact that he failed to act
when the perilous situation should have spurred him into quick and decisive action as master of
the ship. In the face of imminent or actual danger, he did not have to wait for the happenstance to
occur before countermanding or overruling the pilot. By his own admission, Capt. Kabankov
concurred with Capt. Gavino's decisions, and this is precisely the reason why he decided not to
countermand any of the latter's orders. Inasmuch as both lower courts found Capt. Gavino
negligent, by expressing full agreement therewith Capt. Kabankov was just as negligent as Capt.
Gavino.

In general, a pilot is personally liable for damages caused by his own negligence or default to the
owners of the vessel, and to third parties for damages sustained in a collision. Such negligence of
the pilot in the performance of duty constitutes a maritime tort. 87 At common law, a shipowner is
not liable for injuries inflicted exclusively by the negligence of a pilot accepted by a vessel
compulsorily. 88 The exemption from liability for such negligence shall apply if the pilot is
actually in charge and solely in fault. Since, a pilot is responsible only for his own personal
negligence, he cannot be held accountable for damages proximately caused by the default of
others, 89 or, if there be anything which concurred with the fault of the pilot in producing the
accident, the vessel master and owners are liable.

Since the colliding vessel is prima facie responsible, the burden of proof is upon the party
claiming benefit of the exemption from liability. It must be shown affirmatively that the pilot was
at fault, and that there was no fault on the part of the officers or crew, which might have been
conducive to the damage. The fact that the law compelled the master to take the pilot does not
exonerate the vessel from liability. The parties who suffer are entitled to have their remedy against
the vessel that occasioned the damage, and are not under necessity to look to the pilot from whom
redress is not always had for compensation. The owners of the vessel are responsible to the
injured party for the acts of the pilot, and they must be left to recover the amount as well as they
can against him. It cannot be maintained that the circumstance of having a pilot on board, and
acting in conformity to his directions operate as a discharge of responsibility of the
owners. 90Except insofar as their liability is limited or exempted by statute, the vessel or her owner
are liable for all damages caused by the negligence or other wrongs of the owners or those in
charge of the vessel. Where the pilot of a vessel is not a compulsory one in the sense that the
owner or master of the vessel are bound to accept him, but is employed voluntarily, the owners of
the vessel are, all the more, liable for his negligent act. 91

In the United States, the owners of a vessel are not personally liable for the negligent acts of a
compulsory pilot, but by admiralty law, the fault or negligence of a compulsory pilot is imputable
to the vessel and it may be held liable therefor in rem. Where, however, by the provisions of the
statute the pilot is compulsory only in the sense that his fee must be paid, and is not in
compulsory charge of the vessel, there is no exemption from liability. Even though the pilot is
compulsory, if his negligence was not the sole cause of the injury, but the negligence of the master or
crew contributed thereto, the owners are liable. 92 But the liability of the ship in rem does not
release the pilot from the consequences of his own negligence. 93 The rationale for this rule is that
the master is not entirely absolved of responsibility with respect to navigation when a compulsory
pilot is in charge. 94

By way of validation and in light of the aforecited guidepost rulings in American maritime cases,
we declare that our rulings during the early years of this century in City of Manila vs.
Gambe, 95 China Navigation Co., Ltd. vs. Vidal, 96 and Yap Tica & Co. vs. Anderson, et al. 97 have
withstood the proverbial test of time and remain good and relevant case law to this day.

City of Manila stands for the doctrine that the pilot who was in command and complete control of
a vessel, and not the owners, must be held responsible for an accident which was solely the result
of the mistake of the pilot in not giving proper orders, and which did not result from the failure of
the owners to equip the vessel with the most modern and improved machinery. In China
Navigation Co., the pilot deviated from the ordinary and safe course, without heeding the
warnings of the ship captain. It was this careless deviation that caused the vessel to collide with a
pinnacle rock which, though uncharted, was known to pilots and local navigators. Obviously, the
captain was blameless. It was the negligence of the pilot alone which was the proximate cause of
the collision. The Court could not but then rule that —

The pilot in the case at bar having deviated from the usual and ordinary course
followed by navigators in passing through the strait in question, without a
substantial reason, was guilty of negligence, and that negligence having been the
proximate cause of the damages, he is liable for such damages as usually and
naturally flow therefrom. . . .

. . . (T)he defendant should have known of the existence and location of the rock
upon which the vessel struck while under his control and management. . . . .

Consistent with the pronouncements in these two earlier cases, but on a slightly different tack, the
Court in Yap Tico & Co. exonerated the pilot from liability for the accident where the orders of the
pilot in the handling of the ship were disregarded by the officers and crew of the ship. According
to the Court, a pilot is ". . . responsible for a full knowledge of the channel and the navigation only
so far as he can accomplish it through the officers and crew of the ship, and I don't see chat he can
be held responsible for damage when the evidence shows, as it does in this case, that the officers
and crew of the ship failed to obey his orders." Nonetheless, it is possible for a compulsory pilot
and the master of the vessel to be concurrently negligent and thus share the blame for the resulting
damage as joint tortfeasors, 98 but only under the circumstances obtaining in and demonstrated by
the instant petitions.

It may be said, as a general rule, that negligence in order to render a person liable need not be the
sole cause of an injury. It is sufficient that his negligence, concurring with one or more efficient
causes other than piaintiff's, is the proximate cause of the injury. Accordingly, where several
causes combine to produce injuries, a person is not relieved from liability because he is
responsible for only one of them, it being sufficient that the negligence of the person charged with
injury is an efficient cause without which the injury would not have resulted to as great an extent,
and that such cause is not attributable to the person injured. It is no defense to one of the
concurrent tortfeasors that the injury would not have resulted from his negligence alone, without
the negligence or wrongful acts of the other concurrent rortfeasor. 99 Where several causes
producing an injury are concurrent and each is an efficient cause without which the injury would
not have happened, the injury may be attributed to all or any of the causes and recovery may be
had against any or all of the responsible persons although under the circumstances of the case, it
may appear that one of them was more culpable, and that the duty owed by them to the injured
person was not the same. No actor's negligence ceases to be a proximate cause merely because it
does not exceed the negligence of other actors. Each wrongdoer is responsible for the entire result
and is liable as though his acts were the sole cause of the injury. 100

There is no contribution between joint tortfeasors whose liability is solidary since both of them
are liable for the total damage. Where the concurrent or successive negligent acts or omissions of
two or more persons, although acting independently, are in combination the direct and proximate
cause of a single injury to a third person, it is impossible to determine in what proportion each
contributed to the injury and either of them is responsible for the whole injury. Where their
concurring negligence resulted in injury or damage to a third party, they become joint tortfeasors
and are solidarily liable for the resulting damage under Article 2194 101 of the Civil Code. 102

As for the amount of damages awarded by the trial court, we find the same to be reasonable. The
testimony of Mr. Pascual Barral, witness for PPA, on cross and redirect examination, appears to be
grounded on practical considerations:

Q So that the cost of the two additional piles as well as the (two) square
meters is already included in this P1,300,999.77.

A Yes sir, everything. It is (the) final cost already.

Q For the eight piles.

A Including the reduced areas and other reductions.

Q (A)nd the two square meters.

A Yes sir.

Q In other words, this P1,300,999.77 does not represent only for the six
piles that was damaged as well as the corresponding two piles.

A The area was corresponding, was increased by almost two in the


actual payment. That was why the contract was decreased, the real
amount was P1,124,627.40 and the final one is P1,300,999.77.

Q Yes, but that P1,300,999.77 included the additional two new posts.

A It was increased.

Q Why was it increased?

A The original was 48 and the actual was 46.

Q Now, the damage was somewhere in 1980. It took place in 1980 and
you started the repair and reconstruction in 1982, that took almost two
years?

A Yes sir.

Q May it not happen that by natural factors, the existing damage in 1980
was aggravated for the 2 year period that the damage portion was not
repaired?

A I don't think so because that area was at once marked and no vehicles
can park, it was closed.

Q Even if or even natural elements cannot affect the damage?

A Cannot, sir.

xxx xxx xxx

Q You said in the cross-examination that there were six piles damaged
by the accident, but that in the reconstruction of the pier, PPA drove and
constructed 8 piles. Will you explain to us why there was change in the
number of piles from the original number?
A In piers where the piles are withdrawn or pulled out, you cannot re-
drive or drive piles at the same point. You have to redesign the driving
of the piles. We cannot drive the piles at the same point where the piles
are broken or damaged or pulled out. We have to redesign, and you will
note that in the reconstruction, we redesigned such that it necessitated 8
plies.

Q Why not, why could you not drive the same number of piles and on
the same spot?

A The original location was already disturbed. We cannot get required


bearing capacity. The area is already disturbed.

Q Nonetheless, if you drove the original number of piles, six, on


different places, would not that have sustained the same load?

A It will not suffice, sir. 103

We quote the findings of the lower court with approval.

With regards to the amount of damages that is to be awarded to plaintiff, the Court
finds that the amount of P1,053,300.00 is justified. Firstly, the doctrine of res ipsa
loquitur best expounded upon in the landmark case of Republic vs. Luzon Stevedoring
Corp. (21 SCRA 279) establishes the presumption that in the ordinary course of
events the ramming of the dock would not have occurred if proper care was used.

Secondly, the various estimates and plans justify the cost of the port construction
price. The new structure constructed not only replaced the damaged one but was
built of stronger materials to forestall the possibility of any similar accidents in the
future.

The Court inevitably finds that the plaintiff is entitled to an award of P1,053,300.00
which represents actual damages caused by the damage to Berth 4 of the Manila
International Port. Co-defendants Far Eastern Shipping, Capt. Senen Gavino and
Manila Pilots Association are solidariiy liable to pay this amount to plaintiff. 104

The Solicitor General rightly commented that the adjudicated amount of damages
represents the proportional cost of repair and rehabilitation of the damaged section of the
pier. 105

Except insofar as their liability is limited or exempted by statute, the vessel or her owners are
liable for all damages caused by the negligence or other wrongs of the owners or those in charge of
the vessel. As a general rule, the owners or those in possession and control of a vessel and the
vessel are liable for all natural and proximate damages caused to persons or property by reason of
her negligent management or navigation. 106

FESC's imputation of PPA's failure to provide a safe and reliable berthing place is obtuse, not only
because it appears to be a mere afterthought, being tardily raised only in this petition, but also
because there is no allegation or evidence on record about Berth No. 4 being unsafe and
unreliable, although perhaps it is a modest pier by international standards. There was, therefore,
no error on the part of the Court of Appeals in dismissing FESC's counterclaim.

II. G.R. No. 130150

This consolidated case treats on whether the Court of Appeals erred in holding MPA jointly and
solidarily liable with its member pilot. Capt. Gavino, in the absence of employer-employee
relationship and in applying Customs Administrative Order No. 15-65, as basis for the adjudged
solidary liability of MPA and Capt. Gavino.

The pertinent provisions in Chapter I of Customs Administrative Order No. 15-65 are:
PAR. XXVII. — In all pilotage districts where pilotage is compulsory, there shall be
created and maintained by the pilots or pilots' association, in the manner hereinafter
prescribed, a reserve fund equal to P1,000.00 for each pilot thereof for the purpose of
paying claims for damages to vessels or property caused through acts or omissions of
its members while rendered in compulsory pilotage service. In Manila, the reserve
fund shall be P2,000.00 for each pilot.

PAR. XXVIII. — A pilots' association shall not be liable under these regulations for
damage to any vessel, or other property, resulting from acts of a member of an
association in the actual performance of his duty for a greater amount than seventy-
five per centum (75%) of its prescribed reserve fund; it being understood that if the
association is held liable for an amount greater than the amount above-stated, the
excess shall be paid by the personal funds of the member concerned.

PAR. XXXI. — If a payment is made from the reserve fund of an association on


account of damages caused by a member thereof, and he shall have been found at
fault, such member shall reimburse the association in the amount so paid as soon as
practicable; and for this purpose, not less than twenty-five per centum of his
dividends shall be retained each month until the full amount has been returned to
the reserve fund.

PAR. XXXIV. — Nothing in these regulations shall relieve any pilots' association or
members thereof, individually or collectively, from civil responsibility for damages
to life or property resulting from the acts of members in the performance of their
duties.

Correlatively, the relevant provisions of PPA Administrative Order No. 03-85, which timery
amended this applicable maritime regulation, state:

Art. IV

Sec. 17. Pilots' Association — The Pilots in a Pilotage District shall organize
themselves into a Pilots' Association or firm, the members of which shall promulgate
their own By-Laws not in conflict with the rules and regulations promulgated by the
Authority. These By-Laws shall be submitted not later than one (1) month after the
organization of the Pilots' Association for approval by the General Manager of the
Authority. Subsequent amendments thereto shall likewise be submitted for
approval.

Sec. 25. Indemnity Insurance and Reserve Fund —

a) Each Pilots' Association shall collectively insure its


membership at the rate of P50,000.00 each member to cover
in whole or in part any liability arising from any accident
resulting in damage to vessel(s), port facilities and other
properties and/or injury to persons or death which any
member may have caused in the course of his performance
of pilotage duties. . . . .

b) The Pilotage Association shall likewise set up and


maintain a reserve fund which shall answer for any part of
the liability referred to in the immediately preceding
paragraph which is left unsatisfied by the insurance
proceeds, in the following manner:

1) Each pilot in the Association shall


contribute from his own account an amount
of P4,000.00 (P6,000.00 in the Manila Pilotage
District) to the reserve fund. This fund shall
not be considered part of the capital of the
Association nor charged as an expense
thereof.

2) Seventy-five percent (75 %) of the reserve


fund shall be set aside for use in the payment
of damages referred to above incurred in the
actual performance of pilots' duties and the
excess shall be paid from the personal funds
of the member concerned.

xxx xxx xxx

5) If payment is made from the reserve fund


of an Association on account of damage
caused by a member thereof who is found at
fault, he shall reimburse the Association in
the amount so paid as soon as practicable;
and for this purpose, not less than twenty-
five percentum (25 %) of his dividend shall
be retained each month until the full amount
has been returned to the reserve fund.
Thereafter, the pilot involved shall be
entitled to his full dividend.

6) When the reimbursement has been


completed as prescribed in the preceding
paragraph, the ten percentum (10%) and the
interest withheld from the shares of the other
pilots in accordance with paragraph (4) hereof
shall be returned to them.

c) Liability of Pilots' Association — Nothing in these


regulations shall relieve any Pilots' Association or
members thereof, individually or collectively, from any
civil, administrative and/or criminal responsibility for
damages to life or property resulting from the individual
acts of its members as well as those of the Association's
employees and crew in the performance of their duties.

The Court of Appeals, while affirming the trial court's finding of solidary liability on the part of
FESC, MPA and Capt. Gavino, correctly based MPA' s liability not on the concept of employer-
employee relationship between Capt. Gavino and itself, but on the provisions of Customs
Administrative Order No. 15-65:

The Appellant MPA avers that, contrary to the findings and disquisitions of the
Court a quo, the Appellant Gavino was not and has never been an employee of the
MPA but was only a member thereof. The Court a quo, it is noteworthy, did not state
the factual basis on which it anchored its finding that Gavino was the employee of
MPA. We are in accord with MPA's pose. Case law teaches Us that, for an employer-
employee relationship to exist, the confluence of the following elements must be
established: (1) selection and engagement of employees; (2) the payment of wages; (3)
the power of dismissal; (4) the employer's power to control the employees with
respect to the means and method by which the work is to be performed (Ruga versus
NLRC, 181 SCRA 266).

xxx xxx xxx

The liability of MPA for damages is not anchored on Article 2180 of the New Civil
Code as erroneously found and declared by the Court a quo but under the provisions
of Customs Administrative Order No. 15-65, supra, in tandem with the by-laws of the
MPA. 107

There being no employer-employee relationship, clearly Article 2180 108 of the Civil Code is
inapplicable since there is no vicarious liability of an employer to speak of. It is so stated in
American law, as follows:

The well established rule is that pilot associations are immune to vicarious liability
for the tort of their members. They are not the employer of their members and
exercise no control over them once they take the helm of the vessel. They are also not
partnerships because the members do not function as agents for the association or for
each other. Pilots' associations are also not liable for negligently assuring the
competence of their members because as professional associations they made no
guarantee of the professional conduct of their members to the general public. 109

Where under local statutes and regulations, pilot associations lack the necessary legal incidents of
responsibility, they have been held not liable for damages caused by the default of a member
pilot. 110 Whether or not the members of a pilots' association are in legal effect a copartnership
depends wholly on the powers and duties of the members in relation to one another under the
provisions of the governing statutes and regulations. The relation of a pilot to his association is
not that of a servant to the master, but of an associate assisting and participating in a common
purpose. Ultimately, the rights and liabilities between a pilots' association and an individual
member depend largely upon the constitution, articles or by-laws of the association, subject to
appropriate government regulations. 111

No reliance can be placed by MPA on the cited American rulings as to immunity from liability of a
pilots' association in ljght of existing positive regulation under Philippine law. The Court of
Appeals properly applied the clear and unequivocal provisions of Customs Administrative Order
No. 15-65. In doing so, it was just being consistent with its finding of the non-existence of
employer-employee relationship between MPA and Capt. Gavino which precludes the application
of Article 2180 of the Civil Code.

True. Customs Administrative Order No. 15-65 does not categorically characterize or label MPA's
liability as solidary in nature. Nevertheless, a careful reading and proper analysis of the correlated
provisions lead to the conclusion that MPA is solidarily liable for the negligence of its member
pilots, without prejudice to subsequent reimbursement from the pilot at fault.

Art. 1207 of the Civil Code provides that there is solidary liability only when the obligation
expressly so states, or when the law or the nature of the obligation requires solidarity. Plainly,
Customs Administrative Order No. 15-65, which as an implementing rule has the force and effect
of law, can validly provide for solidary liability.We note the Solicitor General's comment hereon,
to wit:

. . . Customs Administrative Order No. 15-65 may be a mere rule and regulation
issued by an administrative agency pursuant to a delegated authority to fix "the
details" in the execution or enforcement of a policy set out in the law itself.
Nonetheless, said administrative order, which adds to the procedural or enforcing
provisions of substantive law, is legally binding and receives the same statutory
force upon going into effect. In that sense, it has equal, not lower, statutory force and
effect as a regular statute passed by the legislature. 112

MPA's prayer for modification of the appellate court's decision under review by exculpating
petitioner MPA "from liability beyond seventy-five percent (75 %) of Reserve Fund" is
unnecessary because the liability of MPA under Par. XXVIII of Customs Administrative Order No.
15-65 is in fact limited to seventy-five percent (75 %) of its prescribed reserve fund, any amount of
liability beyond that being for the personal account of the erring pilot and subject to
reimbursement in case of a finding of fault by the member concerned. This is clarified by the
Solicitor General:
Moreover, contrary to petitioner's pretensions, the provisions of Customs
Administrative Order No. 15-65 do not limit the liability of petitioner as a pilots'
association to an absurdly small amount of seventy-five per centum (75 %) of the
member pilots' contribution of P2,000.00 to the reserve fund. The law speaks of the
entire reserve fund required to be maintained by the pilots' association to answer
(for) whatever liability arising from the tortious act of its members. And even if the
association is held liable for an amount greater than the reserve fund, the association
may not resist the liability by claiming to be liable only up to seventy-five per
centum (75 %) of the reserve fund because in such instance it has the right to be
reimbursed by the offending member pilot for the excess. 113

WHEREFORE, in view of all of the foregoing, the consolidated petitions for review are DENIED
and the assailed decision of the Court of Appeals is AFFIRMED in toto.

Counsel for FESC, the law firm of Del Rosario and Del Rosario, specifically its associate, Atty.
Herbert A. Tria, is REPRIMANDED and WARNED that a repetition of the same or similar acts of
heedless disregard of its undertakings under the Rules shall be dealt with more severely.

The original members of the legal team of the Office of the Solicitor General assigned to this case,
namely, Assistant Solicitor General Roman G. Del Rosario and Solicitor Luis F. Simon, are
ADMONISHED and WARNED that a repetition of the same or similar acts of unduly delaying
proceedings due to delayed filing of required pleadings shall also be dealt with more stringently.

The Solicitor Genral is DIRECTED to look into the circumstances of this case and to adopt
provident measures to avoid a repetition of this incident and which would ensure prompt
compliance with orders of this Court regarding the timely filing of requisite pleadings, in the
interest of just, speedy and orderly administration of justice.

Let copies of this decision be spread upon the personal records of the lawyers named herein in the
Office of the Bar Confidant.

SO ORDERED.
G.R. No. 131166 September 30, 1999

CALTEX (PHILIPPINES), INC., petitioner,


vs.
SULPICIO LINES, INC., GO SIOC SO, ENRIQUE S. GO, EUSEBIO S. GO, CARLOS S. GO,
VICTORIANO S. GO, DOMINADOR S. GO, RICARDO S. GO, EDWARD S. GO, ARTURO S.
GO, EDGAR S. GO, EDMUND S. GO, FRANCISCO SORIANO, VECTOR SHIPPING
CORPORATION, TERESITA G. CAÑEZAL, AND SOTERA E. CAÑEZAL, respondents.

PARDO, J.:

Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered
vessel and a passenger ship?

When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying petroleum products
of Caltex (Philippines), Inc. (hereinafter Caltex) no one could have guessed that it would collide with
MV Doña Paz, killing almost all the passengers and crew members of both ships, and thus resulting
in one of the country's worst maritime disasters.

The petition before us seeks to reverse the Court of Appeals decision 1 holding petitioner jointly liable
with the operator of MT Vector for damages when the latter collided with Sulpicio Lines, Inc.'s
passenger ship MV Doña Paz.

The facts are as follows:

On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m., enroute to
Masbate, loaded with 8,800 barrels of petroleum products shipped by petitioner Caltex. 2 MT Vector
is a tramping motor tanker owned and operated by Vector Shipping Corporation, engaged in the
business of transporting fuel products such as gasoline, kerosene, diesel and crude oil. During that
particular voyage, the MT Vector carried on board gasoline and other oil products owned by Caltex
by virtue of a charter contract between
them. 3

On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doña Paz left the port of Tacloban
headed for Manila with a complement of 59 crew members including the master and his officers, and
passengers totaling 1,493 as indicated in the Coast Guard Clearance. 4 The MV Doña Paz is a
passenger and cargo vessel owned and operated by Sulpicio Lines, Inc. plying the route of Manila/
Tacloban/ Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila, making trips twice a week.

At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea within the vicinity
of Dumali Point between Marinduque and Oriental Mindoro. All the crewmembers of MV Doña Paz
died, while the two survivors from MT Vector claimed that they were sleeping at the time of the
incident.1âwphi1.nêt

The MV Doña Paz carried an estimated 4,000 passengers; many indeed, were not in the passenger
manifest. Only 24 survived the tragedy after having been rescued from the burning waters by vessels
that responded to distress calls. 5 Among those who perished were public school teacher Sebastian
Cañezal (47 years old) and his daughter Corazon Cañezal (11 years old), both unmanifested
passengers but proved to be on board the vessel.

On March 22, 1988, the board of marine inquiry in BMI Case No. 659-87 after investigation found that
the MT Vector, its registered operator Francisco Soriano, and its owner and actual operator Vector
Shipping Corporation, were at fault and responsible for its collision with MV Doña Paz. 6

On February 13, 1989, Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal's wife and mother
respectively, filed with the Regional Trial Court, Branch 8, Manila, a complaint for "Damages Arising
from Breach of Contract of Carriage" against Sulpicio Lines, Inc. (hereafter Sulpicio). Sulpicio, in turn,
filed a third party complaint against Francisco Soriano, Vector Shipping Corporation and Caltex
(Philippines), Inc. Sulpicio alleged that Caltex chartered MT Vector with gross and evident bad faith
knowing fully well that MT Vector was improperly manned, ill-equipped, unseaworthy and a hazard
to safe navigation; as a result, it rammed against MV Doña Paz in the open sea setting MT Vector's
highly flammable cargo ablaze.

On September 15, 1992, the trial court rendered decision dismissing, the third party complaint against
petitioner. The dispositive portion reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against


defendant-3rd party plaintiff Sulpicio Lines, Inc., to wit:

1. For the death of Sebastian E. Cañezal and his 11-year old daughter Corazon G.
Cañezal, including loss of future earnings of said Sebastian, moral and exemplary
damages, attorney's fees, in the total amount of P 1,241,287.44 and finally;

2. The statutory costs of the proceedings.

Likewise, the 3rd party complaint is hereby DISMISSED for want of substantiation and
with costs against the 3rd party plaintiff.

IT IS SO ORDERED.

DONE IN MANILA, this 15th day of September 1992.

ARSE
NIO
M.
GON
ONG

On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on April 15, 1997, the Court of
Appeal modified the trial court's ruling and included petitioner Caltex as one of the those liable for
damages. Thus:

WHEREFORE, in view of all the foregoing, the judgment rendered by the Regional Trial
Court is hereby MODIFIED as follows:

WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the heirs of Sebastian E.
Cañezal and Corazon Cañezal:

1. Compensatory damages for the death of Sebastian E. Cañezal and Corazon Cañezal
the total amount of ONE HUNDRED THOUSAND PESOS (P100,000);

2. Compensatory damages representing the unearned income of Sebastian E. Cañezal,


in the total amount of THREE HUNDRED SIX THOUSAND FOUR HUNDRED
EIGHTY (P306,480.00) PESOS;
3. Moral damages in the amount of THREE HUNDRED THOUSAND PESOS
(P300,000.00);

4. Attorney's fees in the concept of actual damages in the amount of FIFTY THOUSAND
PESOS (P50,000.00);

5. Costs of the suit.

Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held equally
liable under the third party complaint to reimburse/indemnify defendant Sulpicio
Lines, Inc. of the above-mentioned damages, attorney's fees and costs which the latter is
adjudged to pay plaintiffs, the same to be shared half by Vector Shipping Co. (being the
vessel at fault for the collision) and the other half by Caltex (Phils.), Inc. (being the
charterer that negligently caused the shipping of combustible cargo aboard an
unseaworthy vessel).

SO ORDERED.

JORG
E S.
IMPE
RIAL

A
s
s
o
c
i
a
t
e
J
u
s
t
i
c
e

WE CONCUR:

RAMON U. MABUTAS, JR. PORTIA ALIÑO HERMACHUELOS

Associate Justice Associate Justice. 8

Hence, this petition.

We find the petition meritorious.

First: The charterer has no liability for damages under Philippine


Maritime laws.

The respective rights and duties of a shipper and the carrier depends not on whether the carrier is
public or private, but on whether the contract of carriage is a bill of lading or equivalent shipping
documents on the one hand, or a charter party or similar contract on the other. 9

Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter. 10
A charter party is a contract by which an entire ship, or some principal part thereof, is let by the
owner to another person for a specified time or use; a contract of affreightment is one by which the
owner of a ship or other vessel lets the whole or part of her to a merchant or other person for the
conveyance of goods, on a particular voyage, in consideration of the payment of freight. 11

A contract of affreightment may be either time charter, wherein the leased vessel is leased to the
charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In
both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of
time or for a single or consecutive voyage, the ship owner to supply the ship's store, pay for the
wages of the master of the crew, and defray the expenses for the maintenance of the ship. 12

Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own
people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for
damages caused by negligence.

If the charter is a contract of affreightment, which leaves the general owner in possession of the ship
as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The
charterer is free from liability to third persons in respect of the ship. 13

Second: MT Vector is a common carrier

Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage
charter. Does a charter party agreement turn the common carrier into a private one? We need to
answer this question in order to shed light on the responsibilities of the parties.

In this case, the charter party agreement did not convert the common carrier into a private carrier.
The parties entered into a voyage charter, which retains the character of the vessel as a common
carrier.

In Planters Products, Inc. vs. Court of Appeals, 14 we said:

It is therefore imperative that a public carrier shall remain as such, notwithstanding the
charter of the whole portion of a vessel of one or more persons, provided the charter is
limited to the ship only, as in the case of a time-charter or the voyage charter. It is only
when the charter includes both the vessel and its crew, as in a bareboat or demise that a
common carrier becomes private, at least insofar as the particular voyage covering the
charter-party is concerned. Indubitably, a ship-owner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the moment, be the
property of the charterer.

Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals: 15

Although a charter party may transform a common carrier into a private one, the same
however is not true in a contract of affreightment . . .

A common carrier is a person or corporation whose regular business is to carry passengers or


property for all persons who may choose to employ and to remunerate him. 16 MT Vector fits the
definition of a common carrier under Article 1732 of the Civil Code. In Guzman vs. Court of
Appeals, 17 we ruled:

The Civil Code defines "common carriers" in the following terms:

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers for passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service
on a regular or scheduled basis and one offering such services on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general population.
We think that Article 1733 deliberately refrained from making such distinctions.

It appears to the Court that private respondent is properly characterized as a common


carrier even though he merely "back-hauled" goods for other merchants from Manila to
Pangasinan, although such backhauling was done on a periodic, occasional rather than
regular or scheduled manner, and even though respondent's principal occupation was
not the carriage of goods for others. There is no dispute that private respondent charged
his customers a fee for hauling their goods; that the fee frequently fell below
commercial freight rates is not relevant here.

Under the Carriage of Goods by Sea Act :

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to
exercise due diligence to —

(a) Make the ship seaworthy;

(b) Properly man, equip, and supply the ship;

xxx xxx xxx

Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent
officers and crew. The failure of a common carrier to maintain in seaworthy condition the vessel
involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil
Code. 18

The provisions owed their conception to the nature of the business of common carriers. This business
is impressed with a special public duty. The public must of necessity rely on the care and skill of
common carriers in the vigilance over the goods and safety of the passengers, especially because with
the modern development of science and invention, transportation has become more rapid, more
complicated and somehow more hazardous. 19 For these reasons, a passenger or a shipper of goods is
under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law
to impliedly warrant its seaworthiness.

This aside, we now rule on whether Caltex is liable for damages under the Civil Code.

Third: Is Caltex liable for damages under the Civil Code?

We rule that it is not.

Sulpicio argues that Caltex negligently shipped its highly combustible fuel cargo aboard an
unseaworthy vessel such as the MT Vector when Caltex:

1. Did not take steps to have M/T Vector's certificate of inspection and coastwise license renewed;

2. Proceeded to ship its cargo despite defects found by Mr. Carlos Tan of Bataan Refinery
Corporation;

3. Witnessed M/T Vector submitting fake documents and certificates to the Philippine Coast Guard.

Sulpicio further argues that Caltex chose MT Vector transport its cargo despite these deficiencies.
1. The master of M/T Vector did not posses the required Chief Mate license to command and
navigate the vessel;

2. The second mate, Ronaldo Tarife, had the license of a Minor Patron, authorized to navigate only in
bays and rivers when the subject collision occurred in the open sea;

3. The Chief Engineer, Filoteo Aguas, had no license to operate the engine of the vessel;

4. The vessel did not have a Third Mate, a radio operator and lookout; and

5. The vessel had a defective main engine. 20

As basis for the liability of Caltex, the Court of Appeals relied on Articles 20 and 2176 of the Civil
Code, which provide:

Art. 20. — Every person who contrary to law, willfully or negligently causes damage to
another, shall indemnify the latter for the same.

Art. 2176. — Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is
no pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.

And what is negligence?

The Civil Code provides:

Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence
which is required by the nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place. When negligence shows bad
faith, the provisions of Article 1171 and 2201 paragraph 2, shall apply.

If the law does not state the diligence which is to be observed in the performance, that
which is expected of a good father of a family shall be required.

In Southeastern College, Inc. vs. Court of Appeals, 21 we said that negligence, as commonly understood, is
conduct which naturally or reasonably creates undue risk or harm to others. It may be the failure to
observe that degree of care, precaution, and vigilance, which the circumstances justly demand, or the
omission to do something which ordinarily regulate the conduct of human affairs, would do.

The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it
chartered complied with all legal requirements. The duty rests upon the common carrier simply for
being engaged in "public service." 22 The Civil Code demands diligence which is required by the
nature of the obligation and that which corresponds with the circumstances of the persons, the time
and the place. Hence, considering the nature of the obligation between Caltex and MT Vector,
liability as found by the Court of Appeals is without basis.1âwphi1.nêt

The relationship between the parties in this case is governed by special laws. Because of the implied
warranty of seaworthiness, 23 shippers of goods, when transacting with common carriers, are not
expected to inquire into the vessel's seaworthiness, genuineness of its licenses and compliance with
all maritime laws. To demand more from shippers and hold them liable in case of failure exhibits
nothing but the futility of our maritime laws insofar as the protection of the public in general is
concerned. By the same token, we cannot expect passengers to inquire every time they board a
common carrier, whether the carrier possesses the necessary papers or that all the carrier's employees
are qualified. Such a practice would be an absurdity in a business where time is always of the
essence. Considering the nature of transportation business, passengers and shippers alike
customarily presume that common carriers possess all the legal requisites in its operation.
Thus, the nature of the obligation of Caltex demands ordinary diligence like any other shipper in
shipping his cargoes.

A cursory reading of the records convinces us that Caltex had reasons to believe that MT Vector
could legally transport cargo that time of the year.

Atty. Poblador: Mr. Witness, I direct your attention to this portion here containing the
entries here under "VESSEL'S DOCUMENTS

1. Certificate of Inspection No. 1290-85, issued December 21, 1986, and


Expires December 7, 1987", Mr. Witness, what steps did you take
regarding the impending expiry of the C.I. or the Certificate of Inspection
No. 1290-85 during the hiring of MT Vector?

Apolinario Ng: At the time when I extended the Contract, I did nothing
because the tanker has a valid C.I. which will expire on December 7, 1987
but on the last week of November, I called the attention of Mr. Abalos to
ensure that the C.I. be renewed and Mr. Abalos, in turn, assured me they
will renew the same.

Q: What happened after that?

A: On the first week of December, I again made a follow-up from Mr.


Abalos, and said they were going to send me a copy as soon as possible,
sir. 24

xxx xxx xxx

Q: What did you do with the C.I.?

A: We did not insist on getting a copy of the C.I. from Mr. Abalos on the
first place, because of our long business relation, we trust Mr. Abalos and
the fact that the vessel was able to sail indicates that the documents are in
order. . . . 25

On cross examination —

Atty. Sarenas: This being the case, and this being an admission by you,
this Certificate of Inspection has expired on December 7. Did it occur to
you not to let the vessel sail on that day because of the very approaching
date of expiration?

Apolinar Ng: No sir, because as I said before, the operation Manager


assured us that they were able to secure a renewal of the Certificate of
Inspection and that they will in time submit us a
copy. 26

Finally, on Mr. Ng's redirect examination:

Atty. Poblador: Mr. Witness, were you aware of the pending expiry of the
Certificate of Inspection in the coastwise license on December 7, 1987.
What was your assurance for the record that this document was renewed
by the MT Vector?

Atty. Sarenas: . . .

Atty. Poblador: The certificate of Inspection?


A: As I said, firstly, we trusted Mr. Abalos as he is a long time business
partner; secondly, those three years; they were allowed to sail by the Coast
Guard. That are some that make me believe that they in fact were able to
secure the necessary renewal.

Q: If the Coast Guard clears a vessel to sail, what would that mean?

Atty. Sarenas: Objection.

Court: He already answered that in the cross examination to the effect that
if it was allowed, referring to MV Vector, to sail, where it is loaded and
that it was scheduled for a destination by the Coast Guard, it means that it
has Certificate of Inspection extended as assured to this witness by
Restituto Abalos. That in no case MV Vector will be allowed to sail if the
Certificate of inspection is, indeed, not to be extended. That was his
repeated explanation to the cross-examination. So, there is no need to
clarify the same in the re-direct examination. 27

Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two years
before the tragic incident occurred in 1987. Past services rendered showed no reason for Caltex to
observe a higher degree of diligence.

Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as
even the Philippine Coast Guard itself was convinced of its seaworthiness. All things considered, we
find no legal basis to hold petitioner liable for damages.

As Vector Shipping Corporation did not appeal from the Court of Appeals' decision, we limit our
ruling to the liability of Caltex alone. However, we maintain the Court of Appeals' ruling insofar as
Vector is concerned.

WHEREFORE, the Court hereby GRANTS the petition and SETS ASIDE the decision of the Court of
Appeals in CA-G.R. CV No. 39626, promulgated on April 15, 1997, insofar as it held Caltex liable
under the third party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. the damages
the latter is adjudged to pay plaintiffs-appellees. The Court AFFIRMS the decision of the Court of
Appeals insofar as it orders Sulpicio Lines, Inc. to pay the heirs of Sebastian E. Cañezal and Corazon
Cañezal damages as set forth therein. Third-party defendant-appellee Vector Shipping Corporation
and Francisco Soriano are held liable to reimburse/indemnify defendant Sulpicio Lines, Inc.
whatever damages, attorneys' fees and costs the latter is adjudged to pay plaintiffs-appellees in the
case.1âwphi1.nêt

No costs in this instance.

SO ORDERED.
G.R. No. 101503 September 15, 1993

PLANTERS PRODUCTS, INC., petitioner,


vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN
KABUSHIKI KAISHA, respondents.

Gonzales, Sinense, Jimenez & Associates for petitioner.

Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.

BELLOSILLO, J.:

Does a charter-party1 between a shipowner and a charterer transform a common carrier into a private
one as to negate the civil law presumption of negligence in case of loss or damage to its cargo?

Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of
New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in
bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei
Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union,
Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued on
the date of departure.

On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant
to the Uniform General Charter2 was entered into between Mitsubishi as shipper/charterer and
KKKK as shipowner, in Tokyo, Japan.3 Riders to the aforesaid charter-party starting from par. 16 to
40 were attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were
also subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively.

Before loading the fertilizer aboard the vessel, four (4) of her holds4 were all presumably inspected by
the charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the
charter-party which reads:

16. . . . At loading port, notice of readiness to be accomplished by certificate from


National Cargo Bureau inspector or substitute appointed by charterers for his account
certifying the vessel's readiness to receive cargo spaces. The vessel's hold to be properly
swept, cleaned and dried at the vessel's expense and the vessel to be presented clean for use in
bulk to the satisfaction of the inspector before daytime commences. (emphasis supplied)

After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the
shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin,
then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire
voyage.5

Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened
with the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its steelbodied
dump trucks which were parked alongside the berth, using metal scoops attached to the ship,
pursuant to the terms and conditions of the charter-partly (which provided for an F.I.O.S.
clause).6 The hatches remained open throughout the duration of the discharge.7

Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was
transported to the consignee's warehouse located some fifty (50) meters from the wharf. Midway to
the warehouse, the trucks were made to pass through a weighing scale where they were individually
weighed for the purpose of ascertaining the net weight of the cargo. The port area was windy, certain
portions of the route to the warehouse were sandy and the weather was variable, raining occasionally
while the discharge was in progress.8 The petitioner's warehouse was made of corrugated galvanized
iron (GI) sheets, with an opening at the front where the dump trucks entered and unloaded the
fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-between and alongside the
trucks to contain spillages of the ferilizer.9

It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th
and 18th).10A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was
hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel
prior to and after discharge. 11 The survey report submitted by CSCI to the consignee (PPI) dated 19
July 1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer
approximating 18 M/T was contaminated with dirt. The same results were contained in a Certificate
of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo
delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for commerce,
having been polluted with sand, rust and
dirt. 12

Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies
(SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged
shortage in the goods shipped and the diminution in value of that portion said to have been
contaminated with dirt. 13

Respondent SSA explained that they were not able to respond to the consignee's claim for payment
because, according to them, what they received was just a request for shortlanded certificate and not
a formal claim, and that this "request" was denied by them because they "had nothing to do with the
discharge of the shipment." 14 Hence, on 18 July 1975, PPI filed an action for damages with the Court
of First Instance of Manila. The defendant carrier argued that the strict public policy governing
common carriers does not apply to them because they have become private carriers by reason of the
provisions of the charter-party. The court a quo however sustained the claim of the plaintiff against
the defendant carrier for the value of the goods lost or damaged when it ruled thus: 15

. . . Prescinding from the provision of the law that a common carrier is presumed
negligent in case of loss or damage of the goods it contracts to transport, all that a shipper
has to do in a suit to recover for loss or damage is to show receipt by the carrier of the goods and
to delivery by it of less than what it received. After that, the burden of proving that the loss or
damage was due to any of the causes which exempt him from liability is shipted to the carrier,
common or private he may be. Even if the provisions of the charter-party aforequoted are
deemed valid, and the defendants considered private carriers, it was still incumbent upon
them to prove that the shortage or contamination sustained by the cargo is attributable to the
fault or negligence on the part of the shipper or consignee in the loading, stowing, trimming and
discharge of the cargo. This they failed to do. By this omission, coupled with their failure
to destroy the presumption of negligence against them, the defendants are liable
(emphasis supplied).

On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from
liability for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case of Home
Insurance Co. v. American Steamship Agencies, Inc.,17 the appellate court ruled that the cargo vessel M/V
"Sun Plum" owned by private respondent KKKK was a private carrier and not a common carrier by
reason of the time charterer-party. Accordingly, the Civil Code provisions on common carriers which
set forth a presumption of negligence do not find application in the case at bar. Thus —

. . . In the absence of such presumption, it was incumbent upon the plaintiff-appellee to


adduce sufficient evidence to prove the negligence of the defendant carrier as alleged in its
complaint. It is an old and well settled rule that if the plaintiff, upon whom rests the
burden of proving his cause of action, fails to show in a satisfactory manner the facts
upon which he bases his claim, the defendant is under no obligation to prove his
exception or defense (Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing
Belen v. Belen, 13 Phil. 202).
But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its cause of
action, i.e. the alleged negligence of defendant carrier. It appears that the plaintiff was under
the impression that it did not have to establish defendant's negligence. Be that as it may,
contrary to the trial court's finding, the record of the instant case discloses ample
evidence showing that defendant carrier was not negligent in performing its obligation .
. . 18 (emphasis supplied).

Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of
Appeals. Petitioner theorizes that the Home Insurance case has no bearing on the present controversy
because the issue raised therein is the validity of a stipulation in the charter-party delimiting the
liability of the shipowner for loss or damage to goods cause by want of due deligence on its part or
that of its manager to make the vessel seaworthy in all respects, and not whether the presumption of
negligence provided under the Civil Code applies only to common carriers and not to private
carriers. 19 Petitioner further argues that since the possession and control of the vessel remain with
the shipowner, absent any stipulation to the contrary, such shipowner should made liable for the
negligence of the captain and crew. In fine, PPI faults the appellate court in not applying the
presumption of negligence against respondent carrier, and instead shifting the onus probandi on the
shipper to show want of due deligence on the part of the carrier, when he was not even at hand to
witness what transpired during the entire voyage.

As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier by
reason of a charter-party; in the negative, whether the shipowner in the instant case was able to prove
that he had exercised that degree of diligence required of him under the law.

It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so,
we find it fitting to first define important terms which are relevant to our discussion.

A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let
by the owner to another person for a specified time or use; 20 a contract of affreightment by which the
owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the
conveyance of goods, on a particular voyage, in consideration of the payment of freight; 21 Charter
parties are of two types: (a) contract of affreightment which involves the use of shipping space on
vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise
or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to
him of its entire command and possession and consequent control over its navigation, including the
master and the crew, who are his servants. Contract of affreightment may either be time charter,
wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the
ship is leased for a single voyage. 22 In both cases, the charter-party provides for the hire of vessel
only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to
supply the ship's stores, pay for the wages of the master and the crew, and defray the expenses for
the maintenance of the ship.

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil
Code. 23 The definition extends to carriers either by land, air or water which hold themselves out as
ready to engage in carrying goods or transporting passengers or both for compensation as a public
employment and not as a casual occupation. The distinction between a "common or public carrier"
and a "private or special carrier" lies in the character of the business, such that if the undertaking is a
single transaction, not a part of the general business or occupation, although involving the carriage of
goods for a fee, the person or corporation offering such service is a private carrier. 24

Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their
business, should observe extraordinary diligence in the vigilance over the goods they carry.25 In the
case of private carriers, however, the exercise of ordinary diligence in the carriage of goods will
suffice. Moreover, in the case of loss, destruction or deterioration of the goods, common carriers are
presumed to have been at fault or to have acted negligently, and the burden of proving otherwise
rests on them.26 On the contrary, no such presumption applies to private carriers, for whosoever
alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the
negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary course of business, operates as a common
carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel
M/V "Sun Plum", the ship captain, its officers and compliment were under the employ of the
shipowner and therefore continued to be under its direct supervision and control. Hardly then can
we charge the charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo
when the charterer did not have any control of the means in doing so. This is evident in the present
case considering that the steering of the ship, the manning of the decks, the determination of the
course of the voyage and other technical incidents of maritime navigation were all consigned to the
officers and crew who were screened, chosen and hired by the shipowner. 27

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only,
as in the case of a time-charter or voyage-charter. It is only when the charter includes both the vessel
and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or
voyage charter retains possession and control of the ship, although her holds may, for the moment,
be the property of the charterer. 28

Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies,
supra, is misplaced for the reason that the meat of the controversy therein was the validity of a
stipulation in the charter-party exempting the shipowners from liability for loss due to the negligence
of its agent, and not the effects of a special charter on common carriers. At any rate, the rule in the
United States that a ship chartered by a single shipper to carry special cargo is not a common
carrier, 29 does not find application in our jurisdiction, for we have observed that the growing concern
for safety in the transportation of passengers and /or carriage of goods by sea requires a more
exacting interpretation of admiralty laws, more particularly, the rules governing common carriers.

We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30 —

As a matter of principle, it is difficult to find a valid distinction between cases in which


a ship is used to convey the goods of one and of several persons. Where the ship herself
is let to a charterer, so that he takes over the charge and control of her, the case is
different; the shipowner is not then a carrier. But where her services only are let, the
same grounds for imposing a strict responsibility exist, whether he is employed by one
or many. The master and the crew are in each case his servants, the freighter in each
case is usually without any representative on board the ship; the same opportunities for
fraud or collusion occur; and the same difficulty in discovering the truth as to what has
taken place arises . . .

In an action for recovery of damages against a common carrier on the goods shipped, the shipper or
consignee should first prove the fact of shipment and its consequent loss or damage while the same
was in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to
respondent to prove that he has exercised extraordinary diligence required by law or that the loss,
damage or deterioration of the cargo was due to fortuitous event, or some other circumstances
inconsistent with its liability. 31

To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima
faciepresumption of negligence.

The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before
the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that
before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated.
After completing the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were
closed and sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins which
were tied with steel bonds. The hatches remained close and tightly sealed while the ship was in
transit as the weight of the steel covers made it impossible for a person to open without the use of the
ship's boom. 32
It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the
possibility of spillage of the cargo into the sea or seepage of water inside the hull of the
vessel. 33 When M/V "Sun Plum" docked at its berthing place, representatives of the consignee
boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores, and a
cargo surveyor representing CSCI, opened the hatches and inspected the condition of the hull of the
vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates who were
overseeing the whole operation on rotation basis. 34

Verily, the presumption of negligence on the part of the respondent carrier has been efficaciously
overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of
the cargo. This was confirmed by respondent appellate court thus —

. . . Be that as it may, contrary to the trial court's finding, the record of the instant case
discloses ample evidence showing that defendant carrier was not negligent in performing its
obligations. Particularly, the following testimonies of plaintiff-appellee's own witnesses
clearly show absence of negligence by the defendant carrier; that the hull of the vessel at
the time of the discharge of the cargo was sealed and nobody could open the same
except in the presence of the owner of the cargo and the representatives of the vessel
(TSN, 20 July 1977, p. 14); that the cover of the hatches was made of steel and it was
overlaid with tarpaulins, three layers of tarpaulins and therefore their contents were
protected from the weather (TSN, 5 April 1978, p. 24); and, that to open these hatches,
the seals would have to be broken, all the seals were found to be intact (TSN, 20 July
1977, pp. 15-16) (emphasis supplied).

The period during which private respondent was to observe the degree of diligence required of it as a
public carrier began from the time the cargo was unconditionally placed in its charge after the
vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel
reached its destination and its hull was reexamined by the consignee, but prior to unloading. This is
clear from the limitation clause agreed upon by the parties in the Addendum to the standard
"GENCON" time charter-party which provided for an F.I.O.S., meaning, that the loading, stowing,
trimming and discharge of the cargo was to be done by the charterer, free from all risk and expense to
the carrier. 35 Moreover, a shipowner is liable for damage to the cargo resulting from improper
stowage only when the stowing is done by stevedores employed by him, and therefore under his
control and supervision, not when the same is done by the consignee or stevedores under the employ
of the latter. 36

Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss,
destruction or deterioration of the goods if caused by the charterer of the goods or defects in the
packaging or in the containers. The Code of Commerce also provides that all losses and deterioration
which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or
the inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of
these accidents is incumbent upon the carrier. 37 The carrier, nonetheless, shall be liable for the loss
and damage resulting from the preceding causes if it is proved, as against him, that they arose
through his negligence or by reason of his having failed to take the precautions which usage has
established among careful persons. 38

Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped
and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working
with Atlas Fertilizer, described Urea as a chemical compound consisting mostly of ammonia and
carbon monoxide compounds which are used as fertilizer. Urea also contains 46% nitrogen and is
highly soluble in water. However, during storage, nitrogen and ammonia do not normally evaporate
even on a long voyage, provided that the temperature inside the hull does not exceed eighty (80)
degrees centigrade. Mr. Chupungco further added that in unloading fertilizer in bulk with the use of
a clamped shell, losses due to spillage during such operation amounting to one percent (1%) against
the bill of lading is deemed "normal" or "tolerable." The primary cause of these spillages is the
clamped shell which does not seal very tightly. Also, the wind tends to blow away some of the
materials during the unloading process.
The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an extremely
high temperature in its place of storage, or when it comes in contact with water. When Urea is
drenched in water, either fresh or saline, some of its particles dissolve. But the salvaged portion
which is in liquid form still remains potent and usable although no longer saleable in its original
market value.

The probability of the cargo being damaged or getting mixed or contaminated with foreign particles
was made greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the
inimical effects of the elements and the grimy condition of the various pieces of equipment used in
transporting and hauling it.

The evidence of respondent carrier also showed that it was highly improbable for sea water to seep
into the vessel's holds during the voyage since the hull of the vessel was in good condition and her
hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy
to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more
likely to have occurred while the same was being transported from the ship to the dump trucks and
finally to the consignee's warehouse. This may be gleaned from the testimony of the marine and
cargo surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bar
order cargo" as contained in their report to PPI was just an approximation or estimate made by
them after the fertilizer was discharged from the vessel and segregated from the rest of the cargo.

The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo.
It rained from time to time at the harbor area while the cargo was being discharged according to the
supply officer of PPI, who also testified that it was windy at the waterfront and along the shoreline
where the dump trucks passed enroute to the consignee's warehouse.

Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer
carries with it the risk of loss or damage. More so, with a variable weather condition prevalent during
its unloading, as was the case at bar. This is a risk the shipper or the owner of the goods has to face.
Clearly, respondent carrier has sufficiently proved the inherent character of the goods which makes it
highly vulnerable to deterioration; as well as the inadequacy of its packaging which further
contributed to the loss. On the other hand, no proof was adduced by the petitioner showing that the
carrier was remise in the exercise of due diligence in order to minimize the loss or damage to the
goods it carried.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which
reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the
First Instance, now Regional Trial Court, of Manila should be, as it is hereby DISMISSED.

Costs against petitioner.

SO ORDERED.
G.R. No. L-6393 January 31, 1955

A. MAGSAYSAY INC., plaintiff-appellee,


vs.
ANASTACIO AGAN, defendant-appellant.

Custodio A. Villava for appellant.


Quijano, Alidio and Azores for appellee.

REYES, A. J.:

The S S "San Antonio", vessel owned and operated by plaintiff, left Manila on October 6, 1949, bound
for Basco, Batanes, vis Aparri, Cagayan, with general cargo belonging to different shippers, among
them the defendant. The vessel reached Aparri on the 10th of that month, and after a day's stopover
in that port, weighed anchor to proceed to Basco. But while still in port, it ran aground at the mouth
of the Cagayan river, and, attempts to refloat it under its own power having failed, plaintiff have it
refloated by the Luzon Stevedoring Co. at an agreed compensation. Once afloat the vessel returned to
Manila to refuel and then proceeded to Basco, the port of destination. There the cargoes were
delivered to their respective owners or consignees, who, with the exception of defendant, made a
deposit or signed a bond to answer for their contribution to the average.

On the theory that the expenses incurred in floating the vessel constitute general average to which
both ship and cargo should contribute, plaintiff brought the present action in the Court of First
Instance of Manila to make defendant pay his contribution, which, as determined by the average
adjuster, amounts to P841.40. Defendant, in his answer, denies liability to his amount, alleging,
among other things, that the stranding of the vessel was due to the fault, negligence and lack of skill
of its master, that the expenses incurred in putting it afloat did not constitute general average, and
that the liquidation of the average was not made in accordance with law. After trial, the lower court
found for plaintiff and rendered judgment against the defendant for the amount of the claim, with
legal interests. From this judgment defendant had appealed directly to this Court.

Although appellant assigns various errors, under our view of the case only the following need be
considered:

The trial court erred in allowing the general average for floating a vessel unintentionally
stranded inside a port and at the mouth of a river during a fine weather.

For the purposes of this assignment of error we may well accept the finding below that the stranding
of plaintiff's vessel was due to the sudden shifting of the sandbars at the mouth of the river which the
port pilot did not anticipate. The standing may, therefore, be regarded as accidental, and the question
is whether the expenses incurred in floating a vessel so stranded should be considered general
average and shared by the cargo owners.

The law on averages is contained in the Code of Commerce. Under that law, averages are classified
into simple or particular and general or gross. Generally speaking, simple or particular averages
include all expenses and damages caused to the vessel or cargo which have not inured to the
common benefit (Art. 809), and are, therefore, to be borne only by the owner of the property gave rise
to same (Art. 810); while general or gross averages include "all the damages and expenses which are
deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and
known risk" (Art. 811). Being for the common benefit, gross averages are to be borne by the owners of
the articles saved (Art. 812).

In classifying averages into simple o particular and general or gross and defining each class, the Code
(Art. 809 and 811) at the same time enumerates certain specific cases as coming specially under one or
the other denomination. Going over the specific cases enumerated we find that, while the expenses
incurred in putting plaintiff's vessel afloat may well come under number 2 of article 809-which refers
to expenses suffered by the vessel "by reason of an accident of the sea of the force majuere" — and
should therefore be classified as particular average, the said expenses do not fit into any of the
specific cases of general average enumerated in article 811. No. 6 of this article does mention
"expenses caused in order to float a vessel," but it specifically refers to "a vessel intentionally stranded
for the purpose of saving it" and would have no application where, as in the present case, the
stranding was not intentional.

Let us now see whether the expenses here in question could come within the legal concept of the
general average. Tolentino, in his commentaries on the Code of Commerce, gives the following
requisites for general average:

First, there must be a common danger. This means, that both the ship and the cargo, after has
been loaded, are subject to the same danger, whether during the voyage, or in the port of
loading or unloading; that the danger arises from the accidents of the sea, dispositions of the
authority, or faults of men, provided that the circumstances producing the peril should be
ascertained and imminent or may rationally be said to be certain and imminent. This last
requirement exclude measures undertaken against a distant peril.

Second, that for the common safety part of the vessel or of the cargo or both is sacrificed
deliberately.

Third, that from the expenses or damages caused follows the successful saving of the vessel
and cargo.

Fourth, that the expenses or damages should have been incurred or inflicted after taking
proper legal steps and authority. (Vol. 1, 7th ed., p. 155.)

With respect to the first requisite, the evidence does not disclose that the expenses sought to be
recovered from defendant were incurred to save vessel and cargo from a common danger. The vessel
ran aground in fine weather inside the port at the mouth of a river, a place described as "very
shallow". It would thus appear that vessel and cargo were at the time in no imminent danger or a
danger which might "rationally be sought to be certain and imminent." It is, of course, conceivable
that, if left indefinitely at the mercy of the elements, they would run the risk of being destroyed. But
as stated at the above quotation, "this last requirement excludes measures undertaken against a
distant peril." It is the deliverance from an immediate, impending peril, by a common sacrifice, that
constitutes the essence of general average. (The Columbian Insurance Company of Alexandria vs.
Ashby & Stribling et al., 13 Peters 331; 10 L. Ed., 186). In the present case there is no proof that the
vessel had to be put afloat to save it from imminent danger. What does appear from the testimony of
plaintiff's manager is that the vessel had to be salvaged in order to enable it "to proceed to its port of
destination." But as was said in the case just cited it is the safety of the property, and not of the
voyage, which constitutes the true foundation of the general average.

As to the second requisite, we need only repeat that the expenses in question were not incurred for
the common safety of vessel and cargo, since they, or at least the cargo, were not in imminent peril.
The cargo could, without need of expensive salvage operation, have been unloaded by the owners if
they had been required to do so.

With respect to the third requisite, the salvage operation, it is true, was a success. But as the sacrifice
was for the benefit of the vessel — to enable it to proceed to destination — and not for the purpose of
saving the cargo, the cargo owners are not in law bound to contribute to the expenses.

The final requisite has not been proved, for it does not appear that the expenses here in question were
incurred after following the procedure laid down in article 813 et seq.

In conclusion we found that plaintiff not made out a case for general average, with the result that its
claim for contribution against the defendant cannot be granted.

Wherefore, the decision appealed from is reversed and plaintiff's complaint ordered dismissed with
costs.
Paras, C.J., Bengzon, Padilla, Montemayor, Jugo, Bautista Angelo, and Reyes, J.B.L., JJ., concur.
[G.R. No. 154305. December 9, 2004]

MACONDRAY & CO., INC., petitioner, vs. PROVIDENT INSURANCE


CORPORATION, respondent.

DECISION
PANGANIBAN, J.:

Hornbook is the doctrine that the negligence of counsel binds the client. Also settled is the rule that
clients should take the initiative of periodically checking the progress of their cases, so that they could
take timely steps to protect their interest.

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to set aside the
February 28, 2002 Decision[2] and the July 12, 2002 Resolution[3] of the Court of Appeals (CA) in CA-GR
CV No. 57077. The dispositive portion of the Decision reads as follows:

WHEREFORE, premises considered, the assailed Decision dated September 17, 1996 is hereby
REVERSED and SET ASIDE. Accordingly, [Petitioner] Macondray & Co., Inc., is hereby ORDERED to
pay the [respondent] the amount of P1,657,700.95.

The assailed Resolution denied petitioners Motion for Reconsideration.

The Facts

The CA adopted the factual antecedents narrated by the trial court, as follows:

x x x. On February 16, 1991, at Vancouver, B.C. Canada, CANPOTEX SHIPPING SERVICES LIMITED
INC., of Saskatoon, Saskatchewan, (hereinafter the SHIPPER), shipped and loaded on board the
vessel M/V Trade Carrier, 5000 metric tons of Standard Grade Muriate of Potash in bulk for
transportation to and delivery at the port of Sangi, Toledo City, Cebu, in favor of ATLAS
FERTILIZER CORPORATION, (hereinafter CONSIGNEE) covered by B/L Nos. VAN-SAN-1 for the
815.96 metric tons and VAN-SAN-2 for the 4,184.04 metric tons.Subject shipments were insured with
[respondent] against all risks under and by virtue of an Open Marine Policy No. MOP-00143 and
Certificate of Marine Insurance No. CMI-823-91.

When the shipment arrived, CONSIGNEE discovered that the shipment sustained losses/shortage of
476.140 metric tons valued at One Million Six Hundred Fifty Seven Thousand Seven Hundred Pesos
and Ninety Five Centavos (P1,657,700.95), Philippine Currency. Provident paid losses. Formal claims
was then filed with Trade & Transport and Macondray but the same refused and failed to settle the
same. Hence, this complaint.

As per Officers Return dated 4 June 1992, summons was UNSERVED to defendant TRADE AND
TRANSPORT at the given address for reason that TRADE AND TRANSPORT is no longer connected
with Macondray & Co. Inc., and is not holding office at said address as alleged by Ms. Guadalupe
Tan. For failure to effect service of summons the case against TRADE & TRANSPORT was considered
dismissed without prejudice.

Defendant MACONDRAY filed ANSWER, denying liability over the losses, having NO absolute
relation with defendant TRADE AND TRANSPORT, the alleged operator of the vessel who
transported the subject shipment; that accordingly, MACONDRAY is the local representative of the
SHIPPER; the charterer of M/V TRADE CARRIER and not party to this case; that it has no control
over the acts of the captain and crew of the Carrier and cannot be held responsible for any damage
arising from the fault or negligence of said captain and crew; that upon arrival at the port of Sangi,
Toledo City, Cebu, the M/V Trade Carrier discharged the full amount of shipment, as shown by the
draft survey with a total quantity of 5,033.59 metric tons discharged from the vessel and delivered to
the CONSIGNEE.

ISSUES: Whether or not Macondray and Co. Inc., as an agent is responsible for any loss sustained by
any party from the vessel owned by defendant Trade and Transport. Whether or not Macondray is
liable for loss which was allegedly sustained by the plaintiff in this case.

EVIDENCE FOR THE PLAINTIFF

Plaintiff presented the testimonies of Marina Celerina P. Aguas and depositions of Alberto Milan and
Alfonso Picson submitted as additional witnesses for PROVIDENT to prove the material facts of the
complaint are deemed admitted by defendant MACONDRAY, on their defense that it is not an agent
of TRADE AND TRANSPORT.

EVIDENCE FOR THE DEFENDANT MACONDRAY:

Witness Ricardo de la Cruz testified as Supercargo of MACONDRAY, that MACONDRAY was not
an agent of defendant TRADE AND TRANSPORT; that his functions as Supercargo was to prepare a
notice of readiness, statement of facts, sailing notice and customs clearance in order to attend to the
formalities and the need of the vessel; that MACONDRAY is performing functions in behalf of
CANPOTEX and was appointed as local agent of the vessel, which duty includes arrangement of the
entrance and clearance of the vessel.

The trial court, in the decision dated September 17, 1996 earlier adverted to, ruled in favor of the
[petitioner] x x x, the dispositive portion of which reads:

WHEREFORE, PREMISES CONSIDERED, the case as against [petitioner] MACONDRAY is hereby


DISMISSED.

No pronouncement as to costs.[4]

Ruling of the Court of Appeals

The CA affirmed the trial courts finding that petitioner was not the agent of Trade and
Transport. The appellate court ruled, however, that petitioner could still be held liable for the shortages
of the shipment, because the latter was the ship agent of Canpotex Shipping Services Ltd. -- the shipper
and charterer of the vessel M/V Trade Carrier.
All told, the CA held petitioner liable for the losses incurred in the shipment of the subject cargoes
to the [respondent], who, being the insurer of the risk, was subrogated to the rights and causes of action
which the consignee, Atlas Fertilizer Corporation, had against the [petitioner].[5]
Hence, this Petition.[6]

The Issues

Petitioner raises the following issues for our consideration:

Whether or not liability attached to petitioner despite the unequivocal factual findings, that it
was not a ship agent.

Whether or not the 28 February 2002 Decision of the Court of Appeals has attained finality.
Whether or not by filing the instant Petition for Review on Certiorari, petitioner is guilty of forum-
shopping.[7]

The Courts Ruling

The Petition has no merit.

First Issue:
Petitioners Liability

As a rule, factual findings of the Court of Appeals -- when not in conflict with those of the trial
court -- are not disturbed by this Court,[8] to which only questions of law may be raised in an appeal by
certiorari.[9]
In the present case, we find no compelling reason to overturn the Court of Appeals in its categorical
finding that petitioner was the ship agent. Such factual finding was not in conflict with the trial courts
ruling, which had merely stated that petitioner was not the agent of Trade and Transport. Indeed,
although it is not an agent of Trade and Transport, petitioner can still be the ship agent of the
vessel M/V Trade Carrier.
Article 586 of the Code of Commerce states that a ship agent is the person entrusted with
provisioning or representing the vessel in the port in which it may be found.
Hence, whether acting as agent of the owner[10] of the vessel or as agent of the
charterer,[11] petitioner will be considered as the ship agent[12] and may be held liable as such, as long
as the latter is the one that provisions or represents the vessel.
The trial court found that petitioner was appointed as local agent of the vessel, which duty includes
arrangement for the entrance and clearance of the vessel.[13]Further, the CA found and the evidence
shows that petitioner represented the vessel. The latter prepared the Notice of Readiness, the Statement
of Facts, the Completion Notice, the Sailing Notice and Customs Clearance. [14] Petitioners employees
were present at Sangi, Toledo City, one day before the arrival of the vessel, where they stayed until it
departed. They were also present during the actual discharging of the cargo. [15] Moreover, Mr. de la
Cruz, the representative of petitioner, also prepared for the needs of the vessel, like money, provision,
water and fuel.[16]
These acts all point to the conclusion that it was the entity that represented the vessel in
the Port of Manila and was the ship agent[17] within the meaning and context of Article 586 of the Code
of Commerce.
As ship agent, it may be held civilly liable in certain instances. The Code of Commerce provides:

Article 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for
the obligations contracted by the latter to repair, equip, and provision the vessel, provided the
creditor proves that the amount claimed was invested for the benefit of the same.

Article 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 equipments and
the freight it may have earned during the voyage.

Petitioner does not dispute the liabilities of the ship agent for the loss/shortage of 476.140 metric
tons of standard-grade Muriate of Potash valued at P1,657,700.95.Hence, we find no reason to delve
further into the matter or to disturb the finding of the CA holding petitioner, as ship agent, liable to
respondent for the losses sustained by the subject shipment.

Second Issue:
Finality of the CA Decision

Petitioner claims that it picked up the February 28, 2002 Decision of the CA on May 14, 2002, after
receiving the postal notice the day before. It further attributes gross negligence to its previous counsel
for not informing the CA of his change of address. It thus contends that notice of the assailed Decision
given to the previous counsel cannot be considered as notice to petitioner.
We are not persuaded. It is well-settled that when a party is represented by counsel, notice should
be made upon the counsel of record at his given address to which notices of all kinds emanating from
the court should be sent in the absence of a proper and adequate notice to the court of a change of
address.[18]
In the present case, service of the assailed Decision was made on petitioners counsels of record,
Attys. Moldez and Galoz, on March 6, 2002. That copy of the Decision was, however, returned to the
sender for the reason that the addressee had move[d] out. If counsel moves to another address without
informing the court of that change, such omission or neglect is inexcusable and will not stay the finality
of the decision.[19] The court cannot be expected to take judicial notice of the new address of a lawyer
who has moved or to ascertain on its own whether or not the counsel of record has been changed and
who the new counsel could possibly be or where he probably resides or holds office.[20]
It is unfortunate that the lawyer of petitioner neglected his duties to the latter. Be that as it may,
the negligence of counsel binds the client.[21] Service made upon the present counsel of record at his
given address is service to petitioner. Hence, the assailed Decision has already become final and
unappealable.
In the present case, there is no compelling reason to overturn well-settled jurisprudence or to
interpret the rules liberally in favor of petitioner, who is not entirely blameless. It should have taken
the initiative of periodically keeping in touch with its counsel, checking with the court, and inquiring
about the status of its case.[22] In so doing, it could have taken timely steps to neutralize the negligence
of its chosen counsel and to protect its interests. Litigants represented by counsel should not expect
that all they need to do is sit back, relax and await the outcome of their case.[23]
In view of the foregoing, there is no necessity of passing upon the third issue raised by petitioner.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioner.
SO ORDERED.
G.R. No. L-42926 September 13, 1985

PEDRO VASQUEZ, SOLEDAD ORTEGA, CLETO B. BAGAIPO, AGUSTINA VIRTUDES,


ROMEO VASQUEZ and MAXIMINA CAINAY, petitioners,
vs.
THE COURT OF APPEALS and FILIPINAS PIONEER LINES, INC., respondents.

Emilio D. Castellanes for petitioners.

Apolinario A. Abantao for private respondents.

MELENCIO-HERRERA, J.:

This litigation involves a claim for damages for the loss at sea of petitioners' respective children after
the shipwreck of MV Pioneer Cebu due to typhoon "Klaring" in May of 1966.

The factual antecedents, as summarized by the trial Court and adopted by respondent Court, and
which we find supported by the record, read as follows:

When the inter-island vessel MV "Pioneer Cebu" left the Port of Manila in the early
morning of May 15, 1966 bound for Cebu, it had on board the spouses Alfonso Vasquez
and Filipinas Bagaipo and a four-year old boy, Mario Marlon Vasquez, among her
passengers. The MV "Pioneer Cebu" encountered typhoon "Klaring" and struck a reef
on the southern part of Malapascua Island, located somewhere north of the island of
Cebu and subsequently sunk. The aforementioned passengers were unheard from since
then.

Plaintiffs Pedro Vasquez and Soledad Ortega are the parents of Alfonso Vasquez;
plaintiffs Cleto Bagaipo and Agustina Virtudes are the parents of Filipinas Bagaipo; and
plaintiffs Romeo Vasquez and Maxima Cainay are the parents of the child, Mario
Marlon Vasquez. They seek the recovery of damages due to the loss of Alfonso
Vasquez, Filipinas Bagaipo and Mario Marlon Vasquez during said voyage.

At the pre-trial, the defendant admitted its contract of carriage with Alfonso Vasquez,
Filipinas Bagaipo and Mario Marlon Vasquez, and the fact of the sinking of the MV
"Pioneer Cebu". The issues of the case were limited to the defenses alleged by the
defendant that the sinking of the vessel was caused by force majeure, and that the
defendant's liability had been extinguished by the total loss of the vessel.

The evidence on record as to the circumstances of the last voyage of the MV "Pioneer
Cebu" came mainly, if not exclusively, from the defendant. The MV "Pioneer Cebu" was
owned and operated by the defendant and used in the transportation of goods and
passengers in the inter-island shipping. Scheduled to leave the Port of Manila at 9:00
p.m. on May 14, 1966, it actually left port at 5:00 a.m. the following day, May 15, 1966. It
had a passenger capacity of three hundred twenty-two (322) including the crew. It
undertook the said voyage on a special permit issued by the Collector of Customs
inasmuch as, upon inspection, it was found to be without an emergency electrical
power system. The special permit authorized the vessel to carry only two hundred sixty
(260) passengers due to the said deficiency and for lack of safety devices for 322
passengers (Exh. 2). A headcount was made of the passengers on board, resulting on the
tallying of 168 adults and 20 minors, although the passengers manifest only listed 106
passengers. It has been admitted, however, that the headcount is not reliable inasmuch
as it was only done by one man on board the vessel.

When the vessel left Manila, its officers were already aware of the typhoon Klaring
building up somewhere in Mindanao. There being no typhoon signals on the route from
Manila to Cebu, and the vessel having been cleared by the Customs authorities, the MV
"Pioneer Cebu" left on its voyage to Cebu despite the typhoon. When it reached
Romblon Island, it was decided not to seek shelter thereat, inasmuch as the weather
condition was still good. After passing Romblon and while near Jintotolo island, the
barometer still indicated the existence of good weather condition continued until the
vessel approached Tanguingui island. Upon passing the latter island, however, the
weather suddenly changed and heavy rains felt Fearing that due to zero visibility, the
vessel might hit Chocolate island group, the captain ordered a reversal of the course so
that the vessel could 'weather out' the typhoon by facing the winds and the waves in the
open. Unfortunately, at about noontime on May 16, 1966, the vessel struck a reef near
Malapascua island, sustained leaks and eventually sunk, bringing with her Captain
Floro Yap who was in command of the vessel.

Due to the loss of their children, petitioners sued for damages before the Court of First Instance of
Manila (Civil Case No. 67139). Respondent defended on the plea of force majeure, and the extinction of
its liability by the actual total loss of the vessel.

After proper proceedings, the trial Court awarded damages, thus:

WHEREFORE, judgment is hereby rendered ordering the defendant to pay:

(a) Plaintiffs Pedro Vasquez and Soledad Ortega the sums of P15,000.00 for the loss of
earning capacity of the deceased Alfonso Vasquez, P2,100.00 for support, and
P10,000.00 for moral damages;

(b) Plaintiffs Cleto B. Bagaipo and Agustina Virtudes the sum of P17,000.00 for loss of
earning capacity of deceased Filipinas Bagaipo, and P10,000.00 for moral damages; and

(c) Plaintiffs Romeo Vasquez and Maximina Cainay the sum of P10,000.00 by way of
moral damages by reason of the death of Mario Marlon Vasquez.

On appeal, respondent Court reversed the aforementioned judgment and absolved private
respondent from any and all liability.

Hence, this Petition for Review on Certiorari, the basic issue being the liability for damages of private
respondent for the presumptive death of petitioners' children.

The trial Court found the defense of caso fortuito untenable due to various decisive factors, thus:

... It is an admitted fact that even before the vessel left on its last voyage, its officers and
crew were already aware of the typhoon brewing somewhere in the same general
direction to which the vessel was going. The crew of the vessel took a calculated risk
when it proceeded despite the typhoon advisory. This is quite evident from the fact that
the officers of the vessel had to conduct conferences amongst themselves to decide
whether or not to proceed. The crew assumed a greater risk when, instead of seeking
shelter in Romblon and other islands the vessel passed en route, they decided to take a
change on the expected continuation of the good weather the vessel was encountering,
and the possibility that the typhoon would veer to some other directions. The eagerness
of the crew of the vessel to proceed on its voyage and to arrive at its destination is
readily understandable. It is undeniably lamentable, however, that they did so at the
risk of the lives of the passengers on board.

Contrariwise, respondent Appellate Court believed that the calamity was caused solely and
proximately by fortuitous event which not even extraordinary diligence of the highest degree could
have guarded against; and that there was no negligence on the part of the common carrier in the
discharge of its duties.
Upon the evidence and the applicable law, we sustain the trial Court. "To constitute a caso fortuito that
would exempt a person from responsibility, it is necessary that (1) the event must be independent of
the human will; (2) the occurrence must render it impossible for the debtor to fulfill the obligation in
a normal manner; and that (3) the obligor must be free of participation in, or aggravation of, the
injury to the creditor." 1 In the language of the law, the event must have been impossible to foresee, or
if it could be foreseen, must have been impossible to avoid. 2 There must be an entire exclusion of
human agency from the cause of injury or loss. 3

Turning to this case, before they sailed from the port of Manila, the officers and crew were aware of
typhoon "Klaring" that was reported building up at 260 kms. east of Surigao. In fact, they had lashed
all the cargo in the hold before sailing in anticipation of strong winds and rough waters.4 They
proceeded on their way, as did other vessels that day. Upon reaching Romblon, they received the
weather report that the typhoon was 154 kms. east southeast of Tacloban and was moving west
northwest.5 Since they were still not within the radius of the typhoon and the weather was clear, they
deliberated and decided to proceed with the course. At Jintotolo Island, the typhoon was already
reported to be reaching the mainland of Samar. 6 They still decided to proceed noting that the
weather was still "good" although, according to the Chief Forecaster of the Weather Bureau, they
were already within the typhoon zone. 7 At Tanguingui Island, about 2:00 A.M. of May 16, 1966, the
typhoon was in an area quite close to Catbalogan, placing Tanguingui also within the typhoon zone.
Despite knowledge of that fact, they again decided to proceed relying on the forecast that the
typhoon would weaken upon crossing the mainland of Samar. 8 After about half an hour of
navigation towards Chocolate Island, there was a sudden fall of the barometer accompanied by
heavy downpour, big waves, and zero visibility. The Captain of the vessel decided to reverse course
and face the waves in the open sea but because the visibility did not improve they were in total
darkness and, as a consequence, the vessel ran aground a reef and sank on May 16, 1966 around 12:45
P.M. near Malapascua Island somewhere north of the island of Cebu.

Under the circumstances, while, indeed, the typhoon was an inevitable occurrence, yet, having been
kept posted on the course of the typhoon by weather bulletins at intervals of six hours, the captain
and crew were well aware of the risk they were taking as they hopped from island to island from
Romblon up to Tanguingui. They held frequent conferences, and oblivious of the utmost diligence
required of very cautious persons, 9 they decided to take a calculated risk. In so doing, they failed to
observe that extraordinary diligence required of them explicitly by law for the safety of the
passengers transported by them with due regard for an circumstances 10 and unnecessarily exposed
the vessel and passengers to the tragic mishap. They failed to overcome that presumption of fault or
negligence that arises in cases of death or injuries to passengers. 11

While the Board of Marine Inquiry, which investigated the disaster, exonerated the captain from any
negligence, it was because it had considered the question of negligence as "moot and academic," the
captain having "lived up to the true tradition of the profession." While we are bound by the Board's
factual findings, we disagree with its conclusion since it obviously had not taken into account the
legal responsibility of a common carrier towards the safety of the passengers involved.

With respect to private respondent's submission that the total loss of the vessel extinguished its
liability pursuant to Article 587 of the Code of Commerce12 as construed in Yangco vs. Laserna, 73
Phil. 330 [1941], suffice it to state that even in the cited case, it was held that the liability of a
shipowner is limited to the value of the vessel or to the insurance thereon. Despite the total loss of the
vessel therefore, its insurance answers for the damages that a shipowner or agent may be held liable
for by reason of the death of its passengers.

WHEREFORE, the appealed judgment is hereby REVERSED and the judgment of the then Court of
First Instance of Manila, Branch V, in Civil Case No. 67139, is hereby reinstated. No costs.

SO ORDERED.