STEVENS v NORDEUTSCHER

Plaintiff commenced this action in the Court of First Instance of Manila on June 24, 1960. It alleged in the complaint that on March 28, 1959, it had shipped from Hamburg to Manila, aboard the "MS SCHWABENSTEIN", a vessel of defendant Norddeuscher Lloyd, 2,000 pieces of prismatical thermometers valued at $650; that on May 15, 1959, said vessel arrived at Manila; that on May 21, 1959, the master of said vessel notified the plaintiff, thru its broker, of the delivery of said goods; that, upon examination of the case containing the same, it turned out that 1,154 pieces of said thermometers valued at $342.74, were missing and/or destroyed; that plaintiff immediately filed the corresponding notice of loss and/or short delivery, followed by the corresponding notice and formal claim for loss and/or short delivery; that, despite several demands, defendant had refused and failed to pay said sum of $342.74; that, as a consequence, plaintiff had, also, incurred damages in the sums of P1,000, as attorney's fees, and P664.70, as unrealized profits; and that an action instituted in the Municipal Court of Manila on April 27, 1960 — seemingly, for the recovery of the value of said thermometers and the amount of said — damages was dismissed by said court on June 13, 1960, without any trial on the merits, upon the ground of lack of jurisdiction over the subject-matter of the case, inasmuch as the same involved the exercise of admiralty and maritime jurisdiction. Plaintiff prayed for judgment for said sums of $342.74, P1,000 and P664.70, plus costs.

On July 8, 1960, defendant moved to dismiss the complaint upon the ground that plaintiff's causes of action had prescribed, it having been filed on June 24, 1960, or more than a year from May 21, 1959, when plaintiff was notified of the delivery of the case containing the thermometers in question. This motion having been granted and the complaint dismissed, plaintiff interposed this appeal, maintaining that the period of one (1) year prescribed in Commonwealth Act No. 65, in relation to Carriage of Goods by Sea Act — within which the liability of carriers, based upon a contract of carriage goods by sea, may be enforced by suit — was suspended by the commencement of the first action in the municipal court, on April 27, 1960; that the running of said period was resumed or continued on June 13, 1960, when said action was dismissed; and that, excluding said period from April 27, 1960 to June 13, 1960, or forty-seven (47) days, less than one (1) year has elapsed from May 21, 1959 to June 24, 1960, when this case was filed in the court of first instance. In support of this pretense, plaintiff

invokes Article 1155 of the Civil Code of the Philipines, reading:

The prescription of actions is interrupted when they filed before the court, when there is a written extrajudicial command by the creditors, and when there is any written acknowledged judgment of the debt by the debtor.

Upon mature deliberation, we are of the opinion, and so hold, that the order appealed from should be reversed, not only because of the operation of said Article 1155 of our Civil Code, but, also, in view of the provisions section 49 of Act No. 190, pursuant to which:

If, in an action commenced, in due time, a judgment for the plaintiff be reversed, or if the plaintiff fail otherwise than upon the merits, and the time limited for the commencement of such action has, at the date of such reversal or failure, expired, the plaintiff, or, if he die and the cause of action survive, his representatives may commence a new action within one year after such date, and this provision shall apply to any claim asserted in any pleading by a defendant.

The action commenced by the plaintiff in the Municipal Court of Manila, on April 27, 1960, was dismissed June 13, 1960, or over twenty (20) days after the expiration of the period of one (1) year, beginning from May 21, 1959, within which plaintiff's action could be brought pursuant to Commonwealth Act No. 65, in relation to the Carriage of Goods by Sea Act. Under said section of Act No. 190, the period within which plaintiff could initiate the present case was renewed, therefore, for another year, beginning from June 14, 1960 (Tolentino Vitug, 39 Phil., 126; Smith vs. McNeal, 100 U.S. 426, 27 L. ed. 986). The case at bar was commenced on June 24, 1960, or within the period last mentioned.

The cases of Oriental Commercial Co. vs. Jureidini (71 Phil., 25) and Conspecto vs. Fruto (31 Phil., 144), in which it was held that:

. . . Cuando se entabia una accion dentro del plazo de prescripcion y se desiste de ella despues, o se sobresee sin condiciones, por una razon u otra, no hace que la accion que se entable mas tarde pero ya fuera del periodo de prescripcion, se pueda considerar como presentada detro de dicho periodo porque quiere contrase con la accion entablada con anterioridad. La falta de gestion de la recurrente por cuya causa se desestimaron sus demandas segunda y tercera, no puede interpretarse sino como una renuncia de su parte y, al ejercitar su ultima accion no se ha

colocado en la misma situacion en que antes se hallaba al ejercitar sus tres anteriores acciones. Este es el mismo criterio que expresamos cuando se nos presents una cuestion aniloga en la causa de Conspecto contra Fruto, 31 Jur. Fil 155. (Emphasis supplied.)1awphîl.nèt

are not in point, for the dismissal of the herein plaintiff's complaint in the municipal court was not due to its desistance or voluntary abandonment.

Insofar as inconsistent with the conclusion we have thus reached, the view adopted in Chua Kuy vs. Everett Steamship Corp., L-5534 (May 27, 1953) and Yek Tong Lin Fire & Marine Insurance Co. vs. American President Lines, Inc., L-11081 (April 30, 1958) should be, as it is hereby, modified accordingly.

WHEREFORE, the order appealed from is reversed and this case remanded to the lower court for further proceedings, with costs of this instance against defendant Norddeuscher Lloyd. It is so ordered.

DOLE PH v MARITIME CO

The cargo subject of the instant case was discharged in Dadiangas unto the custody of the consignee, Dole Philippines. The corresponding claim for the damages sustained by the cargo was filed by the plaintiff with the defendant, Maritime Company on May 4, 1972.

On June 11, 1973 the plaintiff filed a complaint in the CFI Manila embodying 3 causes of action involving 3 separate and different shipments. The third cause of action therein involved the cargo now subject of this present litigation.

On December 11, 1974, Judge Serafin Cuevas issued an Order dismissing the first two causes of action. The third cause of action which covered the cargo subject of this case now was likewise dismissed but without prejudice as it was not covered by the settlement. Because of the dismissal of the complaint with respect to the third cause of action, DOLE instituted this present complaint on January 6, 1975.

Maritime filed an answer pleading inter alia the affirmative defense of prescription under the provisions of the Carriage of Goods by Sea Act. The Trial Court granted the motion, scheduling the preliminary hearing on April 27, 1977. The record before the Court does not show whether or not that hearing was held, but under date of May 6, 1977, Maritime filed a formal motion to dismiss invoking once more the ground of prescription.

The Trial Court, after due consideration, resolved the matter in favor of Maritime and dismissed the complaint.

Issue: Whether or not Article 1155 of the Civil Code applies in lieu of the COGSA.

Held:No. Article 1155 of the Civil Code provides that the prescription of actions is interrupted by the making of an extrajudicial written demand by the creditor

Section 3, paragraph 6 of the COGSA provides that:

the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered; Provided, That, if a notice of loss or damage, either apparent or conceded, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when.the goods should have been delivered.

1. Dole argues that since the provisions of the Civil Code are, by express mandate of said Code, suppletory of deficiencies in the Code of Commerce and special laws in matters governed by the latter and there being a patent deficiency with respect to the tolling of the prescriptive period provided for in the Carriage of Goods by Sea Act, prescription under said Act is subject to the provisions of Article 1155 of the Civil Code on tolling. Since Dole's claim for loss or damage was filed on May 4, 1972 amounted to a written extrajudicial demand which would toll or interrupt prescription under Article 1155, it operated to toll prescription also in actions under the Carriage of Goods by Sea Act.

These arguments might merit weightier consideration were it not for the fact that the question has already received a definitive answer, adverse to the position taken by Dole, in The Yek Tong Lin Fire & Marine Insurance Co.,

Ltd. vs. American President Lines, Inc.

2. Dole argues that it was error for the court not to have considered the action of plaintiff-appellant suspended by the extrajudicial demand which took place, according to defendant's own motion to dismiss on August 22, 1952.

Court noticed that while plaintiff avoids stating any date when the goods arrived in Manila, it relies upon the allegation made in the motion to dismiss that a protest was filed on August 22, 1952 — which goes to show that plaintiff-appellant's counsel has not been laying the facts squarely before the court for the consideration of the merits of the case. We have already decided that in a case governed by the Carriage of Goods by Sea Act, the general provisions of the Code of Civil Procedure on prescription should not be made to apply. (Chua Kuy vs. Everett Steamship Corp., G.R. No. L-5554, May 27, 1953.) We hold that in such a case the general provisions of the new Civil Code (Art. 1155) cannot be made to apply, as such application would have the effect of extending the one-year period of prescription fixed in the law. It is desirable that matters affecting transportation of goods by sea be decided in as short a time as possible; the application of the provisions of Article 1155 of the new Civil Code would unnecessarily extend the period and permit delays in the settlement of questions affecting transportation, contrary to the clear intent and purpose of the law.

Under Dole's theory, when its claim was received by Maritime, the one-year prescriptive period was interrupted and began to run anew from May 4, 1972, affording Dole another period of one year counted from that date within which to institute action on its claim for damage. Unfortunately, Dole let the new period lapse without filing action. It instituted Civil Case No. 91043 only on June 11, 1973, more than one month after that period has expired and its right of action had prescribed.

ANG v AMERICAN STEAMSHIP

(check chrome)Yau Yue Commercial Bank Ltd. of Hongkong, sell 140 packages ofgalvanized steel durzinc sheetsto one Herminio G. Teves, shippedby Tokyo Boeki Ltd. of Tokyo, Japan. with AmericanSteamshipAgencies, Inc. as the agent in the Philippines, under ashipping agreement. The bill of lading was indorsed to the order

of and delivered to Yau Yue by the shipper. Upon receiptthereof, Yau Yue drew a demand draft together with the bill oflading against Herminio G. Teves, through the Hongkong &Shanghai Bank. Upon arrival, Hongkong & Shanghai Bank notifiedTeves, the "notify party" under the bill of lading, of thearrival of the goods and requested payment of the demand draftrepresenting the purchase price of the articles. Teves, however,did not pay the demand draft, prompting the bank to make thecorresponding protest. The bank likewise returned the bill oflading and demand draft to Yau Yue which indorsed the said billof lading to Domingo Ang. Despite non-payment Teves was able tosecure a "Permit To Deliver Imported Articles" which hepresented to the Bureau of Customs which in turn released to himthe articles covered by the bill of lading. Subsequently,Domingo Ang claimed for the articles from American SteamshipAgencies, Inc., by presenting the indorsed bill of lading, buthe was informed by the latter that it had delivered the articlesto Teves. A complaint was filed by Ang against AmericanSteamship for having allegedly wrongfully delivered and/orconverted the goods covered by the bill of lading. Defendantfiled a motion to dismiss upon the ground that plaintiff's causeof action has prescribed under the Carriage of Goods by Sea Act.Lower court dismissed the case on the ground of prescription.Hence, an appeal was filed to SC.Issue:Has plaintiff-appellant's cause of action prescribed underSection 3(6), paragraph 4 of the Carriage of Goods by Sea Act?What is to be resolved — in order to determine the applicabilityof the prescriptive period of one year to the case at bar — iswhether or not there was "loss" of the goods subject matter ofthe complaint.Ruling:From the allegations of the complaint, therefore, the goodscannot be deemed "lost". They were delivered to Herminio G.Teves, so that there can only be either delivery, if Tevesreally was entitled to receive them, or misdelivery, if he wasnot so entitled. It is not for Us now to resolve whether or notdelivery of the goods to Teves was proper, that is, whether ornot there was rightful delivery or misdelivery. There being noloss or damage to the goods, the aforequoted provision of the

Carriage of Good by Sea Act stating that "In any event, thecarrier and the ship shall be discharged from all liability inrespect of loss or damage unless suit is brought within one yearafter delivery of the goods or the datewhen the goods shouldhave been delivered," does not apply. It follows that for suitspredicated not upon loss or damage but on alleged misdelivery(or conversion) of the goods, the applicable rule onprescriptions that found in the Civil Code, namely, either tenyears for breach of a written contract or four years for quasi-delict. In either case, plaintiff's cause of action has not vetprescribed, since his right of action would have accrued at theearliest on May 9, 1961 when the ship arrived in Manila and hefiled suit on October30, 1963.Wherefore, the dismissal orderappealed from is hereby reversed and set aside and this case isremanded to the court a quo for further proceedings

MITSUI v CA

Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage through Meister Transport, Inc., an international freight forwarder, with private respondent Lavine Loungewear Manufacturing Corporation to transport goods of the latter from Manila to Le Havre, France. Petitioner undertook to deliver the goods to France 28 days from initial loading. On July 24, 1991, petitioner's vessel loaded private respondent's container van for carriage at the said port of originHowever, in Kaoshiung, Taiwan the goods were not transshipped immediately, with the result that the shipment arrived in Le Havre only on November 14, 1991. The consignee allegedly paidonly half the value of the said goods on the ground that they did not arrive in France until the "off season" in that country. The remaining half was allegedly charged to the account of private

respondent which in turn demanded payment from petitioner through its agent.Issue:Whether or not private respondent's action is for "loss or damage" to goods shipped, within the meaning of the Carriage of Goods by Sea Act (COGSA)Ruling:No. The suit is not for "loss or damage" to goods contemplated in §3(6), the question of prescription of action is governed not by the COGSA but by Art. 1144 of the Civil Code which provides for a prescriptive period of ten years. As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, "loss" contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared in such a way that their existence is unknown or they cannot be recovered.There would be some merit in appellant's insistence that the damages suffered by him as a result of the delay in the shipment of his cargo are not covered by the prescriptive provision of the Carriage of Goods by Sea Act above referred to, if such damages were due, not to the deterioration and decay of the goods while in transit, but to other causes independent of the condition of the cargo upon arrival, like a drop in their market value

MARITIME AGENCIES v CA

Facts: Transcontinental Fertilizer Company of London chartered from Hongkong the motor vessel named “Hongkong Island” for the shipment of 8073.35 MT (gross) bagged urea from Novorossisk, Odessa, USSR, to the Philippines, the parties signing for this purpose a Uniform General Charter dated 9 August 1979. Of the total shipment, 5,400.04 MT was for the account of Atlas Fertilizer Company as consignee, 3,400.04 to be discharged in Manila and the remaining 2,000 MT in Cebu. The goods were insured by the consignee with the Union Insurance Society of Canton, Ltd. for P6,779,214.00 against all risks. Maritime Agencies & Services, Inc. was appointed as the charterer’s agent and Macondray

Company, Inc. as the owner’s agent. The vessel arrived in Manila on 3 October 1979, and unloaded part of the consignee’s goods, then proceeded to Cebu on 19 October 1979, to discharge the rest of the cargo. On 31 October 1979, the consignee filed a formal claim against Maritime, copy furnished Macondray, for the amount of P87,163.54, representing C & F value of the 1,383 shortlanded bags. On 12 January 1980, the consignee filed another formal claim, this time against Viva Customs Brokerage, for the amount of P36,030.23, representing the value of 574 bags of net unrecovered spillage. These claims having been rejected, the consignee then went to Union, which on demand paid the total indemnity of P113,123.86 pursuant to the insurance contract. As subrogee of the consignee, Union then filed on 19 September 1980, a complaint for reimbursement of this amount, with legal interest and attorney’s fees, against Hongkong Island Company, Ltd., Maritime Agencies & Services, Inc. and/or Viva Customs Brokerage. On 20 April 1981, the complaint was amended to drop Viva and implead Macondray Company, Inc. as a new defendant. On 4 January 1984, after trial, the trial court rendered judgment, ordering (a) Hongkong Island Co., Ltd., and its local agent Macondray & Co., Inc. to pay Union the sum of P87,1 63.54 plus 12% interest from 20 April 1981 until the whole amount is fully paid, P1,000.00 as attorney’s fees and to pay ½ of the costs; and (b) Maritime Agencies & Services, Inc., to pay Union the sum of P36,030.23, plus 12% interest from 20 April 1981 until the whole amount is fully paid, P600.00 as attorney’s fees and to pay ½ of the costs. Maritime Agencies & Services appealed the decision to the Court of Appeals, which rendered a decision on 28 November 1986, modifying the decision appeal from, finding the charterer Transcontinental Fertilizer Co., Ltd. represented by its agent Maritime Agencies & Services, Inc. liable for the amount of P87,163.54 plus interest at 12% plus attorney’s fees of P1,000.00. Hongkong Island Cos. Ltd. represented by Macondray Co., Inc. were accordingly exempted from any liability. Maritime and Union filed separate motions for reconsideration which were both denied. Hence, the petitions. These two cases were consolidated and given due course, the parties being required to submit simultaneous memoranda. All complied, including Hongkong Island Company, Ltd., and Macondray Company, Inc., although they pointed out that they were not involved in the petitions. The Supreme Court set aside the decision of the appellate court, and reinstated that of the trial court as modified; and further holding that the parties shall bear their respective costs.Factual Findings of the trial court In his decision dated 4 January 1984, Judge Artemon de Luna of the Regional Trial Court of Manila held that the Court, on the basis of the evidence, finds nothing to disprove the finding of the marine and cargo surveyors

that of the 66,390 bags of urea fertilizer, 65,547 bags were “discharged ex-vessel” and there were shortlanded” “1,383 bags,” valued at P87,163.54. This sum should be the principal and primary liability and responsibility of the carrying vessel. Under the contract for the transportation of goods, the vessel’s responsibility commence upon the actual delivery to, and receipt by the carrier or its authorized agent, until its final discharge at the port of Manila.Categories of charters There are three general categories of charters, to wit, the demise or “bareboat charter,” the time charter and the voyage charter. 3. Demise charter A demise involves the transfer of full possession and control of the vessel for the period covered by the contract, the charterer obtaining the right to use the vessel and carry whatever cargo it chooses, while manning and supplying the ship as well. 4. Time charter A time charter is a contract to use a vessel for a particular period of time, the charterer obtaining the right to direct the movements of the vessel during the chartering period, although the owner retains possession and controlVoyage charter A voyage charter is a contract for the hire of a vessel for one or a series of voyages usually for the purpose of transport in goods for the charterer. The voyage charter is a contract of affreightment and is considered a private carriage. 6. Responsibility for cargo loss in case of a voyage charter A voyage charter being a private carriage, the parties may freely contract respecting liability for damage to the goods and other matters. The basic principle is that “the responsibility for cargo loss falls on the one who agreed to perform the duty involved” in accordance with the terms of most voyage charters. This is true in the present cases where the charterer was responsible for loading, stowage and discharging at the ports visited, while the owner was responsible for the care of the cargo during the voyage. 7. Paragraph 2 of the Uniform General Charter Paragraph 2 of the Uniform General Charter reads “Owners are to be responsible for loss of or damage to the goods or for delay in delivery of the goods only in case the loss, damage or delay has been caused by the improper or negligent stowage of the goods or by personal want of due diligence on the part of the Owners or their Manager to make the vessel in all respects seaworthy and to secure that she is properly manned, equipped and supplied or by the personal act or default of the Owners or their Manager. And the Owners are responsible for no loss or damage or delay arising from any other cause whatsoever, even from the neglect or default of the Captain or crew or some other person employed by the Owners onboard or ashore for whose acts they would, but for this clause, be responsible, or from unseaworthiness of the vessel on loading or commencement of the voyage or at any time

whatsoever. Damage caused by contact with or leakage, smell or evaporation from other goods or by the inflammable or explosive nature or insufficient package of other goods not to be considered as caused by improper or negligent stowage, even if in fact so caused.”Clause 17 of the Additional Clauses to Charterparty Clause 17 of Additional Clauses to Charterparty provides that “The cargo shall be loaded, stowed and discharged free of expense to the vessel under the Master’s supervision. However, if required at loading and discharging ports the vessel is to give free use of winches and power to drive them gear, runners and ropes. Also slings, as on board. Shore winchmen are to be employed and they are to be for Charterers’ or Shippers’ or Receivers’ account as the case may be. Vessel is also to give free use of sufficient light, as on board, if required for night work. Time lost through breakdown of winches or derricks is not to count as laytime.” 9. Home Insurance vs. American Steamship Agencies; Stipulations exempting owner from liability in charter valid In Home Insurance Co. v. American Steamship Agencies, Inc., the trial court rejected similar stipulations as contrary to public policy and, applying the provisions of the Civil Code on common carriers and of the Code of Commerce on the duties of the ship captain, held the vessel liable in damages for loss of part of the cargo it was carrying. The Supreme Court reversed, therein, declaring that “the provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy, and is deemed valid. 10. Civil Code provisions on common carrier should not be applied if carrier is acting as private carrier, public not involved The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void only if the strict public policy governing common carriers is applied. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single party. 11. Ruling cannot benefit Hongkong due to shortlanded bags; Presumption of fault in damaged goods covered by clean bill of lading The present ruling cannot benefit Hongkong, because there was no showing in that case that the vessel was at fault. Herein, the trial court found that 1,383 bags were shortlanded, which could only mean that they were damaged or lost on board the vessel before unloading of the shipment. It is not denied that the entire cargo shipped by the charterer in Odessa was covered by a clean bill of lading. As the bags were in good order when

received in the vessel, the presumption is that they were damaged or lost during the voyage as a result of their negligent improper stowage. For this the ship owner should be held liable. 12. Prescription of action; Filing of claim within 1 year, in accordance with COGSA The period for filing the claim is one year, in accordance with the Carriage of Goods by Sea Act. This was adopted and embodied by our legislature in Commonwealth Act 65 which, as a special law, prevails over the general provisions of the Civil Code on prescription of actions. 13. Section 3(6) of Commonwealth Act 65 Section 3(6) of that Act provides that “In any event, the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered; Provided, that if a notice of loss for damage; either apparent or concealed, is not given as provided for in this section, that fact shall not effect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered.” 14. Application of the prescriptive period; Union Carbide vs. Manila Railroad The period was applied by the Court in the case of Union Carbide, Philippines, Inc. v. Manila Railroad Co., where it was held “Under the facts of this case, we held that the one-year period was correctly reckoned by the trial court from December 19, 1961, when, as agreed upon by the parties and as shown in the tally sheets, the cargo was discharged from the carrying vessel and delivered to the Manila Port Service. That one-year period expired on December 19, 1962. Inasmuch as the action was filed on December 21, 1962, it was barred by the statute of limitations.” 15. Application of prescriptive period; Present cases The one-year period in the present cases should commence on 20 October 1979, when the last item was delivered to the consignee. Union’s complaint was filed against Hongkong on 19 September 1980, but tardily against Macondray on 20 April 1981. The consequence is that the action is considered prescribed as far as Macondray is concerned but not against its principal, which is what matters anyway.

FIL MERCHANTS

In 1976, Choa Tiek Seng contracted Frota Oceanica Brasiliera for the latter to deliver goods. Choa Tiek Seng insured the goods with Filipino Merchants Insurnace Company. The goods left the port of Manila on December 13, 1976 and reached its point of destination on December 17, 1976. The goods were however damaged.

Choa Tiek Seng then filed an insurance claim. Filipino Merchants

refused to pay so in August 1977, it was sued by Choa Tiek Seng. In January 1978, Filipino Merchants filed a third party complaint against the carrier Frota Oceanica Brasiliera as it alleged that it is the carrier who is liable to pay damages to Choa Tiek Seng. Judge Jose Alejandro of the trial court ruled against Filipino Merchants. The Court of Appeals affirmed the ruling of the judge. The lower courts ruled that Filipino Merchants is already barred from filing a claim because under the Carriage of Goods by Sea Act, the suit against the carrier must be filed “within one year after delivery of the goods or the date when the goods should have been delivered” or one year from December 17, 1976. The insurance company is already barred for it filed its third party complaint only in January 1978.

ISSUE: Whether or not Filipino Merchants is precluded by the said time-bar rule.

HELD: Yes. The pertinent provision of the Carriage of Goods by Sea Act does not only apply to the shipper but also applies to the insurer. The coverage of the Carriage of Goods by Sea Act includes the insurer of the goods. Otherwise, what the Act intends to prohibit after the lapse of the one year prescriptive period can be done indirectly by the shipper or owner of the goods by simply filing a claim against the insurer even after the lapse of one year. This would be the result if the insurer can, at any time, proceed against the carrier and the ship since it is not bound by the time-bar provision. In this situation, the one year limitation will be practically useless. This could not have been the intention of the law which has also for its purpose the protection of the carrier and the ship from fraudulent claims by having “matters affecting transportation of goods by sea be decided in as short a time as possible” and by avoiding incidents which would “unnecessarily extend the period and permit delays in the settlement of questions affecting the transportation.”

MAYER STEEL PIPE

FACTS: Hong Kong Government Supplies Department contracted Mayer Steel Pipe Corporation to manufacture and supply various

steel pipes and fittings. Prior to the shipping, Mayer insured these pipes and fittings against all risks with South Sea Surety and Insurance Co., Inc. and Charter Insurance Corp., with Industrial Inspection Inc. appointed as third-party inspector. After examining the pipes and fittings, Industrial Inspection certified that they are in good order condition. However, when the goods reached Hong Kong, it was discovered that a substantial portion thereof was damaged.

The trial court found in favor of the insured. However, when the case was elevated to the CA, it set aside the decision of the trial court and dismissed the complaint on the ground of prescription. It held that the action was barred under Sec. 3(6) of the Carriage of Goods by Sea Act (COGSA) since it was filed only on April 17, 1986, more than two years from the time the goods were unloaded from the vessel.

ISSUE: Whether or not the action is barred by prescription.

HELD: Sec. 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability for loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been delivered. Under this provision, only the carrier’s liability is extinguished if no suit is brought within one year. But the liability of the insurer is not extinguished because the insurer’s liability is based not on the contract of carriage but on the contract of insurance.

An insurance contract is a contract whereby one party, for a consideration known as the premium, agrees to indemnify another for loss or damage which he may suffer from a specified peril. An “all risks” insurance policy covers all kinds of loss other than those due to willful and fraudulent act of the insured. Thus, when private respondents issued the “all risks” policies to Mayer, they bound themselves to indemnify the latter in case of loss or damage to the goods insured. Such obligation prescribes in ten years, in accordance with Article 1144 of the New Civil Code.

INTL HARVESTER

FACTS:International Harvester Company of the Philippines is theS/S Belle of the Seatook on board at Los Angeles, California, U. S. A., goodsfor shipment to Manila, and covered by Bill of Lading No. 105; WhenS/S Belle of the Seaarrived in Manila, the cargoes wereduscharged at the Government piers under the supervision and custody of Manila Terminal Co., Inc.Out of the goods covered by Bill of Lading No. 105, one carton of assorted samples with a stipulated value of P200 was not delivered toYaras and Company which was lost through the negligence either of the Manila Terminal Co., Inc., or of the International Harvester Company of the Philippines. The complaint prayed for judgment either against the defendant Manila Terminal Co., Inc., or theInternational Harvester Company of the Philippines, agent of the vessel Belle of the Sea for the amount of P200, with legal interest fromthe date of the filing of the complaint.*Before the trial in the Municipal Court of Manila could be proceeded with, the International Harvester of the Philippines filed a motion todismiss, on the ground that the Municipal Court of Manila had no jurisdiction to try case because the action involves admiralty or maritime jurisdiction, which motion was overruled by the municipal court.*The Court of First Instance of Manila rendered judgment favor of the International Harveter Company of the Philippines, ordering the judge of the municipal court to desist from taking cognizance of civil case against the International Harvester Company of thePhilippines.ISSUE(s):WON the municipal court can take cognizance of civil case for recovery of the undelivered goods against the International Harvester Company of the Philippines.RULING:Wherefore, the judge of the municipal court is ordered to desist from taking cognizance of civil case against the International Harvester Company of the Philippines.REASON(s):In view of our conclusion that the cause of action of Yaras and Company against International Harvester Company of the Philippines

involves admiralty over which the courts of first instance have original jurisdiction and to which the jurisdiction of the justice of the peacecourts (including municipal courts) does not extend the respondent judge was properly restrained from further proceeding with civil caseNo. IV-262.The liability of the International Harvester Company of the Philippines is predicated on the contract of carriage by sea between theInternational Harvester Company of the Philippines and Yaras and Company as evidenced by Bill of Lading No. 105, independently of the liability of the Manila Terminal Co., Inc, as operator of an arrastre service. Admiralty has jurisdiction over all maritime contracts, in whatever form, wherever they were executed or are to be performed, but notover non-maritime contracts. Whether or not a contract is maritime does not depend upon the English rule which conceded jurisdictiononly to contracts made upon and the to be performed upon navigable water, making the locality the test. It depends on the subject-matter of the contract, making the true criterion a maritime service or a maritime transaction.Specifically, admiralty has jurisdiction of a proceedingin remor inpersonamfor the breach of a contract of affreightment, whether evidenced by a bill of lading or a charter party. And typical of a controversy over contracts of affreightment is a suit of one party againstthe other for loss of or damage to the cargo.

PHIL SHIPPING v VERGARA

The Philippine Shipping Company, the owner of the steamship Nuestra Sra. de Lourdes, claims an indemnification of 44,000 pesos for the loss of the said ship as a result of a collision. Ynchusti & Co. also claimed 24,705.64 pesos as an indemnification for the loss of the cargo of hemp and coprax carried by the said ship on her last trip. The defendant, Francisco Garcia Vergara, was the owner of the steamship Navarra, which collided with the Lourdes.

From the judgment of the trial court the Philippine Shipping Company and

the defendant Vergara appealed, but the latter has failed to prosecute his appeal by a bill of exceptions or otherwise. The only appellant who has prosecuted this appeal now reduced its claim to 18,000 pesos, the value of the colliding vessel.

The court below found as a matter of fact that the steamship Lourdes was sailing in accordance with law, but that the Navarra was not, and was therefore responsible for the collision. (Bill of exceptions, p. 7.) The court also found as a fact that "both ships with their respective cargoes were entirely lost." Construing article 837 of the Code Commerce, the court below held "that the defendant was not responsible to the plaintiff for the value of the steamship Lourdes, with the costs against the latter." (Bill of exceptions, p. 8.)

But the appellant, the Philippine Shipping Company, contends that the defendant should pay to 18,000 pesos, the value of the Navarra at the time of its loss; that this is the sense in which the provisions of article 837 of the Code of Commerce should be understood; that said code has followed the principles of the English law and not those of the American law, and that it was immaterial whether the Navarra had been entirely lost, provided her value at the time she was lost could be ascertained, since the extent of the liability of the owner of the colliding vessel for the damages resulting from the collision is to be determined in accordance with such value.

Article 837 of the Code Commerce provides: "The civil liability contracted by the shipowners in the cases prescribed in this section shall be understood as limited to the value of the vessel with all her equipment and all the freight money earned during the voyage."

This section is a necessary consequence of the right to abandon the vessel given to the shipowner in article 587 of the code, and it is one of the many superfluities contained in the code. (Lorenzo Benito, "Lecciones," 352.)

Art. 587. The agent shall also the 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.

ART. 590. The part owners of a vessel shall be civilly liable, in the proportion of their contribution to the common fund, for the results of the

acts of the captain referred to in article 587. Each part owner may exempt himself from this liability by the abandonment, before a notary, of the part of the vessel belonging to him.

The "Exposicion de motivos" of the Code of Commerce contains the following: "The present code (1829) does not determine the juridical status of the agent where such agent is not himself the owner of the vessel. This omission is supplied by the proposed code, which provides in accordance with the principles of maritime law that by agent it is to be understood the person intrusted with the provisioning of the vessel, or the one who represents her in the port in which she happens to be. This person is the only who represents the interest of the owner of the vessel. This provision has therefore cleared the doubt which existed as to the extent of the liability, both of the agent and for the owner of the vessel. Such liability is limited by the proposed code to the value of the vessel and other things appertaining thereto."

There is no doubt that if the Navarra had not been entirely lost, the agent, having held liable for the negligence of the captain of the vessel, could have abandoned her with all her equipment and the freight money earned during the voyage, thus bringing himself within the provisions of the article 837 in so far as the subsidiary civil liability is concerned. This abandonment which would have amounted to an offer of the value of the vessel, of her equipment, and freight money earned could not have been refused, and the agent could not have been personally compelled, under such circumstances, to pay the 18,000 pesos, the estimated value of the vessel at the time of the collision.

This is the difference which exist between the lawful acts and lawful obligation of the captain and the liability which he incurs on account of any unlawful act committed by him. In the first case, the lawful acts and obligations of the captain beneficial to the vessel may be enforced as against the agent for the reason that such obligations arise from the contract of agency (provided, however, that the captain does not exceed his authority), while as to any liability incurred by the captain through his unlawful acts, the ship agent is simply subsidiarily civilly liable. This liability of the agent is limited to the vessel and it does not extend further. For this reason the Code of Commerce makes agent liable to the extent of the value of the vessel, as to the codes of the principal maritime nations provided, with the vessel, and not individually. Such is also the spirit of our

code.

The spirit of our code is accurately set forth in a treatise on maritime law, from which we deem proper to quote the following as the basis of this decision:

That which distinguishes the maritime from the civil law and even from the mercantile law in general is thereal and hypothecary nature of the former, and the many securities of a real nature that maritime customs from time immemorial, the laws, the codes, and the later jurisprudence, have provided for the protection of the various and conflicting interest which are ventured and risked in maritime expeditions, such as the interests of the vessel and of the agent, those of the owners of the cargo and consignees, those who salvage the ship, those who make loans upon the cargo, those of the sailors and members of the crew as to their wages, and those of a constructor as to repairs made to the vessel.

As evidence of this "real" nature of the maritime law we have (1) the limitation of the liability of the agents to the actual value of the vessel and the freight money, and (2) the right to retain the cargo and the embargo and detention of the vessel even cases where the ordinary civil law would not allow more than a personal action against the debtor or person liable. It will be observed that these rights are correlative, and naturally so, because if the agent can exempt himself from liability by abandoning the vessel and freight money, thus avoiding the possibility of risking his whole fortune in the business, it is also just that his maritime creditor may for any reason attach the vessel itself to secure his claim without waiting for a settlement of his rights by a final judgment, even to the prejudice of a third person.

This repeals the civil law to such an extent that, in certain cases, where the mortgaged property is lost no personal action lies against the owner or agent of the vessel. For instance, where the vessel is lost the sailors and members of the crew can not recover their wages; in case of collision, the liability of the agent is limited as aforesaid, and in case of shipwrecks, those who loan their money on the vessel and cargo lose all their rights and can not claim reimbursement under the law.

There are two reasons why it is impossible to do away with these privileges, to wit: (1) The risk to which the thing is exposed, and ( 2 ) the "real" nature of maritime law, exclusively "real," according to which the

liability of the parties is limited to a thing to which is at mercy of the waves. If the agent is only liable with the vessel and freight money and both may be lost through the accidents of navigation it is only just that the maritime creditor have some means of obviating this precarious nature of his rights by detaining the ship, his only security, before it is lost.

The liens, tacit or legal, which may exist upon the vessel and which a purchaser of the same would be obliged to respect and recognize — in addition to those existing in favor of the State by virtue of the privileges which are granted to it by all the laws — pilot, tonnage, and port dues and other similar charges, the wages of the crew earned during the last voyage as provided in article 646, of the Code of Commerce, salvage dues under article 842, the indemnification due to the captain of the vessel in case his contract is terminated on account of the voluntary sale of the ship and the insolvency of the owner as provided in article 608, and other liabilities arising from collisions under article 837 and 838. (Madariaga, pp. 60-62, 63, 85.)

We accordingly hold that the defendant is liable for the indemnification to which the plaintiff is entitled by reason of the collision, but he is not required to pay such indemnification of the reason that the obligation thus incurred has been extinguished on account of the loss of the thing bound for the payment thereof, and in this respect the judgment of the court below is affirmed except in so far as it requires the plaintiff to pay the costs of this action, which is not exactly proper. After the expiration of twenty days let judgment be entered in accordance herewith and ten days thereafter the record be remanded to the Court of First Instance for execution. So ordered.

CHUA YEK v IAC

Facts:Respondent is owner of M/V Luzviminda, a common carrier engaged in coastwise tradefrom the different ports of Oriental Mindoro to the Port of Manila. In October 1977, petitionerloaded 1,000 sacks of copra, valued at P101,227.40 on board M/V Luzviminda for

shipment toManila. Said cargo, however, did not reach Manila because the vessel capsized and sank with allits cargo.Petitioner then instituted a complaint for damages on breach of contract of carriageagainst private respondent. The trial court rendered a decision in favour of the petitioners. Onappeal, the appellate court ruled in favour of the respondents applying article 587 of the Code ofCommerce. Unsuccessful in his motion for reconsideration, petitioner filed this petition.Issue:Whether or not the respondent court erred in applying the doctrine of limited liabilityunder Article 587 of the Code of CommerceHeld:Article 587 of the Code of Commerce provides: The ship agents shall be civilly liable forthe indemnities in favour of third persons which may arise from the conduct of the captain in thecare of the goods which he loaded on the vessel; but he may exempt himself therefrom byabandoning the vessel with all the equipment and the freight it may have earned during thevoyage.Said article is the source of the doctrine of limited liability, which gives the ship agent’sor owner’s right of abandonment of the vessel and earned freight and such abandonmentprovides the cessation of the responsibility of the ship agent/owner. In other words, the shipagent/owner’s liability is merely co-extensive with his interest in the vessel that a total lossthereof results in its extinction, “no vessel, no liability.”The limited liability rule, however provides for exceptions: (1) where the injury or deathto a passenger is due either to the fault of the ship owner, or to the concurring negligence of theship owner and the captain (2) where the vessel is insured; and (3) in workmen's compensation

claims. In this case, there is nothing in the records to show that the loss of the cargo was due tothe fault of the private respondent as ship owners, or to their concurrent negligence with thecaptain of the vessel and there was no showing that the vessel was insured.Also, the provisions of the Civil Code on common carriers do not apply in this case sincethe circumstances of the case are not within those that can be regulated by such provisions so theCode of Commerce and other special laws shall apply.In sum, it is held that the respondents are freed from their liabilities applying the limitedliability rule for having totally lost the vessel and none of the exceptions apply to them, theliability for the loss of the cargo of the copra must be deemed extinguished

YANGCO v LASERNAFacts: At about one o'clock in the afternoon of May 26, 1927, the steamer S.S. Negros, belonging to petitioner here, Teodoro R. Yangco, left the port of Romblon on its return trip to Manila. Typhoon signal No. 2 was then up, of which fact the captain was duly advised and his attention thereto called by the passengers themselves before the vessel set sail. The boat was overloaded as indicated by the load line which was 6 to 7 inches below the surface of the water. The passengers, numbering about 180, were overcrowded, the vessel's capacity being limited to only 123 passengers. As the sea became increasingly violent, the captain ordered the vessel to turn left, evidently to return to port, but in the maneuver, the vessel was caught sidewise by a big wave which caused it to capsize and sink. Many of the passengers died in the mishap. Separate civil actionswere filed against petitioner to recover damages for the death of the passengers. 

Issue: May the shipowner or agent, notwithstanding the total loss of the vessel as a result of the negligence of its captain, be properly held liable in damages for the consequent death of its passengers? 

Held: No. This question is controlled by the provisions of article 587 of the Code of Commerce. Said article reads: 

The agent shall also 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 voyage. 

The provisions 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 equipment and the freight it may have earned during the voyage." 

Lawful acts and obligations of the captain beneficial to the vessel may be enforced as against the agent for the reason that such obligations arise from the contract of agency while as to any liability incurred by the captain through his unlawful acts, the ship agent is simply subsidiarily civilly liable. This liability of the agent is limited to the vessel and it does not extend further. For this reason the Code of Commerce makes the agent liable to the extent of the value of the vessel, as the codes of the principal maritime nations provide with the vessel, and not individually. 

If the shipowner or agent may in any way be held civilly liable at all for injury to or death of passengers arising from the negligence of the captain in cases of collisions or shipwrecks, his liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. 

Assuming that petitioner is liable for a breach of contract of carriage, the exclusively "real and hypothecary nature" of maritime law operates to limit such liability to the value of the vessel, or to the insurance thereon, if any. In the instant case it does not appear that the vessel was insured. Whether the abandonment of the vessel sought by the petitioner in the instant case was in accordance with law of not, is immaterial. The vessel having totally perished, any act of abandonment would be an idle ceremony.

OHTA v STEAMSHIP POMPEY

From the year 1913, plaintiff was the owner of a pier situated in Talomo Bay, Davao. On the western side of his pier were to groups of posts, three to a group, about 20 feet apart and about 2 feet from the pier itself, which served as a protection to the pier against the impact of vessels. Between 1921 and 1922, this pier was repaired, replacing such material as was not in good condition, and driving about 150 piles of pagatpat and 60 of molave. According to the witness Sixto Babao, the officer in charge of the

forest station of that province, pagatpat, when placed in salt water, last from five to six years.

At about 7 o'clock in the morning of July 23, the steamship Pompey, in command of Captain Alfredo Galvez and possessing a certificate of public convenience issued by the Commissioner of Public Utility in he name of "The National Coal Company," carrying cargo consisting principally of flour and rice for the plaintiff, docked alongside the said pier. The ship docked with her bow facing towards the land and fastened her ropes to the posts on the pier. The evidence shows that, previously, other ships docking alongside the said pier had the bow facing towards the land and fastened a rope to a tree situated farther west on the beach a precaution taken to avoid the ship from getting too close to the pier. When the Pompey docked, at the time in question, she did not stretch a rope to the tree on the shore, neither did she drop her bow anchors. After being thus docked they proceeded to unload the flour and rice which was first deposited on the pier and later transported to the plaintiff's warehouse on land, where it was officially receipted for. The work of discharging and the hauling of the cargo to the warehouse of the plaintiff was done without any inference on the part of the plaintiff and exclusively by laborers and the crew of the ship. The unloading of the cargo on to the pier was done in hurry and their being but fifteen or twenty laborers engaged in the hauling of the same to the plaintiff's warehouse, a large amount of cargo accumulated on the dock, with the result that at ten minutes past eleven on the same morning the pier sank with all the merchandise.

It appears that at the time the pier sank there was a current from west to east. As to this point the evidence in the record is conflicting but, after studying it, we believe there actually was a current at that time. According to Captain Calvo, and judging by the condition of the sea as appears from one of the photographs presented in evidence, there was a strong undercurrent. The flour which floated after the sinking of the dock drifted from west to east. The pier, when it sank, leaned towards the east, as well as the posts, which did not collapse completely. After the sinking of the pier the two groups of piles that served as a defense also leaned towards the east, going beyond the western line formerly occupied by the pier; and the hull of the ship came to a stop at a point beyond where the piles of defense formerly stood, as will be noticed from the photograph, Exhibit B, taken after the accident, and in which a man may be seen standing on the edge of the sunken pier supporting himself on the hull of the ship. In view of all of

these circumstances it is evident that the current forced the ship towards the pier, the impact of which caused it to sink.

The sinking could have not been caused, as the defense contends, by the weight of the cargo and by the poor condition of the dock, because according to the evidence it had been recently repaired and, further, that the dock did not fall from its base but leaned towards the east, as did also the posts and defense piles which facts indicate that the dock received the impact of the ship from west to east. In support of its contention of the defense presented, as its principal evidence, the testimony of Captain Razon, who served as first mate of the Pompey on that trip, but we cannot give much weight to the testimony of this witness. He affirmed that the defense piles fell without coming in contact with the ship, which is inconceivable since the piles were not attached to the pier but were 2 feet away from it, so that it cannot be understood how the sinking of the dock could have affected the defense piles. The subsequent contact of the ship with the pier, as shown in the photographs presented as evidence, was explained by this witness who states that, the vessel being tied to the posts of the pier when the latter sank the ship was carried along on account of the ropes; but neither can this explanation be accepted because the posts to which the ropes were tied, except one, did not sink but only inclined. Furthermore, the inclination of these posts, which did not fall, does not explain the shifting of the ship of the space formerly occupied by the dock, taking into account that, according to his testimony, the ship docked about 8 feet away from the pier and the inclination of the posts barely represents a distance of 1 foot from the base. Finally, this witness testified that after the ship had docked he noticed that the pier was in a rotten condition notwithstanding which, and realizing the danger of unloading, he did not take any precaution and proceeded to discharge the cargo, for the reason that he considered it a matter for the owners of the pier and not for him to take the necessary precautions.

Our conclusion is that the dock on account of the impact of the ship as a result of the strong current at the time; that the ship was not fastened with the rope to a tree on shore and that the bow anchors had not been dropped.

Appellants challenged the personality of the plaintiff as a duly organized corporation. But besides the fact that there is evidence of this personality, appellants cannot challenge it after having acknowledged same when

entering into the contract with the plaintiff as such corporation for the transportation of its merchandise.

Appellants urge that, according to the bills of lading of the lost merchandise, the defendant National Coal Company's liability ceased when the said merchandise was unloaded and placed on the dock. This contention is without merit. There is nothing in the bills of lading to uphold it. Article 619 of the Code of Commerce provides that the captain shall be answerable for the cargo from the moment that it is delivered to him at the wharf or alongside the ship in the harbor of embarkation until delivered this provision of the law it is the delivery of the cargo at the port of discharge that terminates the captain's responsibility as to the cargo. In the instant case, when the merchandise was lost on account of the sinking of the dock it had not yet been delivered and consequently it was under the responsibility of the captain. The defendant National Coal Company, as the operator, is responsible for the indemnities arising from the lack of skill or negligence of the captain. (Articles 587 and 618 of the Code of Commerce.)

Appellants also contend that, at any rate, the liability of the other defendant is subsidiary and limited to what the steamship Pompey may answer for. This argument seems to be based upon article 587 of the Code of Commerce which authorizes the shipowner to abandon the ship with all its tackle and freight earned during the voyage in order to answer for his liability to third persons. But this is inapplicable, for the reason that in this case there was no abandonment of the ship. We do not believe that appellants based their contention upon article 837 which refers to collisions, because that is not the case here.

There may be other phases of the case which we have not decided because they have been raised in the briefs. What we have said decides all the errors assigned by the appellants.

The judgment appealed from is affirmed with costs against the appellants. So ordered.

ABOITIZ V GENERAL FIRE AND LIFE ASSURANCE

Aboitiz Shipping is the owner of M/V P. Aboitiz, a vessel w/c sank on a voyage from Hongkong to the Philippines. Thissinking of the vessel gave rise to the filing of several suits for recovery of the lost cargo either by the shippers their successors-in-interest, or the cargo insurers like General Accident (GAFLAC).Board of Marine Inquiry (BMI), on its initial investigation found that such sinking was due toforce majeureand that subjectvessel, at the time of the sinking was seaworthy. The trial court rules against the carrier on the ground that the loss didnot occur as a result of force majeure. This was affirmed by the CA and ordered the immediate execution of the full judgment award.However, other cases have resulted in the finding that vessel was seaworthy at the time of the sinking, and that suchsinking was due toforce majeure.Due to these different rulings, Aboitiz seeks a pronouncement as to the applicability of the doctrine of limited liability onthe totality of the claimsvis a visthe losses brought about by the sinking of the vessel M/V P. ABOITIZ, as based on thereal and hypothecary nature of maritime law. Aboitiz argued that the Limited Liability Rule warrants immediate stay of execution of judgment to prevent impairment of other creditors' shares.ISSUE: Whether the Limited Liability Rule arising out of the real and hypothecary nature of maritime law should apply inthis and related cases.RULING: The SC ruled in the affirmative.The real and hypothecary nature of maritime law simply means that the liability of the carrier in connection with lossesrelated to maritime contracts is confined to the vessel, which is hypothecated for such obligations or which stands as the

guaranty for their settlement. It has its origin by reason of the conditions and risks attending maritime trade in its earliestyears when such trade was replete with innumerable and unknown hazards since vessels had to go through largelyuncharted waters to ply their trade. It was designed to offset such adverse conditions and to encourage people andentities to venture into maritime commerce despite the risks and the prohibitive cost of shipbuilding. Thus, the liability of the vessel owner and agent arising from the operation of such vessel were confined to the vessel itself, its equipment,freight, and insurance, if any, which limitation served to induce capitalists into effectively wagering their resources againstthe consideration of the large profits attainable in the trade.The Limited Liability Rule in the Philippines is taken up in Book III of the Code of Commerce, particularly in Articles 587,590, and 837, hereunder quotedin toto: Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which mayarise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he mayexempt himself therefrom by abandoning the vessel with all her equipment and the freight it may haveearned during the voyage. Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their interests in the commonfund for the results of the acts of the captain referred to in Art. 587.Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the part of the vessel belonging to him. Art. 837. The civil liability incurred by shipowners in the case prescribed in this section (on collisions),shall be understood aslimited to the value of the vessel with all its appurtenances and freightage served during the voyage.Theonly 

time the Limited Liability Ruledoes not apply is when there is an actual finding of negligence on the part of thevessel owner or agent.ISSUE 2: Whether there is a finding of such negligence on the part of the owner in this case.RULING 2: The SC ruled in the negative.In its Decision, the trial court merely held that:. . . Considering the foregoing reasons, the Court holds that the vessel M/V "Aboitiz" and its cargo werenot lost due to fortuitous event or force majeure.Decisions in other cases affirmed the factual findings of the trial court, adding that the cause of the sinking of the vesselwas because of unseaworthiness due to the failure of the crew and the master to exercise extraordinary diligence. Indeed,there appears to have been no evidence presented sufficient to form a conclusion that Aboitiz the shipowner itself wasnegligent, and no tribunal, including this Court will add or subtract to such evidence to justify a conclusion to the contrary.The findings of the trial court and the Court of Appeals, whose finding of "unseaworthiness" clearlydid not pertain to thestructural condition of the vessel which is the basis of the BMI's findings, but to the condition it was in at the time of thesinking, which condition was a result of the acts of the captain and the crew .The rights of a vessel owner or agent under the Limited Liability Rule are akin to those of the rights of shareholders tolimited liability under our corporation law. Both are privileges granted by statute, and while not absolute, must be sweptaside only in the established existence of the most compelling of reasons. In the absence of such reasons, this Courtchooses to exercise prudence and shall not sweep such rights aside on mere whim or surmise, for even in the existenceof cause to do so, such incursion is definitely punitive in nature and must never be taken lightly.More to the point, the rights of parties to claim against an agent or owner of a vessel may be compared to those of creditors against an insolvent corporation whose assets are not enough to

satisfy the totality of claims as against it. Whileeach individual creditor may, and in fact shall, be allowed to prove the actual amounts of their respective claims, this doesnot mean that they shall all be allowed to recover fully thus favoring those who filed and proved their claims sooner to theprejudice of those who come later. In such an instance, such creditors too would not also be able to gain access to theassets of the individual shareholders, but must limit their recovery to what is left in the name of the corporation.In both insolvency of a corporation and the sinking of a vessel, the claimants or creditors are limited in their recovery tothe remaining value of accessible assets. In the case of an insolvent corporation, these are the residual assets of thecorporation left over from its operations. In the case of a lost vessel, these are the insurance proceeds and pendingfreightage for the particular voyage.In the instant case, there is, therefore, a need to collate all claims preparatory to their satisfaction from the insuranceproceeds on the vessel M/V P. Aboitiz and its pending freightage at the time of its loss. No claimant can be givenprecedence over the others by the simple expedience of having filed or completed its action earlier than the rest. Thus,execution of judgment in earlier completed cases, even those already final and executory, must be stayed pendingcompletion of all cases occasioned by the subject sinking. Then and only then can all such claims be simultaneouslysettled, either completely or pro-rata should the insurance proceeds and freightage be not enough to satisfy all claims.