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ABOITIZ SHIPPING CORPORATION, petitioner, vs. GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, LTD., respondent.

Sycip, Salazar, Hernandez & Gamaitan Law Office for petitioner. Napoleon Rama collaborating counsel for petitioner. Dollete, Blanco, Ejercito & Associates for private respondent. MELO, J.: This refers to a petition for review which seeks to annul and set aside the decision of the Court of Appeals dated June 21, 1991, in CA G.R. SP No. 24918. The appellate court dismissed the petition for certiorari filed by herein petitioner, Aboitiz Shipping Corporation, questioning the Order of April 30, 1991 issued by the Regional Trial Court of the National Capital Judicial Region (Manila, Branch IV) in its Civil Case No. 144425 granting private respondent's prayer for execution for the full amount of the judgment award. The trial court in so doing swept aside petitioner's opposition which was grounded on the real and hypothecary nature of petitioner's liability as ship owner. The application of this established principle of maritime law would necessarily result in a probable reduction of the amount to be recovered by private respondent, since it would have to share with a number of other parties similarly situated in the insurance proceeds on the vessel that sank. The basic facts are not disputed. Petitioner is a corporation organized and operating under Philippine laws and engaged in the business of maritime trade as a carrier. As such, it owned and operated the ill-fated "M/V P. ABOITIZ," a common carrier which sank on a voyage from Hongkong to the Philippines on October 31, 1980. Private respondent General Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC), on the other hand, is a foreign insurance company pursuing its remedies as a subrogee of several cargo consignees whose respective cargo sank with the said vessel and for which it has priorly paid. The incident of said vessel's sinking gave rise to the filing of suits for recovery of lost cargo either by the shippers, their successor-in-interest, or the cargo insurers like GAFLAC as subrogees. The sinking was initially investigated by the Board of Marine Inquiry (BMI Case No. 466, December 26, 1984), which found that such sinking was due toforce majeure and that subject vessel, at the time of the sinking was seaworthy. This administrative finding notwithstanding, the trial court in said Civil Case No. 144425 found against the carrier on the basis that the loss subject matter therein did not occur as a result of force majeure. Thus, in said case, plaintiff GAFLAC was allowed to prove, and. was later awarded, its claim. This decision in favor of GAFLAC was elevated all the way up to this Court in G.R. No. 89757 (Aboitiz v. Court of Appeals, 188 SCRA 387 [1990]), with Aboitiz, like its ill-fated vessel, encountering rough sailing. The attempted execution of the judgment award in said case in the amount of P1,072,611.20 plus legal interest has given rise to the instant petition. On the other hand, other cases have resulted in findings upholding the conclusion of the BMI that the vessel was seaworthy at the time of the sinking, and that such sinking was due to force majeure. One such ruling was likewise elevated to this Court in G.R. No. 100373, Country Bankers

Insurance Corporation v. Court of Appeals, et al., August 28, 1991 and was sustained. Part of the task resting upon this Court, therefore, is to reconcile the resulting apparent contrary findings in cases originating out of a single set of facts. It is in this factual milieu that the instant petition seeks a pronouncement as to the applicability of the doctrine of limited liability on the totality of the claims vis a vis the losses brought about by the sinking of the vessel M/V P. ABOITIZ, as based on the real and hypothecary nature of maritime law. This is an issue which begs to be resolved considering that a number of suits alleged in the petition number about 110 (p. 10 and pp. 175 to 183, Rollo) still pend and whose resolution shall well-nigh result in more confusion than presently attends the instant case. In support of the instant petition, the following arguments are submitted by the petitioner: 1. The Limited Liability Rule warrants immediate stay of execution of judgment to prevent impairment of other creditors' shares; 2. The finding of unseaworthiness of a vessel is not necessarily attributable to the shipowner; and 3 The principle of "Law of the Case" is not applicable to the present petition. (pp. 2-26, Rollo.) On the other hand, private respondent opposes the foregoing contentions, arguing that: 1. There is no limited liability to speak of or applicable real and hypothecary rule under Article 587, 590, and 837 of the Code of Commerce in the face of the facts found by the lower court (Civil Case No. 144425), upheld by the Appellate Court (CA G.R. No. 10609), and affirmed in toto by the Supreme Court in G.R. No. 89757 which cited G.R. No. 88159 as the Law of the Case; and 2. Under the doctrine of the Law of the Case, cases involving the same incident, parties similarly situated and the same issues litigated should be decided in conformity therewith following the maximstare decisis et non quieta movere. (pp. 225 to 279, Rollo.) Before proceeding to the main bone of contention, it is important to determine first whether or not the Resolution of this Court in G.R. No. 88159, Aboitiz Shipping, Corporation vs. The Honorable Court of Appeals and Allied Guaranty Insurance Company, Inc., dated November 13, 1989 effectively bars and precludes the instant petition as argued by respondent GAFLAC. An examination of the November 13, 1989 Resolution in G.R. No. 88159 (pp. 280 to 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

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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. It appears, therefore, that the resolution in G.R. 88159 adverted to has no bearing other than factual to the instant case. 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. The articles may be ancient, but they are timeless and have remained to be good law. 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 to 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 sacrosanct if such shall result in the subverting of substantial justice. The right to an execution after finality of a decision is certainly no exception to this. Thus, in Cabrias v. Adil (135 SCRA 355 [1985]), this Court ruled that: . . . It is a truism that every court has the power "to control, in the furtherance of justice, the conduct of its ministerial officers, and of all other persons in any manner connected with a case before it, in every manner appertaining thereto. It has also been said that: . . . 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 carry out the judgment into effect and render it binding and operative, but also 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. (at p. 359)

and again in the case of Lipana v. Development Bank of Rizal (154 SCRA 257 [1987]), this Court found that: The rule that once a decision becomes final and executory, it is the ministerial duty of the court to order its execution, admits of certain exceptions as in cases of special and exceptional nature where it becomes the imperative in the higher interest of justice to direct the suspension of its execution (Vecine v. Geronimo, 59 OG 579); whenever it is necessary to accomplish the aims of justice (Pascual v Tan, 85 Phil. 164); or when certain facts and circumstances transpired after the judgment became final which would render the execution of the judgment unjust (Cabrias v. Adil, 135 SCRA 354). (at p. 201) We now come to the determination of the principal issue as to whether the Limited Liability Rule arising out of the real and hypothecary nature of maritime law should apply in this and related cases. We rule in the affirmative. In deciding the instant case below, the Court of Appeals took refuge in this Court's decision in G.R. No. 89757 upholding private respondent's claims in that particular case, which the Court of Appeals took to mean that this Court has "considered, passed upon and resolved Aboitiz's contention that all claims for the losses should first be determined before GAFLAC's judgment may be satisfied," and that such ruling "in effect necessarily negated the application of the limited liability principle" (p. 175, Rollo). Such conclusion is not accurate. The decision in G.R. No. 89757 considered only the circumstances peculiar to that particular case, and was not meant to traverse the larger picture herein brought to fore, the circumstances of which heretofore were not relevant. We must stress that the matter of the Limited Liability Rule as discussed was never in issue in all prior cases, including those before the RTCs and the Court of Appeals. As discussed earlier, the "limited liability" in issue before the trial courts referred to the package limitation clauses in the bills of lading and not the limited liability doctrine arising from the real and hypothecary nature of maritime trade. The latter rule was never made a matter of defense in any of the cases a quo, as properly it could not have been made so since it was not relevant in said cases. The only time it could come into play is when any of the cases involving the mishap were to be executed, as in this case. Then, and only then, could the matter have been raised, as it has now been brought before the Court. The real and hypothecary nature of maritime law simply means that the liability of the carrier in connection with losses related to maritime contracts is confined to the vessel, which is hypothecated for such obligations or which stands as the guaranty for their settlement. It has its origin by reason of the conditions and risks attending maritime trade in its earliest years when such trade was replete with innumerable and unknown hazards since vessels had to go through largely uncharted waters to ply their trade. It was designed to offset such adverse conditions and to encourage people and entities 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,

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which limitation served to induce capitalists into effectively wagering their resources against the consideration of the large profits attainable in the trade. It might be noteworthy to add in passing that despite the modernization of the shipping industry and the development of high-technology safety devices designed to reduce the risks therein, the limitation has not only persisted, but is even practically absolute in well-developed maritime countries such as the United States and England where it covers almost all maritime casualties. Philippine maritime law is of Anglo-American extraction, and is governed by adherence to both international maritime conventions and generally accepted practices relative to maritime trade and travel. This is highlighted by the following excerpts on the limited liability of vessel owners and/or agents; Sec. 183. The liability of the owner of any vessel, whether American or foreign, for any embezzlement, loss, or destruction by any person of any person or any property, goods, or merchandise shipped or put on board such vessel, or for any loss, damage, or forfeiture, done, occasioned, or incurred, without the privity or knowledge of such owner or owners shall not exceed the amount or value of the interest of such owner in such vessel, and her freight then pending. (Section 183 of the US Federal Limitation of Liability Act). —and— 1. The owner of a sea-going ship may limit his liability in accordance with Article 3 of this Convention in respect of claims arising, from any of the following occurrences, unless the occurrence giving rise to the claim resulted from the actual fault or privity of the owner; (a) loss of life of, or personal injury to, any person being carried in the ship, and loss of, or damage to, any property on board the ship. (b) loss of life of, or personal injury to, any other person, whether on land or on water, loss of or damage to any other property or infringement of any rights caused by the act, neglect or default the owner is responsible for, or any person not on board the ship for whose act, neglect or default the owner is responsible: Provided, however, that in regard to the act, neglect or default of this last class of person, the owner shall only be entitled to limit his liability when the act, neglect or default is one which occurs in the navigation or the management of the ship or in the loading, carriage or discharge of its cargo or in the embarkation, carriage or disembarkation of its passengers. (c) any obligation or liability imposed by any law relating to the removal of wreck and arising from or in connection with the raising, removal or destruction of any ship which is sunk, stranded or abandoned (including anything which may be on board such ship) and any obligation or liability arising out of damage caused to harbor works, basins and

navigable waterways. (Section 1, Article I of the Brussels International Convention of 1957) In this jurisdiction, on the other hand, its application has been well-nigh constricted by the very statute from which it originates. 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 quoted in toto: Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight it may have earned during the voyage. Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their interests in the common fund for the results of the acts of the captain referred to in Art. 587. Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the part of the vessel belonging to him. Art. 837. The civil liability incurred by shipowners in the case prescribed in this section (on collisions), shall be understood as limited to the value of the vessel with all its appurtenances and freightage served during the voyage. (Emphasis supplied) Taken together with related articles, the foregoing cover only liability for injuries to third parties (Art. 587), acts of the captain (Art. 590) and collisions (Art. 837). In view of the foregoing, this Court shall not take the application of such limited liability rule, which is a matter of near absolute application in other jurisdictions, so lightly as to merely "imply" its inapplicability, because as could be seen, the reasons for its being are still apparently much in existence and highly regarded. We now come to its applicability in the instant case. In the few instances when the matter was considered by this Court, we have been consistent in this jurisdiction in holding that the only time the Limited Liability Rule does not apply is when there is an actual finding of negligence on the part of the vessel owner or agent (Yango v. Laserna, 73 Phil. 330 [1941]; Manila Steamship Co., Inc. v. Abdulhanan, 101 Phil. 32 [1957]; Heirs of Amparo delos Santos v. Court of Appeals, 186 SCRA 649 [1967]). The pivotal question, thus, is whether there is a finding of such negligence on the part of the owner in the instant case. A careful reading of the decision rendered by the trial court in Civil Case No. 144425 (pp. 27-33, Rollo) as well as the entirety of the records in the instant case will show that there has been no actual finding of negligence on the part of petitioner. 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 were not lost due to fortuitous event or force majeure." (p. 32, Rollo) The same is true of the decision of this Court in G.R. No. 89757 (pp. 7186, Rollo) affirming the decision of the Court of Appeals in CA-G.R. CV No. 10609 (pp. 34-50, Rollo) since both decisions did not make any new and

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Aboitiz. which condition was a result of the acts of the captain and the crew. be allowed to prove the actual amounts of their respective claims. No claimant can be given precedence over the others by the simple expedience of having filed or completed its action earlier than the rest. adding that the cause of the sinking of the vessel was because of unseaworthiness due to the failure of the crew and the master to exercise extraordinary diligence. 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.additional finding of fact. 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. the Board becomes the trustee of its assets for the equal benefit of all creditors. and no tribunal." under the peculiar circumstances of this case is underscored by the fact that in the Country Banker's case. the Court notes that petitioner has provided this Court with a list of all pending cases (pp. execution of judgment in earlier completed cases. and as a matter of equity. petitioner should institute the necessary limitation and distribution action before the proper admiralty court within 15 days from the finality of this decision. In the case of a lost vessel. Development Bank of Rizal earlier cited. these are the insurance proceeds and pending freightage for the particular voyage. one cannot obtain an advantage or preference over another by an attachment. The trial court is hereby directed to desist from proceeding with the execution of the judgment rendered in Civil Case No. these are the residual assets of the corporation left over from its operations. including this Court will add or subtract to such evidence to justify a conclusion to the contrary. Moreover. The rights of a vessel owner or agent under the Limited Liability Rule are akin to those of the rights of shareholders to limited liability under our corporation law. and after its insolvency. The unseaworthiness found in some cases where the same has been ruled to exist is directly attributable to the vessel's crew and captain. depending on the evidence presented in each. Finally. and the Orders of the Regional Trial Court of Manila.Rollo). therefore. there is. More to the point. might not prevail. and while not absolute. In fairness to the claimants. the finding therein contained to the effect that the vessel was seaworthy deserves merit. the Court sustained the decision of the Court of Appeals that the sinking of the M/V P. there appears to have been no evidence presented sufficient to form a conclusion that petitioner shipowner itself was negligent. must be stayed pending completion of all cases occasioned by the subject sinking. Petitioner is directed to institute the necessary action and to 4 . even those already final and executory. The qualified nature of the meaning of "unseaworthiness. execution or otherwise. 261). for even in the existence of cause to do so. On this point. the stay of execution of judgment is warranted by the fact that the respondent bank was placed under receivership. We likewise note that some of these cases are still with the Court of Appeals. arising from the same sinking. such incursion is definitely punitive in nature and must never be taken lightly. after all. be entirely correct to preclude the trial courts from making their own findings of fact in those cases and deciding the same by allotting shares for these claims. therefore. Thus. It would not. but to the condition it was in at the time of the sinking. Both are privileges granted by statute. (at p. but must limit their recovery to what is left in the name of the corporation. this does not mean that they shall all be allowed to recover fully thus favoring those who filed and proved their claims sooner to the prejudice of those who come later. Indeed. therefore. In the instant case. the claimants or creditors are limited in their recovery to the remaining value of accessible assets. the petition is hereby GRANTED. In the case of an insolvent corporation. Despite appearances. Aboitiz was due to force majeure. 1991 and the Court of Appeals dated June 21. To execute the judgment would unduly deplete the assets of respondent bank to the obvious prejudice of other depositors and creditors. some of which. it should be stressed that unseaworthiness is not a fault that can be laid squarely on petitioner's lap. 1991 are hereby set aside. and in fact shall. Both merely affirmed the factual findings of the trial court. as aptly stated in Central Bank v. the total proceeds of the insurance and pending freightage should now be deposited in trust. In both insolvency of a corporation and the sinking of a vessel. a need to collate all claims preparatory to their satisfaction from the insurance proceeds on the vessel M/V P. must be swept aside only in the established existence of the most compelling of reasons. such creditors too would not also be able to gain access to the assets of the individual shareholders. We held that: In the instant case. this Court chooses to exercise prudence and shall not sweep such rights aside on mere whim or surmise. Morfe (63 SCRA 114). supra. for final pro-rating and settlement thereof. 144425 pending determination of the totality of claims recoverable from the petitioner as the owner of the M/V P. together with the corresponding claims and the pro-rated share of each. after the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations. Branch IV dated April 30. rule that the pro-rated share of each claim can only be found after all the cases shall have been decided. 175 to 183. Such a construction would also put matters to rest relative to the decision of the Board of Marine Inquiry. absent a factual basis for such a conclusion. it is not totally incompatible with the findings of the trial court and the Court of Appeals. 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. While each individual creditor may. In the absence of such reasons. since. In such an instance. Thus. whose finding of "unseaworthiness" clearly did not pertain to the structural condition of the vessel which is the basis of the BMI's findings. Aboitiz and its pending freightage at the time of its loss. ACCORDINGLY. in the case of Lipana v. While the conclusion therein exonerating the captain and crew of the vessel was not sustained for lack of basis. We. 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. and some still with the trial courts and which probably are still undergoing trial.

42 Phil. respondent Appellate Court ruled to the contrary when it applied Article 587 of the Code of Commerce and the doctrine in Yangco vs. attorney's fees in the amount of P5. 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. Ramirez.000. SO ORDERED. On 30 March 1979. L-48264. (p. Inc. Batangas. petitioner.40 representing the value of the cargo belonging to the plaintiff which was lost while in the custody of the defendants. 587. the court believes and so holds that the preponderance of evidence militates in favor of the plaintiff and against the defendants by ordering the latter. In their Answer. Oriental Mindoro.227. 30. 256 [1921]). This expresses the universal principle of limited liability under maritime law. 96 SCRA 297). this direct liability is moderated and limited by the ship agent's or ship owner's right of abandonment of the vessel and earned freight. 100 Phil.R. Mariano Guno. petitioner has availed of the present recourse. The most fundamental effect of abandonment is the cessation of the responsibility of the ship agent/owner (Switzerland General Insurance Co.: In this Petition for Review on certiorari petitioner seeks to set aside the Decision of respondent Appellate Court in AC G. on board the vessel "M/V Luzviminda I" for shipment from Puerta Galera." a common carrier engaged in coastwise trade from the different ports of Oriental Mindoro to the Port of Manila. 1991 is hereby made permanent. 45 Phil. The term "ship agent" as used in the foregoing provision is broad enough to include the ship owner (Standard Oil Co.40. the vessel capsized and sank with all its cargo. "M/V Luzviminda I. for the loss of the cargo is merely co-extensive with their interest in the vessel such that a total loss thereof results in its extinction. petitioner loaded 1. to pay the plaintiff the sum of P101. petitioner instituted before the then Court of First Instance of Oriental Mindoro. Rollo). 805. however. and to pay the costs of suit. vs. which may arise from the conduct of the captain in the care of goods transported. Ltd. February 21.00. MARIANO GUNO. both the ship owner and ship agent are civilly and directly liable for the indemnities in favor of third persons. Rollo). INTERMEDIATE APPELLATE COURT. reversing the Trial Court and relieving private respondents (defendants below) of any liability for damages for loss of cargo. The decretal portion of that Decision 1 reads: IN VIEW OF THE FOREGOING CONSIDERATIONS. 01375 entitled "Chua Yek Hong vs. "No vessel. the Trial Court rendered its Decision. However. a Complaint for damages based on breach of contract of carriage against private respondents (Civil Case No. the ship owner'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. vs. their liability had been extinguished by reason of the total loss of said vessel. CHUA YEK HONG.550. the dispositive portion of which follows: WHEREFORE. supra). vs. while private respondents are the owners of the vessel.deposit the proceeds of the insurance of subject vessel as above-described within fifteen (15) days from finality of this decision.227. the decision appealed from is hereby REVERSED. vs.. Estrada for petitioner. In other words. in view of the foregoing considerations. 330 [1941]) and held that private respondents' liability. The temporary restraining order issued in this case dated August 7. R-3205). supra. Pursuant to said provision. under the same Article. respondents." promulgated on 3 April 1986..000 sacks of copra belonging to plaintiff-appellee. (p. valued at P101. Lasema. 1980. In October 1977. as well as for the safety of passengers transported Yangco vs. Laserna. and another one entered dismissing the complaint against defendantsappellants and absolving them from any and all liabilities arising from the loss of 1. Abdulhaman et al. No.000 sacks of copra. Manila Steamship Co. therefore. The basic issue for resolution is whether or not respondent Appellate Court erred in applying the doctrine of limited liability under Article 587 of the Code of Commerce as expounded in Yangco vs. Oriental Mindoro. supra. Unsuccessful in his Motion for Reconsideration of the aforesaid Decision. but he may exempt himself therefrom by abandoning the vessel with all the equipments and the freight it may have earned during the voyage. Francisco D. The total destruction of the vessel extinguishes maritime liens as there is no longer any res to which it can attach (Govt.. Costs against appellee. On appeal. The basic facts are not disputed: Petitioner is a duly licensed copra dealer based at Puerta Galera. MELENCIO-HERRERA. P65. did not reach Manila because somewhere between Cape Santiago and Calatagan. Lasema (73 Phil. Said cargo. jointly and severally. to Manila. vs. Article 587 of the Code of Commerce provides: Art. no liability" expresses in a nutshell the limited liability rule. as ship owners. Purita Hontanosas-Cortes for private respondents. As this Court held: If the ship owner 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 5 ." and "to the insurance thereof if any" (Yangco vs. and DOMINADOR OLIT.00 representing miscellaneous expenses of plaintiff on said lost cargo. It has thus been held that by necessary implication.. 807 [1924]). On 17 May 1983. Insular Maritime Co. the ship agent's or ship owner's 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. The Insular Maritime. J. 19. Lopez Castelo. Laserna. 32 [1956]). et al. private respondents averred that even assuming that the alleged cargo was truly loaded aboard their vessel.

(2) where the vessel is insured. even to the prejudice of a third person. WHEREFORE. Vergara. is not without exceptions. 17321766) and in default thereof. the Code of Commerce and other special laws are applied. the primary law is the Civil Code (Arts. it will have to be held that since the ship agent's or ship owner's liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction (Yangco vs. these provisions would not have any effect on the principle of limited liability for ship owners or ship agents. Lasema. Laserna. The limited liability rule. his liability was extinguished. In other words. attended by innumerable hazards and perils. supra). Inc. if any. petitioner vs. the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws. —0— 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. 31 May 1979 of the National Seamen Board ("NSB") in NSB Case No. Negros. Shipping Co. Laserna. or insurance. namely: (1) where the injury or death to a passenger is due either to the fault of the ship owner. and (3) in workmen's compensation claims Abueg vs.. had its origin in the prevailing conditions of the maritime trade and sea voyages during the medieval ages. or to the insurance thereon.. (Abueg vs. that govern in this case. In all matters not regulated by this Code. San Diego. the judgment sought to be reviewed is hereby AFFIRMED.. What about the provisions of the Civil Code on common carriers? Considering the "real and hypothecary nature" of liability under maritime law. if any. But assuming that petitioner is liable for a breach of contract of carriage. The rationale therefor has been explained as follows: The real and hypothecary nature of the liability of the ship owner or agent embodied in the provisions of the Maritime Law. supra). Valte.. 1331-77 affirming the decision dated 17 February 1977 of the NSB hearing officer which adjudged petitioner Litonjua liable to private respondent for violation of the latter's contract of employment and which ordered petitioner to pay damages. vs. (Yangco vs.S. Article 1766 of the Civil Code provides: Art. Laserila. petitioner Litonjua Shipping Company. 1766. however. as a vessel engaged in interisland trade. (Yangco vs. supra). 284 [1906]). As was expounded by this Court: In arriving at this conclusion. There is no showing that the vessel was insured in this case. FELICIANO. and naturally so. is a common carrier. 6 . 6 Phil. (Phil. LITONJUA SHIPPING COMPANY INC. In this case. and none of the exceptions to the rule on limited liability being present. because if the agent can exempt himself from liability by abandoning the vessel and freight money. Estratonico S. Code of Commerce." Yangco vs. vs. NATIONAL SEAMEN BOARD and GREGORIO P. SO ORDERED. equipment. et al.: In this Petition for Certiorari. et al. and the apprehension of this would be fatal to the interest of navigation. ("Lintonjua") seeks to annul and set aside a decision dated. No costs. supra). It will be observed that these rights are correlative. 77 Phil. so that if the ship owner or agent abandoned the ship. the exclusively 'real and hypothecary nature of maritime law operates to limit such liability to the value of the vessel. and freight. J. Moreover. or to their concurrent negligence with the captain of the vessel. Book III. and that the relationship between the petitioner and the passengers who died in the mishap rests on a contract of carriage. 730 [1946]) —0— Without the principle of limited liability. CANDONGO respondents. S. the liability of private respondents for the loss of the cargo of copra must be deemed to have been extinguished. his liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. Sangalang & Villanueva for petitioner. In sum. equipment. Ferrer. Anano for private respondent. San Diego. To offset against these adverse conditions and to encourage ship building and maritime commerce. Since the Civil Code contains no provisions regulating liability of ship owners or agents in the event of total loss or destruction of the vessel. it was deemed necessary to confine the liability of the owner or agent arising from the operation of a ship to the vessel. Mariano. thus avoiding the possibility of risking his whole fortune in the business. In the instant case it does not appear that the vessel was insured. and (2) the right to retain the cargo and the embargo and detention of the vessel even in cases where the ordinary civil law would not allow more than a personal action against the debtor or person liable. it is the provisions of the Code of Commerce. there is nothing in the records to show that the loss of the cargo was due to the fault of the private respondent as shipowners.shipwrecks. Abdulhaman supra). 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. supra). the fact is not ignored that the illfated. a ship owner and investor in maritime commerce would run the risk of being ruined by the bad faith or negligence of his captain. or to the concurring negligence of the ship owner and the captain (Manila Steamship Co. more particularly Article 587. Inc. and freight.

referring to Exhibit "B" (Standard Format of a Service Agreement) and Exhibit "C" (Affidavit of Undertaking). on 26 April 1978. the motion was denied.L. 1 Shortly after returning to the Philippines. the Fairwind Shipping Corporation. the participation of the Litonjua Shipping Corporation in the recruitment of complainant. On 28 December 1976. 7 . Mullion Ship Broking Agency Ltd. among others. and to bind and sign contracts for our behalf.00.. Edmond Cruz. Inc. The cause of the discharge was described in his Seaman's Book as 'by owner's arrange". the NSB hearing officer held a conference with the parties. the latter was accompanied to the NSB Cebu Area Manning Unit by two (2) supercargos sent by petitioner Litonjua to Cebu. Complainant's wages account further show that he has an undrawn wage amounting to US$13. 2 the dispositive portion of which read: Wherefore. was representing to be the shipowner. the vessel's master contracted the services of. what was indicated therein was R. the Litonjua Shipping Company was the authorized agent of the vessel's charterer. and that in the recruitment process. 1976 by the Fairwind Shipping Limited. private respondent Gregorio Candongo to serve as Third Engineer for a period of twelve (12) months with a monthly wage of US$500. Edmond Cruz asked.. We further authorized Litonjua Shipping Co. copy of which is on file with Contracts and Licensing Division. On 17 February 1977. At the initial hearing. for violation of contract.D. private respondent testified that when he was recruited by the Captain of the Dufton Bay. Ltd. to act as local representative who can sue and be sued. 4 The NSB then lifted the suspension of the hearing officer's 17 February 1977 decision. 3 Petitioner Litonjua filed a motion for reconsideration of the hearing officer's decision. thereby allowing the latter to adduce evidence in its own behalf The NSB hearing officer. Cebu Area Manning Unit. Inc. is duly appointed local crewing Managing Office to attend on our Crew requirements as well as attend to our ship's requirements when in Philippine ports.D. Thereafter. made the following findings: While it appears that in the preparation of the employment papers of the complainant. ("Mullion"). and Litonjua Shipping Co. The M/V Dufton Bay is an ocean-going vessel of foreign registry owned by the R. together with the other crewmembers. the Litonjua Shipping Company through its supercargos in the persons of Edmund Cruz and Renato Litonjua. Moreover. NSB then suspended its hearing officer's decision and lifted the order of default against petitioner Litonjua. at which conference petitioner Litonjua was represented by one of its supercargos. Litonjua Shipping.657. and was returned to the Philippines on 5 January 1977. in writing. as duly verified by the National Seamen Board.D. Wu addressed to the National Seamen Board. private respondent filed a complaint before public respondent NSB. jointly and solidarily to pay the complainant the sum of four thousand six hundred fifty seven dollars and sixty three cents ($4. On 11 September 1976. currency within 10 days from receipt of the copy of this Decision the payment of which to be coursed through the then NSB. before expiration of his contract. premises considered.Petitioner Litonjua is the duly appointed local crewing Managing Office of the Fairwind Shipping Corporation ('Fairwind). Inc. while the Dufton Bay was in the port of Cebu and while under charter by Fairwind.00 monthly salary. judgment is hereby rendered ordering the respondents R. Cruz and Litonjua were also present during private respondent's interview by Captain Ho King Yiu of the Dufton Bay. private respondent was required to disembark at Port Kelang.. The above conclusion was rationalized in the following terms: From the evidence on record it clearly appears that there was no sufficient or valid cause for the respondents to terminate the services of complainant prior to 17 September 1977. and that the two (2) supercargos Edmond Cruz and Renato Litonjua assisted private respondent in the procurement of his National Investigation and Security Agency (NISA) clearance..63) or its equivalent in the Phil. At the hearing. the Master of the vessel Dufton Bay. as thecompany whom Captain Ho King Yiu.19 to be paid by the respondents Philippine agency together with his accrued leave pay.. that the hearing be postponed for a month upon the ground that the employee of Litonjua in charge of the case was out of town. Mullion Shipbrokers Co. thru its Director David H. which is the expiry date of the contract. Mullion Co. Messrs. quote: This is to certify that Messrs. This agreement was executed before the Cebu Area Manning Unit of the NSB. against Mullion as the shipping company and petitioner Litonjua as agent of the shipowner and of the charterer of the vessel. which complaint was docketed as NSB-1331-77. had knowledge thereof and in fact assisted in the interviews conducted by the Master of the crew applicants as admitted by Renato Litonjua including the acts of facilitating the crew's NISA clearances as testified to by complainant. the fact remains that at the time of the recruitment of the complainant. The hearing officer denied this request and then declared petitioner Litonjua in default. Petitioner next filed an "Appeal and/or Motion for Reconsideration of the Default Judgment dated 9 August 1977" with the central office of the NSB. Malaysia. For this reason the respondents have violated the conditions of the contract of employment which is a sufficient justification for this Board to render award in favor of the complainant of the unpaid salaries due the latter as damages corresponding to the unexpired portion of the contract including the accrued leave pay computed on the basis of five [51 days pay for every month of service based at $500. private respondent boarded the vessel. in Cebu in September 1976 can be traced to the contents of the letter of April 5. (HK) Ltd. the hearing officer of the NSB rendered a judgment by default.

(Emphasis supplied) In the instant Petition for Certiorari. it had been established by complainant that Litonjua Shipping Company. The shipowner is not normally required by the terms of a demise charter to provide a crew. charterer of the vessel 'Dufton Bay.19 is no other than Litonjua Shipping Company. It necessarily follows that Fairwind Shipping Corporation is the employer of said complainant. it can be reasonably inferred that the master of the vessel acted for and in behalf of Fairwind Shipping Corporation who had the obligation to pay the salary of the complainant. it accordingly should not have been held liable on the contract of employment of private respondent. upon the other hand. The principal if not the sole issue to be resolved here is whether or not the charterer Fairwind was properly regarded as the employer of private respondent Candongo. liable to complainant . master and crew remain in the employ of the owner of the vessel. In a voyage charter. and 2) The evidence of record is grossly inadequate to shift such liability from the shipowner to the petitioner. 7Petitioner also argues that its supercargos merely assisted Captain Ho King Yiu of the Dufton Bay in being private respondent as Third Engineer. 8 Sometimes. to wit: 1) As a general rule. Inc. that the decision dated February 17. (b) the "time" charter. is based on evidence formally offered and presented during the hearing and that there was no grave abuse of discretion committed by the hearing officer in finding respondent Litonjua Shipping Company. of course. In modern maritime law and usage.. including its implementing rules and regulations.. public respondent NSB rendered a decision 5 which affirmed its hearing offices decision of 17 February 1977 and which read in part as follows: It is clear that respondent Litonjua Shipping Co. Inc. from one or more ports of loading to one or more ports of unloading.. is the authorized Philippine agent of Fairwind Shipping Corporation. Inc. and the charterer (and not the owner) through the agency of the master. Petitioner Litonjua makes two (2) principal submissions in support of its contention. 1976. the demise charter might provide that the shipowner is to furnish a master and crew to man the vessel under the charterer's direction.e. 3 of the New Labor Code of the Philippines. A time charter. Inc. wherein complainant. 4 thereof. and (c) the "voyage" or "trip" charter. it is our conclusion. and not the charterer.' as well as the provisions of Art. We believe that there are two (2) grounds upon which petitioner Litonjua may be held liable to the private respondent on the contract of employment. 1977. has possession and control of the vessel during the charter period. the Master of the vessel is the agent of the charterer and not of 8 . admiralty law as embodied in the Philippine Code of Commerce fastens liability for payment of the crew's wages upon the ship owner. i. the charterer is treated as owner pro hac vice of the vessel. as constituting a grave abuse of discretion amounting to lack of jurisdiction. . A bareboat or demise charter is a demise of a vessel. however. represented by the ship's master. the owner of a time-chartered vessel (unlike the owner of a vessel under a demise or bare-boat charter). petitioner Litonjua assails the decision of public respondent NSB declaring the charterer Fairwind as employer of private respondent. and that liability for damages cannot be imposed upon petitioner which was a mere agent of the charterer. which provides that. the shipowner. On 31 May 1979. that 'all doubts in the implementation and interpretation of the provisions of the Code. and so the charterer gets the "bare boat". that is. and Fairwind. is a contract for the use of a vessel for a specified period of time or for the duration of one or more specified voyages. much as a lease of an unfurnished house is a demise of real property. . retains possession and control through the master and crew who remain his employees. there are three (3) distinguishable types of charter parties: (a) the "bareboat" or "demise" charter. who then undertakes to provide a crew and victuals and supplies and fuel for her during the term of the charter. signed by the Master of the vessel that the Philippine agency referred to herein directed to pay the said withdrawn wages of $13. not the charterer. was the employer of private respondent. like a demise charter. It is insisted that private respondent's contract of employment and affidavit of undertaking clearly showed that the party with whom he had contracted was none other than Mullion. the charterer. without a crew. such that the master and crew provided by the shipowner become the agents and servants or employees of the charterer. Moreover. served as 3rd Engineer from 17 September until disembarkation on December 28. The first basis is the charter party which existed between Mullion.Petitioner Litonjua once more moved for reconsideration. From this observation. In this case. It is also clear from the complainant's wages account bearing the heading 'Fairwind Shipping Corporation'. 10 In such case. a contract for the carriage of goods. had knowledge of and participated. shall be resolved in favor of labor'. in the recruitment of herein complainant. A voyage charter. and pursuant to Art. 'The state shall afford protection to labor . on one or on a series of voyages. through its employee. The shipowner turns over possession of his vessel to the charterer. is simply a contract of affreightment." Petitioner Litonjua thus argues that being the agent of the charterer and not of the shipowner. Petitioner also points to the circumstance that the discharge and the repatriation of private respondent was specified in his Seaman's Book as having been "by owner's arrange. We are not persuaded by petitioner's argument. 9 It is well settled that in a demise or bare boat charter. xxx xxx xxx In view of the foregoing. 6 Petitioner Litonjua contends that the shipowner. the charterer assuming in large measure the customary rights and liabilities of the shipowner in relation to third persons who have dealt with him or with the vessel. the shipowner.. and for whose liability petitioner was made responsible. What the time charterer acquires is the right to utilize the carrying capacity and facilities of the vessel and to designate her destinations during the term of the charter. or trip charter.

would be defenseless against a breach of their respective contracts. should it be held liable to private respondent for the latter's claims. Upon the other hand. The statement of account which the Dufton Bay'sMaster had signed and which pertained to the salary of private respondent had referred to a Philippine agency which would take care of disbursing or paying such account. petitioner Litonjua certainly in effect represented that it was taking care of the crewing and other requirements of a vessel chartered by its principal. Fairwind would be in an indefinitely better position (than private respondent) to seek and obtain recourse from Mullion. it is not clear from the authorization given by Fairwind to petitioner Litonjua that vessels chartered by Fairwind (and owned by some other companies) were not to be taken care of by petitioner Litonjua should such vessels put into a Philippine port. The charterer of the vessel. SO ORDERED. the scope of authority or the responsibility of petitioner Litonjua was not clearly delimited.R. To hold otherwise would be to leave private respondent (and others who may find themselves in his position) without any effective recourse for the unjust dismissal and for the breach of his contract of employment. as Philippine agent of the charterer. PHILIPPINE NATIONAL BANK/NATIONAL INVESTMENT DEVELOPMENT CORPORATION. respondents. We think this result. While wages of crew members constitute a maritime lien upon the vessel. Fairwind. Moreover. as Philippine agent of the charterer. was present in the Philippines. Secondly. Branch 146 in Civil Case No. operating requirements of a vessel for crew members and for supplies and provisions have no relationship to the technical characterization of the vessel as owned by or as merely chartered by Fairwind. CHINA BANKING CORPORATION.-G. THE COURT OF APPEALS. 7119 insofar as it dismissed the complaint-in-intervention of private respondent China Banking Corporation. The facts of the case are as follows: To finance the acquisition of seven (7) ocean-going vessels. there is the circumstance that extreme hardship would result for the private respondent if petitioner Litonjua. 11 The charterer or owner pro hac vice. private respondent is in no position to enforce that lien. 13 Treating Fairwind as owner pro hac vice. which public respondent reached.: In this petition for review on certiorari under Rule 45 of the Rules of Court. There is a second and ethically more compelling basis for holding petitioner Litonjua liable on the contract of employment of private respondent. reinforced by convergence of other circumstances of which the Court must take account. No. vs. the Petition for certiorari is DISMISSED and the Decision of the then National Seamen Board dated 31 May 1979 is hereby AFFIRMED. The assailed decision set aside the Order[2] dated 4 March 1992 of the Regional Trial Court of Makati City. In any case. But the documentary authorization read into the record of this case does not make that clear at all. clearly benefitted from the employment of private respondent as Third Engineer of the Dufton Bay. there is also no question that petitioner Litonjua did assist the Master of the vessel in locating and recruiting private respondent as Third Engineer of the vessel as well as ten (10) other Filipino seamen as crew members. CV-38131. is held liable for the expenses of the voyage including the wages of the seamen. being one of foreign registry and not ordinarily doing business in the Philippines or making regular calls on Philippine ports cannot be effectively held to answer for such claims in a Philippine forum. the private respondent. and the other Filipino crew members of the vessel. should Fairwind feel entitled to reimbursement of the amounts paid to private respondent through petitioner Litonjua. along with the ten (10) other Filipino crewmembers recruited by Captain Ho in Cebu at the same occasion.the shipowner. The equitable consequence of this benefit to the charterer is.” M/V “Asean Nations. In turn. it was because the charter party and the provisions thereof were not supportive of the position adopted by petitioner Litonjua in the present case. petitioners seek the reversal of the 21 March 1997 decision [1] of the Court of Appeals in C.” M/V “Asean Independence. took the position that its commission was limited to taking care of vessels owned by Fairwind. In so doing. it seems quite clear that petitioner Litonjua. the ship would not have been able to proceed with its voyage.” M/V “Asean Greatness. There is the circumstance that only the charterer. 15 Last. through the petitioner. No pronouncement as to costs.” and M/V “Asean Objectives. and not the general owner of the vessel. but certainly not least. which had been entered into by its principal. far from constituting a grave abuse of discretion. We conclude that private respondent was properly regarded as an employee of the charterer Fairwind and that petitioner Litonjua may be held to answer to private respondent for the latter's claims as the agent in the Philippines of Fairwind. Fairwind. is not held liable to private respondent upon the contract of employment. namely M/V “Asean Liberty. Indeed the commercial. would be better placed to secure reimbursement from its principal Fairwind. Clearly. We must assume that petitioner Litonjua was aware of the nature of a bareboat or demise charter and that if petitioner did not see fit to include in the record a copy of the charter party. 12 It is important to note that petitioner Litonjua did not place into the record of this case a copy of the charter party covering the M/V Dufton Bay. WHEREFORE. we believe and so hold that petitioner Litonjua. 'there is no question that Philippine agency was the Philippine agent of the charterer Fairwind. a position diametrically opposed to the legal consequence of a bareboat charter.” M/V “Asean Mission. is compelled by equitable principles and by the demands of substantial justice. Petitioner as noted. petitioner Litonjua having failed to show that it was not such.A. the foreign shipowner.” M/V “Asean Knowledge.petitioners. DECISION GONZAGA-REYES. 14 If private respondent had not agreed to serve as such Third Engineer. moreover. may be held liable on the contract of employment between the ship captain and the private respondent. J. If only because the vessel.” the Philippine International Shipping Corporation (hereinafter “PISC”) applied for and was granted by petitioner National Investment and Development Corporation (hereinafter “NIDC”) the following guaranty accommodations: 9 . The words "our ships" may well be read to refer both to vessels registered in the name of Fairwind and vessels owned by others but chartered by Fairwind.

000.225. In this letter.. 1979 constituted on M/V “Asean Liberty” and M/V “Asean Nation” and recorded on September 25.00 with private respondent CBC in favor of Citibank.000. a Promissory note for US$545.225. 10 . PISC executed in favor of petitioners the following mortgage documents: a. US$1. and in an amended answer impleaded additional counterclaim defendants. 1997. of Zurich. as lender. Pan Asia.470. b. As first stated. for recovery upon maritime liens against the proceeds of the sale of the foreclosed vessels. (hereinafter “Citibank”) to cover the repair and partial conversion of the vessel M/V “Asean Liberty”. there now remain only Lloyd’s and China Bank claims in intervention. and c..225. 1989. and c.291 Million in favor of PNB as evidenced by and subject to the terms and conditions of that Second Consolidated Amendatory Agreement dated July 17. irregular. Irving Trust Co. Co.. 1979 to finance the acquisition cost of four (4) additional ocean-going vessels.00 in favor of Citibank.” M/V “Asean Knowledge.00 was executed by PISC in favor of Citibank pursuant to the Loan Agreement for US$545.00.G.a. petitioner PNB conducted. except for the vessel M/V “Asean Objective. claiming that the foreclosure sale of its mortgaged vessels was illegal. for failure of PISC to settle its obligations in the amount of US$64. for short) and Philippine National Bank (PNB. 1979.000.[6] On June 15. 1983 drawing on Letter of Credit No. 1983. Citibank certified that the draft attached thereto for US$242. and oppressive. PISC executed an Application and Agreement for Commercial Letter of Credit for $545. for the repair and conversion of the vessel M/V “Asean Liberty” at a contract price of HK$2. In an Order dated September 29. [3] As security for these guaranty accommodations. recovery upon which is covered by a PNB bank guarantee therefor if found matters of entitlement (sic) by said intervenors.60 Million in favor of the Philippine National Bank (hereinafter “PNB” as evidenced by and subject to the terms and conditions of a Consolidated Amendatory Agreement dated January 25. the following proceedings transpired in the lower court: “Records show that on May 27. by cable. Deed of Chattel Mortgage dated September 14. CBC instructed its correspondent Irving Trust Co. 1979 to finance the additional acquisition cost of one (1) ocean-going vessel. the complaint itself against and the NIDC counterclaims were dismissed with prejudice. 1979. and made the basis for the Decision of August 23. On September 17.[9] On May 27. to pay to Citibank the amount of US$242. 1986. Thus.. Citibank sent to private respondent CBC a letter dated March 25..00 between PISC. and HANMF Marine Service.00 in favor of Citibank for account of PISC. US$23. 1978 to partly finance the acquisition of two (2) ocean-going vessels.[4] Meanwhile. PISC instituted before the Regional Trial Court of Makati. the proceeds of which were used for the repair and conversion of M/V Asean Liberty. [5] On May 28.200. b. then Judge Jose L. US$9.00. 1979. dismissed the complaint as against PNB and the counterclaimed defendants. Ltd. Inc.44 Million in favor of Ultrafin A.00 represented the principal balance due to Citibank as of March 17. for short) for annulment of foreclosure of mortgage and auction sale with damages vis-à-vis the sale on foreclosure of vessels Asean Mission. 1989. Supplemental Chattel Mortgage constituted on M/V “Asean Greatness” and recorded with the Philippine Coast Guard Headquarters on February 3.. Ltd. thru the Sheriff’s Office.” Petitioner NIDC emerged as the highest bidder in these auctions. 79/4174 for US$545. Hyundai. Ltd. 1981. 1981 to July 14.. Chiang Tung Enterprises Co. on March 30. Jr. Ltd. [7] Upon failure of PISC to fulfill its obligations under the said promissory note. Intervenor Lloyd’s claim is for ‘the service of herein intervenor Lloyd’s Register of Shipping to class aforementioned vessels (M/V Asean Nations and Asean Greatness) during the period covering July 22. Complaints in intervention were filed by and for Unitor Ships Services PTE. NIDC answered the complaint.00 had been debited against CBC’s Account No. private respondent CBC issued on September 12. Pursuant to this application and agreement. In the meantime.” and M/V “Asean Objectives” and recorded with the Philippine Coast Guard Headquarters on February 13. 1983. This was pursuant to the letter of the Central Bank of the Philippines dated May 28. 1983. China bank. an auction sale of the mortgaged vessels. as borrower. UDDVALLARVARVET AB. 1979. NIDC having thereafter disposed of said vessels in favor of the National Steel Corporation (NSC). The parties concerned. 1983 under the promissory note executed by PISC. Shipyard Co. 79/4174. 1984. and Citibank. On the same date.96. N.A. Asean Nations and Asean Greatness (as well as Asean Liberty and Asean Independence). eventually submitted a Compromise Agreement dated July 12. except for intervenors Lloyd’s and China Bank. 8033278269 and remitted to Citibank. 1980. As accurately narrated in the trial court’s Order and adopted by the Court of Appeals in its Decision of March 21. NIDC acquired the vessels as highest bidder in the foreclosure thereof initiated by PNB. 1979 with the Philippine Coast Guard Headquarters. Lloyd’s.000. Supplemental Chattel Mortgage dated October 2. a civil case [10] against petitioners for the annulment of the foreclosure and auction sale of its vessels and damages. Switzerland as Agent for the banks/financial institutions as evidenced by and subject to the terms and conditions of a Guaranty Agreement dated December 7.930. PISC entered into a Contract Agreement with Hong Kong United Dockyards. Asean Knowledge.” M/V “Asean Mission.. 1979 constituted on M/V “Asean Independence. advised private respondent CBC by mail that the amount of US$242.000. 1983. 1979 its Irrevocable Standby Letter of Credit No. And under date of November 3. unjust.000. on March 12. PISC (Philippine International Shipping Corporation) filed suit against National Investment and Development Corporation (NIDC. 1983 and the cost for said maritime surveys in the sum of HK$65. IMO Industries AB. Coscolluela.[8] On May 10.00 variable as provided therein.789. 1979. the Central Bank of the Philippines authorized PISC to open with private respondent China Banking Corporation (hereinafter “CBC”) a standby letter of credit for US$545. 1979 as amended on June 20.

1981 to July 14.45 and P9. in the context in which they sought to be recovered.930. In its appeal.UKC10. to the extent of US$242. C. and to pay for bunker fuel.[12] On March 21.00 paid by China Bank to Citibank.00’ said to have been unpaid by PISC despite demands. of the sum of US$3. private respondent CBC imputed the following errors allegedly committed by the trial court: a) the trial court erred in holding that the loans extended by China Banking Corporation to the Philippine International Shipping Corporation did not create maritime liens. Intervenor-claimant China Banking Corporation seeks recovery. presentation of evidence and/or witnesses in point is unnecessary. failing formulation of any amicable settlement in the manner arrived at by all other intervenors.890. Thus.00. the date of filing of CBC’s complaint-inintervention. as well as salaries and wages of crew members.45 and P9. 1984. and that the appeal of CBC should have been lodged with the Supreme Court by petition for review oncertiorari..7 Million plus stipulated interests. UK Pounds C10.700.930.363.002. Plaintiffs. pre-trial proceedings for the subject last remaining claims in intervention by and for Lloyd’s and China Bank resulted in an August 9. N. such recovery may be allowed in relation with PNB’s being the mortgagee of the assets from which recovery is sought. ISSUES. and (b) Ordering the appellee Philippine International Shipping Corporation to pay the same CBC the amounts of US$648. PNB-NIDC and intervenor-claimant Lloyd’s Register of Shipping stipulate and admit that the totality of its claims as fully supported by documentation already verified by the parties are in the sums of HK$65.00 or its Philippine Peso Equivalent at the time of payment.53 as fortified by documentation already verified in point. China Bank’s claims are premised on the above as being preferred maritime liens. container rental and insurance. Plaintiffs admit the recoverability of said claims as being in the nature of preferred maritime liens. Considering that the issues to be addressed are purely legal in nature. the trial court ruled that the claim of private respondent CBC was not a preferred maritime lien but was merely a loan extended to PISC by CBC. 1997.00 as being in the nature of preferred maritime liens on the vessels M/V “ASEAN NATIONS” and “ASEAN GREATNESS”.000.227. Whether or not said claims.45 and P9. B.225. and ii. 11 . particularly a BA Draft for US$648. Shortly after the undersigned penning Judge assumed his duties in this Court. to obviate the necessity of adducing evidence in point on matters capable of stipulation. Intervenor China Bank’s claims are predicated on (i) a China Bank Standby Letter of Credit in favor of Citibank. herein petitioners PNB/NIDC raised as an issue in its Appellee’s Brief before the Court of Appeals the lack of jurisdiction of the appellate court to entertain and pass upon the appeal interposed by CBC on the ground that the issues raised therein were purely legal. insofar as the appellant CBC is concerned. the trial court issued on March 4.54 and US$2. the Court of Appeals promulgated its questioned decision. much less preferred maritime liens. as being in the nature of a preferred maritime lien. Plaintiffs. The parties have agreed to limit the resolution of the last two remaining claims in intervention aforementioned to the following legal questions: i. b) assuming that the loans are not themselves maritime liens. representing costs for maritime services rendered for said vessels for the period July 22.363.54 said to have been applied towards vessel repair and conversion by the China Shipbuilding Corporation of Taiwan. the trial court erred in holding that the China Banking Corporation did not acquire the maritime liens of Philippine International Shipping Corporation's creditors by subrogation. the appealed Order is hereby SET ASIDE and judgment is rendered: (a) Directing the appellee Philippine National Bank/National Investment and Development Corporation to pay the appellant China Banking Corporation from the proceeds of the foreclosure sale of M/V Asean Liberty the amount of US$242. whereas PNB-NIDC contests the said claims. together with stipulated interests due from PISC.00 as evidenced by a promissory note. are preferred maritime lien as would entitle said claims to recover.002. A.870.653. NIDC rejects said claims as not being maritime liens. and (iii) a China bank commercial letter of credit to PISC in favor of Bank of America. for expenses and storage container rentals and insurance premium paid out by it.225.00. (ii) a China Bank loan of US$2.’” [11] After the parties submitted their respective memoranda. Lloyd’s and China Bank were enjoined to furnish opposite counsel with copies of the documentation of their respective claims. 1992 an Order dismissing the complaint-inintervention filed by private respondent CBC for lack of merit.53. NATURE OF THE CASE Claimant-intervenor Lloyd’s Register of Shipping seeks recovery as unpaid creditor of HK$65. In dismissing the complaint-in-intervention. until fully paid. with interest thereon at the legal rate from November 7. NIDC traversed the Lloyd’s claim as not being preferred maritime liens and in any event inferior in nature. defray port expenses and storage. the loan proceeds said to have allowed PISC to reduce overhead expenses and afford it competitive advantage in overseas shipping. the dispositive portion of which states: “WHEREFORE. STIPULATIONS AND ADMISSIONS.653. UKC10. Whether or not assuming recoverability thereon as being in the nature of maritime liens. purportedly to cover repair and partial conversion of M/V Asean Liberty. 1983. representing the totality of loans extended by said intervenor-claimant said to have been expended in financing repair and conversion costs. For its part.363. and said to be now owing by PISC together with stipulated interest. 1991 Pre-Trial Order which set forth‘A.227.653. PNB-NIDC and intervenor-claimant China Banking Corporation stipulate and admit that the totality of its claim is in the sum of US$3. Private respondent CBC appealed the Order of the trial court to the Court of Appeals.

OO AS EVIDENCED BY ITS IRREVOCABLE LETTER OF CREDIT NO.”[13] In the said decision.7 Million were found by the appellate court as not being in the nature of maritime liens and as such. Appeals of this nature should be raised to the Supreme Court. their relation to each other and to the whole and probabilities of the situation. recoverable only from PISC.54 and US$2. as in this case. If the petition raised only questions of law. 79/4174 OF SEPTEMBER 12.00. Private respondent CBC’s other claims of US$648. continued ignorance or willful disregard of the law on appeals will not be tolerated.225. taxes and penalties. WHETHER OR NOT THE COURT OF APPEALS HAS APPELLATE JURISDICTION TO ENTERTAIN AND PASS UPON THE APPEAL INTERPOSED BY PRIVATE RESPONDENT CBC FROM THE ORDER OF THE TRIAL COURT OF MARCH 4. 1521. On the other hand. 1979 IS IN THE NATURE OF A MARITIME LIEN UNDER THE PROVISIONS OF P. which was used for the repair and conversion of the M/V “Asean Liberty”. – If an appeal under Rule 41 is taken from the Regional Trial Court to the Court of Appeals and therein the appellant raises only questions of law. Citing the pronouncement of this Court en banc in Anacleto Murillo vs. the appeal brought before the Court of Appeals by the private respondent CBC must first be analyzed as to whether the same raised questions or errors of law alone. Erroneous Appeals. issues purely of law not being reviewable by said court. Notwithstanding this legal rule. Circular 2-90. indirectly states that cases from the Regional Trial Court raising only questions of law should be taken to the Supreme Court. such amount was to be paid by petitioners PNB/NIDC from the proceeds of the foreclosure sale of the vessel M/V “Asean Liberty”. as it was only this amount which CBC was able to prove as being a preferred maritime lien. xxx xxx xxx (c) Raising issues purely of law in the Court of Appeals or appeal by wrong mode. As distinguished from a question of law which exists ‘when the doubt or difference arises as to what the law is on certain state of facts’ – ‘there is a question of fact when the doubt or difference arises as to the truth or the falsehood of alleged facts. NO. petitioners argue that the Court of Appeals committed grave error in law in taking cognizance of the appeal interposed by private respondent CBC from the Order of the trial court dated 4 March 1992 involving as it does pure questions of law. Not satisfied with the decision of the appellate court. As such. transfer of erroneous appeals is not allowed and the tribunal which receives the erroneous appeal should perforce dismiss the same for lack of jurisdiction. AND IF SO. we note with approval the following justification made by the respondent court in assuming jurisdiction over the case: “A question of fact has been distinguished from a question of law in this wise: ‘At this point. On the first issue.[17] As such. WHETHER OR NOT PRIVATE RESPONDENT CBC’S CLAIM FOR US$242. 12 . petitioners continue. then the Court of Appeals correctly exercised jurisdiction over the issue. the distinction between a question of fact and a question of law must be clear.’ or when the query necessarily invites calibration of the whole evidence considering mainly the credibility of witnesses.225. swap premiums. the appellate court held petitioners PNB/NIDC liable to CBC only for the amount of US$242.D. the appeal shall be dismissed. 216 SCRA 224) Stated differently. Rodolfo Consul[14]. II. the documentary evidence adduced by the parties was admitted without objection. It is true that the decisions of the Regional Trial Court may be directly reviewed by the Supreme Court on petition for review if pure questions of law are raised. a question of fact is still involved when the query necessarily invites the calibration of the whole evidence including the relevancy of surrounding circumstances and their relation to each other.’(Bernardo vs.” From the cited provisions. 4(c) and (d) of the said Circular provide as follows: “4. Paragraphs No. 1992 WHICH INVOLVED PURE QUESTIONS OF LAW. On this point.000. losses. xxx SO ORDERED. – No transfers of appeals erroneously taken to the Supreme Court or to the Court of Appeals to whichever of these Tribunals has appropriate appellate jurisdiction will be allowed. then the Court of Appeals had no jurisdiction to take cognizance of the case and should have dismissed the case outright. xxx (d) No transfer of appeals erroneously taken. Moreover.[16] Furthermore. even if. – An appeal taken to either the Supreme Court of the Court of Appeals by the wrong or inappropriate mode shall be dismissed. a question of law does not involve an examination of the probative value of the evidence presented by the litigants or any of them.arrangement fees. WHETHER OR NOT SAID MARITIME LIEN IS PREFERRED OVER THE MORTGAGE LIEN OF PETITIONER PNB/NIDC ON THE FORECLOSED VESSEL M/V “ASEAN LIBERTY”. They claim that the Court of Appeals had no jurisdiction to entertain and pass upon the appeal interposed by private respondent CBC as the issues raised therein are purely legal. not from herein petitioners PNB/NIDC. petitioners PNB/NIDC institute the present petition for review on certiorari where they raise the following issues: I. Court of Appeals. existence and relevancy of specific surrounding circumstances. if the petition raised only questions of fact or questions of both fact and law. it is clear that the Court of Appeals does not have jurisdiction over appeals from the Regional Trial Court that raise purely questions of law. the petitioners conclude that the appeal made by private respondent CBC to the Court of Appeals should have been dismissed by the respondent court for lack of jurisdiction. the appeal of CBC should have been lodged directly with the Supreme Court by way of petition for review on certiorari under Rule 45 of the Revised Rules of Court. expenses.[15] which petitioners cite and which outlined the applicable rules of procedure on this matter at that time.

Ltd. any person furnishing repairs. if such examination and re-evaluation of the evidence is called for. as contractor. a question of fact is raised. shall be held terminated and shall thereafter attach. the residue shall be divided among them pro rata. the former. including any possessory common-law lien of which a lienor is deprived under the provisions of Section 16 of this Decree. “In the decision from which the CBC appealed. b) Payment will be: (1) Before departure of vessel from Contractor’s yard: 20% of contract price. the CBC argues that in so holding. and as a result. Priorities. in the exercise of its review power. if it arose prior to the recording of a preferred mortgage lien. provide an Irrevocable Documentary Credit for the Contract Price plus an estimate to cover the cost of extra work. a maritime lien in favor of Hongkong United Dockyards.” “Sec. shall have priority over the said mortgage lien. In the instant case. Ltd. indubitable that mixed questions of fact and of law are involved over which this Court has jurisdiction. (3) 90 days from departure of vessel from Contractors yard: 40% of contract price. It is the contention of private respondent CBC however. over the vessel M/V “Asean Liberty”. that it ultimately acquired the maritime lien of Hongkong United Dockyards. Section 7 of the said Agreement provides as follows: “(7) a) The Owner will.” which was owned by PISC.” Under these provisions. in resolving the issues raised by private respondent in the Court of Appeals. was constituted on the said vessel by virtue of Section 21 of the Ship Mortgage Decree of 1978. The issue thus raised cannot be judiciously resolved without reviewing the probative weight of the evidence on record consisting in the main of the various documents. the trial court primarily held that the former is a mere money lender and not a maritime lienor. all pre-existing claims on the vessel. whether fully or partially shall subsist as ordinary credits enforceable by personal action against the debtor. which originally possessed a maritime lien over the vessel M/V “Asean Liberty” by virtue of its repair of the said vessel on credit. supplies. how the proceeds of the loans were used. The next issue brought up by petitioners is whether or not private respondent CBC’s claim for US$242. which may be enforced by suit in rem. Ltd. Moreover. in order to address fully the issues raised by the parties in their pleadings. Under the Contract Agreement dated March 12.”[20] The foregoing provision of the contract agreement indubitably shows that credit was given to the vessel M/V “Asean Liberty” by Hongkong United Dockyards. and (6) damages arising out of tort. and it shall be necessary to allege or prove that credit was given to the vessel. – Any person furnishing repairs. If the appellate court. the trial court disregarded the maritime purposes for which the loans it extended to the Philippine International Shipping Corporation (PISC) were availed of and used. use of dry dock or maritime railway. In its appeal. the appellate court had to make a factual inquiry. it was Hongkong United Dockyards. including contract salvage. and that said maritime lien is preferred over the mortgage lien of petitioners PNB/NIDC on the foreclosed vessel M/V Asean Liberty. (5) maritime liens arising prior in time to the recording of the preferred mortgage. supplies.225. It is the contention of petitioners that “(t)he Court of Appeals gravely erred in law in holding that private respondent CBC’s claim under its Standby Letter of Credit No. or other necessaries to any vessel. Ltd. the issues being mixed questions of fact and law.” [19] The applicable law on the matter is Presidential Decree No. (2) crew’s wages. (4) salvage. Preferred Maritime Liens. 1521.” [18] Thus. In short. the relationship of the different parties with one another and with respect to the vessels involved in the case. The banks and wording of the Credit are to be agreed by the Contractor. The determination of these facts is crucial as it will resolve whether the amount advanced by respondent CBC is in the nature of a maritime lien and if so. therefore. then a mortgage lien was indubitably established over the shipping vessels. otherwise known as the Ship Mortgage Decree of 1978. As shown by the documentary 13 . whether the lien is superior to the mortgage lien of petitioners. Maritime Lien for Necessaries. It is. (2) 60 days from departure of vessel from Contractors yard: 40% of contract price. All credits not paid. on the nature and terms of the contracts among the different parties. or other necessaries to a vessel on credit will have a maritime lien on the said vessel. (3) general average. in like amount and in accordance with the priorities established herein to the proceeds of the sale. the issues raised by private respondent in the appellate court were cognizable by the said court. Ltd. 1979 between Hongkong United Dockyards. 21. a determination of the dates when the respective liens of the parties were constituted over the vessels will answer the question as to which lien is preferred over the other. The record of judicial sale or sale by public auction shall be recorded in the Record of Transfers & Encumbrances of Vessels in the port of documentation. Such maritime lien. and (7) preferred mortgage registered prior in time. finds that the amount advanced by CBC was used for the repair of the vessels. except the following claims in the order stated: (1) expenses and fees allowed and costs taxed by the court and taxes due to the government. obligated itself to repair and convert the vessel M/V “Asean Liberty. Verily. (b) If the proceeds of the sale should not be sufficient to pay all creditors included in one number or grade. and the correct dates when the maritime and mortgage liens were constituted on the vessels. towage. before the commencement of work. persons entitled to such lien. Sections 17 and 21 of the said Presidential Decree provides as follows: “Sec. whether foreign or domestic. 79/4174 is a maritime lien. Other Liens – (a) Upon the sale of any mortgaged vessel in any extra-judicial sale or by order of a district court of the Philippines in any suit in rem in admiralty for the enforcement of a preferred mortgage lien thereon. among others.00 is in the nature of a maritime lien. The preferred mortgage lien shall have priority over all claims against the vessel. 17. upon the order of the owner. Respondent court was therefore acting within its jurisdiction when it promulgated its questioned decision. shall have a maritime lien on the vessel. the appellate court necessarily had to make factual findings. and PISC. contracts and transactions attached to CBC’s complaint-in-intervention.otherwise.

the proceeds of which loan. 1979..000..”[28] In short. promising to pay the latter the principal sum of US$545. On June 20.evidence offered by private respondent CBC. Per express provisions of the Letter of Credit. they being the ones who furnished the repair works.00 in favor of Citibank.000. Ltd. 1979. 1979 letter stated that the credit for US$545.000 would be used “to cover the partial conversion cost of the vessel ‘Asean Liberty’”. the Central Bank approved the request of PISC to change the beneficiary of the said Standby Letter of Credit from Hongkong United Dockyards.00 was debited against CBC’s Account No. (f) On March 25. Irving Trust Co. advised private respondent CBC by mail that the sum of US$242. 1979. It is presumed that there is legal subrogation: xxx xxx xxx (2) When a third person not interested in the obligation pays with the express or tacit approval of the debtor.002.00 in favor of Hongkong United Dockyards. ‘any person furnishing repairs.. 1302 (2). the proceeds of which loan. This March 25.00 in favor of Citibank. 1980 until September 17.225. towage. Ltd. Ltd. the same was established to “guarantee your (Citibank) loan in the principal amount of US$545. Ltd. as deposed by George Lim. Makati. (d) On September 12. according to accountee. No. respectively.200. its proof that it acquired said maritime lien is as follows: (a) On March 12. it is not necessary to allege or prove that the credit was given to the vessel. 1979[26]. PISC entered into a Contract Agreement with Hongkong United Dockyards. PISC executed on September 17.000. to Citibank[22]. On the same date.00 [21]. True it is that under the law the persons entitled to the lien are the Hongkong United Dockyards. it is clear that private respondent’s claim is predicated on the payment it made to Citibank by virtue of the Irrevocable Letter of Credit it established in the latter’s favor. This May 28. Such being the case. according to accountee. or of a person authorized by the owner has a maritime lien on the vessel which may be enforced by suit in rem. (c) On June 15.555. and the China Shipbuilding Corporation of Taiwan. insofar as the creation of the lien and the persons entitled to the lien are concerned.00 in nine (9) consecutive semi-annual installments of US$60. by legal subrogation and thus acquired the maritime lien of the latter over the vessel M/V “Asean Liberty. undertaken by Hongkong United Dockyards. From the documentary evidence thus presented. (g) On March 30.000.’ The only difference is that under the Federal Maritime Lien Act. the proceeds of which will be used “to finance partially the conversion cost of the vessel MV ‘ASIAN LIBERTY’” [23]. private respondent CBC issued an Irrevocable Standby Letter of Credit in favor of Citibank for any sum or sums not exceeding a total of US$545. 1979. PISC executed an Application and Agreement with private respondent CBC for the opening of a Standby Letter of Credit for US$545.. Article 1302 (2) of our Civil Code explicitly provides: ‘Art. Citibank sent a letter to private respondent CBC calling and drawing on CBC’s Letter of Credit No. It was Citibank. Makati[27].00 represents the principal balance due to Citibank as of March 17. and the China Shipbuilding Corporation of Taiwan.000. Ltd. or other necessaries. However. to pay Citibank US$242. Irving Trust Co. it stepped into the shoes of the latter by subrogation. use of drydock or marine railway.000. 1983 under PISC’s Promissory Note of September 17.00.00 commencing one (1) year from date hereof or on September 17.00.’ Significantly. xxx xxx xxx. provides that. which advanced the money to PISC. 1983. to any foreign or domestic vessel on the order of the owner of such vessel.225. Furthermore. are to finance partially the conversion cost of the vessel M/V ‘ASIAN LIBERTY’”[24].000. private respondent CBC instructed by cable its correspondent. its purpose was “to guarantee (Citibank’s) loan to Philippine International Shipping Corporation. upon the order of the owner. American jurisprudence is highly persuasive. The agreement confirmed that the letter of credit would be used to guarantee the loan in the amount of US$545. maritime liens on the vessels concerned arose conformably with the aforequoted provision of Section 21 of P. N.225. 8033278269 and remitted to the Citibank Foreign Currency Deposit Unit. Per express terms of the Letter of Credit.000. It was only upon the failure of PISC to fulfill its obligations under its promissory note to Citibank that private respondent CBC was called upon by Citibank to exercise its duties under the Standby Letter of Credit. 1984[25]. Ltd. like our Ship Mortgage Decree of 1978. the Federal Maritime Lien Act.’ 14 . This is the prevailing doctrine in American jurisprudence which holds that: ‘A creditor who advances money specifically for the purpose of discharging a maritime lien is subrogated to the lienor’s rights. (b) On May 28.225. Metro Manila as beneficiary. 79/4174 and certifying that the draft attached thereto for US$242. 1983. 1979. are to finance partially the conversion cost of the vessel M/V “Asean Liberty.” Thus: “It is not disputed that CBC’s claim for US$242. 1979 a promissory note for US$545. or of a person authorized by the owner of such vessel. as contractor.00 to Philippine International Shipping Corporation. that private respondent stepped into the shoes of Hongkong United Dockyards.54 refer to the repair and conversion of two (2) of PISC’s vessels. namely M/V Asean Liberty and M/V Asean Mission.D. however.00.A. the Central Bank of the Philippines approved PISC’s request to open with private respondent China Banking Corporation a Standby Letter of Credit for US$545. for the repair and conversion of its vessel M/V “Asean Liberty” for a contract price of HK$2. the President of the PISC. Hence.00 and US$648. 1983 letter likewise indicated that the loan due from PISC was used to finance partially the conversion cost of the vessel M/V “Asian Liberty”. 1521. supplies. It is the holding of the appellate court. private respondent CBC was a guarantor of the loan extended by Citibank to PISC. (e) Pursuant to its loan agreement with Citibank. since it was CBC who paid off these lienors.

as pointed out by the appellate court. legal subrogation took place in CBC’s favor. as maritime lienor over the vessel. there is still sufficient documentary evidence in the records supporting the appellate court’s findings. by virtue of Article 1302.” Under these doctrines. Ltd. over the vessel M/V “Asean Liberty. was itself subrogated to all the rights of Citibank as against PISC.” Otherwise. Citibank could not have acquired the maritime lien of Hongkong United Dockyards. the records are replete with documents that show that the proceeds of the loans were used for the repair and conversion of the vessel M/V “Asean Liberty.” Moreover.S. As held by the public respondent Court of Appeals. Ltd. the Application and Agreement. and the Standby Letter of Credit itself explicitly state that the proceeds of the loan applied for by PISC are to be used to finance partially the conversion cost of the vessel M/V “Asean Liberty. as against PISC. Citibank was subrogated to the rights of Hongkong United Dockyards. Having thus established that private respondent CBC possessed a maritime lien over the vessel M/V “Asean Liberty. the provisions of the Ship Mortgage Decree of 1978 may thus be construed with the aid of foreign jurisprudence from which they are derived except insofar as they conflict with existing laws or are inconsistent with local customs and institutions.” Private respondent. Ltd. it became the transferee of all the rights of Hongkong United Dockyards. Article 2067 of the New Civil Code provides that “(t)he guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had against the debtor. The provisions of our Ship Mortgage Decree of 1978 were patterned quite closely after the U.”[31] Being of foreign origin. and one advancing money to discharge a valid lien gets a lien of equal dignity with the one discharged. 2 of the New Civil Code. subrogation is the transfer of all the rights of the creditor to a third person. Considering that Citibank had a maritime lien over the vessel M/V “Asean Liberty. In the presence of such documentary evidence.”[33] There is no reason why these doctrines cannot be given persuasive application in the instant case considering that they do not violate or contravene any of our existing laws. which were admitted without objection from the petitioners. including the maritime lien over the vessel M/V “Asean Liberty. the President of PISC. or other necessaries. or of a person authorized by the owner has a maritime lien on the vessel. not interested in the fulfillment in the obligation. we agree with the position of private respondent that the question of whether or not the proceeds of the loans extended by Citibank were used for the repair and conversion of M/V “Asean Liberty” is a factual issue[35] which the Court cannot review absent a showing that it was arbitrarily resolved. George Lim. who substitutes him in all his rights.” Petitioners do not question the abovequoted rationale of the Court of Appeals. use of drydock. was therefore. those who provide credit to a master of a vessel for the purpose of discharging a maritime lien also acquire a lien over the said vessel. petitioners claim that the respondent court committed serious error in law when it considered and gave credence to the written deposition of Mr. as basis for the said finding considering that the same had earlier been denied admission by the trial court. On this point. the March 25. By definition. Hongkong United Dockyards. having paid off the debt of PISC to Citibank. to any foreign or domestic vessel on the order of the owner of such vessel. From the foregoing. George Lim. confirmed that the loan due from PISC was used to finance partially the conversion cost of the said vessel. towage.” On this point. Moreover. petitioners argue that the entirety of the documentary evidence of private respondent CBC does not show that the latter actually paid off the maritime lienholder for the repair of M/V “Asean Liberty” as required by Section 21 of the Ship Mortgage Act of 1978. raises a lien just as though the things (for which) money was obtained to pay for had been furnished by the lender.” private respondent was likewise subrogated to this right when it paid off Citibank under the contract of guarantee. it is clear that the amount used for the repair of the vessel M/V “Asean Liberty” was advanced by Citibank and was utilized for the purpose of paying off the original maritime lienor. “(a)dvances to discharge maritime liens create a lien on the vessel. As a person not interested in the fulfillment of the obligation between PISC and Hongkong United Dockyards. 1302. it becomes necessary to prove that the credit advanced by Citibank to PISC was actually utilized for the repair and conversion of the vessel M/V “Asean Liberty.”[34] As applied in the instant case.Accordingly. these doctrines are in accord with our provisions on subrogation particularly Art.[36] Contrary to the assertions of petitioners. in order to forward the voyage of the vessel. like our Ship Mortgage Decree of 1978. [30] Significantly. supplies. 1983 letter of Citibank to private respondent CBC drawing on the latter’s letter of credit.00 advanced by Citibank was actually paid to the persons who furnished the repairs on the vessels. subrogated to all the rights Citibank had against its debtor PISC.000.” Private respondent CBC.” Even without the written deposition of Mr.. Ship Mortgage Act of 1920. “(f)urnishing money to a master in good faith to obtain repairs or supplies or to remove liens. we cannot say that the Court of Appeals resolved the issue arbitrarily. a person who extends credit for the purpose of discharging a maritime lien is not entitled to the said lien “where the funds were not furnished to the ship on the order of the master and there was no evidence that the money was actually used to pay debts secured by the lien. or marine railway. The appellate court’s finding that the amount sought to be recovered by petitioner was actually used for the repair and conversion of the vessel M/V “Asean Liberty” is based on substantial evidence. the Federal Maritime Lien Act of the United States. [29] Furthermore.” the next issue is 15 . which may be enforced by suit in rem. since CBC’s payment to the lienors was with the express consent of the debtor owner of the vessels repaired. the latter’s debtor. Ltd. paragraph 2 of the New Civil Code which provides that there is legal subrogation “when a third person. provides that “any person furnishing repairs. pays with the express or tacit approval of the debtor. Ltd. There is no merit in the contentions of petitioners. It takes exception however to the appellate court’s finding and conclusion that it was ultimately private respondent CBC which paid off the maritime lienor and that the US$545. as guarantor. par. The correspondences between PISC and the Central Bank. [37] Considering that Citibank paid off the debt of PISC to Hongkong United Dockyards.”[32] Likewise. Under American jurisprudence. Ltd.

DECISION TINGA. petitioners’ mortgage lien arose on September 25. Ltd. to secure a first mortgage on the five new vessels and on the second-hand vessels. in view of the foregoing. extended credit accommodations in favor of GALLEON totaling US$3. 1979. As such. Ltd.91 in favor of Asian Hardwood. 1979.” M/V “Galleon Pride. the right of private respondent CBC to claim or to collect the maritime lien arose only at the time CBC actually paid off the said lien to Citibank on March 30. through Cuenca.32. GALLEON executed on January 25. POLIAND INDUSTRIAL LIMITED. In G. [2] At that time. CV. Pursuant to Section 17 of the Ship Mortgage Decree of 1978. 1983. a jus in re. Asian Hardwood Limited (Asian Hardwood). WHERFORE.[39] Considering that its mortgage lien arose on September 25. corresponding to the maritime lien in favor of POLIAND. Thus. which modified the Decision of the Regional Trial Court.391. it relates back to the period when it first attached. GALLEON. it was actually enforcing a privilege that attached to the ship as early as March 12. 1983. The advances were utilized to augment GALLEON’s working capital depleted as a result of the purchase of five new vessels and two secondhand vessels in 1979 and competitiveness of the shipping industry.” and M/V “Galleon Trust” in favor of DBP.” M/V “Galleon Dignity. as early as March 12. petitioners argue that inasmuch as the Standby Letter of Credit was in the nature of a guarantee. Taiyo Kobe Bank.298. to be afterward enforced in admiralty by process in rem.00 for the purpose of paying off PISC’s debt to Hongkong United Dockyards.747. it is inchoate. 1979. petitioner Poliand Industrial Limited (POLIAND) seeks judgment declaring the National Development Company (NDC) and the DBP solidarily liable in the amount of US$2. and Marubeni Benelux. among others. Upon motion of the Development Bank of the Philippines (DBP). was engaged in the maritime transport of goods. No.” a maritime lien had already attached to the said vessel.317. GALLEON..225. by a proceeding in rem. plus interest. M/V “Galleon Honor. in order for the maritime lien of private respondent CBC to be preferred over the mortgage lien of petitioners. As stated by a noted commentator on the subject. on January 21. Roberto Cuenca. In G. a domestic corporation organized in 1977 and headed by its president.”[40] In the case at bench. It also prays that NDC and DBP be ordered to pay the attorney’s fees and costs of the proceedings as solidary debtors. Ltd. No. a “preferred mortgage lien shall have priority over all claims against the vessel” except. CV No. ANTECEDENTS The following factual antecedents are matters of record. 1981.084.32. among others. made repairs on the said vessel on credit. petitioners thus conclude that its lien is preferred as against private respondent CBC’s maritime lien. Otherwise stated. 1155. Mitsui Bank Ltd. and DBP executed a Deed of Undertaking[3] whereby DBP guaranteed the prompt and punctual payment of GALLEON’s borrowings from the Japanese lenders.R.whether the said maritime lien is preferred over the mortgage lien of petitioners. There is no merit in this contention. GALLEON obtained loans from Japanese lenders. 1997 in CA-G. Makati City in Civil Case No. [4] Meanwhile. the said maritime lien has priority over the said mortgage lien. 1983 when CBC actually paid off the outstanding obligation of PISC to Citibank. 1979 when the said mortgage was registered with the Philippine Coast Guard Headquarters. On October 10. “maritime liens arising prior in time to the recording of the preferred mortgage. vs. directing NDC to acquire the entire shareholdings of GALLEON for the amount originally contributed by its shareholders payable in five (5) years without interest cost to the 16 . and when carried into effect by legal process. When private respondent honored its contract of guarantee with Citibank on March 30. the same must have arisen prior to the recording of the mortgage on September 25. the two petitions were consolidated since both assail the same Decision of the Court of Appeals.” M/V “Galleon Integrity. a Hong Kong corporation.” Thus. SO ORDERED.[38] As such. the maritime lien over the vessel M/V “Asean Liberty” arose or was constituted at the time Hongkong United Drydocks. To secure DBP’s guarantee under the Deed of Undertaking. namely.920.. 1982 a mortgage contract over five of its vessels namely. GALLEON had incurred an obligation in the total amount of US$3. 143866.: Before this Court are two Rule 45 consolidated petitions for review seeking the review of the Decision[1] of the Court of Appeals (Fourth Division) in CA-G. 1979. it acquired the existing maritime lien over the vessel. Branch 61. On this point. 53257. The maritime lien of private respondent CBC thus arose prior in time to the recording of petitioners’ mortgage on September 25. petitioner.315. petitioner NDC seeks the reversal of the Court of Appeals’ Decision ordering it to pay POLIAND the amount of One Million Nine Hundred Twenty Thousand Two Hundred Ninety-Eight and 56/100 United States Dollars (US$1. Between October 1979 and March 1981. To finance the acquisition of the vessels.R. representing the maritime lien in favor of POLIAND and the net amount of loans incurred by Galleon Shipping Corporation (GALLEON). NATIONAL DEVELOPMENT COMPANY. it is the contention of petitioners that private respondent CBC’s maritime lien under its Standby Letter of Credit No. J.” The respondent court thus committed no reversible error when it ruled that the maritime lien of private respondent CBC is superior to the mortgage lien of petitioners. when private respondent CBC chose to exercise its right to the maritime lien during the proceedings in the trial court. In the case at bench. As such.747. 91-2798.R. From the moment the claim or privilege attaches. President Ferdinand Marcos issued Letter of Instruction (LOI) No.56). 1979. 143877.R. it likewise acquired by subrogation the maritime lien that was already existing over the vessel M/V “Asean Liberty. GALLEON promised. the petition is denied and the decision of the Court of Appeals dated March 21. When Citibank advanced the amount of US$242. the date of the contract for the repair and conversion of M/V “Asean Liberty. 79/4174 arose only on March 30. 1979.respondent. No. 38131 is hereby AFFIRMED. a maritime lien “constitutes a present right of property in the ship.

1982.56. moral and exemplary damages and attorney’s fees against POLIAND as compulsory counterclaim. DBP argued that POLIAND’s complaint stated no cause of action against DBP or was barred by the Statute of Frauds because DBP did not sign any memorandum to act as guarantor for the alleged credit advances/loan accommodations in favor of POLIAND. DBP prayed that its co-defendant GALLEON be ordered to indemnify DBP for the full amount.747.747. POLIAND claimed that under LOI No. defendants GALLEON. The complaint prayed for judgment ordering NDC.A. POLIAND also claimed that it had a preferred maritime lien over the proceeds of the extrajudicial foreclosure sale of GALLEON’s vessels mortgaged by NDC to DBP. DBP and NDC are liable for those obligations. For failure of GALLEON to pay its debt despite repeated demands from DBP.000. 1991. 1195. 64. Cuenca.000. 1982. By way of an alternative cause of action.747. and NDC.315. DBP subsequently sold the vessels to NDC for the same amount. [12] For failure to heed the demand. [13] In its Answer with Compulsory Counterclaim and Cross-claim .000. The trial court also found NDC liable for GALLEON’s obligations based on the Memorandum of Agreement dated August 1981 executed between GALLEON and NDC. Makati City. and DBP for the satisfaction of the outstanding balance in the amount of US$2. through the Asset Privatization Trust (APT) for disposition. 1195’s directive to “limit and protect” to mean that “DBP and NDC should not assume or incur additional exposure with respect to GALLEON.32 and attorney’s fees of P100. DBP countered that it was unaware of the maritime lien on the five vessels mortgaged in its favor and that as far as GALLEON’s foreign borrowings are concerned.”[17] The trial court dismissed NDC’s argument that the Memorandum of Agreement was merely a preliminary agreement. In the event that it be adjudged liable for the payment of the loan accommodations and the maritime liens. 1996 in favor of POLIAND. 1195. NDC specifically denied having agreed to the assumption of GALLEON’s liabilities because no purchase and sale agreement was executed and the delivery of the required shares of stock of GALLEON did not take place. NDC assumed the management and operations of GALLEON although Cuenca remained president until May 9. Thereafter. the trial court issued an Order limiting the issues to the following: (1) whether or not GALLEON has an outstanding obligation in the amount of US$2. LOI No. 1981. in turn.000. On August 10.[5] whereby NDC and GALLEON agreed to execute a share purchase agreement within sixty days for the transfer of GALLEON’s shareholdings. GALLEON. At the pre-trial conference on April 29. The trial court did not regard the non-execution of the stock purchase 17 . POLIAND made written demands on GALLEON.[6] Using its own funds. since it was rescinded by LOI No.government. the vessels were extrajudicially foreclosed on various dates and acquired by DBP for the total amount of P539. 1982 the amount of US$1. Branch 61. DBP also denied any liability under LOI No.000. S. 1155. NDC and DBP’s obligation under LOI No. (2) whether or not NDC and DBP may be held solidarily liable therefor. the only condition for the payment of GALLEON’s subsisting loans by NDC was the determination by the latter that those obligations were incurred in the ordinary course of GALLEON’s business. NDC paid Asian Hardwood on January 15.000.00 as partial settlement of GALLEON’s obligations. which it described as immoral and unconstitutional. NDC. By way of its Affirmative Allegations and Defenses. POLIAND sought reimbursement from NDC and DBP for the preferred maritime lien of US$1. DBP and GALLEON filed on October 10.00 plus 20% of the amount recovered. and DBP were solidarily liable to POLIAND as assignee of the rights of the credit advances/loan accommodations to GALLEON. the trial court dropped GALLEON as a defendant. Accordingly. embodied in a Deed of Assignment executed on April 29.32 to World Universal Trading and Investment Company. [11] On March 24. POLIAND instituted a collection suit against NDC. 1155. noting that under paragraph nine thereof. the trial court concluded that under LOI No. The trial court was of the opinion that despite the subsequent issuance of LOI No. DBP was to advance to GALLEON within three years from its effectivity the principal amount and the interest thereon of GALLEON’s maturing obligations.193. 1989.315.” Accordingly. the Board of Directors of GALLEON amended the Articles of Incorporation changing the corporate name from Galleon Shipping Corporation to National Galleon Shipping Corporation and increasing the number of directors from seven to nine.000.747.[7] On February 10.32. NDC. despite vigorous oppositions from NDC and DBP. directing NDC and Philippine Export and Foreign Loan Guarantee Corporation (now Trade and Investment Development Corporation of the Philippines) to transfer some of their assets to the National Government. the court a quo rendered a decision on August 9. [10]World Universal. represented by Minister of Trade Roberto Ongpin.[14] For its part.00 in favor of POLIAND. NDC denied any participation in the execution of the loan accommodations/credit advances and acquisition of ownership of GALLEON. the trial court interpreted LOI No. 1982. (World Universal). DBP prayed for the award of actual.[8] On April 22. 1988. and GALLEON to pay POLIAND jointly and severally the balance of the credit advances/loan accommodations in the amount of US$2.[16] After trial on the merits.32. 1993. 1155 subsisted because “vested rights of the parties have arisen therefrom. represented by its president. DBP denied being a party to any of the alleged loan transactions. 1991 with the Regional Trial Court. then President Aquino issued Administrative Order No.315. Among those transferred to the APT were the five GALLEON vessels sold at the foreclosure proceedings. Finding that GALLEON’s loan advances/credit accommodations were duly established by the evidence on record. where it was provided that NDC shall prioritize repayments of GALLEON’s valid and subsisting liabilities subject of a meritorious lawsuit or which have been arranged and guaranteed by Cuenca.[9] Asian Hardwood assigned its rights over the outstanding obligation of GALLEON of US$2. [15] Upon motion by POLIAND. assigned the credit to petitioner POLIAND sometime in July 1989. asserting that it acted only as manager of GALLEON. 1155 and the Memorandum of Agreement between GALLEON and NDC. forged a Memorandum of Agreement. 1195 was issued directing the foreclosure of the mortgage on the five vessels.315.00. On September 24. and (3) whether or not there exists a preferred maritime lien of P1.298. DBP agreed to act as guarantor thereof only under the conditions laid down under the Deed of Undertaking. DBP. In the same LOI.

RESPONDENT NDC’S ACQUISITION OF FULL OWNERSHIP AND CONTROL OF GALLEON CARRIED WITH IT THE ASSUMPTION OF THE LATTER’S LIABILITIES TO THIRD PARTIES SUCH AS ASIAN HARDWOOD. in accordance with the foregoing findings. NDC was held liable to POLIAND for the payment of the preferred maritime lien based on LOI No.[19] Not satisfied with the modified judgment. B. 143877. No. Philippine Currency. plus interest at the rate of 12% per annum from 25 September 1991 until fully paid.R. although on different fronts. NDC filed its petition. 143866 filed on August 21. THUS.agreement as fatal to POLIAND’s cause since its non-happening was solely attributable to NDC. (B) PETITIONER NDC DOES NOT HOLD THE PROCEEDS OF THE FORECLOSURE SALE OF THE FIVE (5) GALLEON VESSELS. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER NDC IS LIABLE TO PAY GALLEON’S OUTSTANDING OBLIGATION TO RESPONDENT POLIAND IN THE AMOUNT OF US$ 1.32) computed at the official exchange rate at the time of payment. absolving DBP of any liability in view of POLIAND’s failure to clearly prove its action against DBP.000. RESPONDENT COURT OF APPEALS GRAVELY ERRED ALSO IN NOT FINDING THAT RESPONDENT DBP IS JOINTLY AND SOLIDARILY LIABLE WITH RESPONDENT NDC FOR THE PAYMENT OF MARITIME LIENS PLUS INTEREST PURSUANT TO SECTION 17 OF PRESIDENTIAL DECREEE 1521. The dispositive portion of the Decision reads: WHEREFORE. 143877. However. No. DISMISSED THE CASE AGAINST RESPONDENT DBP WITHOUT STATING CLEARLY AND DISTINCTLY THE REASONS FOR SUCH A DISMISSAL. ISSUES 18 .315. THE COURT OF APPEALS ERRED IN AWARDING ATTORNEY’S FEES TO RESPONDENT POLIAND.R.R. 143866. POLIAND questions the appellate court’s finding that neither NDC nor DBP can be held liable for the loan accommodations to GALLEON. 1521 OTHERWISE KNOWN AS THE ‘SHIP MORTGAGE DECREE OF 1978 IS NOT APPLICABLE IN THE CASE AT BAR. imputing the following errors to the Court of Appeals: I. No. 1195 which directed NDC to “discharge such maritime liens as may be necessary to allow the foreclosed vessels to engage on the international shipping business. SO ORDERED. PETITIONER POLIAND WAS ABLE TO ESTABLISH THAT RESPONDENT DBP IS SOLIDARILY LIABLE. II.298.56 plus legal interest effective September 12. NDC asserts that it is not liable to POLIAND for the preferred maritime lien.000.[21] The two petitions were consolidated considering that both petitions assail the same Court of Appeals’ Decision. petitioner POLIAND raises the following arguments: RESPONDENT COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERRORS IN ITS QUESTIONED DECISION DATED 29 JUNE 2000 AND DECIDED QUESTIONS CONTRARY TO LAW AND THE APPLICABLE DECISIONS OF THE HONORABLE COURT WHEN IT MODIFIED THE DECISION DATED 09 AUGUST 1996 RENDERED BY THE REGIONAL TRIAL COURT (BRANCH 61) CONSIDERING THAT: A. In G.56.” as well as attorney’s fees and costs of suit. PETITIONER POLIAND’S PREDECESSOR-IN-INTEREST. Costs against defendant-appellant NDC. IN VIOLATION OF THE CONSTITUTION AND THE RULES OF COURT. TO SATISFY THE PREFERRED MARITIME LIENS OVER THE PROCEEDS OF THE FORECLOSURE SALE OF THE FIVE GALLEON VESSELS. No. To jointly and severally PAY plaintiff POLIAND the amount of TWO MILLION THREE HUNDRED FIFTEEN THOUSAND SEVEN HUNDRED FORTY SEVEN AND 21/100 [sic] United States Dollars (US$2. premises above considered. C. and 3. D. judgment is hereby rendered for plaintiff as against defendants DBP and NDC. SO ORDERED. CONTRARY TO THE FINDINGS OF RESPONDENT COURT OF APPEALS. who are hereby ORDERED as follows: 1. for and as attorney’s fees. as follows: The case against defendant-appellant DBP is hereby DISMISSED. The appellate court also discharged NDC of any liability arising from the credit advances/loan obligations obtained by GALLEON on the ground that NDC did not acquire ownership of GALLEON but merely assumed control over its management and operations. WITH RESPECT TO THE NET TOTAL AMOUNT OWING TO PETITIONER POLIAND. The trial court also ruled that POLIAND had preference to the maritime lien over the proceeds of the extrajudicial foreclosure sale of GALLEON’s vessels since the loan advances/credit accommodations utilized for the payment of expenses on the vessels were obtained prior to the constitution of the mortgage in favor of DBP.[18] Both NDC and DBP appealed the trial court’s decision. In G. (A) PRESIDENTIAL DECREE NO. The award of attorney’s fees and cost of suit is addressed only against NDC.R. 2000. 1155 AND THE MEMORANDUM OF AGREEMENT DATED 10 AUGUST 1981. Defendant-appellant NDC is hereby ordered to pay plaintiff-appellee POLIAND the amount of US$1. RESPONDENT NDC NOT ONLY TOOK OVER TOTALLY THE MANAGEMENT AND CONTROL OF GALLEON BUT ALSO ASSUMED OWNERSHIP OF GALLEON PURSUANT TO LOI NO. CONTRARY TO THE FINDINGS OF RESPONDENT COURT OF APPEALS. RESPONDENT COURT OF APPEALS. 2000.920.) Pesos.920. [20] On August 25. In G. both POLIAND and NDC elevated it to this Court via two separate petitions for review on certiorari.747. (C) THE FORECLOSURE SALE OF THE FIVE (5) GALLEON VESSELS EXTINGUISHES ALL CLAIMS AGAINST THE VESSELS. To PAY the costs of the proceedings. The Court of Appeals rendered a modified judgment. 1984. the assailed decision is MODIFIED. To PAY the amount of ONE MILLION (P1.298. docketed as G. NDC and DBP were ordered to pay POLIAND as follows: WHEREFORE. TOGETHER WITH RESPONDENT NDC. In sum. 2.

on January 15.[27] NDC denies POLIAND’s contention that it deliberately prevented the execution of the share purchase agreement considering that Cuenca remained GALLEON’s president seven months after the signing of the Memorandum of Agreement. Inc. [34] 19 . The MOA executed by GALLEON and NDC following the issuance of LOI 1155 called for the execution of a “formal share purchase agreement and the transfer of all the shareholdings of seller to Buyer. 1982. which was implemented through the execution of the Memorandum of Agreement. issued in the exercise of his administrative power of control. education and culture of our people. a determination of whether or not it was issued in response to the objectives stated in Legaspi is necessary. partially paid the latter One Million ($1. 1155 As a general rule. POLIAND argues that NDC acquired ownership of GALLEON pursuant to paragraphs 1 and 2 of LOI No. consequently. including that bearing on its claim for damages and attorney’s fees which does not persuade. and (2) the establishment of a New Society by the institution of disciplinary measures designed to eradicate the deep-rooted causes of the rebellion and elevate the standards of living.R. and most of all the social amelioration of the poor and underprivileged in the farms and in the barrios. if not a strong separatist movement in Mindanao.000. resolution of the matters raised in its assignment of errors hinges on whether or not it acquired the shareholdings of GALLEON as directed by LOI 1155. during the period when then President Marcos exercised extraordinary legislative powers. unfamiliar to traditional constitutionalists and political scientists—for two basic and transcendental objectives were intended by it: (1) the quelling of nation-wide subversive activities characteristic not only of a rebellion but of a state of war fanned by a foreign power of a different ideology from ours. Minister Enrile . As pointed out by the Court in Legaspi v. thus: True. namely: (1) Whether NDC or DBP or both are liable to POLIAND on the loan accommodations and credit advances incurred by GALLEON. he issued certain decrees. With respect to defendant-appellant DBP. v. whenever in his judgment. not liable under LOI No. terms and conditions of said purchase. NDC asserts that it could not have acquired GALLEON’s equity and. 1155 does not have the force and effect of law and cannot be a valid source of obligation. to the end that hopefully insurgency may not rear its head in this country again. prescribing the manner. or whenever the interim Batasan Pambansa or the regular National Assembly fails or is unable to act adequately on any matter for any reason that in his judgment requires immediate action. became inoperative and non-existent. NDC did not acquire ownership of GALLEON. and (2) Whether POLIAND has a maritime lien enforceable against NDC or DBP or both. [32] Thus. whether or not it is liable to pay GALLEON’s outstanding obligation. Ruben D. even as he declared that said martial law was of a double-barrelled type. President Marcos made it clear that there was no military take-over of the government. Even assuming that conditions were set. et al. after being satisfied of the existence of GALLEON’s obligation to ASIAN HARDWOOD. POLIAND opines that the conditions were deemed fulfilled pursuant to Article 1186 of the Civil Code because of NDC’s apparent intent to prevent the execution of the share purchase agreement. Minister of Finance. Moreover. [29] NDC. et al. The following conditions must be established before a letter of instruction may be considered a law: To form part of the law of the land.[30] Being administrative in nature. including the loan advances/credit accommodations obtained by GALLEON from POLIAND’s predecessors-ininterest.. et al. Liability on loan accommodations and credit advances incurred by GALLEON The Court of Appeals reversed the trial court’s conclusion that NDC and DBP are both liable to POLIAND for GALLEON’s debts on the basis of LOI No. and not excluding the stopping effectively of a brewing. they do not have the force and effect of a law and..000. 1155. cannot be a valid source of obligation. In G. v. and that much less was there being established a revolutionary government. and if in the negative. [24] On the other hand.[26] is of the opinion that LOI No.00) US dollars. the decree. Parong. letters of instructions are simply directives of the President of the Philippines.[23] POLIAND’s cause of action against NDC is premised on the theory that when NDC acquired all the shareholdings of GALLEON. It ratiocinated thus: With respect to appellant NDC. relying on the pronouncements in Philippine Association of Service Exporters. Minister Enrile[33] differentiated between LOIs in the nature of mere administrative issuances and those forming part of the law of the land.[22] . RULING of the COURT I.” Since no such execution and consequent transfer of shareholdings took place.The bone of contention revolves around two main issues. NDC. orders and letters of instruction which the Court has declared as having the force and effect of a statute.[28]NDC contends that the Memorandum of Agreement was a mere preliminary agreement between Cuenca and Ongpin for the intended purchase of GALLEON’s equity. It merely assumed “actual control over the management and operations” of GALLEON in the exercise of which it. 1195. without loss of time.[31] paramount considerations compelled the grant of extraordinary legislative power to the President at that time when the nation was beset with threats to public order and the purpose for which the authority was granted was specific to meet the exigencies of that period. 143866. there exists a grave emergency or threat or imminence thereof. its liabilities because LOI No. thus. The Court answers the issue in the negative. to heads of departments and/or officers under the executive branch of the government for observance by the officials and/or employees thereof. v. the former also assumed the latter’s liabilities. No. This leaves it unnecessary to dwell on DBP’s other assigned errors. and therefore. order or LOI must be issued by the President in the exercise of his extraordinary power of legislation as contemplated in Section 6 of the 1976 amendments to the Constitution.. 1155 and the Memorandum of Agreement. Torres[25] and Parong. 1155 had been rescinded by LOI No. POLIAND failed to clearly prove its cause of action against it. However. before a letter of instruction is declared as having the force and effect of a statute. It believes that no conditions were required prior to the assumption by NDC of GALLEON’s ownership and subsisting loans.

By operation of law. 1155 was undoubtedly issued at the time when the President exercised legislative powers granted under Amendment No. In addition.[36] As specifically provided under Section 79 [37] of said Code. 1981 when then President Marcos was vested with extraordinary legislative powers. 2. 20 . that is. 1155 DEVELOPMENT BANK OF THE PHILIPPINES NATIONAL DEVELOPMENT COMPANY MARITIME INDUSTRY AUTHORITY DIRECTING A REHABILITATION PLAN FOR GALLEON SHIPPING CORPORATION . the President could not have intended that the parties disregard the requirements of law.Only when issued under any of the two circumstances will a decree.. The decree or instruction should have been issued either when there existed a grave emergency or threat or imminence or when the Legislature failed or was unable to act adequately on the matter. 1155 was specifically directed to DBP. while the rest are dissolved and all their rights. POLIAND cannot assert that no conditions were required prior to the assumption by NDC of ownership of GALLEON and its subsisting loans. or letter be qualified as having the force and effect of law. Obviously.. not liable under LOI No. 4. NDC to immediately infuse P30 million into Galleon Shipping Corporation in lieu of is previously approved subscription to Philippine National Lines. order. DBP. DBP to advance for a period of three years from date hereof both the principal and the interest on Galleon's obligations falling due and to convert such advances into 12% preferred shares in Galleon Shipping Corporation. NDC ipso facto acquired the interests in GALLEON without disregarding applicable statutory requirements governing the acquisition of a corporation. 1155 was in the nature of a grant of authority by the President on DBP to enter into certain transactions for the satisfaction of GALLEON’s obligations. Ordinarily. MARINA to provide assistance to Galleon by mandating a rational liner shipping schedule considering existing freight volumes and to immediately negotiate a bilateral agreement with the United States in accordance with UNCTAD resolutions. [39]DBP argues that POLIAND has no cause of action against it under LOI No. [38] The records do not show SEC approval of the merger. there was no effective transfer of the shareholdings in GALLEON to NDC. Although LOI No. NDC is to provide additional equity to Galleon as may be required. 1155 was in the nature of a mere administrative issuance directed to NDC. LOI No.[40] The Court affirms the appellate court’s ruling that POLIAND does not have any cause of action against DBP under LOI No. properties and liabilities are acquired by the surviving corporation. the language and purpose of LOI No. 1155 is not connected. LOI No.. The subject matter of LOI No. The qualification that there exists a grave emergency or threat or imminence thereof must be interpreted to refer to the prevailing peace and order conditions because the particular purpose the President was authorized to assume legislative powers was to address the deteriorating peace and order situation during the martial law period. 1155. [35] The merger. Nothing in the language of LOI No. the absorbed corporation ceases to exist but its rights. Where a party to the merger is a special corporation governed by its own charter. In directing NDC to acquire the shareholdings in GALLEON. In the absence of SEC approval. LOI No. 1155 which is void and unconstitutional. to rehabilitate a private corporation. At best. however.. 1155 suggests that it was issued to address the security of the nation. NDC and the Maritime Industry Authority to undertake the following tasks: LETTER OF INSTRUCTIONS NO.. There is no doubt that LOI No. nothing from the records of the case to indicate that DBP had acted as surety or guarantor. 1155 cannot be a valid source of obligation because it did not create any privity of contract between DBP and POLIAND or its predecessors-in-interest. to a grave emergency or threat to the peace and order situation of the nation in particular or to the public interest in general. upon the effectivity of the merger. 5. however. The issuance of the certificate of merger is crucial because not only does it bear out SEC’s approval but also marks the moment whereupon the consequences of a merger take place.7 million which is the amount originally contributed by the present shareholders. subject to its prior determination that the merger is not inconsistent with the Code or existing laws. . Compliance with the statutory requirements is a condition precedent to the effective transfer of the shareholdings in GALLEON to NDC. 1. Hence. including its liabilities. NDC did not acquire the rights or interests of GALLEON. and properties as well as liabilities shall be taken and deemed transferred to and vested in the surviving corporation. in the merger of two or more existing corporations. or had otherwise accommodated GALLEON’s obligations to POLIAND or its predecessors-ininterest. NDC shall acquire 100% of the shareholdings of Galleon Shipping Corporation from its present owners for the amount of P46. Being a mere administrative issuance. 1155.. 1155 was issued on July 21. the merger shall only be effective upon the issuance of a certificate of merger by the Securities and Exchange Commission (SEC). DBP and NDC to negotiate a restructuring of loans extended by foreign creditors of Galleon. 1155 POLIAND argues that paragraph 3 of LOI No. 6 of the 1973 Constitution. 1155 precludes this Court from declaring that said LOI had the force and effect of law in the absence of any of the conditions set out in Parong. DBP and MARINA to undertake a policy measure. payable after five years with no interest cost. one of the combining corporations survives and continues the combined business. the directive in LOI No. not liable under the Corporation Code The Court cannot accept POLIAND’s theory that with the effectivity of LOI No. the Code particularly mandates that a favorable recommendation of the appropriate government agency should first be obtained. 1155 unequivocally obliged DBP to advance the obligations of GALLEON. 3. does not become effective upon the mere agreement of the constituent corporations. NDC. There is. directly or remotely.

No. but for the purpose of guaranteeing GALLEON’s foreign borrowings. [45] The issue on the maritime lien is a matter of record having been adequately ventilated before and passed upon by the trial court and the appellate court. [51] P. No. to satisfy the preferred maritime liens over the proceeds of the foreclosure sale of the 5 vessels. as the posterior law. P.D. is dependent. P. [49] Article 578 of the Code of Commerce is not relevant to the facts of the instant case because it governs the sale of vessels in a foreign port. Article 580. (b) Matters not assigned as errors on appeal but are evidently plain or clerical errors within contemplation of law. Besides. the appellate court ruled in the affirmative. the debts shall be satisfied in the order specified therein.D. reveal that the issue on the liability on the preferred maritime lien had been properly raised and argued upon before the Court of Appeals not by NDC but by DBP who was also adjudged liable thereon by the trial court. NDC is liable to pay ASIAN HARDWOOD’s successor-in-interest POLIAND the equivalent of US$1. which have preference over the preferred mortgage lien in the order stated therein. 1521 is a subsequent legislation and since said law in Section 17 thereof confers on the preferred mortgage lien on the vessel superiority over all other claims. Since P.D. The records. however. Said provision outlines the formal and registration requirements in order that a sale of a vessel on voyage or in a foreign port becomes effective as against third persons. No. No. by way of exception. NDC did not assign it as an error. reversed the trial court’s finding that NDC and DBP are liable to POLIAND for the payment of the credit advances and loan accommodations and instead found NDC to be solely liable on the preferred maritime lien although NDC did not assign it as an error.D. the Court ruled that an appellate court is accorded a broad discretionary power to waive the lack of assignment of errors and consider errors not assigned: (a) Grounds not assigned as errors but affecting the jurisdiction of the court over the subject matter. (c) Matters not assigned as errors on appeal but consideration of which is necessary in arriving at a just decision and complete resolution of the case or to serve the interests of a justice or to avoid dispensing piecemeal justice. On the other hand. such preferred mortgage lien shall have priority over all pre-existing claims against the vessel. thereby engendering an irreconcilable conflict with the order of preference provided under Article 580 of the Code of Commerce. that is. [52] 21 . 1521. had been repealed by the pertinent provisions of Presidential Decree (P. [42] Generally. Section 17 of P. In the following instances. the resolution of the instant case depends on the determination as to which creditor is entitled to the proceeds of the foreclosure sale of the vessels.D. it was not given in connection with the construction. an appellate court may only pass upon errors assigned. NDC and DBP both argue that POLIAND’s claim cannot prevail over DBP’s mortgage credit over the foreclosed vessels because the mortgage executed in favor of DBP pursuant to the October 10.[43] It is noteworthy that the question of NDC and DBP’s liability on the maritime lien had been raised by POLIAND as an alternative cause of action against NDC and DBP and was passed upon by the trial court. (f) Matters not assigned as errors on appeal but upon which the determination of a question properly assigned. However. purchase or initial operation of the vessels.930.[46] Articles 578 and 580 of the Code of Commerce. 1979 Deed of Undertaking signed by GALLEON and DBP was an ordinary ship mortgage and not a preferred one. The Court of Appeals. Thus. acquisition. No.56 representing the proceeds of the loan from Asian Hardwood which were spent by GALLEON for ship modification and salaries of crew. while providing for the order of payment of creditors in the event of sale of a vessel. 1521[50] also provides that in the judicial or extrajudicial sale of a vessel for the enforcement of a preferred mortgage lien constituted in accordance with Section 2 of P.D.) No. even if they are not assigned as errors in the appeal if it finds that their consideration is necessary in arriving at a just decision of the case. if it falls within the ambit of Section 2. defining how a preferred mortgage is constituted. 1521 may be properly applied in the instant case depends on the classification of the mortgage on the GALLEON vessels. No. NDC is not precluded from again raising the issue before this Court even if it did not specifically assign the matter as an error before the Court of Appeals. to wit: Non-acquisition of ownership of GALLEON notwithstanding. 1521 is applicable.D. it follows that the Code of Commerce provision is deemed repealed by the provision of P.298. not the Civil Code provisions on concurrence/preference of credits Whether or not the order of preference under Section 17. Liability on maritime lien On the second issue of whether or not NDC is liable to POLIAND for the payment of maritime lien. that is. not applicable NDC cites Articles 578[47] and 580[48] of the Code of Commerce to bolster its argument that the foreclosure of the vessels extinguished all claims against the vessels including POLIAND’s claim. 1521. (e) Matters not assigned as errors on appeal but closely related to an error assigned. 1521.II. DBP’s appellant’s brief [44] pointed out POLIAND’s failure to present convincing evidence to prove its alternative cause of action. this rule is not without exceptions. [41] POLIAND contends that NDC can no longer raise the issue on the latter’s liability for the payment of the maritime lien considering that upon appeal to the Court of Appeals. On the other hand.D. (d) Matters not specifically assigned as errors on appeal but raised in the trial court and are matters of record having some bearing on the issue submitted which the parties failed to raise or which the lower court ignored. this Court is clothed with ample authority to review matters. Article 578 of the Code of Commerce is inapplicable. Article 580 provides that in case of the judicial sale of a vessel for the payment of creditors. No. otherwise known as the Ship Mortgage Decree of 1978. however. which POLIAND disputed in its appellee’s brief. 1521. save for those claims enumerated under Section 17. In particular. Clearly.

the proceeds of the sale shall be first applied to the claim of the mortgage creditor unless there are superior or preferential liens. P.D. and it shall be necessary to allege or prove that credit was given to the vessel. 1521 which is considered to be superior to the preferred mortgage lien is a maritime lien arising prior in time to the recording of the preferred mortgage. all pre-existing claims in the vessel. Contrary to NDC’s assertion. The mortgage in favor of DBP was therefore constituted to facilitate the acquisition of funds necessary for the purchase of the vessels. While it is correct that GALLEON executed the mortgage in consideration of DBP’s guarantee of the prompt payment of GALLEON’s obligations to the Japanese lenders. — Any citizen of the Philippines. No. — Any person furnishing repairs. (5) maritime liens arising prior in time to the recording of the preferred mortgage. the Japanese lenders would not have provided the funds utilized in the purchase of the GALLEON vessels. to the exclusion of all others to the extent of the value of the personal property to which the preference exists. (4) salvage including contract salvage. No.Section 2 of P. Who may Constitute a Ship Mortgage. NDC’s argument does not persuade the Court.D. for the purpose of financing the construction. P.D. P. No. the Civil Code provisions on concurrence and preference of credits and not P. No. Under the law. or of a person authorized by the owner. purchase of vessels or initial operation of vessels. 1195 on NDC to discharge maritime liens to allow the vessels to engage in international business. NDC contends that under Article 2246. One of such claims enumerated under Section 17. All credits not paid. (3) general average. — (a) Upon the sale of any mortgaged vessel in any extra-judicial sale or by order of a district court of the Philippines in any suit in rem in admiralty for the enforcement of a preferred mortgage lien thereon. unused stores and oil. including any possessory common-law lien of which a lienor is deprived under the provisions of Section 16 of this Decree. it must be shown to be one of the enumerated claims which Section 17. (b) If the proceeds of the sale should not be sufficient to pay all creditors included in one number or grade. which enjoys no preference. which is fourth in the order of preference under Article 2241. P. domestic or foreign. Such maritime lien is described under Section 21. 1521. 1521. to wit: SECTION 2. shall have a maritime lien on the vessel.[58] These expenses clearly fall under Section 21. No. (6) damages arising out of tort. Without DBP’s guarantee. [55] POLIAND’s alternative cause of action for the payment of maritime liens is based on Sections 17 and 21 of P. or other necessaries to any vessel. freely constitute a mortgage or any other lien or encumbrance on his or its vessels and its equipment with any bank or other financial institutions. (Emphasis supplied. NDC adds that being an ordinary ship mortgage. No. as enumerated under Section 17. DBP’s undertaking to pay the Japanese banks was a condition sine qua non to the acquisition of funds for the purchase of the GALLEON vessels. at least sixty per cent of the capital of which is owned by citizens of the Philippines may. The provision of P. use of dry dock or marine railway. purchase of vessels or initial operation of vessels. is superior to POLIAND’s claim. If the mortgage on the vessel is constituted for the purpose stated under Section 2. Under the aforequoted provision. [54] Following NDC’s theory. Upon enforcement of the preferred mortgage and eventual foreclosure of the vessel. No. No. provisions. Other Liens. and generally be so interpreted as to embrace only cases in which the special provisions are not applicable. and repair and docking of the GALLEON vessels. P. 1521. and (7) preferred mortgage registered prior in time. except the following claims in the order stated: (1) expenses and fees allowed and costs taxed by the court and taxes due to the Government. General legislation must give way to special legislation on the same subject. Priorities. (2) crew's wages.[56] POLIAND’s maritime lien is superior to DBP’s mortgage lien Before POLIAND’s claim may be classified as superior to the mortgage constituted on the vessel. which reads: SECTION 21. namely: SECTION 17.D.D. towage. No. which may be enforced by suit in rem. 1521. bonded stores. acquisition. The record of judicial sale or sale by public auction shall be recorded in the Record of Transfers and Encumbrances of Vessels in the port of documentation. 1521 should govern. supplies. 1521 declares as having preferential status in the event of the sale of the vessel. 1521 because GALLEON constituted the same for the purpose of financing the construction. 1521 on the order of preference in the satisfaction of the claims against the vessel is the more applicable statute to the instant case compared to the Civil Code provisions on the concurrence and preference of credit. the credits guaranteed by a chattel mortgage upon the thing mortgaged shall enjoy preference (with respect to the thing mortgaged). acquisition.D.D. 22 .) There is no question that the mortgage executed in favor of DBP is covered by P. upon the order of the owner of such vessel. the residue shall be divided among them pro rata. Preferred Maritime Lien.D. POLIAND also contends that by virtue of the directive in LOI No. in relation to Article 2241 of the Civil Code. the expense must be incurred upon the order of the owner of the vessel or its authorized person and prior to the recording of the ship mortgage. persons entitled to such lien. NDC is liable therefor.D.D. it must be established that the credit was extended to the vessel itself. whether fully or partially shall subsist as ordinary credits enforceable by personal action against the debtor. The preferred mortgage lien shall have priority over all claims against the vessel. shall be held terminated and shall thereafter attach in like amount and in accordance with the priorities established herein to the proceeds of the sale. No. whether foreign or domestic. 1521 recognizes the constitution of a mortgage on a vessel. Maritime Lien for Necessaries. or any association or corporation organized under the laws of the Philippines. the mortgage obtains a preferred status provided the formal requisites enumerated under Section 4[53] are complied with. the mortgage constituted on GALLEON’s vessels in favor of DBP may appropriately be characterized as a preferred mortgage under Section 2.[57] The trial court found that GALLEON’s advances obtained from Asian Hardwood were used to cover for the payment of bunker oil/fuel. DBP’s mortgage credit.

D. P. when the Court of Appeals. and when findings of fact of the Court of Appeals are premised on the absence of evidence but are contradicted by the evidence on record. when the factual findings of the trial and appellate courts are conflicting. and (3) POLIAND’s claim is barred by prescription and laches. 1195 and P. Although POLIAND or its predecessorsin-interest are not sailors entitled to wages. No. 1991. P. With respect to the claim for salary and wages of the crew. POLIAND’s preferred maritime lien is unenforceable pursuant to Article 1403 of the Civil Code. is inapplicable. 1521. it instituted the instant suit seasonably. DBP contends that a ship modification cost is omitted under Section 17. par. and DBP. At that time. As a person not interested in the fulfillment of the obligation between PISC and Hong Kong United Dockyards. as a maritime lienor over the vessel. DBP reiterates the following arguments: (1) The salary and crew’s wages cannot be claimed by POLIAND or its predecessors-ininterest because none of them is a sailor or mariner. No. and not on any contract or agreement. it became the transferee of all the rights of Hong Kong Dockyards. including the maritime lien over the vessel M/V “Asian Liberty.D. there is no doubt that it is also one of the enumerated claims under Section 17. when the inference made is manifestly mistaken. By definition.The trial court also found that the advances from Asian Hardwood were spent for ship modification cost and the crew’s salary and wages. The Court explained as follows: From the foregoing.D. Considering that Citibank paid off the debt of PISC to Hong Kong United Dockyards. absurd or impossible. No. the preferred maritime lien attaches to the proceeds of the sale of the vessels and has priority over all claims against the vessels in accordance with Section 17. having a status superior to DBP’s mortgage lien. the Court finds that only NDC is liable for the payment of the maritime lien. All told. To begin with. the determination of the existence and the amount of POLIAND’s claim for maritime lien is a finding of fact which is within the province of the courts below. Citibank was subrogated to the rights of Hong Kong United Dockyards.D. used only with reference to certain proceedings in courts of admiralty wherein the property alone is treated as responsible for the claim or obligation upon which the proceedings are based.[62] The first argument is absurd. 1521. POLIAND hinges its claim on the maritime lien based on LOI No. Prescription could not have set in because the prescriptive period was tolled when POLIAND made a written demand for the satisfaction of the obligation on September 24. 1982. when the judgment of the appellate court is premised on a misapprehension of facts or when it has failed to notice certain relevant facts which. hence. It claims that since the lien was incurred prior to the constitution of the mortgage on January 25. P. will justify a different conclusion. [66] Considering that DBP subsequently transferred ownership of the vessels to NDC. No. however. 1521. 1521. it may properly be treated as a maritime lien for necessaries under Section 21. No. on the other. Article 1403 (2) of the Civil Code. surmises or conjectures.[65] The expression “action in rem” is. 1521. Hong Kong United Dockyards. Only NDC is liable on the maritime lien POLIAND maintains that DBP is also solidarily liable for the payment of the preferred maritime lien over the proceeds of the foreclosure sale by virtue of Section 17. they can still make a claim for the advances spent for the salary and wages of the crew under the principle of legal subrogation. second only to judicial costs and taxes due the government in preference and. or before the lapse of the ten-year prescriptive period. A maritime lien is akin to a mortgage lien in that in spite of the transfer of ownership. The right of action arose after January 15. as against PISC. on one hand.” The ship modification cost may properly be classified under this broad category because it was a necessary expenses for the vessel’s navigation.D. which enumerates the contracts covered by the Statue of Frauds..[60] In its defense. the lien is not extinguished. when NDC partially paid off GALLEON’s obligations to POLIAND’s predecessor-in-interest. it does not have a status superior to DBP’s preferred mortgage lien. Indeed. [59] The Court finds no sufficient justification to reverse the findings of the trial court and the appellate court in respect to the existence and amount of maritime lien. Hence. Under Article 1144 of the Civil Code. thus.D. Asian Hardwood. when the findings of fact are conclusions without citation of specific evidence upon which they are based.”[64] DBP’s reliance on the Statute of Frauds is misplaced. Neither can DBP invoke prescription or laches against POLIAND. 1521. Ltd. the enforcement of a maritime lien is in the nature and character of a proceeding quasi in rem. As explained in Philippine National Bank v. the Court holds the latter liable on the maritime lien. P. P. All things considered. The maritime lien is inseparable from the vessel and until discharged. P. when there is grave abuse of discretion in the appreciation of facts. Ltd. who substitutes him in all his rights. Laches also do not lie because there was no unreasonable delay on the part of POLIAND in asserting its rights. subrogation is the transfer of all the rights of the creditor to a third person. [61] (2) Even if conceded. an action upon an obligation created by law must be brought within ten years from the time the right of action accrues. No. Court of Appeals. Findings of fact of lower courts are deemed conclusive and binding upon the Supreme Court except when the findings are grounded on speculation. As long as an expense on the vessel is indispensable to the maintenance and navigation of the vessel. As stated in Section 21. Ltd. Ltd. Notwithstanding the subsequent transfer of the vessels to NDC. it is clear that the amount used for the repair of the vessel M/V “Asean Liberty” was advanced by Citibank and was utilized for the purpose of paying off the original maritime lienor. there is no privity of contract between POLIAND or its predecessors-in-interest.[63] a third person who satisfies the obligation to an original maritime lienor may claim from the debtor because the third person is subrogated to the rights of the maritime lienor over the vessel. has gone beyond the issues of the case and such findings are contrary to the admissions of both appellant and appellee. 23 . the maritime lien subsists. by virtue of Article 1302. 1521.D. in its narrow application. in making its findings. Ltd. a maritime lien may consist in “other necessaries spent for the vessel. if properly considered. the prescriptive period for the enforcement by action of the balance of GALLEON’s outstanding obligations had commenced. it follows the vessel. 2 of the New Civil Code. 1982. No.

2000] MONARCH INSURANCE CO. the bigger amount stated in the dispositive portion of the Court of Appeals’ Decision must have been awarded through indavertence. 64. [69] The award was affirmed by the Court of Appeals as against NDC only. both Petitions in G. No. on its hypothesis that such transfer extinguished the lien. COURT OF APPEALS and ABOITIZ SHIPPING CORPORATION. On this note. Such denouement would smack of denial of due process and taking of property without just compensation. The Decision of the Court of Appeals in CA-G. This rule rests on the theory that the fallo is the final order while the opinion in the body is merely a statement ordering nothing. 64 did not divest NDC of its ownership over the GALLEON vessels because APT merely holds the vessels in trust for NDC until the same are disposed. NDC also cannot rely on Administrative Order No. 143877 are DENIED. respondents. No. NDC could not have pleaded ignorance over the existence of a prior or preferential lien on the vessels subject of foreclosure. 94867. that would not be sufficient to discharge the maritime lien and deprive POLIAND of its recourse based on the lien. At that time. given the fact that in its “actual control over the management and operations” of GALLEON. Even if ownership was transferred to APT.298.. SO ORDERED.000. TABACALERA INSURANCE CO.930.[67] Thus. At the very least. 143866 and G. Judge AMANTE PURISIMA.56). attorney’s fees may be awarded inter alia when the defendant’s act or omission has compelled the plaintiff to incur expenses to protect his interest or in any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation be recovered. There is a discrepancy between the dispositive portion of the Court of Appeals’ Decision and the body thereof with respect to the amount of the maritime lien in favor of POLIAND.[70] This Court finds no reversible error with the award as upheld by the appellate court.56. Administrative Order No. the lack of notice to GALLEON’s creditors suggests that the extrajudicial foreclosure was effected to prejudice the rights of GALLEON’s other creditors.193. it was put on notice of the various obligations of GALLEON including those secured from ASIAN HARDWOOD as in fact it even paid ASIAN HARDWOOD US$1. APT is a mere conduit through which the assets acquired by the National Government are provisionally held and managed until their eventual disposal or privatization. The general rule is that where there is conflict between the dispositive portion or the fallo and the body of the decision. 53257 is MODIFIED to the extent that National Development Company is liable to Poliand Industrial Limited for the amount of One Million One Hundred Ninety Three Thousand Two Hundred Ninety Eight US Dollars and Fifty-Six US Cents (US$ 1.R. it is clear from the trial court records and the Court of Appeals’ Rollo that the bigger amount awarded in the dispositive portion of the Court of Appeals’ Decision was a typographical mistake. before it (NDC) mortgaged the 5 vessels to DBP on January 25.298. June 8. the latter foreclosed on its mortgage over the GALLEON ships.193. it is with respect to POLIAND’s claim for payment of US$1. No. vs. the fallo controls.56 representing part of the proceeds of GALLEON’s loan which was spent by GALLEON “for ship modification and salaries of crew” that NDC is liable. The dispositive portion ordered NDC to pay POLIAND “the amount of US$1. plus interest of 12% per annum computed from 25 September 1991 until fully paid. NDC cannot claim that it was a subsequent purchaser in good faith because it had knowledge that the vessels were subject to various liens. It took place when NDC had already assumed the management and operations of GALLEON. could not have participated as they were unaware and were not made parties to the case. When GALLEON defaulted in the payment of its obligations to DBP. [G.[75] In the instant case. As aptly held by the Court of Appeals: NDC’s claim that even if maritime liens existed over the proceeds of the foreclosure sale of the vessels which it subsequently purchased from DBP. Parenthetically. 1982. where the inevitable conclusion from the body of the decision is so clear as to show that there was a mistake in the dispositive portion. June 8.000. CV No. to evince good faith.R.000.000. NDC could have inquired as to the existence of other claims against the vessels apart from DBP’s mortgage lien. [G. No pronouncement as to costs.R. Considering that NDC was also in a position to know or discover the financial condition of GALLEON when it took over its management.R. the Court believes and so holds that the institution of the extrajudicial foreclosure proceedings was tainted with bad faith.298. Considering that the appellate court’s Decision merely affirmed the trial court’s finding with respect to the amount of maritime lien. WHEREFORE. Under Article 2208[71] of the Civil Code. GALLEON was already a failing corporation having borrowed large sums of money from banks and financial institutions.This is a unique situation where the extrajudicial foreclosure of the GALLEON vessels took place without the intervention of GALLEON’s other creditors including POLIAND’s predecessors-in-interest who were apparently left in the dark about the foreclosure proceedings. as prayed for by POLIAND in its complaint. LOI 1195 directed NDC to “discharge such maritime liens as may be necessary to allow the foreclosed vessels to engage on the international shipping business. However.. The other creditors. NDC’s liability for attorney’s fees The lower court awarded attorney’s fees to POLIAND in the amount of P1. INC. including POLIAND’s predecessors-in-interest who apparently had earlier or superior rights over the foreclosed vessels.. In other respects.R. 92735. the body of the decision will prevail.00 in partial settlement of GALLEON’s obligations. No. [68] which directed the transfer of the vessels to the APT.298.56” plus interest[72] despite a finding that NDC’s liability to POLIAND represents the maritime lien[73] which according to the complaint[74] is the alternative cause of action of POLIAND in the smaller amount of US$1. said Decision is AFFIRMED.00 on account of the amount involved in the case and the protracted character of the litigation.920.” In fine. One final note. INC and Hon. petitioners. it is not liable as it was a purchaser in good faith fails. 2000] 24 .

However. the cargo carrier. The survey established that on her voyage to Manila from Hong Kong. docketed as Civil Cases Nos.00. they were consolidated and jointly tried.207.E.00 and cost of suit.R. the co-petitioner in G.000. 95578. 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. a weather condition classified as typical and moderate in the South China Sea at that particular time of the year. interest at the legal rate on all these amounts. respondents. Without resolving the pending motion to set aside the order of default. JR. Aboitiz. petitioner. P213.00 corresponding to the value of nine (9) cases of Renault spare parts. in accordance with the rule on limited liability. Aboitiz.00 plus earned freight of P500.218. for the recovery of P39. 20844 which ordered the lower court to stay the execution of the judgment in favor of the petitioner. They indemnified the shippers and were consequently subrogated to their rights.000. 92735. Case No. Zuellig and Aboitiz in Civil Case No. a surveyor commissioned to investigate the possible cause of the sinking of the cargo vessel. litigation expenses. interests and actions against Aboitiz.. Aboitiz Shipping Corporation (hereafter "Aboitiz") on the ground that the latter is entitled to the benefit of the limited liability rule in maritime law.[6] In its answer with counterclaim. No.00 for the value of four (4) cartons of motor vehicle parts that foundered with the M/V P.00 for the value of twenty-five (25) cases of door closers and P42. Aboitiz. the vessel did not encounter weather so inclement that Aboitiz would be exculpated from liability for losses. 82-2768 and 82-2769. 82-2769. [G.000. [5] In Civil Case No. The cases were thus re-raffled to Branch VII of the RTC of Manila presided by Judge Amante P. 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. Civil Case No. [2] In Civil Case No. June 8. Incorporated (hereafter "Tabacalera") against private respondent. and JESUS ELBINIAS and ABOITIZ SHIPPING CORPORATION.R.254. Seeking indemnification for the loss of their cargoes. the trial court set the cases for hearing. 82-2767 where Monarch also named Malaysian International Shipping Corporation and Litonjua Merchant Shipping Agency as Aboitiz’s co-defendants. COURT OF APPEALS. 92735. and cost of suit. the presiding judge of the trial court. Before the motion could be acted upon.[8] Monarch and Tabacalera proffered in evidence the survey of Perfect Lambert. 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. plus attorney’s fees of not less than P20. vs. Br. PEDRO RAMIREZ. 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. 17427 which set aside the writ of execution issued by the lower court for the full indemnification of the claims of the petitioners. vs. plus attorney’s fees of not less than P10. Inc. F. Justices RODOLFO NOCON. No.R.66 representing the value of one case of motor vehicle parts which was lost when the M/V P.00 representing the value of eighteen (18) cases of plastic spangle. Monarch and Tabacalera are insurance carriers of lost cargoes.115. Judge Bienvenido Ejercito. G. G. 1980. docketed as Civil Cases Nos."[9] 25 . 1990 in C.R. No.000. Monarch sought recovery of P29. To this day. 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.00 which is almost thrice the amount of insurance proceeds of P14. SP No. For its part.[4] Tabacalera sought against Franco Belgian Services.R.500. Monarch Insurance Company (hereafter "Monarch") and Tabacalera Insurance Company. respondents. Tabacalera claimed from Hong Kong Island Shipping Co. RTC Manila. Presiding Judge. The claims numbered one hundred and ten (110) for the total amount ofP41.000. it filed two complaints against Aboitiz. the shippers.R. 1990 and its resolution dated October 4. As these four (4) cases had common causes of action. a common carrier owned and operated by Aboitiz.00 and cost of suit. COURT OF APPEALS. the master of M/V P. 1990 in CA-G.R.R. sank on her voyage from Hong Kong to Manila on October 31. No.00 and cost of suit. In his note of protest. All cases arose from the loss of cargoes of various shippers when the M/V P.579. Aboitiz.88 representing the value of three (3) pallets of glass tubing that sank with the M/V P. E. 82-2768 the recovery ofP284. No. J. DECISION DE LEON.A. 1990 in CA-G. [3] Civil Case No. was promoted to the then Intermediate Appellate Court. 15071 which modified the judgment of the lower court by applying the hypothecary rule on limited liability to limit 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..719. plus attorney’s fees of not less than P50. 82-2770 was a complaint filed by Monarch against Aboitiz and co-defendants Compagnie Maritime des Chargeurs Reunis and F.230. 000. Tabacalera also filed two complaints against the same defendant.R. including those of herein petitioners. [1] Because Aboitiz refused to compensate Monarch. 2000] EQUITABLE INSURANCE CORPORATION. No. Aboitiz. since Aboitiz had repeatedly failed to appear in court. Citadel Lines and Aboitiz indemnification in the amount of P75. Zuellig (M). the trial court denied the said motion and allowed Monarch and Tabacalera to present evidence ex-parte.. and G. Its counsel filed a motion to set aside the order of default with notice of his withdrawal as such counsel.058. their successorsin-interest. 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. and the cargo insurers such as the instant petitioners filed separate suits against Aboitiz before the Regional Trial Courts. Aboitiz sank on her way to Manila.: Before us are three consolidated petitions. petitioner.[7] Aboitiz was subsequently declared as in default for its failure to appear during the pre-trial. 24 and ABOITIZ SHIPPING CORPORATION.ALLIED GUARANTEE INSURANCE COMPANY. G. plus attorney’s fees of not less than P5. Ltd. 82-2767 and 82-2770. G. have not yet been settled. Aboitiz described the wind force encountered by the vessel as from ten (10) to fifteen (15) knots. Purisima. some of these claims. SP.00 according to Aboitiz. Former First Division Composed of Hon.

"The writ of preliminary injunction issued in favor of Aboitiz. and the assailed orders of respondent Judge dated April 4 and April 19. P539. certificates of sale.058.The appellate court erred in ignoring the case of "Aboitiz Shipping Corporation v. litigation expenses and cost of suit. Tabacalera was also the highest bidder for one (1) unit TCH TL-251 Hyster Container Lifter.88 with legal interest from the filing of the complaint until fully paid plus attorney’s fees of P30. annulling the subject writs of execution."[20] Hence. No.. Aboitiz was held liable for the following: (a) in Civil Case No. being factual issues.. and one (1) unit ER-353 Crane. Monarch was the highest bidder for one (1) unit FL-151 Fork Lift (big) and one (1) unit FL-25 Fork Lift (small).000. to indemnify Monarch and Tabacalera ahead of the other claimants would be prejudicial to the latter. on April 12.. 1989. Aboitiz’s motion for the reconsideration of said Resolution was similarly denied. 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.00 attorney’s fees.[16] On April 17.. considering that said case. No.000. 82-2769. [19] On March 29.. having served its purpose. 1989. on the alleged ground that the issue of real and hypothecary liability had not been previously resolved by Purisima.579. one (1) unit Hyster Top Lifter (out of order). 82-2770. 1988. the writ of certiorari is hereby granted. (c) in Civil Case No..00 with legal interest of 12% per annum from date of filing of the complaint until fully paid.000. On April 19. 1989. "SO ORDERED. [15] According to Aboitiz. The trial court granted the motion on April 4. It subsequently filed an urgent motion for reconsideration of the dismissal with prayer for the admission of its attached appellant’s brief. Supreme Court. invoking the real and hypothecary nature of liability in maritime law..00 and cost of suit. Tabacalera and Judge Purisima raise the following assignment of errors: 1. Monarch and Tabacalera opposed the motion to quash. the sheriff levied upon five (5) heavy equipment owned by Aboitiz for public auction sale. plus attorney’s fees ofP5. "The writ of prohibition is also granted to enjoin respondent Judge. is hereby lifted.. filed an urgent motion to quash the writs of execution.[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... now factual and executory. The court denied the motion on August 27.[10] Aboitiz appealed to the Court of Appeals but the appeal was dismissed for its failure to file appellant’s brief. plus attorney’s fees of P30. 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. On April 18. the petition was denied in the Resolution of October 10.00. plus P5. 84158.000. the appellate court rendered a Decision the dispositive portion of which reads: "WHEREFORE. and (d) in Civil Case No. decided by this Honorable Supreme Court as early as November 13. and this Hon. SP-17427. litigation expenses and cost of suit. 26 .719. 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.66 with legal interest of 12% per annum from date of filing of the complaint until fully paid." (G.R. The appellate court denied that motion for lack of merit in a Resolution dated July 8. before the motion to quash could be heard.In due course.R. Aboitiz filed a motion for reconsideration of the decision and/or for new trial to lift the order of default. the trial court rendered judgment against Aboitiz but the complaint against all the other defendants was dismissed. 1989 [14]and issued separate writs of execution.. 1989. the instant petition for review on certiorari where petitioners Monarch. to add the fact that an auction sale had taken place. the appellate court. 82-2768. The corresponding certificates of sale[17] were issued to Monarch and Tabacalera. Inc. At said sale.679. 1986...The appellate court erred when it resolved that Aboitiz is entitled to the limited real and hypothecary liability of a ship owner. already final and executory. [12]Entry of judgment was made in the case. P29. Aboitiz filed a supplement to its motion. P75. Monarch and Tabacalera moved for execution of judgment. 3. However.00. 1988 for being filed out of time. the day before the hearing of the motion to quash. shall be threshed out before respondent Judge. (b) in Civil Case No. 4. [11] Aboitiz thus filed a petition for review before this Court. 82-2767. 2. [13] Consequently.R.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. No. 1989. CA and Allied Guaranty Insurance Co. "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...00 with legal interest of 12% per annum from date of filing of the complaint until fully paid. since its liability is limited to the value of the vessel which was insufficient to satisfy the aggregate claims of all 110 claimants. 1989 insofar as the money value of those properties of Aboitiz.. 88159).The appellate court grievously erred in re-opening the Purisima decisions. auction sale. 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. litigation expenses and cost of suit. P39. No pronouncement as to costs. Docketed as G. considering the facts on record and the law on the matter. levied on execution and sold at public auction. is in pari materia with the instant case.. 1990.

of October 31. Racines received a report from his chief engineer that the water level in the cargo holds was rapidly rising. Aboitiz and its cargo were lost due to force majeure. Southern Quezon and Southern Tagalog provinces.E. 4 that describes the sea condition as "moderate breeze." and "small waves becoming longer.. the cargo holds were already flooded with sea water that rose from three to twelve feet.[21] G. The M/V P. Ilocos Norte. Branch XXIV. Taiwan where Capt. the M/V Kapuas (Capuas) manned by Capt. plus attorney’s fees. Virgilio Gonzales rescued the officers and crew of the ill-fated M/V P.. particularly along the sea route from Hong Kong to Manila. They were initially successful in pumping out the water. the vessel suddenly encountered rough seas with waves about fifteen to twenty-five feet high. At 6:00 a. 1980 while the storm was still within Philippine territory. 7. 6. The latter found that sea water had entered cargo hold Nos. a meteorologist of the Philippine Atmospheric Geophysical and Astronomical Services Administration (PAGASA). Aboitiz and brought them to Waileen. master mariner of the M/V P. 1980 at latitude 18 degrees North.85 representing the value of 76 drums of synthetic organic tanning substances and 1. the Philippines and Taiwan with the nearest land being the northern tip of Luzon. which was approximately 250 miles away from the eye of the storm."[25] PAGASA issued weather bulletins from October 28-30.. Branch VIII. 138643 as follows: 27 . as insurer-subrogee of consignee-assured Axel Manufacturing Corporation. testified in both cases that during the inclusive dates of October 28-31. filed an amended complaint against Franco Belgian Services. Capt. Gerry N. 1980."[26] To fortify its position. with legal interest from the date of filing of the complaint. Despite diligent efforts of the officers and crew. the trial court rendered a decision that disposed of Civil Case No. Racines. the latter ignored. 1980.The appellate court erred in concluding that certiorari was the proper remedy for Aboitiz. Equitable. It prayed for the dismissal of the cases and the payment of attorney’s fees. Mabunay.. F. however. return check and subrogation receipt. 587 of the Code of Commerce..50 representing the value of 676 bags of PVC compound and 10 bags of ABS plastic lost on board the M/V P. Justo Iglesias. a device capable of ejecting 180 gallons of water per minute.. Racines affirmed that the wind force on October 29-30. Bangui.794. around 270 miles from Cape Bojeador. In its answer with counterclaim in the two cases. 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. a stormy weather condition prevailed within the Philippine area of responsibility. Equitable presented Rogelio T. Zuellig. alleging that the loss was due to a fortuitous event or an act of God. filed a complaint against Aboitiz for the recovery of P278. NOS. 94867 & 95578 Allied as insurer-subrogee of consignee Peak Plastic and Metal Products Limited. 1980 was only ten (10) to fifteen (15) knots. and Justo C. he recommended payment to Axel Manufacturing Corporation as evidenced by the cash voucher.. Aboitiz disclaimed responsibility for the amounts being recovered. 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.. Aboitiz. had made its exit to the South China Sea through Bataan. seaworthiness of the vessel and exercise of due diligence in the carriage of goods as regards the cross-claim of its co-defendants. Aboitiz presented the testimonies of Capt.000 kilograms of optical bleaching agents which were also lost on board the M/V P. 138396. He immediately directed that water be pumped out by means of the vessel’s bilge pump. relying mainly on the marine protest filed by Capt. No domestic bulletins were issued the following day when the storm which hit Eastern Samar. litigation expenses plus costs of suit. with legal interest from the date of filing of the complaint. In his marine protest under oath. exemplary damages. because of tropical depression "Yoning. [22] Docketed as Civil Case No. Barboza who testified that as claims supervisor and processor of Equitable. The departure was delayed for two hours because he (Capt. Aboitiz sank at about 7:00 p. meteorologist of PAGASA and another witness of Aboitiz. It similarly relied on the defenses of force mejeure.The appellate court erred when it concluded that other claimants would suffer if Tabacalera and Monarch would be fully paid. litigation expenses and costs of suit.. Iglesias. Inc. Racines) was observing the direction of the storm that crossed the Bicol Region. 1 and 2. plus 25% attorney’s fees. Responding to the captain’s distress call.[24] In support of its position. the case was heard before the Regional Trial Court of Manila. and Aboitiz for the recovery of P194. longitude 170 degrees East in the South China Sea in between Hong Kong. Allied and Equitable refuted the allegation that the M/V P. Aboitiz.536. disabling the bilge pump from containing the water. however.The appellate court erred in not concluding that irrespective of whether Aboitiz is entitled to limited hypothecary liability or not.The appellate court erred when it concluded that Aboitiz had made an "abandonment" as envisioned by Art. the vessel. 1984. At about 8:00 o’clock in the morning of October 30.m. said wind velocity falls under scale No. He ordered his chief engineer to check the cargo holds. of October 31. 1980.. exemplary damages and costs. Racines lodged his marine protest dated November 3. there are enough funds to satisfy all the claimants. [27] On April 24. however. Aboitiz left Hong Kong for Manila at about 7:30 in the evening of October 29.. Capt.[23] Docketed as Civil Case No. 1980.. 8. fairly frequent white horses. 138643.m.. presided by Judge Sergio D. The gist of the testimony of Capt. Racines as well as on the Beaufort Scale of Wind.. He proceeded with the voyage only after being informed that the storm had abated. began to list on starboard side at 27 degrees. Racines in the two cases follows: The M/V P. Barboza also presented a letter of demand to Aboitiz which. after more than twelve (12) hours of navigation.. Aboitiz.R. the complaint was assigned to the Regional Trial Court of Manila. Under the Beaufort Scale of Wind. On the other hand.5.. 1980 after securing a departure clearance from the Hong Kong Port Authority.

. 88159. 4. Inc.[34] Consequently. 138643. "SO ORDERED.R. No.R. 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. "SO ORDERED. Allied prayed for the issuance of a writ of execution in the lower court which was granted by the latter on April 4. judgment is hereby rendered ordering defendant Aboitiz Shipping Company to pay plaintiff Allied Guarantee Insurance Company. Aggrieved. the dispositive portion of which reads: "WHEREFORE.R. No. in favor of plaintiffappellee Equitable Insurance Corporation as subrogee of the consignee for the loss of its shipment aboard the M/V `P. [30] On August 15. 20844. the Court of Appeals rendered the assailed decision.. amend.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. 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..536. mandamus and injunction with preliminary injunction and/or restraining order before this Court alleging the following assignment of errors: 1. 85 with legal rate of interest thereon from February 27. Allied filed the instant petition for certiorari. Aboitiz appealed to the Court of Appeals under CA-G. sustained by the Court of Appeals in CA-G. Entry of judgment was made and the lower court’s decision in Civil Case No. No pronouncement as to costs. 1990."[33] On September 12.. 88159 which is now the law of the case as held in G. the dispositive portion of which reads as follows: "WHEREFORE. 89757 28 . 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.. 138396 that favored Equitable. 92735) and disposing of the appeal as follows: "WHEREFORE. [32] From the decision of the trial court in Civil Case No. erroneously brushed aside the doctrine in G. res adjudicata and estoppel by judgment. with costs of suit. with grave abuse of discretion amounting to lack or excess of jurisdiction.. No.. 1990. No. 04121 and affirmed in toto by the Supreme Court in G. Equitable filed with this Court a petition for review 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. 1990 granting the execution is hereby set aside. 1990 which was in accord with law and jurisprudence. No. Aboitiz filed a petition for certiorari and prohibition with preliminary injunction with the Court of Appeals docketed as CA-G.00 as attorney’s fees. 15071. 794. On March 23. plus P30. 1981 until fully paid..R. However. CV No. No..R. 1990. No. 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. 138643 became final and executory. A motion for reconsideration of the said decision was likewise denied by the Court of Appeals on May 3. On August 24. the Court of Appeals affirmed the decision of the lower court."[29] In Civil Case No. we hereby affirm the trial court’s awards of actual damages. until fully paid. "SO ORDERED. SO ORDERED.. No. 1990. to pay the sum of P194. 1989. Aboitiz’ and against defendant-appellant Aboitiz Shipping Corporation. 04121.R.000. Aboitiz likewise appealed to the Court of Appeals through CAG. plus litigation expenses and costs of litigation. with legal interest thereon from March 10. 138396. To stay the execution of the judgment of the lower court.Real and hypothecary rule under Articles 587.R. CV No.R. SP-17427 (now G. 1990.R. the sum of P278. SP No. The Court of Appeals denied the motion for reconsideration on October 4. 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. then date of the filing of the complaint..R. the Court of Appeals rendered the Decision quoting extensively its Decision in CA-G. No pronouncement as to costs. which determination shall be made by the trial court... 1987.. with the exception of legal interest. the challenged order of the respondent Judge dated April 4. Aboitiz then filed a petition for review with this Court docketed as G.. attorney’s fees of twenty-five (25%) percent of the total claim.50. this Court hereby renders judgment in favor of plaintiff and against defendant Aboitiz Shipping Corporation.R."WHEREFORE. 88159. modify. reverse or invalidate a final judgment as affirmed by the Honorable Supreme Court in G.R. 2. 3.. 88159 which was denied for lack merit..Respondent Court of Appeals.. 88159 which is now the law of the case and observance of time honored principles of stare decisis. 1981."[28] A similar decision was arrived at in Civil Case No.Respondent Court of Appeals with grave abuse of discretion amounting to lack or excess of jurisdiction. brushed aside the doctrine in G... attorney s fees and litigation expenses. No."[31] Hence. Equitable moved to reconsider the Court of Appeals’ Decision. in view of the foregoing.

[37] where the petitioner in the special civil action of certiorari and mandamus was also the judge whose order was being assailed. General Accident Fire and Life Assurance Corporation. 88159. "It should be pointed out. No. No. 1991 on the ground that the petitioners "have identical causes of action against the same respondent and similar reliefs are prayed for. 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. No."[38] While the petition in G. Second.[39] "An examination of the November 13. 1989 Resolution in G. At the outset. No. fault of the shipowner or privity thereto constitutes one of the exceptions to the application of limited liability under Article 587. Petitioners asseverate that the judgments of the lower courts..R.. reversed or invalidated. but an altogether different aspect. first of which is that the doctrine of primary administrative jurisdiction is not applicable therein. 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. 92735. 2. is named as a co-petitioner. 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. No. 1990. In Calderon v. and second is that a limitation of liability in said case would render inefficacious the extraordinary diligence required by law of common carriers. 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. the Court takes note of the fact that in G.. Before we can address this issue. cannot be directly or indirectly altered. 1990."[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. 1989 which was subsequently declared as "law of the case" in G. Rollo) shows that the same settles two principal matters. Petitioners are either deliberately misleading this Court or profoundly confused. 89757 promulgated on August 6. that the limited liability discussed in said case is not the same one now in issue at bar. 590 and 837 of the Code of Commerce. While the matters threshed out in G. whose decision in the Regional Trial Court is sought to be upheld. 280-282. Aboitiz.R. First.R. Solicitor General. 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.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. Civil Code provisions on common carriers for breach of contract of carriage prevails. 89757 on August 6. 88159 as early as November 13. 94867 and 95578 were consolidated in the Resolution of August 5.R. the instant case raises a completely different issue.involving the same and identical set of facts and cause of action relative to the sinking of the M/V `P.R. 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. amended. petitioner in a way ceased to be judicial and has become adversarial instead. popularly known as package limitation clauses. As elucidated in the case of Aboitiz Shipping Corporation vs.. 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.R. No. 88159 already declared as the `law of the case’ in a subsequent decision of this Honorable Court in G.Real and hypothecary rule under Articles 587.. The existence of what petitioners insist is already the "law of the case" on the matter of limited liability is at best illusory. Aboitiz’ and observance of the time honored principles of stare decisis. No.R.. No.. already final and executory. 92735. the fact that Judge Purisima is named as petitioner has not escaped this Court’s notice. 88159 is that which attaches to cargo by virtue of stipulations in the Bill of Lading. 88159 (pp. No.R. there are procedural matters that need to be threshed out. 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. 3. 29 .R. By filing this case. He should not appear as a party seeking the reversal of a decision that is unfavorable to the action taken by him. Judge Amante Purisima. which in that case was contained in Section 8 of the Bill of Lading and which limited the carrier’s liability to US$500. The limited liability settled in G. 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. Said resolution did not tackle the matter of the Limited Liability Rule arising out of the real and hypothecary nature of maritime law."[40] Third.R. modified. Nos.00 for the cargo whose value was therein sought to be recovered. and estoppel by judgment. which was not raised therein. and which is the principal bone of contention in this case. however.[35] These three petitions in G. however..

We have allowed the suspension of execution in cases of special and exceptional nature when it becomes imperative in the higher interest of justice.xxx. whether or not the respondent Court of Appeals erred in finding. If a judgment is sought to be perverted and made a medium of consummating a wrong the court on proper application can prevent it.The rule that once a decision becomes final and executory. We cannot. Aboitiz did not sink by reason of force majeure but because of its unseaworthiness and the concurrent fault and/or negligence of Aboitiz. 14425 (G. and will remove obstructions to the enforcement thereof. it claimed that the sinking of the M/V P. 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. the material averments contained in the complaint.... In Aboitiz’ answer with counterclaim. inCabrias v. However. Aboitiz also alleged that it exercised the due diligence required by law. Petitioners in G.. 30 ... The principle of limited liability is enunciated in the following provisions of the Code of Commerce: Art.[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. No. x x x.. "We shall tackle the latter issue first. and to exercise equitable control over such enforcement. 92735 in the lower court and all the way to the Supreme Court. however.. 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. determination of the question of whether execution of judgments which have become final and executory may be stayed is also an issue. We reiterate our pronouncement in Aboitiz Shipping Corporation vs. 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. the sinking justified the extinguishment of its liability for the lost shipment.R. Aboitiz was due to an act of God or unforeseen event and that the said ship had been seaworthy and fit for the voyage.. agree with petitioners that this circumstance prevents the respondent Court of Appeals from taking cognizance of Aboitiz’ defenses on appeal. [43] It is true that for having been declared in default. "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. that Aboitiz is entitled to the benefit of the limited liability rule is an altogether different matter which shall be discussed below. it is the ministerial duty of the court to order its execution.. the Court of Appeals may review the correctness of the evaluation of the plaintiff’s evidence by the lower court. Thus.. 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. and that considering the real and hypothecary nature of maritime trade. [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 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.. Rule on Limited Liability. Aboitiz was precluded from presenting evidence to prove its defenses in the court a quo.. 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. this Court ruled that: ‘xxx.. [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.xxx ‘x x x every court having jurisdiction to render a particular judgment has inherent power to enforce it. Likewise. General Accident Fire and Life Assurance Corporation on this very same issue. Petitioners Monarch and Tabacalera remind this Court that from the inception of G. upon review. the respondent Court of Appeals may properly rule on the same. the tenor of which is that no procedural consideration is sancrosanct if such shall result in the subverting of justice. thus effectively denying the application of the limited liability enunciated under the appropriate articles of the Code of Commerce. No.’"[42] Fourth. The right to execution after finality of a decision is certainly no exception to this. 587.. 89757). The court has authority to inquire whether its judgment has been executed. thereby barring Aboitiz from availing of the benefit of the limited liability rule. the captain and its crew.R. a number of decisions have originated herefrom. is not an absolute one. 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. Such authority extends not only to such orders and such writs as may be necessary to prevent an improper enforcement of the judgment. The petitioners assert in common that the vessel M/V P... 92735 aver 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. but he may exempt himself therefrom by abandoning the vessel with all the equipments and the freight it may have earned during the voyage..[47] The former should be allowed to reiterate all affirmative defenses pleaded in his answer before the Court of Appeals. Adil (135 SCRA 355 [1885]). Collaterally. It does not imply admission by the defendant of the facts and causes of action of the plaintiff. Consistent with this view. via his answer..R. Such defendant has a better standing than a defendant who has neither answered nor appeared at trial. No..

587. 138396 (now G.[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. This is so. on appeal. destruction. 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. hence. [59] 31 . that the limited liability rule is without exceptions. Such fault was directly attributable to the captain. These issues are therefore ultimately questions of fact which have been subject of conflicting determinations by the trial courts. shall be understood as limited to the value of the vessel with all its appurtenances and the freightage served during the voyage. No. attended by innumerable hazards and perils.[48] this Court elucidated on the import of Art. The consensus of authorities is to the effect that notwithstanding the language of the aforequoted provision. equipment. [58] However. Aboitiz was unseaworthy. In Yangco v. are to examine the vessel before sailing and to comply with the laws on navigation. This is not to say. the ship captain and crew of the M/V P. Each co-owner may exempt himself from his liability by the abandonment. unless the same is due to flood. lightning. 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.[54] A finding that a fortuitous event was the sole cause of the loss of the M/V P. The total destruction of the vessel extinguishes maritime liens because there is no longer any res to which it can attach. the trial court also upheld petitioners’ allegation that the M/V P. Article 587 does not apply. 612 of the Code of Commerce. 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. and (3) in workmen’s compensation claims. even if she (M/V P. Aboitiz is still entitled to the benefit under the rule of limited liability accorded to shipowners by the Code of Commerce. Article 837 applies the principle of limited liability in cases of collision. 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. The civil liability incurred by shipowners in the case prescribed in this section. among the inherent duties of a captain. after receiving Monarch’s and Tabacalera’s evidence. [55] However.[53] We have categorically stated that Article 587 speaks only of situations where the fault or negligence is committed solely by the captain. 587 and 590 embody the universal principle of limited liability in all cases. 92735 that the unseaworthiness of the M/V P. [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. earthquake.[52] (2) where the vessel is insured." expresses in a nutshell the limited liability rule. 587 as follows: "The provision accords a shipowner or agent the right of abandonment. Aboitiz would render inapplicable the rule on limited liability. applies in all cases wherein the shipowner or agent may properly be held liable for the negligent or illicit acts of the captain.R. Such a situation will be covered by the provisions of the Civil Code on common carriers.R. Arts. however.R. or to the concurring negligence of the shipowner and the captain. namely: (1) where the injury or death to a passenger is due either to the fault of the shipowner."[56]. 92735). No. Aboitiz was not due to an act of God or force majeure. and that Aboitiz is entitled to the benefit of the limited liability rule for having abandoned its ship. storm.Art. Aboitiz) was found to be unseaworthy. the benefit of limited liability therein provided for. or deterioration of the goods they carry. the Court of Appeals and even this Court. Art. Laserna. 590. the trial court found that the complete loss of the shipment on board the M/V P."[49] "No vessel. 95578) was similarly resolved by the trial court. Aboitiz sank by reason of fault and/or negligence of Aboitiz.’ 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. of the part of the vessel belonging to him. 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. before a notary. In cases where the ship owner is likewise to be blamed. For Aboitiz’ failure to present controverting evidence. and by necessary implication. or other natural disaster or calamity. In Civil Cases Nos. Aboitiz when it sank was neither due to a fortuitous event nor a storm or natural cause. Aboitiz. and freight. No. 82-2767-82-2770 (now G. but this is a mere deficiency of language and in no way indicates the true extent of such liability. respondent Court of Appeals exculpated Aboitiz from fault or negligence and ruled that: "x x x. or insurance. which found that the sinking of the M/V P. no liability. if any. because under Art. 837. this fault (distinguished from civil liability) cannot be laid on the shipowner’s door. this Court continues to apply the said rule in appropriate cases. 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. even if the vessel was unseaworthy due to the captain’s fault. On the other hand. a finding that the M/V P. Aboitiz’ appeal was favorably acted upon by the respondent Court of Appeals which reiterated its ruling in G. Aboitiz was not a fault directly attributable to Aboitiz but to the captain."[57] Civil Case No. and that: "x x x although the shipowner may be held civilly liable for the captain’s fault x x x having abandoned the vessel in question.

because of tropical depression "Yoning". On the matter 32 . SP No. 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. however."[63] It should be pointed out that the issue of whether or not the M/V P. CV No. Aboitiz to founder. Aboitiz was not due to the waves caused by tropical storm "Yoning" but due to the fault and negligence of Aboitiz.R." and characterizes the waves as "small x x x becoming longer.[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. and that Aboitiz had failed to satisfactorily establish that it had observed extraordinary diligence in the vigilance over the goods transported by it. 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."[71] However. falls within scale No.R." [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. in the subsequent case of Aboitiz Shipping Corporation v. 1980."[68] Captain Racines also testified in open court that the ill-fated M/V P. Such a construction would also put matters to rest relative to the decision of the Board of Marine Inquiry. thereby affirming and adopting as its own. In Aboitiz Shipping Corporation v.[60] In CA-G. 20844 (now G. Aboitiz was not due to the waves caused by tropical storm "Yoning" but due to the fault and negligence of petitioner. In direct contradiction is this Court’s categorical declaration in Aboitiz Shipping Corporation v. 100373. Aboitiz had caused it to founder.R. Ltd. 94867) to annul and set aside the order of execution issued by the lower court was resolved in favor of Aboitiz. In view of these conflicting pronouncements. particularly along the sea route from Hong Kong to Manila."[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. Country Bankers Insurance Corporation v. that the unseaworthiness of the M/V P.[72] this Court exculpated Aboitiz from fault and/or negligence while holding that the unseaworthiness of the M/V P. Aboitiz’ petition before the Court of Appeals. "On this point. its master and crew. No. and the captain and crew of the M/V P. Court of Appeals. the finding therein contained to the effect that the vessel was seaworthy deserves merit. under the Beaufort Scale of Wind. Despite appearances. 1991 denying the petition for review on the ground that the Court of Appeals committed no reversible error. which condition was a result of the acts of the captain and the crew.[64] this Court approved the findings of the trial court and the appellate court that the sinking of the M/V P. absent a factual basis for such conclusion. the trial court held that the M/V P. Ltd. 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. [74]. we find that now is the opportune time to settle once and for all the issue of whether or not force majeure had indeed caused the M/V P.[66] this Court issued a Resolution on August 28. Thus. 04121. The court reproduces with approval said findings x x x. .[70] to wit: "The trial court and the appellate court found that the sinking of the M/V P." It is true that as testified by Justo Iglesias. 138643 (now G. in the later case of Country Bankers Insurance Corporation v. Aboitiz was not lost due to a fortuitous event or force majeure. but to the condition it was in at the time of the sinking.R. Aboitiz foundered on October 31. Guided by our previous pronouncements and illuminated by the evidence now on record. this Court found no error in the findings of the Court of Appeals that the M/V P. 4 that describes the wind velocity as "moderate breeze. In G. the M/V P. the findings of the Court of Appeals that force majeure had caused the M/V P. General Accident Fire and Life Assurance Corporation.[69] The issue of negligence on the part of Aboitiz. Aboitiz has also been subject of conflicting rulings by this Court. Aboitiz was only attributable to the negligence of its captain and crew. docketed as CA-G. No. in Civil Case No. however. We. After reviewing the records of the instant cases. No. 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.[65] On the other hand. [61] Subsequently. we categorically state that by the facts on record. Court of Appeals. meteorologist of Pag-Asa. a stormy weather condition prevailed within the Philippine area of responsibility. Aboitiz. Court of Appeals. 94867). Aboitiz sank by reason of force majeure. whose finding of "unseaworthiness" clearly did not pertain to the structural condition of the vessel which is the basis of the BMI’s findings. 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. its master and crew. fairly frequent white horses. Aboitiz was two hundred (200) miles away from storm "Yoning" when it sank. during the inclusive dates of October 28-31. we reiterate our findings in Aboitiz Shipping Corporation v. it should be stressed that unseaworthiness is not a fault that can be laid squarely on petitioner’s lap. While the conclusion therein exonerating the captain and crew of the vessel was not sustained for lack of basis. Aboitiz to sink. it is not totally incompatible with the findings of the trial court and the Court of Appeals. The unseaworthiness found in some cases where the same has been ruled to exist is directly attributable to the vessel’s crew and captain.R. 1980 was only ten (10) to fifteen (15) knots which. and that there was no negligence on the part of its officers and crew. Court of Appeals . Aboitiz did not go under water because of the storm "Yoning.Finally. General Accident Fire and Life Assurance Corporation.

The said survey established that the cause of the sinking of the vessel was the leakage of water into the M/V P. General Accident Fire and Life Assurance Corporation. Well aware of the 110 claimants against it.. While the goods are in the possession of the carrier. Ltd. there is. a need to collate all claims preparatory to their satisfaction from the insurance proceeds on the vessel M/V P. Aboitiz. and if loss occurs.[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.x x x. 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 tolerated the situation of several claimants waiting to get hold of its insurance proceeds.R.. 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. Aboitiz had unfortunately failed to discharge. therefore. petitioners Monarch and Tabacalera presented a survey from Perfect Lambert. either completely or pro-rata should the insurance proceeds and freightage be not enough to satisfy all claims. No claimant can be given precedence over the others by the simple expedience of having completed its action earlier than the rest. No. a surveyor based in Hong Kong that conducted an investigation on the possible cause of the sinking of the vessel. 82-2767-82-2770 (now G. Aboitiz and its pending freightage at the time of its loss.. petitioner should institute the necessary limitation and distribution action before the proper admiralty court within 15 days from finality of this decision.. that claimants be treated as "creditors in an insolvent corporation whose assets are not enough to satisfy the totality of claims against it.. Court of Appeals.. the defendant failed to prove hat the loss of the subject cargo was not due to its fault or negligence.of Aboitiz’ negligence. Consequently. In fact. By its failure to abide by the order of this Court. "x x x.. the total proceeds of the insurance and pending freightage should now be deposited in trust... The rule on limited liability should be applied in accordance with the latest ruling in Aboitiz Shipping Corporation v. and the captain and crew of the M/V P. execution of judgment in earlier completed cases. " In fairness to the claimants. 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.. Aboitiz was waiting for a judgment that might prove favorable to it. Aboitiz which probably started in the forward part of the No. 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. had Aboitiz complied therewith."[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. Moreover.x x x. Then and only then can all such claims be simultaneously settled..[75] that found Aboitiz.[80] promulgated on January 21. The pendency of the instant cases before the Court is not a reason for Aboitiz to disregard the aforementioned order of the Court. although no explanation was proffered as to why the No. In the case at bar. The surveyor concluded that whatever the cause of the leakage of water into these hulls.. once the vessel owner or any party asserts the right to limit its liability. 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. even those already final and executory must be stayed pending completion of all cases occasioned by the subject sinking..1 to pass through hull No. the defendant common carrier from the nature of its business and for reasons of public policy. that is necessary to protect the interest of the shipper which is at the mercy of the carrier x x x. 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. we adhere to our ruling in Aboitiz Shipping Corporation v. Aboitiz preferred to litigate the claims singly rather than exert effort towards the consolidation of all claims. in blatant violation of the basic provisions of the Civil Code on abuse of rights. 92735). However. the initial burden of proof of negligence or unseaworthiness rests on the claimants.. 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... for final pro-rating and settlement thereof. Aboitiz to have been concurrently negligent. We are inclined to believe that instead of filing the suit as directed by this Court..[79] This burden. This is in accordance with the rule that in cases involving the limited liability of shipowners.. 2.."[81] To do so.. which.) There is no record that Aboitiz has instituted such action or that it has deposited in trust the insurance proceeds and freightage earned. courts have arrived at conflicting decisions while claimants waited over the years for a resolution of any of the cases that 33 ."[82] (Underscoring supplied. 1 and 2 holds which allowed the water entering hull No. 1993. if correctly handled must have multiplied in amount by now. it is but fair that it exercise extraordinary diligence in protecting them from loss or damage. the Court set out in that case the procedural guidelines: "In the instant case. Court of Appeals[77] on the issue of Aboitiz’ liability in the sinking of its vessel. 2 hull was likewise flooded. to wit: "In accordance with Article 1732 of the Civil Code. Aboitiz. During the trial of Civil Case Nos... and as a matter of equity. 1 hull.. 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. Thus. even these cases could have been terminated earlier. the law presumes that it was due to the carrier’s fault or negligence. It was obvious that from among the many cases filed against it over the years. We therefore reiterate our pronouncement in Aboitiz Corporation v.

the petitions in G. were sent in search of assistance. it is not required that the act be done purposely to produce the injury. General Accident Fire and Life Assurance Corporation. where they arrived on October 7. [88] petitioners should be granted attorney’s fees. Ltd.R. with four seamen. including the Neil Macleod and one of the Pujalte boats. Palawan. September 26. 1918 G. vs.. M/V P. for its contumacious act of defying the order of this Court to file the appropriate action to consolidate all claims for settlement. on 22 September. the London Salvage Association acting in the interest of the underwriters of the ship and the cargo. plaintiffsappellants.[85] Aboitiz is well aware that by not instituting the said suit. An act is considered willful if it is done with knowledge of its injurious effect. SO ORDERED.00 as attorney’s fees. the captain of the Bengloe. engaged Ker & Co. G.” At this time. Master. 13229 JOSE FERNANDEZ. the first and third officers of the vessel. WHEREFORE. consisting of the second officer and some members of the crew. good customs or public policy. On October 1. 1993 in Aboitiz Shipping Corporation v. A. which had the captain and members of the crew of the Bengloe on board. Swan. O. Swan left Manila on the Coast Guard Cutter Polillo on October 6 for the scene of the wreck. an engineer and marine surveyor. to (a) institute the necessary limitation and distribution action before the proper Regional Trial Court. W. KER & CO. the British steamer Bengloe owned by W. these gentlemen formed a partnership. and M. Holmsen. and CA-G. Holmes and Fernandez proceeded with the launch to Brook’s Point. was dispatched on a similar mission.500. SP-17427 dated March 29.R. J.[86] Thus. 94867. 20844 dated August 15. Lawrence & Ross for appellees. to conduct the work.. Jose Fernandez. Macleod. N. the captain sent the following telegram to the agents of the vessel at Manila: Bengloe abandoned last Thursday eighteen days on Corral Reef no assistance whatever to hand ship dangerous position settling down forward and listed heavily to Port Cargo in aft holds possible to salve. with a capital of P1. Holmsen and Fernandez began negotiations with various owners of vessels in Manila. Malcolm. General Accident Fire and Life Assurance Corporation. January 21.. [87] Crossfield & O’Brien for appellants.R. Ltd. stranded on the Mayone shoal in the Sulu sea some twenty-five miles from Brook’s Point on the Island of Palawan. 15071 dated August 24. STEVENSON & CO.. and their assistants arrived at the wreck on On account of Aboitiz’ refusal to satisfy petitioners’ claims in accordance with the directive of the Court in Aboitiz Shipping Corporation v. within fifteen (15) days from the finality of this decision. 1914.R. No. 92735. pursuant to Article 2208 of the Civil Code. The latter firm in its turn employed William Swan. to take charge of the salvage operations. Crew all safe. MACLEOD. 1993. Captain GUY. another party. and 95578 are DENIED.: On September 13. They immediately took possession of the vessel and removed 14. the captain later arrived at Puerto Princesa. The decisions of the Court of Appeals in CA-G. defendantsappellees. and (b) thereafter to deposit with the said court the insurance proceeds from the loss of the vessel. On the way there. it caused the delay in the resolution of all claims against it. Captain SWAN. 34 . CA-G.) Guy. On learning of the abandonment of the Bengloe by her crew. General Accident Fire and Life Assurance Corporation. Neither of these boats. On the same day. and M. of the approximate value of P2. Aboitiz failed to give the claimants their due and to observe honesty and good faith in the exercise of its rights. however. were residents of Palawan. for the purpose of salving the vessel and cargo.000.00 as moral damages and P50.. the copra and other effects were stored in the Government warehouse.. No. 100446. 1914. [84] cannot be anything but willful on its part. 1990. The copra being perishable was later sold by an order of court and the proceeds amounting to P2.F. A. JOHN DOE. now plaintiffs. and with a number of laborers proceeded to the wreck to ascertain its condition. 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). Nos. CV No. and treble the cost of suit. SP No. No. Ltd. Respondent Aboitiz Shipping Corporation is further directed to comply with the Order promulgated by this Court on January 21. Having willfully caused loss or injury to the petitioners in a manner that is contrary to morals. Aboitiz is liable for damages to the latter. 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. They hired the launch Florence of between thirty and forty tons capacity from the provincial authorities of Puerto Princesa. (Sgd. While at that place. O. Thompson & co. Aboitiz.[83] Aboitiz’ blatant disregard of the order of this Court in Aboitiz Shipping Corporation v. No word having been received from these men. was ever chartered or placed at the disposition of the plaintiffs. 1990 are AFFIRMED with the MODIFICATION that respondent Aboitiz Shipping Corporation is ordered to pay each of the respective petitioners the amounts of P100. the Polillo intercepted the Paglima. it acted in gross and evident bad faith. HOLMSEN. and with the consent of the ship’s agents. 1990. and took them back to the wreck.937 kilos of copra and certain furniture and effects.500. In the meantime. The other articles were left in the custody of the provincial treasurer of Palawan.would lead to the eventual resolution of the rest.000.R.051. THOMPSON & CO. RICHARD ROE and HENRY JONES. Proceeding Manila per Panglima due fifteenth advise Leith.R. Accordingly. while en route from Manila to European ports. acting as admiralty court.63 deposited with the clerk of court. N.

that is.” “partly looted. but as an actual fact. perilously situated. presumably in good faith. 6 Fed. laden with sugar. and bunker coal of a value of P352.000.200 with interest thereon at the rate of 6 per cent per annum from November 24. and were pointedly given to understand that their presence was not desired. however meritorious they were intended to be were not successful in any degree and cannot be compensated in damages.” “their conduct in plundering a stranded ship. The claim of plaintiffs for P170. and in fact no satisfactory evidence could have been presented.500 from the steamship Bengloe and as damages because of having been forcibly deprived of the possession of the steamship and thereby prevented from prosecuting salvage operations. and that the plaintiffs commenced the salvage operations in entire good faith. The facts. and while in technical possession. and no other person has the right to interfere with them. When the other plaintiffs Holmsen and Fernandez. and in the successful prosecution of it. 744) Appellee in reply point out the very important qualification of the rule. Holmsen. to show that the vessel could have been saved and the cargo salved with the small launch at plaintiffs’ disposal. however. regarding which there can be little or no dispute. returned on the launch. and Macleod. if offered. their further exertions. Cases. The services rendered by the plaintiffs contributed immediately to the preservation of a small amount of property on the stranded vessel. and are conducting the business with fidelity and vigor. it was decided that the first set of salvors had no right to exclude the second set from saving the merchandise in the vessel.October 9. This was the best salvage equipment available in Puerto Princesa on the Island of Palawan. No evidence was submitted. After trial of the case. are entitled to be regarded as meritorious salvors of whatever is preserved. seems undeniable. 1914. This finding of fact. and plaintiffs’ three assignment of error. 3092). We thus have presented this unique situation: Wellintentioned men with inadequate equipment are first on the scene of a wreck.000 as damages must then rest upon what they might have done had they been left in undisturbed possession of the vessel. The amount of this judgment was to paid over to the plaintiffs by the clerk of court out of the funds deposited with him in the present case.” and “entered upon a purely speculative adventure. excluding for the time being plaintiff’s contention that a larger award should be given. Judgment was rendered for the plaintiffs and against the defendants for the sum of P1. The trial court. cannot be successfully disputed on appeal. and Macleod began action in the Court of First Instance of the city of Manila to recover from the owners of the Bengloe and other parties the sum of P179. Nor can we do more than speculate as to the value of plaintiffs’ services if they had been permitted to help and the two parties had worked together. Appellants rely on the following proposition: Parties taking possession of an abandoned vessel or cargo have a right to retain it until the salvage is completed. they were prevented from taking any further part in the salvage operations. Holmsen. The defendants originally claimed the sole and exclusive possession of the wreck on the ground that they had not abandoned it but only left to seek assistance.” “spoliation. It is around this last finding that most of the controversy now centers. (The Concordia [1855]. are driven off and operations begun by a second salvage party under an expert superintendent and with adequate equipment. But if their own means are inadequate they are bound to accept additional assistance. Macleod and the two laborers found on board were shown scant hospitality by the second party. and after the copra and other effects had been removed. the first set not having at the time the means to save it. 35 . There remains to be decided whether P1. claimed to be due as compensation for the salvage of merchandise and effects of the value of P2.” Thus. namely. although appellees to emphasize their thought do make use of such expressive words as “vendetta with legitimate salvors. Those beginning a salvage service. But plaintiffs also made futile efforts. “provided they are able to effect the salvage and are conducting the business with fidelity and vigor. with costs. the lower court found the facts practically as above stated. Fernandez.780. present for resolution the following interrogatories: had the plaintiffs adequate equipment to effect the salvage of the ship and cargo? Had plaintiffs the right to insist upon retaining possession of the Bengloe and her cargo for the purpose of salvage as against the salvors employed by the owners and underwriters? Was P1. two days after the arrival of Fernandez.. when wrongfully interrupted in the work by others who complete the salvage. copra.200 adequate compensation for the property saved by the plaintiff? The only equipment actually in the possession of the plaintiffs for salving the Bengloe and he cargo was a small launch and some baskets and sacks. MaCleod was finally forced to leave the vessel by the captain of the Polillo and a lieutenant of the Constabulary sent to the wreck with constabulary soldiers to protect it from plunder. and that they had no right to insist upon retaining possession of the wreck as against the representative of the owners and underwriters.500. (35 Cyc. found that the appearances justified the conclusion that the Bengloe was abandoned by the defendants on October 7.” The trial court further found that the equipment of the plaintiffs was utterly inadequate for the task they endeavored to undertake.200 is adequate salvage compensation for the property saved by the plaintiffs. to acquire adequate salvage equipment. provided they are able to effect the salvage. Against his vigorous protest.” “raids such as this. 1914. in a Federal case. who had superior equipment and ample financial resources. We must answer the first two questions in the negative with the result that the second and third assignments of error are resolved against appellants. That such equipment was inadequate for the salvage of a vessel valued at P100.

Swedish East Asiatic Co. L-13695 October 18. and energy displayed in rendering the service and saving the property.. vs. concur. 22 Phil. would be P2. G. STREET. I will observe that this case is obviously determined on its own facts. J. (4) The risk incurred by the salvors in securing the property from the impending peril. Rep. and in order that the decision may not be interpreted as declaring a rule of compensation more favorable to salvors that is generally sanctioned by the decided cases. Johnson. Macondray & Co. Ltd. and the danger to which such property was exposed. but as a reward given for perilur services. 1914. See further G. in case he is successful. until paid. 1921 STANDARD OIL COMPANY OF NEW YORK. with interest thereon at 6 per cent per annum from November 24. and off the western coast of Sorsogon. we are inclined to agree with appellants that a reasonable. plaintiff-appellee. and while the storm was at its height the captain was compelled for the safety 36 . Gabriel La O for appellant. For this consignment a bill of lading of the usual form was delivered. 228. Ship. So ordered. No. JJ. in the Province of Sorsogon. and that the charterer should have no other control over the captain.) Public policy encourages the hardy and adventurous mariner to engage in these laborious and sometimes dangerous enterprises.. Urrutia & Co. Said bill of lading contained no provision with respect to the storage of the petroleum.J. not only because the service is usually rendered by a costly instrumentality. [1912]. 1. and Manila Railroad Co.000. vs. Sancelito Tug Company [1870]... in addition to their expenses. Araullo and Avanceña. MANUEL LOPEZ CASTELO. Cromwell vs. Judgment is modified so that plaintiffs shall shave and recover from the defendants. the law allows him. the standard Oil Company delivered to the agent of the boat in Manila a quantity of petroleum to be conveyed to the port of Casiguran. (Wms. [1918]. Compensation for salvage services necessarily depends on the circumstances of the particular case. but because the service is in general rendered with greater promptitude and is of a more effectual character. [1916]. Rep. for their services as meritorious salvors. 178. J. on the principle of a quantum meruit or as a remuneration pro opere et labore. Pasig Steamer and Lighter Co.) The amount of the property saved was valued at approximately P2. a liberal compensation.The object of the award and the circumstances determining the amount of compensation in salvage claims have been authoritatively set out in a decision of the United States Supreme Court in the following language: “Nothing remains to be considered but the question whether the amount awarded in the court below to the libelants was correct.. (6) The degree of danger from which the property was rescued. a violent typhoon passed over that region.500. defendant-appellant. vs.. (The Blackwall vs. 10 Wall. voluntarily rendered.. (2) The promptitude... (5) The value of the property saved. the sum of P2. 1 Cliff.. Steam vessels are always considered as entitled to a liberal reward. but it was in fact placed upon the deck of the ship and not in the hold. Plaintiffs incurred expenditures in the sum of P972. Prac. and with a view to withdraw from him every temptation to embezzlement and dishonesty. 850. with the stipulation that freight should be paid at the destination. In this contract it was stipulated that the officers and crew of the Batangueñoshould be supplied by the owner. Manuel Lopez Castelo. Compensation as salvage is not viewed by the admiralty courts merely as pay.: By contract of character dated February 8. Lawrence and Ross for appellee. 330. 34 Phil. and at the same time liberal award.000. pilot. The Island City. and the circumstance that the plaintiffs were mistreated and practically ejected from the Bengloe by the defendants has caused the court to be more liberal as to the amount of compensation allowed than it otherwise probably would have been. (3) The value of the property employed by the salvors rendering the service. as owner. 1915. Adm. & Bruce. skill. only a little more than P200 as a bounty. 2 Pars. The quantum for salvage allowed by the trial court of P1. While the boat was on her way to the port mentioned. and engineers than to specify the voyages that they should make and to require the owner to discipline or relieve them as soon as possible in case they should fail to perform the duties respectively assigned to them. let the small interisland steamer Batangueño for the term of one year to Jose Lim Chumbuque for use in the conveying of cargo between certain ports of the Philippine Islands. with the costs of both instances against defendants. STREET. 116. 292. In this instance. 37 Phil. and as an inducement to seamen and others to embark in such undertakings to save life and property. Erlanger & Galinger vs.R.. C. Courts of admiralty usually consider the following circumstances as the main ingredients in determining the amount of the reward to be decreed for a salvage service: (1) The labor expended by the salvors in rendering the salvage service.200 was therefore approximately one-half of the value of this property and gave plaintiffs. While the boat was being thus used by the charterer in the interisland trade. Arellano.95 in the salvage of the copra and other effects and in making arrangements for the salvage of the remainder of the cargo. concurring: I concur.

if the marine ordinances allow cargo to the laden on deck in coastwise navigation. gasoline. The first question for discussion is whether the loss of this petroleum was a general average loss or a particular less to be borne solely by the owner of the cargo. Moreover. and with the advent of the steamship as the principal conveyer of cargo by sea." The reason for this rule is found in the fact that deck cargo is in an extra-hazardous position and. the damages suffered by such merchandise shall not be dealt with as particular average (art. and in article 587 where it is used alone. Who is the person. she can often reach a port of safety before disaster overtakes her. 587. Code). where judgment was rendered in favor of the plaintiff. and it is a general rule. with the result that the coasting vessel can use more circumspection about the condition of the weather at the time of departure. Reg. From what has been said it is evident that the loss of this petroleum is a general and not a special average. This is clearly expressed in Rule I of the York-Antwerp Rules. The reason for adopting a more liberal rule with respect to deck cargo on vessels used in the coastwise trade than upon those used for ordinary ocean borne traffic is to be found of course in the circumstance that in the coastwise trade the boats are small and voyages are short. especially in the case of small vessels. shall be civil liable for the acts of the master.of all to jettison the entire consignment of petroleum consisting of two hundred cases. 588. Recognition is given to this idea in two different articles in the Spanish Code of Commerce. Mar. [1913]. liquidation. as follows: "No jettison of deck cargo shall be made good as general average. Code).. 809 [3]. it is expressly declared that deck cargo shall be cast overboard before cargo stowed in the hold. Indeed. Another consideration is that the coastwise trade must as a matter of public policy be encouraged. that ordinarily the loss of cargo carried on deck shall not be considered a general average loss. par 23). and in the other it is stated that merchandise laden on the upper deck of the vessel shall contribute in the general average if it should be saved. and what are the conditions under which the action can be maintained? That the owner of the ship is a person to whom the plaintiff in this case may immediately look for reimbursement to the extent above stated is deducible not only from the general doctrines of admiralty jurisprudence but from the provisions of the Code of Commerce applicable to the case. by the express provision of the Code. or persons. in subsection 1 of article 815 of the Code of Commerce. may be lawfully carried on deck in our coatwise trade. Code of Comm. are entitled to contribution as a general average loss (24 R. but that there shall be no right to indemnity if it should be lost by reason of being jettisoned for the general safety. The real point to which we direct attention is that. as well as gasoline. 1419). it may be noted that there is a discrepancy between the meaning of naviero. Now. Indeed. especially with reference to coastwise trade. except when the marine ordinances allow its shipment in this manner in coastwise navigation (art. it renders the boat top-heavy and thus may have to be cast overboard sooner than would be necessary if it were in the hold. C. or charterer. it has been felt that the reason for the rule has become less weighty. From this judgment the defendant appealed. but the remainder was wholly lost. When the storm abated the ship made port. its presence is likely to obstruct the free action of the crew in managing the ship. namely. by article 852 of the Code of Commerce the captain is required to initiate the proceedings for the adjustment. was first mad in the days of sailing vessels. who are liable to make good this loss. But this is not vital to the present discussion. it cannot be denied that this commodity also. There is no express provision declaring that petroleum shall be carried on deck in any case. both under the Spanish Commercial Code and under the doctrines prevailing in the courts of admiralty of England America. and distribution 37 . even if not altogether ideal.). the owner of the vessel is civilly liable for the acts of the captain. the present action was instituted by the Standard Oil Company against the owner of the ship in the Court of First Instance of Manila. if on a sailing vessel. The Marine Regulations now in force in these Islands contain provisions recognizing the right of vessels engaged in the interisland trade to carry deck cargo. L. and domestic traffic must be permitted under such conditions as are practically possible. denying deck cargo the right to contribution by way of general average in case of jettison. who in one case may be the owner and in another the charterer. In this connection. To recover the value of the petroleum thus jettisoned but not recovered. and in fact it appears that even after the vessel was thus eased. where the word is used in contradistinction to the term "owner of the vessel" (propietario). Comm. by steam vessels navigating coastwise and inland waters. and if threatening weather arises. as well as in other countries. 855. and he can only escape from this civil liability by abandoning his property in the ship and any freight that he may have earned on the voyage (arts. in articles 586 of the Code of Commerce. though it may be carried on the deck if certain precautions are taken. and thirteen cases of the petroleum were recovered. Upon this point it will be observed that the cargo was carried upon deck. there is one commodity. which from its inflammable nature is not permitted to be carried in the hold of any passenger vessel. she was with difficulty prevented from capsizing. but having regard to its inflammable nature and the known practices of the interisland boats. so great was the intensity of the storm. But this rule. Fundamentally the word "naviero" must be understood to refer to the person undertaking the voyage. No question is made upon the point that the captain exercised proper discretion in casting this petroleum overboard. In the first it is in effect declared that. and article 586 of the Code of Commerce expressly declares that both the owner of the vessel and the naviero. as a step necessary to the salvation of the ship. and apparently in a sense broad enough to include the owner. Comm. and express provision is made as to the manner in which it shall be bestowed and protected from the elements (Phil. It is universally recognized that the captain is primarily the representative of the owner. and naturally it is always the first cargo to go over in case of emergency. according to the custom of trade. and it is now generally held that jettisoned goods carried on deck. with the result that the plaintiff is entitled to recover in some way and from somebody an amount bearing such proportion to its total loss as the value of both the ship and the saved cargo bears to the value of the ship and entire cargo before the jettison was effected.

The shipper may in our opinion go at once upon the owner and the latter. the owner of the ship. It is also suggested that if the plaintiff has any right of action at all upon the state of facts here presented. in the person of the captain. as well as of the disposition of the cargo at the end of the voyage. which is the amount for which judgment should be given. Accordingly. we think. if so minded. Upon the apportionment of this total loss among the different interests involved. and that at any rate the defendant. value of cargo. of which P719. we supposed. So ordered.of any gross average to which the circumstances of the voyage may have given origin.35. under article 852 and related provisions. with a means whereby he may escape bearing the entire burden of the loss and may distribute it among all the persons who ought to participate in sharing it. the next article (852) gives to those concerned — whether shipowner (naviero) or shipper — the right to maintain an action against the captain for indemnification for the loss. is to place the primary liability upon the person who has actual control over the conduct of the voyage and who has most capital embarked in the venture. would be primarily accomplished by requiring the consignees of other cargo. modifying the judgment appealed from to this extent. In ordinary practice this. It is sufficient to say that the captain is required to take the necessary steps to effect the adjustment. we have as a result. a misconception of the true import of the provisions relating to the adjustment and liquidation of general average. This cannot be permitted.J. 38 . should only be held liable for his proportion of the general average. may have his recourse for indemnization against his captain.67. and it is therefore his duty to take the proper steps to protect any shipper whose goods may have been jettisoned for the general safety. But it is not necessary here to inquire into details. In this connection it appears that the total value of the jettisoned cargo. It results that the plaintiff is entitled to recover in this action. In considering the question now before us it is important to remember that the owner of the ship ordinarily has vastly more capital embarked upon a voyage than has any individual shipper of cargo. JJ. but the making of the liquidation is not a condition precedent to the liability of the shipowner of the shipper whose property has been jettisoned.95 represented the value of the plaintiff's petroleum. acting of cause in the person of the captain. it is against the captain. liquidation. liquidation. with costs. to give a sufficient bond to respond for their proportion of the general average. belonging partly to the plaintiff to another shipper. we affirm the same. for one thing. was P880. value of ship. has complete and exclusive control of the crew and of the navigation of the ship. but the recognition of this right of action does not by any means involve the suppression of the right of action which is elsewhere recognized in the shipper against the ship's owner. and distribution of the general average. to wit. taken in all of its provisions. and we are of the opinion that the failure of the captain to take those steps gave rise to a liability for which the owner of the ship must answer. concurs in the result.. the owner of the ship. Deducting this from the value of the petroleum. To adopt the interpretation of the law for which the appellant contends would place the shipowner in a position to escape all responsibility for a general average of this character by means of the delinquency of his own captain. from other individuals who have been drawn into the venture as shippers. Moreover. concur. It is true that if the captain does not comply with the article relating to the adjustment.28. This argument involves. the amount of P708. But it is said — and the entire defense seems to be planted upon this proposition — that the liquidation of the general average is. leaving him to obtain recourse. it appears that the amount of the loss apportionable to the plaintiff is P11. The evident intention of the Code. and the earned but lost freight. It is therefore proper that any person whose property may have been cast overboard by order of the captain should have a right of action directly against the ship's owner for the breach of any duty which the law may have imposed on the captain with respect to such cargo. as it is very easy to do. a condition precedent to the liability of the defendant.. Johnson and Villamor. who has been delinquent in performing the duty which the law imposes on him. and the only additional point to be inquired into is the amount that should be awarded. In the case before us the captain of the vessel did not take those steps. namely. as a condition precedent to the delivery of their goods to them. C. and distribution of the general average. Clearly. as owner of the ship. those provisions are intended to supply the shipowner. Mapa.