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Philippine American General Insurance Company vs.

CA
G.R. No. 116940
June 11, 1997

FACTS:
1. On 6 July 1983 Coca-Cola Bottlers Philippines, Inc. (Coca-Cola Bottlers),
loaded on board "MV Asilda," a vessel owned and operated by respondent
Felman Shipping Lines (FELMAN), 7,500 cases of 1-liter Coca-Cola softdrink
bottles to be transported from Zamboanga City to Cebu City for consignee
Coca-Cola Bottlers Philippines, Inc., Cebu. The shipment was insured with
petitioner Philippine American General Insurance Co., Inc. (PHILAMGEN)
2. In a joint statement, the Captain as well as the chief mate of the vessel
confirmed that the weather was fine when "MV Asilda" left the port of
Zamboanga at 8 p.m. on 6 July. The ship captain stated that around 4 a.m. of
7 July 1983 he was awakened by the officer on duty to inform him that the
vessel had hit a floating log.
3. At that time he noticed that the weather had deteriorated with strong
southeast winds inducing big waves. After 30 minutes, he observed that the
vessel was listing slightly to starboard and would not correct itself despite the
heavy rolling and pitching. He then ordered his crew to shift the cargo from
starboard to portside until the vessel was balanced. At about 7 a.m., the
master of the vessel stopped the engine because the vessel was listing
dangerously to portside. He ordered his crew to shift the cargo back to
starboard (right). The shifting of cargo took about an hour after which he rang
the engine room to resume full speed.
4. At around 8:45 a.m., the vessel suddenly listed to portside and before the
captain could decide on his next move, some of the cargo on deck were
thrown overboard and seawater entered the engine room and cargo holds of
the vessel. At that instance, the master of the vessel ordered his crew to
abandon ship.
5. Shortly thereafter, "MV Asilda" capsized and sank in the waters of
Zamboanga del Norte bringing down her entire cargo with her including the
subject 7,500 cases of 1-liter Coca-Cola softdrink bottles.
6. The Ship Captain ascribed the sinking to the entry of seawater through a hole
in the hull caused by the vessel's collision with a partially submerged log.
7. On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc., Cebu
plant, filed a claim with respondent FELMAN for recovery of damages.
FELMAN denied the claim thus prompting the consignee to file an insurance
claim with PHILAMGEN which paid its claim of P755,250.00.
8. Claiming its right of subrogation PHILAMGEN sought recourse against
respondent FELMAN which disclaimed any liability for the loss. Consequently,
on 29 November 1983 PHILAMGEN sued the shipowner for sum of money and
damages, alleging that the total loss of cargo was due to the vessels
unseaworthiness as she was put to sea in an unstable condition. FELMAN, on
the other hand, filed a motion to dismiss contending that there was no right
of subrogation in favor of PHILAMGEN since it had abandoned all its rights,
interests and ownership over the vessel together with her freight and
appurtenances for the purpose of limiting and extinguishing its liability under
Art. 587 of the Code of Commerce.
9. The RTC dismissed PHILAMGENs complaint and appealed to the CA which
remanded the case and denied its motion for reconsideration. The RTC then
ruled that the vessel was seaworthy and even if assumed unseaworthy,
PHILAMGEN still could not recover from FELMAN since Coca-Cola Bottlers had
breached its implied warranty on the vessels seaworthiness.
10. On appeal, the CA ruled that the vessel was unseaworthy for being top-
heavy as 2,500 cases of Coca-Cola softdrinks bottles were improperly stowed
on deck. Even though the vessel possessed the necessary Coast Guard
certification indicating its seaworthiness with respect to the structure of the
ship itself, it was not seaworthy with respect to the cargo. However, it denied
the money claim of PHILAMGEN because of the implied breach of warranty of
seaworthiness by Coca-Cola Bottlers. Furthermore, the filing of notice of
abandonment had absolved FELMAN from liability under the limited liability
rule.

ISSUES:
1. Whether MV Asilda was seaworthy when it left port of Zamboanga
2. Whether the limited liability under Article 587 of the Code of Commerce
should apply

RULING:
1. NO. The Supreme Court subscribe to the findings of the Elite Adjusters and
the Court of Appeals that the proximate cause of the sinking of the MV Asilda
was its being top-heavy. As according to the report submitted by the Elite
Adjusters, while the vessel may not have been overloaded, the distribution or
stowage of the cargo on board was done in such a manner that the vessel
was in top-heavy condition at the time of its departure which rendered it
unstable and unseaworthy for that particular voyage. Furthermore, MV Asilda
was designed as a fishing vessel and was not designed to carry a substantial
amount or quantity of cargo in deck and from the moment it was utilized to
load heavy cargo, the vessel was rendered unseaworthy for the purpose of
carrying the type of cargo and that the capsizing and sinking of the vessel
was bound to happen and an inevitable occurrence.
2. NO. The Supreme Court held that Article 587 of the Code of Commerce is not
applicable. The ship agent is liable for the negligent acts of the captain in the
care of the goods loaded on the vessel. This liability, although can be limited
through abandonment of the vessel, its equipment and freightage, as
provided in Art. 587, there exceptional circumstances wherein the ship agent
could still be held answerable, as where the loss or injury was due to the fault
of the ship owner and the captain. The international rule is to the effect that
the right of abandonment of vessels, as a legal limitation of a ship owner's
liability, does not apply to cases where the injury or average was occasioned
by the ship owner's own fault. It must be stressed at this point that Art. 587
speaks only of situations where the fault or negligence is committed solely by
the captain. Where the ship owner is likewise to be blamed, Art. 587 will not
apply, and such situation will be covered by the provisions of the Civil Code
on common carrier. Under Art 1733 of the Civil Code, "(c)ommon carriers,
from the nature of their business and for reasons of public policy, are bound
to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them, according to all the
circumstances of each case . . ." In the event of loss of goods, common
carriers are presumed to have acted negligently. FELMAN, the ship owner,
was not able to rebut this presumption.