Heirs of Amparo de los Santos v. CA | Medialdea, J.
(1990) he is entitled of right to abandon – the vessel with all her equipments and the
RATIO DECIDENDI
The limited liability doctrine applies not only to goods but also in all cases like
death or injury to passengers wherein the shipowner or agent may properly
be held liable for the negligent or illicit acts of the captain and it only applies
in situations where the fault or negligence is committed solely by the captain.
FACTS
 M/V Mindoro sailed from Manila to New Washington, Aklan with many passengers
aboard.
 The vessel met typhoon Welming and it sank.
o Many of its passengers died. One of them was Amparo delos Santos.
 In a decision by the Board of Marine Inquiry, it was found that the captain and
some officers of the crew were negligent in operating the vessel.
 The Heirs of Amparo contends that there was negligence on the part of the vessel.
On the other hand, Compania Maritima contends that no negligence was ever
established and that the drowning of the passengers was due to force majeure.
ISSUE/HELD
[1] WoN Compania Maritima was negligent – YES
[2] WoN Art. 587 is applicable in this case – NO
RATIO
[1] Compania Maritima was negligent.
 Modern technology belies the claim of Compania Maritima that it did not have any
information about typhoon Welming until after the boat was already at sea.
o The Weather Bureau is equipped with modern apparatus which enables it to
detect any incoming atmospheric disturbances.
o It is highly improbable due to the late departure of the ship that the Weather
Bureau had not yet issued any typhoon bulletin at any time during the day to
the shipping companies.
 Maritima displayed lack of foresight and minimum concern for the safety of its
passengers.
o The ship was delayed for 4 hours and it did not check from the captain the
reasons behind the delay nor send its representative to inquire into the cause
of the delay.
o A closer supervision could have prevented the overloading of the vessel.
o Maritima also did not install a radar which could have allowed the ship to
navigate safely for shelter during the storm. The vessel was left at the mercy
of Welming.
[2] Art. 587 is inapplicable because the shipowner was also negligent.
 Under Art. 587 of the Code of Commerce, a shipowner or agent has the right of
abandonment; and by necessary implication, his liability is confined to that which
freight it may have earned during the voyage.
o This rule is necessary to offset against the innumerable hazards and perils of
sea voyage and to encourage shipbuilding and maritime commerce.
 The limited liability doctrine applies not only to goods but also in all cases
like death or injury to passengers wherein the shipowner or agent may
properly be held liable for the negligent or illicit acts of the captain.
o Art. 587 speaks only of situations where the fault or negligence is committed
solely by the captain.
o In cases where the shipowner is likewise to be blamed, Art. 587 does
not apply.
o Such a situation will be covered by the New Civil Code provisions on common
carriers.
Aboitiz Shipping Corporation V. General Accident Fire and Life Assurance
Corporation, Ltd. | Melo, J. (1993)
RATIO DECIDENDI
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 guaranty for their settlement.
FACTS
 Aboitiz Corporation operated M/V P. Aboitiz, a common carrier which sank on a
voyage from Hong Kong to the Philippines on 31 October 1980.
 General Accident Fire and Life Assurance Corporation, Ltd. Is a foreign insurance
company pursuing its remedies as subrogee of several cargo consignees whose
cargo sank with the said vessel.
 The sinking gave rise to several suits against Aboitiz.
 The sinking was initially investigated by the Board of Marine Inquiry which found
that the sinking was due to force majeure and that the vessel was sea worthy.
 Notwithstanding such finding, the trial court found against the carrier on the basis
that the loss was not due to force majeure.
o The attempted execution of the judgment award in said case gave rise to this
case.
 Aboitiz contends that the Limited Liability Rule warrants immediate stay of
execution of judgment to prevent impairment of other creditor’s shares.
ISSUE/HELD
WoN the Limited Liability Rule arising out of the real and hypothecary nature
of maritime law should apply in this case - YES
RATIO
 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
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 the vessel, which is hypothecated for such obligations or which stands as guaranty
for their settlement.
o 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.
 The Limited Liability Rule in the Philippines cover only liability for injuries to third
parties, acts of the captain and collisions.
 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.
o In this case, there has been no actual finding of negligence on the part of
Aboitiz.
 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 against it.
o Each individual creditor may prove the actual amount of their respective claims
but this does not mean that they shall be allowed to recover fully.
o The claimants or creditors are limited in their recovery to the remaining value
of accessible assets.
o No claimant can be given precedence over the others by the simple expedience
of having filed or completed its action than the rest.
 Thus, execution of judgment must be stayed pending completion of all
cases occasioned by the subject sinking.
MONARCH INSURANCE v CA | De Leon, Sr. | 2000
FACTS:
 This case are 3 consolidated petitions that arose form the loss of cargoes of various
shippers when M/V P. Aboitiz, a common carrier owned and operated by Aboitiz,
sank on her voyage from Hong Kong to Manila
 Petitioners are insurance carriers of lost cargoes, which indemnified the shippers
but were refused to be compensated by Aboitiz on the ground that the sinking of
the vessel was due to force majeure
 One of the petitioners (Monarch) offered in evidence the survey of Lambert, a
surveyor commissioned to investigate the possible cause of the sinking of the cargo
vessel, which established the following:
o The wind force encountered by the vessel is only categorized as “moderate
breeze”
o The seaworthiness of the vessel was in question because the breaches of the
hull and the serious flooding of the 2 cargo holds occurred simultaneously in
“seasonal weather”
 In the Monarch case, Aboitiz was declared in default while in the Equitable case,
Aboitiz presented Racines, the master mariner, and a PAG-ASA meteorologist
o Racines testified that despite diligent efforts of the officers and crew, the
vessel, which was approximately 250 miles away from the eye of the storm
o PAG-ASA testified that a stormy weather condition prevailed particularly along
the sea route from Hong Kong to Manila
 In all 3 cases: TC-against Aboitiz  CA: Affirmed  SC: Denied the appeal  Entry
of Judgment was made  Petitioners moved for execution of judgment  Writs of
execution were issued
 Aboitiz filed with the CA a petition for certiorari and prohibition and invoked the real
and hypothecary nature of liability in maritime law in order to quash the writs of
execution or to stay the execution of the judgment
 CA: granted the writ of certiorari and ordered the stay the execution of the
judgment insofar as it impairs the rights and prejudices the pro-rata share of the
other claimants to the insurance proceeds
ISSUES/DECISION:
1. WoN the inapplicability of the limited liability rule to Aboitiz has already
been decided in another case, which was subsequently declared in
another case as the law of the case
 NO. As discussed in Aboitiz v General Accident, the limited liability discussed in
a prior case is that which attaches to cargo by virtue of stipulations in the Bill
of Lading. The said case did not tackle the matter of Limited Liability Rule
arising out of the real and hypothecary nature of maritime law.
2. WoN the judgments of the TC, which already became final and executory,
can still be altered, modified, amended, reversed or invalidated
 YES. Courts have allowed the suspension if execution in cases of special and
exceptional nature when it becomes imperative in the higher interest of justice.
 IN THIS CASE, allowing the execution of the judgment would result in unjust
and inequitable effects upon various other claimants against Aboitiz
3. WoN Aboitiz is entitled to the benefit of the limited liability rule. YES. Even
if Aboitiz failed to discharge the burden of proving that the unseaworthiness of the
vessel was not due to its negligence, the limited liability rule should still be applied
 “No vessel, no liability” expresses the limited liability rule. This means
that the shipowner’s or agent’s liability is merely extensive with his
interest in the vessel such that a total loss thereof results in its
extinction.
 This doctrine is based on the real and hypothecary nature of maritime
law which has its origin in the prevailing conditions (hazards and perils) of the
maritime trade and sea voyages during the medieval ages. 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.
 However, this rule CANNOT BE APPLIED:
o Where the injury or death to a passenger is due either to the fault
of the shipowner, or to the concurring negligence of the
shipowner and the captain
o Where the vessel is insured
o In workmen’s compensation claims
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  The universal principle of limited liability in all cases (except collision which is
governed by Art 837) is governed by Art 537 1 and 590 of the Code of
Commerce
 APPLICABILTIY OF ART 587
o It extends to the liability of the shipowner or agent for the negligent or
illicit acts of the captain
o It applies only to situations where the fault or negligence is committed
by the captain. THUS, when the shipowner is also to be blamed, it does
not apply. The latter situation is covered by the provisions of the CC on
common carriers
 THUS, the next issue to be resolved is with respect to the cause of the loss
of the vessel. If it is due to a fortuitous event, then Aboitiz would be
absolved. On the other hand, if the loss is caused by reason of fault/negligence
of Aboitiz, the ship captain and crew of the vessel then the limited liability rule
is inapplicable
 IN THIS CASE, the answer to such issue has been subject to conflicting
pronouncements.
o TC found that the loss of cargo was not due to a fortuitous event
o CA found that (1) even if the vessel was unseaworthy, this fault is directly
attributable to the captain because under Art. 612 of the Code of
Commerce, one of the inherent duties of the captain is to examine the
vessel before sailing and to comply with the laws on navigation; and (2)
The limited liability rule is still applicable since the captain abandoned the
vessel
o In Aboitiz v CA, SC ruled that the sinking of the vessel was due to the
fault and negligence of Aboitiz
o In Country Bankers v CA, SC ruled that the loss was due to force
majeure
 AS SUCH, SC has to settle once and for all the issue WoN force
majeure caused the vessel to sink. And the SC ruled that the vessel
did not go under water because of the storm. This is based on the
following:
o Aboitiz’ own evidence affirmed that the wind velocity can only be
characterized as “moderate breeze”
o The vessel was 200 miles away from the eye of the storm when it sank
 MOREOVER, the issue on Aboitiz’ negligence has also been subject of
conflicting rulings. In the case at bar, the finally ruled that:
o The RULE is that in cases involving limited liability of shipowners, the initial
burden of proof of negligence of unseaworthiness rests on the claimants.
HOWEVER, once the vessel owner or any party asserts the right to limit its
liability, the BoP as to lack of privity or knowledge on its part re: matter of
negligence and unseaworthiness is shifted to it.
1  TC ruled in favour of respondent New India
The shipagent shall also be civilly liable for the indemnities in favor of 3rd persons which may arise from
the conduct of the captain in the care of goods which he loaded on the vessel; but he may exempt himself
therefrom by abandoning the vessel with all the equipment and the freight it may have earned during the
voyage
o IN THIS CASE, the petitioners presented expert testimony of the surveyor
Lambert and Aboitiz failed to present sufficient evidence to exculpate itself
from fault and/or negligence.
o AS SUCH, the SC was constrained to hold that Aboitiz was concurrently at
fault/negligent with the ship captain and crew of the vessel
 HOWEVER, the peculiar circumstance of the case demands that there should
no strict adherence to procedural rules on evidence. Otherwise, the just claims
of shippers/insurers would be frustrated. AS SUCH, even if Aboitiz failed to
discharge the burden of proving that the unseaworthiness of the
vessel was not due to its negligence, the limited liability rule should
still be applied. The rule should be applied in accordance with the procedure
mentioned in case of Aboitiz v General Accident, i.e.:
o All claims should be collated
o Total proceeds of the insurance and pending freightage should be
deposited in trust before the proper admiralty within 15 days from finality
of the decision
Aboitiz Shipping Corp. v. New India Assurance Company
FACTS
 Societe Francaise Des Colloides loaded a cargo of textiles and chemicals from
France on board a vessel owned by Franco-Belgian Services, Inc. The cargo was
consigned to General Textile, Inc. and insured by respondent New India Assurance
 While in HK, the cargo was transferred to M/V P. Aboitiz for transhipment to Manila
 Before departure, the Japanese Meteorological Center advised the vessel it was safe
to travel. But at sea, the vessel got a report of a typhoon moving within its path. It
changed its course to avoid the typhoon but still, its hull leaked and the vessel sank
 The captain of M/V P. Aboitiz filed his Marine Protest stating that the wind force
was at 10-15 knots, and the weather described as “moderate breeze, small waves,
becoming longer, fairly frequent white horses.”
 Respondent insurer paid General textile and was subrogated to its rights
 respondent New India’s surveyor found that the cause was the flooding of the holds
brought about by the vessel’s questionable seaworthiness.
 respondent New India filed a complaint for damages against petitioner Aboitiz
alleging that the proximate cause of the shipment’s loss was the fault/negligence of
the master and crew of the vessel, its unseaworthiness and defendants’ failure to
exercise extraordinary diligence in the transport of goods.
 petitioner Aboitiz alleged that in accordance with the real and hypothecary nature
of maritime law, the sinking of M/V P. Aboitiz extinguished its liability on the loss of
the cargoes.
 the Board of Marine Inquiry (BMI) exonerated the captain and crew of any
administrative liability and declared the vessel seaworthy and that the sinking was
due to typhoon
 CA affirmed
ISSUE: WoN the limited liability doctrine, which limits respondent’s award of damages
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to its pro rata share in the insurance proceeds, applies in this case? NO
RATIO:
 In the case of Monarch, the sinking was not due to force majeure but to its
unseaworthy condition. There, the petitioner was concurrently liable with the
captain and crew. The circumstances made the doctrine of limited liability
applicable.
 An exception to the limited liability doctrine is when the damage is due to
the fault of the shipowner or to the concurrent negligence of the
shipowner and captain. In which case, the shipowner shall be liable fully
for damages.
 Where the vessel is found unseaworthy, the shipowner is presumed negligent since
it’s tasked with the maintenance of its vessel. Though this duty can be delegated,
the shipowner must still exercise close supervision over its men.
 In this case, petitioner Aboitiz has the burden of showing that it exercise
extradordinacry diligence in the transport of the goods it had on board in order to
invoke the limited liability doctrine. To limit its liability to the amount of the
insurance proceeds, Aboitiz had to prove that the unseaworthiness of its vessel was
not due to its fault or negligence. Under the circumstances, Aboitiz failed to
discharge this burden. The TC and CA found that the sinking wasn’t due to the
typhoon but to the vessel’s unseaworthiness. Evidence shows that the weather was
moderate when it sank. Moreover, the findings of BMI are not always binding on
courts. The exoneration of the officers and crew only relate to their administrative
liabilities and doesn’t serve to absolve the common carrier from its liabilities arising
from its failure to exercise extraordinary diligence.
 Where the shipowner fails to overcome the presumption of negligence,
the doctrine of limited liability cannot be applied.
Manila Steamship vs. Insa Abdulhaman
CENTENNIAL TRANSMARINE vs. DELA CRUZ | (2008)
(Labor dismissal case)
FACTS
 Petitioner in behalf of its foreign principal, Centennial Maritime, hired Dela Cruz as
Chief Officer of an oil tanker vessel for a period of 9 months. He boarded on May
2000, however, just 4 months after or on September 2000, he was relieved of his
duties and repatriated to the Philippines.
 Dela Cruz filed a complaint for illegal dismissal.
 Petitioner claims first that respondent was not dismissed but temporarily relieved;
but later changed its theory that he was relieved from duty due to inefficiency and
lack of skill in tanker operations. Petitioner bases its claim on a mere copy of the
logbook report by the Captain and Statements of 2 officers of the vessel.
 Labor Arbiter: Dismissed the complaint. Held that Dela Cruz was validly dismissed
for he committed acts in violation of his duties, amounting to breach of trust and
confidence.
 NLRC: Dismissed appeal by Dela Cruz.
 CA: Reversed the LA and NLRC. Ordered petitioner to pay respondent the salaries
for the unexpired portion of his contract, full reimbursement of placement fee, and
moral and exemplary damages.
ISSUE/S & HELD:
WON Dela Cruz was validly terminated. NO.
RATIONALE
 Loss of trust and confidence is premised on the fact that the employee holds a
position whose functions may only be performed by someone who has the
confidence of management. With respect to a managerial employee, the mere
existence of a basis for believing that such employee has breached the trust of his
employer would suffice for his dismissal. Only substantial evidence is required which
must establish clearly and convincingly the facts on which the loss of confidence
rests.
 Article 627 of the Code of Commerce defines the Chief Mate, also called
Chief Officer or Sailing Mate, as “the second chief of the vessel, and unless the
agent orders otherwise, shall take the place of the captain in cases of absence,
sickness, or death, and shall then assume all his powers, duties, and
responsibilities.”; Second in command, next only to the captain of the vessel.
 The Chief Mate is a managerial employee; he is vested with powers or prerogatives
to lay down and execute management policies. The exercise of discretion and
judgment in directing a ship’s course is as much managerial in nature as decisions
arrived at in the confines of the more conventional board room or executive office.
Important functions pertaining to the navigation of the vessel like assessing risks
and evaluating the vessel’s situation are managerial in nature.
 Respondent, as Chief Officer, is a managerial employee; hence, petitioners need to
show by substantial evidence the basis for their claim that respondent has
breached their trust and confidence.
 A ship’s log/logbook is the official record of a ship’s voyage which its captain is
obligated by law to keep. A logbook is a respectable record that can be relied upon
when presented in evidence.
 In previous cases, the Court ruled that a copy of an official entry in the logbook is
legally binding and serves as an exception to the hearsay rule. In the said case,
however, there was no controversy as to the genuineness of the said entry and the
authenticity of the copy presented in evidence.
 In the instant case, respondent has consistently assailed the genuineness of the
purported entry and the authenticity of such copy; that the Captain’s signature in
such purported entry was forged. Thus, it was incumbent upon petitioners to prove
the authenticity of the copy, which they failed to do. Likewise, the Statements of
the Safety Officer and Chief Officer also cannot be given weight for lack of
authentication.
 Moreover, records show that respondent was not afforded due process.
 Laws applicable: laws on overseas employment as well as with the regulations
issued by the POEA, such as those embodied in the Standard Contract for Seafarers
Employed Abroad (Standard Contract).
 Section 17 of the Standard Contract provides for the procedure which the Master
shall comply with before taking disciplinary measures against an erring seafarer.
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 (Notice; Formal investigation/hearing with a chance to be heard; Notice of penalty
furnished to seafarer and to the Philippine Agent).
McMicking v. El Banco Español [April 1,1909 | Johnson,J.]
Facts:
 Sanchez and Cue Suan were the owners as a sociedad en comandita of steamship
Hock-Tay.The said sociedad borrowed from El Banco Español-Filipino the sum of
P3,000 and gave as security for the payment of said sum a chattel mortgage.
 El Banco Español-Filipino later caused to be delivered to the sheriff of the city of
Manila the said chattel mortgage on the said steamer, Hock-Tay, together with
notice that the terms of said mortgage had been broken by the mortgagors, and
requested that the sheriff sell said mortgaged property.
 Before the sale, Manuel Ayala made a demand upon the sheriff, as captain of the
steamer Hock-Tay, not to deliver to the Banco Español-Filipino the sum of
P4,441.92, which he claimed is the amount of the wages of the crew and expenses
of supplies owing, and which, in accordance with the Code of Commerce, constitute
preferred claims.
 He claims in his affidavit that in accordance with article 580 of the Code of
Commerce, the money due to the captain and other members of the crew for
salaries is entitled to preference over the claim of the bank; that the amounts
owing by the ship for her equipment and provisions are also entitled to preference;
that the wages due the captain and crew as shown by the shipping articles and
account books of the vessel amount to the sum of P2,840.19; that the sum of
P1,601.73 is now owing to the affiant for provisions, equipment and supplies
furnished the vessel and expended during her last voyage upon proper authority.
 The cause was submitted to the lower court and the court found that there is due
the defendant Ayala from the proceeds of the sale of the vessel and in preference
to the claim of the mortgagee the sum of P756.66.
 El Banco Español-Filipino did not appeal from the judgment of the lower court.
Issue: WON the wages of the crew and expenses incurred for the ship and furnishing
supplies for the same have a preference over the claim of the other defendant, El Banco
Español-Filipino: NO
Ratio:
 The defendant bases his claim upon the provisions of articles 580 and 646 of the
Code of Commerce. Article 580 provides: In all judicial sales of vessels for the
payment of creditors, the following shall have preference in the order stated: XXXX
6. The salaries due the captain and crew during their last voyage, which shall be
vouched for by virtue of the liquidation made from the shipping articles and
account books of the vessel, approved by the chief of the bureau of merchant
marine where there is one, and in his absence by the consul, or judge, or court.
 By reference to paragraph 6 of said article 580, it is seen that in all judicial sales of
vessels the salaries due the captain and the crew during the last voyage shall be
paid in accordance with the preferences mentioned in said article out of the
proceeds of said ship. Article 646 of said Code of Commerce provides: The vessel
with her engines, rigging, equipment, and freights shall be liable for the pay earned
by the crew engaged per month or for the trip, the liquidation and payment to take
place between one voyage and the other. After a new voyage has been
undertaken, credits such as the former shall lose their right of preference.
 This article creates a lien upon a ship in favor of the crew engage in the operation
of the same and this lien in favor of the crew takes certain preference in
accordance with the provisions of said articles 580. The wages due the crew and
expenses incurred in maintaining the ship during the last voyage constitute a lien
under the law and take the preference over a lien created by giving the ship as
security for money borrowed. The crew, therefore, under article 580 of the
Commercial Code, for their wages, etc., for the last voyage, having a prior lien upon
a ship, to the lien created in the present case by the chattel mortgage. Liens in
favor of the crew under these circumstances are known as legal liens and whoever
buys a ship or loans money and takes a chattel mortgage as security, takes the ship
subject to such prior liens.
 It will be seen that there is no provision in the law for using the funds received in
the sale of mortgaged property for the payment of amounts due on prior liens. The
reason is plain why no such provision was made. It is that in no case can such a
sale or a sale based upon the second mortgage or lien upon property affect in any
way prior liens.
 The sale of the ship under the mortgage in question in no way divested the lien
which the law created in favor of the said Manuel Ayala and his crew against the
ship in question. His remedy is, therefore, not against the money which was
received under said sale, but against the ship by foreclosing his lien against the
same.
 Also, under no theory could Ayala recover the amount due to the other members of
the crew whose claims had not been assigned to him. Said section 114 of the Code
of Civil Procedure in Civil Actions expressly provides that every action must be
prosecuted in the name of the real party in interest.
 Judgment of lower court affirmed.
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