Aboitiz Shipping Corporation vs. General Accident Fire and Life Assurance Corporation, Ltd Case Digest GR 100446 ; January 21, 1993 ; 217 SCRA 359

Aboitiz Shipping Corporation vs. General Accident Fire and Life Assurance Corporation, Ltd. Case Digest 

G.R. 100446 ; January 21, 1993 ; 217 SCRA 359

  

PRINCIPLE/S:

1) Real and hypothecary nature of maritime law meaning

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. Thus, the liability of the vessel owner and agent arising from the operation of such vessel were confined to the vessel itself, its equipment, freight, and insurance, if any, which limitation served to induce capitalists into effectively wagering their resources against the consideration of the large profits attainable in the trade.

2) Origins of real and hypothecary nature

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.

3) 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.

Both are privileges granted by statute, and while not absolute, must be swept aside only in the established existence of the most compelling of reasons

4) 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.

·         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.

·         The claimants or creditors are limited in their recovery to the remaining value of accessible assets.

o   Insolvent corporation - residual assets of the corporation left over from its operations

o   Lost vessel - insurance proceeds and pending freightage for the particular voyage

·         No claimant can be given precedence over the others by the simple expedience of having filed or completed its action than the rest.

·         Execution of judgment must be stayed pending completion of all cases occasioned by the subject sinking.

o   Pro-rated share of each claim can only be found after all the cases shall have been decided.

5) GR: Once a decision becomes final and executory, it is the ministerial duty of the court to order its execution

Exceptions:

a) 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);

b)  Whenever it is necessary to accomplish the aims of justice (Pascual v Tan, 85 Phil. 164);

c) 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)

FACTS: Petitioner is a corporation engaged in the business of maritime trade as a carrier who owned and operated the M/V P/ ABOITIZ, a common carrier that sank on a voyage. Private respondent General Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC)  is a foreign insurance company pursuing its remedy as a subrogee of several cargo consignees whose respective cargo sank with the said vessel and for which it has priory paid. The sinking of vessel gave rise to filling of suit to recover the lost cargo either by shippers, their successors-in-interest, or the cargo insurers like GAFLAC as subrogees.

The sinking was initially investigated by the Board of Marine Inquiry, which found that such sinking was due to fortuitous event.  Notwithstanding such finding, the trial court found against the carrier on the basis that the loss was not due to force majeure. 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: WON the doctrine of limited liability is applicable to the case? 

HELD: YES. The provisions under the Code of Commerce provides that limited liability rule covers only civil liabilities for injuries to third parties (Art. 587), acts of the captain (Art. 590) and collisions If these circumstances are attendant then 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. In this case, there has been no actual finding of negligence on the part of Aboitiz. 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. There appears to have been no evidence presented sufficient to form a conclusion that petitioner shipowner itself was negligent.