MONARCH INSURANCE vs CA (2000)

MONARCH INSURANCE CO., INC.,

TABACALERA INSURANCE CO., INC
and Hon. Judge AMANTE PURISIMA,
petitioners, vs. COURT OF APPEALS
and ABOITIZ SHIPPING
CORPORATION, respondents. G.R. No.
92735 June 8, 2000
ALLIED GUARANTEE INSURANCE
COMPANY, petitioner, vs. COURT OF
APPEALS, Presiding Judge, RTC
Manila, Br. 24 and ABOITIZ SHIPPING
CORPORATION,respondents. G.R. No.
94867 June 8, 2000
EQUITABLE INSURANCE
CORPORATION, petitioner, vs. COURT
OF APPEALS, Former First Division
Composed of Hon. Justices RODOLFO
NOCON, PEDRO RAMIREZ, and JESUS
ELBINIAS and ABOITIZ SHIPPING
CORPORATION, respondents. G.R. No.
95578 June 8, 2000
These are three consolidated cases. All
cases arose from the loss of cargoes of
various shippers when the M/V P.
Aboitiz, a common carrier owned
and operated by Aboitiz, sank on
her voyage from Hong Kong to
Manila on October 31, 1980. The
claims numbered one hundred and ten
(110) for the total amount of
P41,230,115.00 which is almost thrice
the amount of the insurance proceeds of
P14,500,000.00 plus earned freight of
500,000.00 according to Aboitiz.
Facts: The M/V P. Aboitiz left Hong Kong
for Manila at about 7:30 in the evening of
October 29, 1980 after securing a
departure clearance from the Hong Kong
Port Authority. The departure was
delayed for two hours because he (Capt.
Racines) was observing the direction of
the storm that crossed the Bicol Region.
He proceeded with the voyage only after
being informed that the storm had
abated. The M/V P. Aboitiz sank at about
7:00 p.m. of October 31, 1980.
Justo Iglesias, meteorologist of PAGASA,
testified in both cases that during the
inclusive dates of October 28-31, 1980, a

stormy weather condition prevailed

within the Philippine area of
responsibility, particularly along the sea
route from Hong Kong to Manila, because
of tropical depression "Yoning."
Petitioners Allied and Equitable refuted
the allegation that the M/V P. Aboitiz and
its cargo were lost due to force majeure,
relying mainly on the marine protest filed
by Capt. Racines under scale No. 4 that
describes the sea condition as
"moderate breeze," and "small
waves becoming longer, fairly
frequent white horses."
Monarch and Tabacalera are insurance
carriers of lost cargoes. They indemnified
the shippers and were consequently
subrogated to their rights, interests and
actions against Aboitiz. Because Aboitiz
refused to compensate Monarch, it filed
two complaints against Aboitiz. In its
answer with counterclaim, 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.
Aboitiz had repeatedly failed to appear in
court, it then allowed Monarch and
Tabacalera to present evidence exparte. The survey established that on
her voyage to Manila from Hong
Kong, the vessel did not encounter
weather so inclement that Aboitiz
would be exculpated from liability
for losses. 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."
In due course, the trial court rendered
judgment against Aboitiz. It was
appealed to the Court of Appeals but the
appeal was dismissed for its failure to file
appellant's brief.
Consequently, Monarch and Tabacalera
moved for execution of judgment. The
trial court granted the motion and issued
separate writs of execution. However,
Aboitiz, invoking the real and
hypothecary nature of liability in

maritime law, filed an urgent motion to

quash the writs of execution.
According to Aboitiz, since its
liability is limited to the value of the
vessel which was insufficient to
satisfy the aggregate claims of all
110 claimants, to indemnify Monarch
and Tabacalera ahead of the other
claimants would be prejudicial to the
latter.
Aboitiz filed with the Court of Appeals a
petition for certiorari and prohibition with
prayer for preliminary injunction and/or
temporary restraining order, the same
was granted by the court.
ISSUE WON the
liability applies

doctrine

of

limited

RULING Yes. 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. Aboitiz.
This is in accordance with the rule that in
cases involving the limited liability of
shipowners, the initial burden of proof of
negligence or unseaworthiness rests on
the claimants. However, once the vessel
owner or any party asserts the right to
limit its liability, 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. This
burden, Aboitiz had unfortunately failed
to discharge. 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.
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.
The rule on limited liability should be
applied in accordance with the latest
ruling in Aboitiz Shipping Corporation vs.
General Accident that claimants be
treated as "creditors in an insolvent
corporation whose assets are not enough
to satisfy the totality of claims against it."

Discussion: Aboitiz was held liable. It

was found out that the sinking of the
vessel was because the vessel was
unseaworthy, the negligence of both
Aboitiz and the crew and master, and
that the sinking was not due to a
fortuitous event but nothwithstanding the
ruling, it did not reverse its ruling in the
1993 case. Instead, it reiterated its
pronouncement to the effect that is
treated as creditor in an insolvent
corporation whose assets are not enough
to satisfy the totality of the claims. Why?
Because the claim amounted to 43
million but the insurance proceed were
only 14 million. You cannot get the entire
43 million, you have to share pro-rata the
proceeds of the insurance and there is no
preference of credit.
In contrast with
ABOITIZ vs EQUITABLE (2008)
ISSUE WON the limited liability doctrine
applies
RULING No. A perusal of the decisions of
the courts below in all three petitions
reveals that there is a categorical finding
of negligence on the part of Aboitiz. For
instance, in G.R. No. 121833, the RTC
therein expressly stated that the captain
of M/V P. Aboitiz was negligent in failing
to take a course of action that would
prevent the vessel from sailing into the
typhoon. In G.R. No. 130752, the RTC
concluded that Aboitiz failed to show that
it
had
exercised
the
required
extraordinary diligence in steering the
vessel before, during and after the storm.
In G.R. No. 137801, the RTC categorically
stated that the sinking of M/V P. Aboitiz
was attributable to the negligence or
fault of Aboitiz. In all instances, the Court
of Appeals affirmed the factual findings
of the trial courts. The finding of actual
fault on the part of Aboitiz is central to
the issue of its liability to the
respondents. Aboitizs contention, that
with the sinking of M/V P. Aboitiz, its
liability to the cargo shippers and
shippers should be limited only to the
insurance proceeds of the vessel absent
any finding of fault on the part of Aboitiz,
is not supported by the record. Thus,
Aboitiz is not entitled to the limited
liability rule and is, therefore, liable for
the value of the lost cargoes as so duly
alleged and proven during trial.

Discussion: The ruling in 2008 affirmed

the 2006 ruling in New India. So as a
general rule, a ship owners liability is
really just coextensive with its interest in
the vessel. Except if there was actual
fault attributable to the ship owner. Thus
an exception to the limited liability rule is
when a ship owner or agent is liable for
damages and the sinking of the vessel is

attributable to its negligence or its failure

to ensure the seaworthiness of the
vessel.And in this case, as it was found
by the courts below, that both Aboitiz
and its crew failed to insure the
seaworthiness of M/V Aboitiz. It failed to
prove that it exercised extra diligence. So
it is liable.