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 vessel’s 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 PHILAMGEN’s 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 vessel’s seaworthiness. 10. On appeal, the CA ruled that the vessel was unseaworthy for being topheavy 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.
