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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
It is a well-settled principle that the exception to the limited liability doctrine applies when the damage is due to the fault of the shipowner or to the concurrent negligence of the shipowner and the captain. Where the shipowner fails to overcome the presumption of negligence, the doctrine of limited liability cannot be applied. (Aboitiz Shipping Corporation v. Court of Appeals, G.R. No. 121833, October 17, 2008)
For the exception to the limited liability rule to apply, the loss must be due to the fault of the shipowner, or to the concurring negligence of the shipowner and the captain. (Chua Yek Hong v. Intermediate Appellate Court, et al., G.R. No. L-74811, December 14, 1988)
The real and hypothecary doctrine, otherwise known as the “no vessel, no liability” rule, or the limited liability rule provides that the shipowner or agent’s liability is merely co-extensive with his interest in the vessel such that the total loss thereof results in its extinction.
As discussed in the previous article entitled “Limited Liability Rule”, the Civil Code provides for the liability of shipowners and ship agents, to wit:
The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was invested for the benefit of the same. (Article 586, Civil Code)
The ship agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freightage he may have earned during the voyage. (Article 587, Civil Code)
In cases of collision, the civil liability incurred by the shipowners in the cases prescribed in this section, shall be understood as limited to the value of the vessel with all its appurtenances and freightage earned during the voyage. (Article 837, Civil Code)
In the case of Aboitiz Shipping Corporation v. Court of Appeals (G.R. No. 121833, October 17, 2008), the Supreme Court discussed the rule on limited liability and the instances in which the rule does not apply.
Jurisprudence says:
In this jurisdiction, the limited liability rule is embodied in Articles 587, 590 and 837 under Book III of the Code of Commerce, thus:
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight it may have earned during the voyage.
Art. 590. The co-owners of the vessel shall be civilly liable in the proportion of their interests in the common fund for the results of the acts of the captain referred to in Art. 587.
Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the part of the vessel belonging to him.
Art. 837. The civil liability incurred by shipowners in the case prescribed in this section, shall be understood as limited to the value of the vessel with all its appurtenances and freightage served during the voyage.
These articles precisely intend to limit the liability of the shipowner or agent to the value of the vessel, its appurtenances and freightage earned in the voyage, provided that the owner or agent abandons the vessel. When the vessel is totally lost in which case there is no vessel to abandon, abandonment is not required. Because of such total loss the liability of the shipowner or agent for damages is extinguished. However, despite the total loss of the vessel, its insurance answers for the damages for which a shipowner or agent may be held liable.
Nonetheless, there are exceptional circumstances wherein the ship agent could still be held answerable despite the abandonment of the vessel, as where the loss or injury was due to the fault of the shipowner and the captain. The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a shipowner’s liability, does not apply to cases where the injury or average was occasioned by the shipowner’s own fault. Likewise, the shipowner may be held liable for injuries to passengers notwithstanding the exclusively real and hypothecary nature of maritime law if fault can be attributed to the shipowner.
In the case of Chua Yek Hong v. Intermediate Appellate Court, et al. (G.R. No. L-74811, December 14, 1988), the Supreme Court ruled that for the exception to the limited liability rule to apply, the loss must be due to the fault of the shipowner, or to the concurring negligence of the shipowner and the captain.
In the case of Philippine Nippon Kyoei v. Rosalia Gudelosao (G.R. No. 181375, July 13, 2016), citing the case of Abueg v. San Diego (77 Phil. 730, 1946), the limited liability rule under the Civil Code is inapplicable in a liability created by statute to compensate employees and laborers, or the heirs and dependents, in cases of injury received by or inflicted upon them while engaged in the performance of their work or employment.
Jurisprudence says:
“The provisions of the Code of Commerce invoked by appellant have no room in the application of the Workmen’s Compensation Act which seeks to improve, and aims at the amelioration of, the condition of laborers and employees.
It is not the liability for the damage or loss of the cargo or injury to, or death of, a passenger by or through the misconduct of the captain or master of the ship; nor the liability for the loss of the ship as a result of collision; nor the responsibility for wages of the crew, but a liability created by a statute to compensate employees and laborers in cases of injury received by or inflicted upon them, while engaged in the performance of their work or employment, or the heirs and dependents of such laborers and employees in the event of death caused by their employment.
Such compensation has nothing to do with the provisions of the Code of Commerce regarding maritime commerce. It is an item in the cost of production which must be included in the budget of any well-managed industry.”
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