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ABOITIZ SHIPPING CORPORATION v. GENERAL ACCIDENT FIRE

FACTS:

This case involves a petition for review seeking to annul and set aside the decision of the Court of Appeals. The petitioner, Aboitiz Shipping Corporation, is a corporation engaged in maritime trade and owned and operated the "MV P. ABOITIZ," a common carrier that sank. The private respondent, General Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC), is a foreign insurance company acting as the subrogee of cargo consignees whose cargo sank with the vessel. Several suits were filed for recovery of lost cargo, with one case finding against the carrier and awarding the claim to GAFLAC. The petitioner argues for a stay of execution of the judgment citing the Limited Liability Rule and maintains that the finding of unseaworthiness is not attributable to the shipowner. The private respondent, on the other hand, contends that there is no limited liability rule applicable and invokes the doctrine of the Law of the Case. The resolution of a previous case involving the same parties is also discussed, clarifying that the limited liability settled in that case is different from the issue at hand.

This case involves a dispute over the application of the Limited Liability Rule arising from the real and hypothecary nature of maritime law. The court points out that a previous resolution in a different case settled the limited liability that attaches to cargo by virtue of stipulations in the Bill of Lading, but did not address the Limited Liability Rule arising from the real and hypothecary nature of maritime law. The primary question is whether the court erred in granting execution of the full judgment award, thus denying the application of the limited liability under the Code of Commerce. The court then discusses the power of the court to control the enforcement of its judgments in the furtherance of justice. It cites cases that emphasize the need to prevent the improper enforcement of a judgment, especially when it would result in an injustice. Finally, the court concludes that the Limited Liability Rule arising from the real and hypothecary nature of maritime law should apply in this case. It states that a previous decision that upheld the claims of the private respondent only considered the peculiar circumstances of that case and should not be seen as negating the application of the limited liability principle in this and related cases.

ISSUES:

  1. Whether the ruling in a previous case negated the application of the limited liability principle.

  2. Whether the limited liability doctrine arising from the real and hypothecary nature of maritime trade was relevant in the previous cases.

  3. Whether the matter of limited liability could be raised in the execution of the present case.

  4. Whether the Limited Liability Rule applies in the case.

  5. Whether there is a finding of negligence on the part of the vessel owner.

  6. Whether or not execution of judgment in earlier completed cases, even those already final and executory, must be stayed pending completion of all cases occasioned by the sinking of the vessel M/V P. Aboitiz.

  7. Whether or not the pro-rated share of each claim can only be determined after all the cases shall have been decided.

RULING:

  1. The ruling in the previous case did not negate the application of the limited liability principle as it only considered the circumstances peculiar to that particular case.

  2. The limited liability doctrine arising from the real and hypothecary nature of maritime trade was not relevant in the previous cases as it was never made a matter of defense.

  3. The matter of limited liability could be raised in the execution of the present case.

  4. The Limited Liability Rule applies in the case. The Court has consistently held that the rule does not apply only when there is an actual finding of negligence on the part of the vessel owner or agent. In the absence of such finding, the rule applies.

  5. There has been no actual finding of negligence on the part of the vessel owner. The trial court and the Court of Appeals did not make any new and additional finding of fact that the petitioner shipowner was negligent. The cause of the sinking of the vessel was attributed to unseaworthiness due to the failure of the crew and the master to exercise extraordinary diligence. There was no evidence presented to conclude that the petitioner shipowner itself was negligent.

  6. Yes, execution of judgment in earlier completed cases, even those already final and executory, must be stayed pending completion of all cases occasioned by the sinking of the vessel M/V P. Aboitiz. All claims need to be collated and satisfied from the insurance proceeds on the vessel and its pending freightage at the time of its loss. No claimant can be given precedence over the others by having filed or completed its action earlier than the rest.

  7. The pro-rated share of each claim can only be determined after all the cases shall have been decided.

PRINCIPLES:

  • The limited liability principle in maritime law means that the liability of the carrier is confined to the vessel, which is hypothecated for such obligations or serves as guaranty for their settlement.

  • The limited liability principle originated from the conditions and risks attending maritime trade and encourages people and entities to venture into maritime commerce.

  • The limited liability principle persists in well-developed maritime countries and is practically absolute.

  • In the Philippines, the limited liability principle is governed by international maritime conventions and generally accepted practices.

  • The limited liability principle is found in the US Federal Limitation of Liability Act and the Brussels International Convention of 1957.

  • The limited liability principle is discussed in Articles 587, 590, and 837 of Book III of the Code of Commerce.

  • The Limited Liability Rule applies unless there is a finding of negligence on the part of the vessel owner or agent.

  • Unseaworthiness is not a fault that can be solely attributed to the vessel owner. It is generally attributable to the vessel's crew and captain.

  • The rights of a vessel owner or agent under the Limited Liability Rule are privileges granted by statute and must be swept aside only in the existence of the most compelling reasons.

  • The rights of parties to claim against a vessel owner or agent are akin to those of creditors against an insolvent corporation. Each creditor may prove their respective claims, but recovery is limited to the assets of the corporation or vessel.

  • After the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets for the equal benefit of all creditors. No advantage or preference can be obtained by one creditor over another by an attachment, execution, or otherwise.

  • In both the insolvency of a corporation and the sinking of a vessel, claimants or creditors are limited in their recovery to the remaining value of accessible assets, such as residual assets of a corporation or insurance proceeds and pending freightage for a lost vessel.

  • All claims occasioned by the sinking of a vessel must be simultaneously settled, either completely or pro-rata should the insurance proceeds and freightage be insufficient to satisfy all claims.

  • The pro-rated share of each claim can only be determined after all the cases involved have been decided.

  • The total proceeds of insurance and pending freightage should be deposited in trust to safeguard them pending final resolution of all incidents for final pro-rating and settlement. The owner of the vessel is directed to institute the necessary limitation and distribution action and deposit the proceeds with the proper admiralty court.