G.R. No. L-58897 December 3, 1987
LUZON STEVEDORING CORPORATION, petitioner, vs. COURT OF APPEALS, HIJOS DE F. ESCANO, INC., and DOMESTIC INSURANCE COMPANY OF THE PHILIPPINES, respondents.

FACTS

On May 30, 1968, a collision occurred between petitioner Luzon Stevedoring Corporation’s tanker LSCO “Cavite” and respondent Hijos de F. Escano, Inc.’s passenger ship MV “Fernando Escano,” resulting in the latter’s sinking. The trial court found the LSCO “Cavite” solely at fault and ordered petitioner to pay substantial damages. Petitioner invoked Article 837 of the Code of Commerce, arguing its liability should be limited to the value of its vessel and freight earned. The trial court and the Court of Appeals rejected this defense, prompting a petition to the Supreme Court.

ISSUE

Whether the petitioner, as the shipowner at fault, can limit its liability to the value of its vessel and freight under Article 837 of the Code of Commerce without having abandoned the vessel.

RULING

The Supreme Court denied the petition, ruling that abandonment of the vessel is a prerequisite for a shipowner to avail of the limited liability under Article 837 of the Code of Commerce. The legal logic is anchored on the consistent interpretation of Articles 587, 590, and 837 of the Code, which establish abandonment as the mechanism by which a shipowner can be absolved from personal liability beyond the value of the vessel, its appurtenances, and freight. The Court clarified that this rule applies in collision cases where the vessel is at fault. Since the LSCO “Cavite” was found solely responsible for the collision and the petitioner did not abandon the vessel, it cannot invoke the benefit of limited liability. The exception, where abandonment is not required, is when the vessel is totally lost, thereby extinguishing liability, but this did not apply as the petitioner’s vessel remained extant. Consequently, the petitioner is personally liable for the full damages awarded.