G.R. No. 156978 May 2, 2006
ABOITIZ SHIPPING CORPORATION, Petitioner, vs. NEW INDIA ASSURANCE COMPANY, LTD., Respondent.

FACTS

Respondent New India Assurance insured a cargo of textiles and chemicals consigned to General Textile, Inc. The cargo was loaded onto petitioner Aboitiz Shipping’s vessel, M/V P. Aboitiz, in Hong Kong for transshipment to Manila. While en route, the vessel, having altered its course to avoid a reported typhoon, sank on October 31, 1980, resulting in the total loss of the cargo. The captain filed a marine protest describing moderate weather conditions at the time of sinking. Respondent, as insurer, paid the consignee’s claim and was subrogated to its rights. It then filed a complaint for damages against petitioner, alleging unseaworthiness and negligence.
Petitioner defended by claiming the sinking was due to a fortuitous event (the typhoon) and that the vessel was seaworthy. It also invoked the limited liability doctrine under maritime law, arguing its liability, if any, should be limited to its proportionate share of the insurance proceeds from the vessel’s loss. The Board of Marine Inquiry (BMI) later exonerated the captain and crew of administrative liability, finding the vessel seaworthy and the loss due to the typhoon. However, petitioner did not inform the trial court of this BMI proceeding during the initial trial.

ISSUE

Whether the doctrine of limited liability under maritime law applies to exempt petitioner from full liability for the lost cargo.

RULING

No, the limited liability doctrine does not apply. The Supreme Court affirmed the lower courts’ decisions holding petitioner fully liable. The legal logic is anchored on the obligations of a common carrier and the exceptions to limited liability. A common carrier is bound to observe extraordinary diligence in the vigilance over goods transported. The loss of the cargo raises a presumption of negligence against the carrier under Article 1735 of the Civil Code. To overcome this presumption and claim exemption due to a fortuitous event, the carrier must prove that the cause was indeed a natural disaster and that it exercised such extraordinary diligence.
Here, petitioner failed to discharge this burden. The marine protest filed by its own captain indicated only moderate weather, contradicting the claim that an overwhelming typhoon was the sole cause. This cast doubt on the vessel’s actual condition and the crew’s actions. Critically, the limited liability doctrine, which limits a shipowner’s liability to the value of the vessel’s interest after the loss, is not absolute. It does not apply when the loss is due to the concurrent fault or negligence of the shipowner. Since petitioner was found negligent for failing to prove it exercised extraordinary diligence to prevent the loss, it cannot hide behind the limited liability rule. Consequently, it is liable for the full value of the lost cargo.