G.R. No. 140613. October 15, 2002
Seven Brothers Shipping Corporation, petitioner, vs. Oriental Assurance Corporation, respondent.

FACTS

On December 20, 1988, a charter party was executed between C. Alcantara & Sons, Inc. and petitioner Seven Brothers Shipping Corporation, owner of the vessel M/V “Diamond Bear,” to ship lauan logs. Respondent Oriental Assurance Corporation insured the cargo for P8,000,000.00. On March 9, 1989, the entire cargo was lost when the vessel sank. Oriental Assurance paid the consignee the insured value and, as subrogee, filed a complaint against Seven Brothers for recovery of the amount paid. The Regional Trial Court (RTC) dismissed the complaint. The Court of Appeals reversed the RTC, holding Seven Brothers liable for the loss due to its failure to exercise extraordinary diligence as a common carrier, and ordered it to pay P8,000,000.00 plus interest. Seven Brothers’ petition for review to the Supreme Court (G.R. No. 128982) was dismissed for lack of a certification against forum shopping, and the dismissal became final and executory on October 31, 1997. Upon Oriental Assurance’s motion, the RTC issued a writ of execution. The sheriff levied on vessels M/V “Diamond Deer” and M/V “Diamond Rabbit.” Seven Brothers filed a motion to quash the writ and lift the levy, contending the M/V “Diamond Deer” was not owned by it, the levy on M/V “Diamond Rabbit” violated procedural rules for lack of prior demand for cash payment, and its liability was extinguished under the Limited Liability Rule. The RTC granted the motion. Oriental Assurance filed a petition for certiorari with the Court of Appeals, which reversed the RTC orders, reinstated the writ of execution and levy, and ordered immediate execution. Seven Brothers filed the present petition.

ISSUE

1. Whether the Court of Appeals erred in not applying the Limited Liability Rule.
2. Whether the Court of Appeals erred in reinstating the levy on the M/V “Diamond Deer,” allegedly not owned by Seven Brothers.
3. Whether the Court of Appeals erred in not ruling that the Sheriff violated the Rules of Court in levying upon the vessels.

RULING

The Supreme Court DENIED the petition and AFFIRMED the Decision of the Court of Appeals.
1. The Court of Appeals correctly did not apply the Limited Liability Rule. The liability of Seven Brothers had already been conclusively established with finality in the prior decision (CA-G.R. CV No. 42890), which found it liable due to failure to exercise extraordinary diligence. That decision, having become final and executory, is immutable. Seven Brothers can no longer raise defenses, including the Limited Liability Rule, that were or could have been raised in that concluded case. The doctrine of finality of judgments bars re-litigation.
2. The Court of Appeals correctly reinstated the levy on the vessels. On the ownership of M/V “Diamond Deer,” the Supreme Court noted that the Court of Appeals found the RTC’s order lifting the levy was issued with grave abuse of discretion. The Supreme Court deferred to this finding. More importantly, the Supreme Court held that the issue of ownership is a factual matter that should be threshed out in a separate proceeding, not in a motion to quash a writ of execution of a final judgment.
3. The Court of Appeals correctly did not rule that the Sheriff violated the Rules of Court. The Supreme Court agreed with the appellate court’s finding that the immediate levy was justified under the circumstances. The sheriff was not required to make a prior cash demand because Seven Brothers was not in a position to pay, as indicated by its financial reports showing insufficient assets and its failure to post a cash bond. Furthermore, a liberal interpretation of procedural rules is warranted to promote substantial justice, especially given the risk that the vessels could sail beyond the jurisdiction of Philippine courts.