G.R. No. 45070 ; November 28, 1938
CHIN GUAN, plaintiff-appellee, vs. COMPAÑIA MARITIMA, defendant-appellant.

FACTS

Plaintiff Chin Guan shipped 60 sacks of flour on the steamship Corregidor. The Corregidor sank after a collision with the steamship Cebu, owned by defendant Compañia Maritima, resulting in the total loss of the cargo. Chin Guan sued to recover the value of the flour. The trial court rendered judgment in favor of Chin Guan. Compañia Maritima appealed, arguing that under Article 837 of the Code of Commerce, its liability for damages arising from the fault of the ship captain is limited to the value of the vessel and its freight earnings, and since the Corregidor was totally lost, its liability was extinguished.

ISSUE

Whether the defendant shipowner’s liability for the loss of cargo due to a collision is extinguished when the ship at fault is totally lost.

RULING

No. The Supreme Court reversed the trial court’s judgment. While Article 837 of the Code of Commerce limits a shipowner’s civil liability to the value of the vessel and freight earned, the total loss of the vessel does not automatically extinguish liability if the vessel was insured. Following the precedent in G. Urrutia and Co. vs. Baco River Plantation Co., the insurance proceeds substitute for the value of the lost vessel and must be used to satisfy claims. If the vessel was uninsured, the liability is limited to the freight earned on the voyage. The case was remanded to determine if the Corregidor was insured; if so, plaintiff may recover from the insurance proceeds; otherwise, recovery is limited to the freight earned.

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