G.R. No. L-1600

FACTS:
The Philippine Shipping Company, owner of the steamship Nuestra Señora de Lourdes, and Ynchusti & Co., owner of its cargo, filed a claim for damages against Francisco Garcia Vergara, owner of the steamship Navarra, due to a collision between the two vessels. The trial court found the Navarra at fault for the collision, which resulted in the total loss of both vessels and their cargoes. The court, however, absolved Vergara from liability for the value of the lost Lourdes, interpreting Article 837 of the Code of Commerce. The Philippine Shipping Company appealed, reducing its claim to P18,000, representing the value of the Navarra at the time of the loss.

ISSUE:
Whether the defendant shipowner, whose vessel was entirely lost in a collision for which it was at fault, is personally liable for damages beyond the value of the lost vessel, or if his liability is extinguished by such total loss.

RULING:
No. The defendant’s liability is extinguished by the total loss of his vessel. The Supreme Court affirmed the trial court’s dismissal of the claim for indemnity. The Court held that under the real and hypothecary nature of maritime law, as embodied in Articles 587, 590, and 837 of the Code of Commerce, the liability of a shipowner or agent for the unlawful acts of the captain is merely subsidiary and is limited to the value of the vessel, its equipment, and freight earned. This liability is secured by the vessel itself. Consequently, when the vessel is entirely lost, the security for the liability is extinguished, and no personal action against the owner survives. The obligation is extinguished by the loss of the res upon which the liability is exclusively based. The trial court’s judgment was affirmed, but the order for the plaintiff to pay costs was set aside.