CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA, respondent.

Doctrine of Limited Liability does not apply to situations in which the loss or the injury is due to the concurrent negligence of the shipowner and the captain.

Facts:

1.    On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its vessel, the M/V ‘Central Bohol,’ 376 pieces of Philippine Apitong Round Logs and undertook to transport said shipment to Manila for delivery to Alaska Lumber Co., Inc.

2.    During the voyage the degree of the position of the ship would change due to the shifting of the logs inside. Eventually at about 15 degrees the captain ordered for everyone to abandon the ship.

3.    Respondent alleged that the total loss of the shipment was caused by the fault and negligence of the petitioner and its captain. Petitioner while admitting the sinking of the vessel, interposed the defense that the vessel was fully manned, fully equipped and in all respects seaworthy; that all the logs were properly loaded and secured; that the vessel’s master exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the storm.

4.    “It raised as its main defense that the proximate and only cause of the sinking of its vessel and the loss of its cargo was a natural disaster, a tropical storm which neither [petitioner] nor the captain of its vessel could have foreseen.”

5.    The RTC was unconvinced that the sinking of M/V Central Bohol had been caused by the weather or any other caso fortuito. It noted that monsoons, which were common occurrences during the months of July to December, could have been foreseen and provided for by an ocean-going vessel. Applying the rule of presumptive fault or negligence against the carrier, the trial court held petitioner liable for the loss of the cargo.

6.    The CA affirmed the trial court’s finding that the southwestern monsoon encountered by the vessel was not unforeseeable. Given the season of rains and monsoons, the ship captain and his crew should have anticipated the perils of the sea. Citing Arada v. CA,7 it said that findings of the BMI were limited to the administrative liability of the owner/operator, officers and crew of the vessel. However, the determination of whether the carrier observed extraordinary diligence in protecting the cargo it was transporting was a function of the courts, not of the BMI.

Issue:

Whether or not the Doctrine of Limited Liability applies.

Held:

No it does not.

Common carriers are bound to observe extraordinary diligence over the goods they transport, according to all the circumstances of each case; In all other cases not specified under Article 1734 of the Civil Code, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence. From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over the goods they transport, according to all the circumstances of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers are responsible; that is, unless they can prove that such loss, destruction or deterioration was brought about—among others—by “flood, storm, earthquake, lightning or other natural disaster or calamity.” In all other cases not specified under Article 1734 of the Civil Code, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence.
The doctrine of limited liability under Article 587 of the Code of Commerce is not applicable to the present case. This rule does not apply to situations in which the loss or the injury is due to the concurrent negligence of the ship-owner and the captain. It has already been established that the sinking of M/V Central Bohol had been caused by the fault or negligence of the ship captain and the crew, as shown by the improper stowage of the cargo of logs. “Closer supervision on the part of the shipowner could have prevented this fatal miscalculation.” As such, the shipowner was equally negligent. It cannot escape liability by virtue of the limited liability rule.