ABOITIZ SHIPPING CORPORATION, PETITIONER, VS. COURT OF APPEALS AND GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, LTD., RESPONDENTS.

The extent of the liability of a carrier of goods is again
brought to the fore in this case.

On October 28, 1980, the vessel M/V “P. Aboitiz” took
on board in Hongkong for shipment to Manila some cargo consisting of one (1)
twenty (20)-footer container holding 271 rolls of goods for apparel covered by
Bill of Lading No. 515-M and one (1) forty (40)-footer container holding four
hundred forty-seven (447) rolls, ten (10) bulk and ninety-five (95) cartons of
goods for apparel covered by Bill of Lading No. 505-M. The total value, including invoice value,
freightage, customs duties, taxes and similar imports amounts to US$39,885.85
for the first shipment while that of the second shipment amounts to
US$94,190.55. Both shipments were
consigned to the Philippine Apparel, Inc. and insured with the General Accident
Fire and Life Assurance Corporation, Ltd. (GAFLAC for short). The vessel is owned and operated by Aboitiz
Shipping Corporation (Aboitiz for short).

On October 31, 1980 on its way to Manila the vessel sunk and it
was declared lost with all its cargoes. GAFLAC paid the consignee the amounts US$39,885.85 or P319,086.80 and
US$94,190.55 or P753,524.40 for the lost cargo. As GAFLAC was subrogated to all the rights, interests and actions
of the consignee against Aboitiz, it filed an action for damages against
Aboitiz in the Regional Trial Court of Manila alleging that the loss was due to
the fault and negligence of Aboitiz and the master and crew of its vessel in
that they did not observe the extraordinary diligence required by law as
regards common carriers.

After the issues were joined and the trial on the merits a
decision was rendered by the trial court on June 29, 1985, the dispositive part
of which reads as follows:

“PREMISES CONSIDERED, the Court finds in favor of the
plaintiff and against the defendant, ordering the latter to pay the former
actual damages in the sum of P1,072,611.20 plus legal interest from the date of
the filing of the complaint on October 28, 1981, until full payment thereof,
attorney’s fees in the amount of 20% of the total claim and to pay the costs.

“SO ORDERED.”^[1]

Not satisfied therewith, Aboitiz appealed to the Court of Appeals
wherein in due course a decision was rendered on March 9, 1989 affirming in
toto the appealed decision, with costs against defendant Aboitiz.^[2]

A motion for reconsideration of said decision filed by Aboitiz
was denied in a resolution dated August 15, 1989.

Hence the herein petition for review alleging that the Court of
Appeals decided the case not in accordance with law when –

“1.  The Court of Appeals held that ‘findings of
administrative bodies are not always binding on courts. This is especially so in the case at bar
where GAFLAC was not a party in the BMI proceedings and which proceedings was
not adversary in character.’ This ruling is contrary to the principle
established in Vasquez vs. Court of Appeals (138 SCRA 559), where it was
held that since the BMI possesses the required expertise in shipping matters
and is imbued with quasi-judicial powers, its factual findings are conclusive
and binding on the court. Likewise, the
case of Timber Export Inc. vs. Retla Steamship Co. (CA-G.R. No. 66143-R)
also established the rule that decision of BMI must be given ‘great materiality
and weight to the determination and resolution of the case.’

2.     
The Court of Appeals also held that the trial court did not
err when it fixed the liability of Aboitiz not on the basis of the stipulation
in the bills of lading at US$500.00 per package/container but on the actual
value of the shipment lost notwithstanding the long line of cases decided by
this Honorable Supreme Court holding a contrary opinion, as shown below.

3.     
The Court of Appeals also held that the trial court did not
abuse its discretion in granting GAFLAC’s motion for execution pending appeal
notwithstanding the absence of reasonable and justifiable grounds to support
the same.”^[3]

Under the first issue petitioner states that the sinking of the
vessel M/V “P. Aboitiz” was the subject of an administrative
investigation conducted by the Board of Marine Inquiry (BMI) whereby in a
decision dated December 26, 1984, it was found that the sinking of the vessel
may be attributed to force majeure on account of a typhoon. Petitioner contends that these findings are
conclusive on the courts.

In rejecting the evidence offered by the petitioner the appellate
court ruled –

“But over and above all these considerations, the trial court
did not err in not giving weight to the finding of the BMI that the vessel sank
due to a fortuitous event. Findings of
administrative bodies are not always binding on courts. This is especially so in the case at bar
where plaintiff was not a party in the BMI proceedings and which proceeding was
not adversary in character.”^[4]

As a general rule, administrative findings of facts are not
disturbed by the courts when supported by substantial evidence unless it is
tainted with unfairness or arbitrariness that would amount to abuse of
discretion or lack of jurisdiction.^[5]
Even in Vasquez vs. Court of Appeals^[6]
which is cited by petitioner, this Court ruled that We nevertheless disagree
with the conclusion of the BMI exonerating the captain from any negligence
“since it obviously had not taken into account the legal responsibility of
a common carrier towards the security of the passengers involved.”

This case was brought to court on October 28, 1981. The trial court was never informed of a
parallel administrative investigation that was being conducted by the BMI in
any of the pleadings of the petitioner. It was only on March 22, 1985 when petitioner revealed to the trial
court the decision of the BMI dated December 26, 1984 (one day after Christmas
day).^[7]
The said decision appears to have been rendered over three (3) years after the
case was brought to court.

Moreover, said administrative investigation was conducted
unilaterally. Private respondent GAFLAC
was not notified or given an opportunity to participate therein. It cannot thereby be bound by said findings
and conclusions of the BMI.

The trial court and the appellate court found that the sinking of
the M/V “P. Aboitiz” was not due to the waves caused by tropical
storm “Yoning” but due to the fault and negligence of petitioner, its
master and crew. The court reproduces
with approval said findings –

“xxx                                                   xxx

‘After a careful examination of the evidence, the Court is
convinced in the plaintiff’s claim that the M/V ‘Aboitiz’ and its cargo were
not lost due to fortuitous event or force majeure.

‘To begin with, paragraph 4 of the marine protest (Exh.
“4”, also Exhibit “M”), which is defendant’s own evidence,
shows that the wind force when the ill-fated ship foundered was 10 to 15
knots. According to the Beaufort Scale
(Exhibit “I”), which is admittedly an accurate reference for
measuring wind velocity, the wind force of 10 to 15 knots is classified as
scale no. 4 and described as ‘moderate breeze,’ small waves, becoming longer,
fairly frequent white horses.’ Meteorologist Justo Iglesias, Jr. himself
affirms the above description of a wind force of 10 to 15 knots and adds that
the weather condition prevailing under said wind force is usual and
forseeable. Thus, Iglesias, Jr.
testified:

‘Q.- In the marine protest of the master
of the vessel of Aboitiz, there is reference to wind force from ten to 15
knots. In this Beaufort Scale, will you
be able to clarify what this wind force of 10 to 15 as stated in the marine
protest?

A.- It will be under Force 4 of the Beaufort Scale.

Q.- What is the basis of your answer?

A.- 10 to 15 falls within this scale of the Beaufort Scale, Force 4.

Atty. Dollete:

May I read into the
records, Your Honor. Force 4,
descriptive term moderate breeze. Near
velocity in knots 11-16 meters per second, 5.5-7.9 in kilometers per hour to 20
to 28 kilometers per hour and 13 to 18 miles per hour. Sea the description of this will be small
waves becoming longer fairly frequent white horse (sic).

Q.- In the layman’s language how do you interpret this white horses?

A.- It means white forms. At the top
of the crest they were beginning to form white foams.

Q.- How about this moderate breeze as described under this Force 4 of the
Beaufort Scale, how will you interpret that?

‘A.- Moderate breeze will only give winds of 29 kilometers per hour which is
equivalent to just extending your hand out of a running car at that speed.

Q.- This weather condition between
October 28 and November 1, 1980, will you classify this as extraordinary or
ordinary?

A.- It was ordinary.

Q.- When you said ordinary, was it usual or unusual?

A.- It is usual.

Q.- When you said it is usual it is foreseeable and predictable?

A.- For an experienced meteorologist like a ship captain, it is foreseeable.

Q.- When it is foreseeable, necessarily
it follows that the weather could be predicted based on the weather bulletin or
report?

A.- Yes, sir.

Q.- And usually the bulletin states the condition in other words, this
weather condition which you testified to and reflected in your Exhibit ‘7’ is
an ordinary occurrence within that area of Philippine responsibility?

A.- Yes, sir.

Q.- And in fact this weather condition is to be anticipated at that time of
the year with respect to weather condition which is reflected in Exhibit ‘7’?

A.- It is a regular occurrence.’

xxx.

‘Moreover, Capt. Racines again admitted in Court that his ill-fated
vessel was 200 miles away from the storm ‘Yoning’ when it sank. Said Capt. Racines:

‘Q.- How far were you from this depression or weather disturbance on October
30, 1980?

A.- Two hundred miles.

xxx                                        xxx

‘Q.- In other words, this depression was
far from your route because it took a northern approach whereas you were
towards the south approach?

A.- As I have said, I was 200 miles away from the disturbance.’ xxx.

“Considering the foregoing reasons, the Court holds that the
vessel M/V “Aboitiz” and its cargo were not lost due to fortuitous
event or force majeure.

“In accordance with Article 1732 of the Civil Code, the
defendant common carrier, from the nature of its business and for reasons of
public policy, is bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by it according
to all the circumstances of each case. While the goods are in the possession of the carrier, it is but fair
that it exercise extraordinary diligence in protecting them from loss or
damage, and if loss occurs, the law presumes that it was due to the carrier’s
fault or negligence; that is necessary to protect the interest of the shipper
which is at the mercy of the carrier (Article 1756, Civil Code; Anuran vs.
Puno, 17 SCRA 224; Nocum vs. Laguna Tayabas Bus CO., 30 SCRA 69; Landigan vs.
Pangasinan Transportation Company, 88 SCRA 284). In the case at bar, the defendant failed to prove that the loss
of the subject cargo was not due to its fault or negligence.”^[8]

The said factual findings of the appellate court and the trial
court are binding on this Court. Its
conclusion as to the negligence of the petitioner is supported by the
evidence.

The second issue raised to the effect that the liability of the
petitioner should be fixed at US$500.00 per package/container, as stipulated in
the bill of lading and not at the actual value of the cargo, should be resolved
against petitioner.

While it is true that in the bill of lading there is such
stipulation that the liability of the carrier is US$500.00 per
package/container/customary freight, there is an exception, that is, when the
nature and value of such goods have been declared by the shipper before
shipment and inserted in the bill of lading. This is provided for in Section 4(5) of the Carriage of Goods By Sea Act
to wit –

“(5) Neither the carrier nor the ship shall in
any event be or become liable for any loss or damage to or in connection with
the transportation of goods in an amount exceeding $500 per package of lawful
money of the United States, or in case of goods not shipped in packages, per
customary freight unit, or the equivalent of that sum in other currency, unless
the nature and value of such goods
have been inserted in the bill of
lading. This declaration, if
embodied in the bill of lading, shall be prima facie evidence,
but shall not be conclusive on the carrier.

By agreement between the carrier, master or agent of the carrier,
and the shipper another maximum amount than that mentioned in this paragraph
may be fixed: Provided, that such
maximum shall not be less than the figure above named. In no event shall the carrier be liable for
more than the amount of damage actually sustained.

Neither the carrier nor the ship shall b responsible in any event
for loss or damage to or in connection with the transportation of the goods if
the nature or value thereof has been knowingly and fraudulently mis-stated by
the shipper in the bill of lading.” (Underscoring supplied.)

In this case the description of the nature and the value of the
goods shipped are declared and reflected in the bills of lading. Thus, it is the basis of the liability of
the carrier as the actual value of the loss.

Moreover, it is absurd to interpret “container,” as
provided in the bill of lading to be valued at US$500.00 each, to refer to the
container which is the modern substitute for the hold of the vessel.^[9]
The package/container contemplated by the law to limit the liability of the
carrier should be sensibly related to the unit in which the shipper packed the
goods and described them, not a large metal object, functionally a part of the
ship, in which the carrier caused them to be contained.^[10]
Such “container” must be given the same meaning and classification as
a “package” and “customary freight unit.”

The appellate court in disposing this issue quoted its decision
in Allied Guarantee Insurance Co. Inc. vs. Aboitiz Shipping Corporation, CA GR.
CV No. 04121, March 23, 1987, viz;

“Third. Still
it is contended that the carrier’s liability is limited to $500.00, pursuant to
section 8 of the Bill of Lading which provides that ‘The liability of the
Carrier for any loss or damage to the goods shall in no case exceed the sum of
U.S. $500.00 per package/container/customary freight unit, unless the value of
the goods has been correctly declared and extra freight paid, prior to shipment
and a signed declaration to this effect appears in the bill of lading, duly
confirmed by the Carrier. …’ It is contended that the Bill of Lading does not
indicate the value of the goods. Nor
was the corresponding freight … paid prior to shipment.

“Generally speaking a stipulation, limiting the common
carrier’s liability to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is valid. (Civil Code, Art. 1749). Such stipulation, however, must be
reasonable and just under the circumstances and must have been fairly and
freely agreed upon. (St. Paul Fire
& Marine Insurance Co. vs. Macondray Co., 70 SCRA 122, 126-127 (1976)) In
the case at bar, the goods shipped on the M/V “P. Aboitiz” were
insured for P278,530.50, which may be taken as their value. To limit the liability of the carrier to
$500.00 would obviously put it in its power to have taken the whole cargo. In Juan Ysmael & Co. vs. Gabino
Barreto & Co., 51 Phil. 90 (1927), it was held that a stipulation
limiting the carrier’s liability to $500.00 per package of silk when the value
of such package was P2,500.00 unless the true value had been declared and the
corresponding freight paid was ‘void as against public policy.’ That ruling
applies to this case.

“Moreover, by the weight of modern authority, a carrier cannot
limit its liability for injury or loss of goods shipped where such injury or
loss was caused by its own negligence. (Juan Ysmael & Co. v. Gabino Barreto & Co., supra) Here
to limit the liability of Aboitiz Shipping to $500.00 would nullify the policy
of the law imposing on common carriers the duty to observe extraordinary
diligence in the carriage of goods.

“Indeed, it is even doubtful whether the word ‘container’ in
section B of the Bill of Lading includes containers which are a substitute for
the hold of a vessel. This provision
limits the carrier’s liability to ‘the sum of US $500.00 per package/container/customary
freight unit.’ By the rule of noscitur a sociis, the word
‘container’ must be given the same meaning as ‘package’ and ‘customary freight
unit’ and therefore cannot possibly refer to modern containers which are used
for shipment of goods in bulk.”^[11]

In the same light, the third issue questioning the order of
execution pending appeal of the trial court must be resolved against petitioner
as well.

The averments in the motion for execution pending appeal dated
December 8, 1985 are as follows?

“Aside from the fact that petitioner can easily post a
supersedeas bond to stay execution, still other circumstances are present
peculiar in the incident of the sinking of M/V P. Aboitiz which would justify
the issuance of execution pending appeal. There are other decided cases adjudging petitioner liable in the lower
court in the same incident. Other cases
are on appeal, upcoming and about to be decided. The value of cargo loss caused by the sinking of petitioner’s
vessel is in the tune of no less than fifty million pesos inclusive of
interests fees and all claims. Its
insurer has gone bankrupt and petitioner alone must face and answer for all
those claims. In one branch of the
Regional Trial Court of Manila alone there are twenty five (25) cases pending
against petitioner involving the same loss of cargoes aboard M/V “P.
Aboitiz” as per certification herewith attached as Annex
“A”. This claims do not include
others, pending in various courts in Metro Manila which would have to be
satisfied ultimately by petitioner, it being a common carrier which failed to
exercise extraordinary diligence over the goods lost. The judgment sought to be enforced may indeed be rendered imminently
ineffectual in the ultimate analysis.

“The purpose of Sec. 2 Rule 39 would not be achieved or
execution pending appeal would not be achieved if insolvency would still be
awaited. The remedy is available to
petitioner under Sec. 3 Rule 39 of the Rules of Court but to place insolvency
as a condition to issuance of a writ of execution pending appeal would render
it illusory and ineffectual.

“Justice and equity therefore dictates, that as a consequence
of the bond posted by private respondent and there being several other cases
against petitioner, decided as well as pending, the totality of which claims
may render the appealed decision imminently ineffectual and the further fact
that the appeal being interposed is evidently for delay as a consequence of the
several adverse decisions against it as a common carrier in the lower court, a
reconsideration of the decision dated November 25, 1985 of the Honorable Court
will be in consonance with law, jurisprudence and equity.

“In order to erase all apprehensions that the aforesaid
judgment award will wind up ineffectual when not immediately executed, it is
most respectfully prayed that herein respondent be required to post a
supersedeas bond. The statutory
undertaking of posting a bond will then achieve a three-pronged direction of
justice, (1) it will cast no doubt on the solvency of the herein petitioner;
(2) it will not defeat or render phyrric a just resolution of the case
whichever party prevails in the end or in the main case on appeal, since both
of their claims are secured by their corresponding bonds; and (3) it will put
to equitable operation Sec. 3 Rule 39 of the Revised Rules of Court.^[12]

The foregoing allegations which were not traversed that
petitioner is facing many law suits arising from said sinking of its vessel
involving cargo loss of no less than 50 million pesos, in some cases of which
judgment had been rendered against Aboitiz, and considering that its insurer is
now bankrupt, leaving Aboitiz alone to face and answer the suits, which may
render any judgment for GAFLAC ineffectual, that the appeal is interposed
manifestly for delay and the willingness of GAFLAC to put up a bond certainly
are cogent bases for the issuance of an order of execution pending appeal.

Finally, in a similar case for damages arising from the same incident
entitled Aboitiz Shipping Corporation vs. Honorable Court of Appeals and Allied
Guaranteed Insurance Company, Inc., G.R. No. 88159, this Court in a resolution
dated November 13, 1989 dismissed the petition for lack of merit. Therein this Court held in part –

“The appellate court affirmed the decision of the lower court
based on its findings that the cause of sinking of the vessel was due to its
unseaworthiness and the failure of its crew and the master to exercise
extraordinary diligence.

The petitioner, however, contends that the appellate court erred on
this matter and insists that the contrary findings of the Board of Marine
Inquiry (BMI), which conducted a separate investigation to the effect that the
proximate cause of the sinking of the vessel was due to force majeure
and that the officers and crew had exhausted all preventive measures to save
the vessel and her cargo but to no avail, should prevail. This, according to the petitioner is based
on the doctrine of primary administrative jurisdiction.

This argument is untenable.

A cursory reading of the decision and resolution of the appellate
court shows that the same took into consideration not only the findings of the
lower court but also the findings of the BMI. Thus, the appellate court stated:

‘Indeed, the decision of the Board was based simply on its finding
that the Philippine Coast Guard had certified the vessel to be seaworthy and
that it sank because it was exposed later to an oncoming typhoon plotted within
the radius where the vessel was positioned. This generalization certainly cannot prevail over the detailed
explanation of the trial court in this case as basis for its contrary
conclusion.’ (Rollo, at p. 42)

We find no cogent reason to deviate from the factual findings of
the appellate court and rule that the doctrine of primary administrative
jurisdiction is not applicable in the case at bar.

The other issue raised is whether or not the carrier’s liability is
limited to $500.00 pursuant to section 8 of the Bill of Lading. The petitioner claims that the appellate
court erred in disregarding the limitation of liability stipulated in the bill
of lading. It argues that the consignee
agreed to this amount (and) therefore is bound by this rate and that there is
no basis for the appellate court’s finding that the rate is unreasonable.

The argument is not well-taken. As aptly stated by the appellate court:

‘Generally speaking any stipulation, limiting the common carrier’s
liability to the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value is valid. (Civil Code, Art. 1749) Such stipulation, however, must be
reasonable and just under the circumstances and must have been fairly and
freely agreed upon. (St. Paul Fire
& Marine Insurance Co. v. Macondray & Co., 70 SCRA 122, 126-127 [1976])
In the case at bar, the goods shipped on the M/V ‘P. Aboitiz’ were insured for
P278,536.50, which may be taken as their value. To limit the liability of the carrier to $500.00 would obviously
put in its power to have taken the whole cargo. In Juan Ysmael & Co. v. Gabino Barretto & Co., 51
Phil. 90 [1927], it was held that a stipulation limiting the carrier’s
liability to P300.00 per package of silk, when the value of such package was
P2,500.00, unless the true value had been declared and the corresponding
freight paid; was void as against public policy. That ruling applies to this case.’

As argued by the respondent, a limitation of liability in this case
would render inefficacious the extraordinary diligence required by law of
common carriers.”¹³

The motion for reconsideration of said resolution filed by
petitioner was denied with finality in a resolution dated January 8, 1990. Said resolution of the case had become final
and executory, entry of judgment having been made and the records remanded for
execution on March 22, 1990.

Said case is now the law of the case applicable to the present
petition.

WHEREFORE, the petition is dismissed with costs against
petitioner.

SO ORDERED.

Narvasa, (Chairman), Cruz, Griño-Aquino, and Medialdea, JJ., concur.

^[1]
Page 36, Rollo.

^[2]
Justice Reynato S. Puno was the ponente with Justices Jorge S. Imperial
and Cezar D. Francisco concurring.

^[3]
Pages 14 to 15, Rollo.

^[4]
Page 44, Rollo.

^[5]
Manahan vs. People, 167 SCRA 1, 7 (1988); Mangubat vs. de Castro,
163 SCRA 608, 612 (1988); Rosario Bros. Inc. vs. Ople, 131 SCRA 72
(1984).

^[6]
138 SCRA 553, 559 (1985).

^[7]
Page 174, Rollo.

^[8]
Pages 38 to 41, Rollo.

^[9]
Northeast Marine Terminal Co. Inc. vs. Caputo, 432 U.S. 249, 270,
1977 AMC 1037, 1053-54 (1977); Mitsui & Co. vs. American Export
Lines, Inc., 1981 AMC at 343; 636 F. 2d at 816.

^[10]
Leather’s Best, Inc vs. S.S. Meamaclynx, 1871 AMC 2383, 2403, 451 F. 2d
800, 815 (2 Cir. 1971).

^[11]
Pages 50-51, Rollo.

^[12]
Pages 182 to 183, Rollo.

14 Pages 92 to 94, Rollo.