G.R. No.

L-74811 December 14, 1988

CHUA YEK HONG, petitioner,

vs.
INTERMEDIATE APPELLATE COURT, MARIANO GUNO and DOMINADOR
OLIT, respondents.

FACTS:

Respondent is owner of M/V Luzviminda, a common carrier engaged in coastwise trade from
the different ports of Oriental Mindoro to the Port of Manila. In October 1977, petitioner
loaded 1,000 sacks of copra, valued at P101,227.40 on board M/V Luzviminda for shipment
to Manila. Said cargo, however, did not reach Manila because the vessel capsized and sank
with all its cargo. Petitioner then instituted a complaint for damages on breach of contract of
carriage against private respondent. The trial court rendered a decision in favour of the
petitioners. On appeal, the appellate court ruled in favour of the respondents applying
article 587 of the Code of Commerce.

Unsuccessful in his motion for reconsideration, petitioner filed this petition.

ISSUE:

Whether or not the respondent court erred in applying the doctrine of limited liability under
Article 587 of the Code of Commerce

HELD:

Article 587 of the Code of Commerce provides: The ship agents shall be civilly liable
for the indemnities in favour of third persons which may arise from the conduct of
the captain in the care of the goods which he loaded on the vessel; but he may
exempt himself therefrom by abandoning the vessel with all the equipment and the
freight it may have earned during the voyage.

The limited liability rule, however provides for exceptions: (1) where the injury or death to a
passenger is due either to the fault of the ship owner, or to the concurring negligence of the
ship owner and the captain (2) where the vessel is insured; and (3) in workmen's
compensation claims. In this case, there is nothing in the records to show that the loss of the
cargo was due to the fault of the private respondent as ship owners, or to their concurrent
negligence with the captain of the vessel and there was no showing that the vessel was
insured. As the court held, there is nothing in the records showing such negligence

Said article is the source of the doctrine of limited liability, which gives the ship agents or
owners right of abandonment of the vessel and earned freight and such abandonment
provides the cessation of the responsibility of the ship agent/owner. In other words, the ship
agent/owners liability is merely co-extensive with his interest in the vessel that a total loss
thereof results in its extinction, no vessel, no liability.

Also, the provisions of the Civil Code on common carriers do not apply in this case since the
circumstances of the case are not within those that can be regulated by such provisions so
the Code of Commerce and other special laws shall apply. In sum, it is held that the
respondents are freed from their liabilities applying the limited liability rule for having totally
lost the vessel and none of the exceptions apply to them, the liability for the loss of the
cargo of the copra must be deemed extinguished.