Supreme Court E-Library

160 PHILIPPINE REPORTS

Dela Torre vs. Hon. Court of Appeals, et al.

THIRD DIVISION

[G.R. No. 160088. July 13, 2011]

AGUSTIN P. DELA TORRE, petitioner, vs. THE

HONORABLE COURT OF APPEALS, CRISOSTOMO
G. CONCEPCION, RAMON “BOY” LARRAZABAL,
PHILIPPINE TRIGON SHIPYARD CORPORATION,
and ROLAND G. DELA TORRE, respondents.

[G.R. No. 160565. July 13, 2011]

PHILIPPINE TRIGON SHIPYARD CORPORATION and

ROLAND G. DELA TORRE, petitioners, vs.
CRISOSTOMO G. CONCEPCION, AGUSTIN DELA
TORRE and RAMON “BOY” LARRAZABAL,
respondents.

SYLLABUS

1. REMEDIAL LAW; APPEALS; FACTUAL FINDINGS OF THE

TRIAL COURT, RESPECTED.— As regards the issues
requiring a review of the factual findings of the trial court,
the Court finds no compelling reason to deviate from the rule
that findings of fact of a trial judge, especially when affirmed
by the appellate court, are binding before this Court.
2. COMMERCIAL LAW; CODE OF COMMERCE; LIMITED
LIABILITY RULE; ELUCIDATED.— [T]he Limited Liability
Rule under the Code of Commerce x x x has been explained
to be that of the real and hypothecary doctrine in maritime
law where the shipowner or ship agent’s liability is held as
merely co-extensive with his interest in the vessel such that
a total loss thereof results in its extinction. In this jurisdiction,
this rule is provided in three articles of the Code of Commerce.
These are: Art. 587. The ship agent shall also be civilly liable
for the indemnities in favor 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 her equipment and the freight
it may have earned during the voyage. Art. 590. The co-owners
 Supreme Court E-Library

VOL. 669, JULY 13, 2011 161

Dela Torre vs. Hon. Court of Appeals, et al.

of the vessel shall be civilly liable in the proportion of their

interests in the common fund for the results of the acts of the
captain referred to in Art. 587. Each co-owner may exempt
himself from this liability by the abandonment, before a notary,
of the part of the vessel belonging to him. Art. 837. The civil
liability incurred by shipowners in the case prescribed in this
section, shall be understood as limited to the value of the vessel
with all its appurtenances and freightage served during the
voyage. Article 837 specifically applies to cases involving
collision which is a necessary consequence of the right to
abandon the vessel given to the shipowner or ship agent under
the first provision – Article 587. Similarly, Article 590 is a
reiteration of Article 587, only this time the situation is that
the vessel is co-owned by several persons. Obviously, the
forerunner of the Limited Liability Rule under the Code of
Commerce is Article 587. Now, the latter is quite clear on
which indemnities may be confined or restricted to the value
of the vessel pursuant to the said Rule, and these are the –
“indemnities in favor of third persons which may arise from
the conduct of the captain in the care of the goods which he
loaded on the vessel.” Thus, what is contemplated is the liability
to third persons who may have dealt with the shipowner, the
agent or even the charterer in case of demise or bareboat charter.
The only person who could avail of this is the shipowner,
Concepcion. He is the very person whom the Limited Liability
Rule has been conceived to protect.
3. ID.; ID.; RIGHTS BETWEEN THE CHARTERER AND THE
SHIPOWNER, DISTINGUISHED.— In distinguishing the
rights between the charterer and the shipowner, the case of
Yueng Sheng Exchange and Reading Co. v. Urrutia & Co. is
most enlightening. In that case, no less than Chief Justice
Arellano wrote: The whole ground of this assignment of errors
rests on the proposition advanced by the appellant company
that ‘the charterer of a vessel, under the conditions stipulated
in the charter party in question, is the owner pro hac vice of
the ship and takes upon himself the responsibilities of the
owner.’ x x x If G. Urrutia & Co., by virtue of the above-
mentioned contract, became the agents of the Cebu, then they
must respond for the damages claimed, because the owner and
the agent are civilly responsible for the acts of the captain.
But G. Urrutia & Co. could not in any way exercise the powers
 Supreme Court E-Library

162 PHILIPPINE REPORTS

Dela Torre vs. Hon. Court of Appeals, et al.

or rights of an agent. They could not represent the ownership

of the vessel, nor could they, in their own name and in such
capacity, take judicial or extrajudicial steps in all that relates
to commerce; thus if the Cebu were attached, they would have
no legal capacity to proceed to secure its release; speaking
generally, not even the fines could or ought to be paid by them,
unless such fines were occasioned by their orders. x x x. The
contract executed by Smith, Bell & Co., as agents for the Cebu,
and G. Urrutia & Co., as charterers of the vessel, did not put
the latter in the place of the former, nor make them agents of
the owner or owners of the vessel. With relation to those
agents, they retained opposing rights derived from the charter
party of the vessel, and at no time could they be regarded by
the third parties, or by the authorities, or by the courts, as
being in the place of the owners or the agents in matters relating
to the responsibilities pertaining to the ownership and
possession of the vessel. x x x In Yueng Sheng, it was further
stressed that the charterer does not completely and absolutely
step into the shoes of the shipowner or even the ship agent
because there remains conflicting rights between the former
and the real shipowner as derived from their charter agreement.
The Court again quotes Chief Justice Arellano: Their (the
charterer’s) possession was, therefore, the uncertain title of
lease, not a possession of the owner, such as is that of the
agent, who is fully subrogated to the place of the owner in
regard to the dominion, possession, free administration, and
navigation of the vessel. Therefore, even if the contract is for
a bareboat or demise charter where possession, free
administration and even navigation are temporarily surrendered
to the charterer, dominion over the vessel remains with the
shipowner. Ergo, the charterer or the sub-charterer, whose
rights cannot rise above that of the former, can never set up
the Limited Liability Rule against the very owner of the vessel.
Borrowing the words of Chief Justice Artemio V. Panganiban,
“Indeed, where the reason for the rule ceases, the rule itself
does not apply.”
4. ID.; ID.; CHARTERED VESSEL NOT COMMERCIALLY
OFFERED FOR PUBLIC USE, AGREEMENTS ARE THAT
OF A PRIVATE CARRIAGE WITH RIGHTS GOVERNED
BY THEIR CONTRACT.— In the present case, the charterer
and the sub-charterer through their respective contracts of
agreement/charter parties, obtained the use and service of the
 Supreme Court E-Library

VOL. 669, JULY 13, 2011 163

Dela Torre vs. Hon. Court of Appeals, et al.

entire LCT-Josephine. The vessel was likewise manned by the

charterer and later by the sub-charterer’s people. With the
complete and exclusive relinquishment of possession, command
and navigation of the vessel, the charterer and later the sub-
charterer became the vessel’s owner pro hac vice. Now, and
in the absence of any showing that the vessel or any part thereof
was commercially offered for use to the public, the above
agreements/charter parties are that of a private carriage where
the rights of the contracting parties are primarily defined and
governed by the stipulations in their contract.
5. ID.; ID.; CHARTER PARTIES; WHERE RIGHTS AND
OBLIGATIONS UNDER THE CODE OF COMMERCE
NOT APPLICABLE TO THE PRESENT CASE,
DEFICIENCY THEREOF SUPPLIED BY THE NEW CIVIL
CODE.— Although certain statutory rights and obligations of
charter parties are found in the Code of Commerce, these
provisions are not applicable in the present case. Indeed, none
of the provisions found in the Code of Commerce deals with
the specific rights and obligations between the real shipowner
and the charterer obtaining in this case. Necessarily, the Court
looks to the New Civil Code to supply the deficiency.

APPEARANCES OF COUNSEL

Jarvis Y. Ortega for Agustin Y. Ortega.

Edgar G. Dela Torre for Phil. Trigon Shipyard Corp.
Ricardo B. Bermudo for Crisostomo Concepcion.

DECISION

MENDOZA, J.:

These consolidated petitions1 for review on certiorari seek

to reverse and set aside the September 30, 2002 Decision 2 and
1
G.R. No. 160088 and G.R. No. 160565 consolidated as per Court Resolution
dated May 17, 2004.
2
Rollo (G.R. No. 160088), pp. 38-55. Penned by then Associate Justice
Ruben T. Reyes (a retired member of this Court) with Associate Justices
Andres B. Reyes (now Presiding Justice of the Court of Appeals) and Mariano
C. Del Castillo (now an Associate Justice of this Court), concurring.
 Supreme Court E-Library

164 PHILIPPINE REPORTS

Dela Torre vs. Hon. Court of Appeals, et al.

September 18, 2003 Resolution3 of the Court of Appeals (CA)

in CA-G.R. CV No. 36035, affirming in toto the July 10, 1991
Decision 4 of the Regional Trial Court, Branch 60, Angeles City
(RTC). The RTC Decision in Civil Case No. 4609, an action
for Sum of Money and Damages, ordered the defendants, jointly
and severally, to pay various damages to the plaintiff.
The Facts:
Respondent Crisostomo G. Concepcion (Concepcion) owned
LCT-Josephine, a vessel registered with the Philippine Coast
Guard. On February 1, 1984, Concepcion entered into a “Preliminary
Agreement”5 with Roland de la Torre (Roland) for the dry-
docking and repairs of the said vessel as well as for its charter
afterwards.6 Under this agreement, Concepcion agreed that after
the dry-docking and repair of LCT-Josephine, it “should” be
chartered for P10,000.00 per month with the following conditions:
1. The CHARTERER will be the one to pay the insurance
premium of the vessel
2. The vessel will be used once every three (3) months for a
maximum period of two (2) weeks
3. The SECOND PARTY (referring to Concepcion) agreed that
LCT-Josephine should be used by the FIRST PARTY
(referring to Roland) for the maximum period of two (2)
years
4. The FIRST PARTY (Roland) will take charge[x] of maintenance
cost of the said vessel. [Underscoring Supplied]

On June 20, 1984, Concepcion and the Philippine Trigon

Shipyard Corporation 7 (PTSC), represented by Roland, entered
3
Id. (G.R. No. 160505), p. 63.
4
Records, pp. 85-100. Penned by Judge Antonio L. Descallar, RTC, Br. 60,
Angeles City.
5
Roland de la Torre is a petitioner in G.R. No. 160565 and one of the
respondents in G.R. No. 160088.
6
Rollo (G.R. No. 160088), p. 39.
7
PTSC is also a petitioner in G.R. No. 160565 and the respondent corporation
in G.R. No. 160088.
 Supreme Court E-Library

VOL. 669, JULY 13, 2011 165

Dela Torre vs. Hon. Court of Appeals, et al.

into a “Contract of Agreement,”8 wherein the latter would charter

LCT-Josephine retroactive to May 1, 1984, under the following
conditions:
a. Chartered amount of the vessel – P20,000.00 per month
effective May 1, 1984;
j. The owner (Concepcion) shall pay 50% downpayment for
the dry-docking and repair of the vessel and the balance shall
be paid every month in the amount of P10,000.00, to be
deducted from the rental amount of the vessel;
k. In the event that a THIRD PARTY is interested to purchase
the said vessel, the SECOND PARTY (PTSC/ Roland) has
the option for first priority to purchase the vessel. If the
SECOND PARTY (PTSC/Roland) refuses the offer of the
FIRST PARTY (Concepcion), shall give the SECOND PARTY
(PTSC/Roland) enough time to turn over the vessel so as
not to disrupt previous commitments;
l. That the SECOND PARTY (PTSC/Roland) has the option
to terminate the contract in the event of the SECOND PARTY
(PTSC/Roland) decide to stop operating;
m. The SECOND PARTY (PTSC/Roland) shall give 90 days
notice of such termination of contract;
n. Next x x x year of dry-docking and repair of vessel shall be
shouldered by the SECOND PARTY (PTSC/Roland);
[Underscoring Supplied]
On August 1, 1984, PTSC/Roland sub-chartered LCT-
Josephine to Trigon Shipping Lines (TSL), a single proprietorship
owned by Roland’s father, Agustin de la Torre (Agustin). 9 The
following are the terms and conditions of that “Contract of
Agreement”:10
a. Chartered amount of the vessel P30,000.00 per month
effective August, 1984;
8
Exhibit “C”, Folder of Exhibits, Vol. 1, p. 194.
9
Agustin de la Torre is the Petitioner in G.R. No. 160088 and one of the
respondents in G.R. No. 160565; rollo (G.R. No. 160088), p. 41.
10
Exhibits “2”/“102”, Folder of Exhibits, Vol. 3, p. 1.
 Supreme Court E-Library

166 PHILIPPINE REPORTS

Dela Torre vs. Hon. Court of Appeals, et al.

b. Downpayment of the 50% upon signing of the contract and

the balance every end of the month;
c. Any cost for the additional equipment to be installed on
the vessel will be borne by the FIRST PARTY (PTSC/ Roland)
and the cost of the equipment will be deductible from the
monthly rental of the vessel;
d. In the event the vessel is grounded or other [force majeure]
that will make the vessel non-opera[xx]ble, the rental of
the vessel shall be suspended from the start until the vessel
will be considered operational;
e. The cost for the dry-docking and/or repair of vessel shall
not exceed P200,000.00, any excess shall be borne by the
SECOND PARTY (TSL/Agustin);
f. The SECOND PARTY (TSL/Agustin) undertakes to shoulder
the maintenance cost for the duration of the usage;
g. All cost for the necessary repair of the vessel shall be on
the account of the SECOND PARTY (TSL/Agustin);
h. That the SECOND PARTY (TSL/Agustin) has the option to
terminate the contract in the event the SECOND PARTY
(TSL/Agustin) decides to stop operating;
j. The FIRST PARTY (PTSC/Roland) will terminate the services
of all vessel’s crew and the SECOND PARTY (TSL/Agustin)
shall have the right to replace and rehire the crew of the
vessel.
k. Insurance premium of the vessel will be divided equally
between the FIRST PARTY (PTSC/Rolando) and the
SECOND PARTY (TSL/ Agustin). [Underscoring supplied]

On November 22, 1984, TSL, this time represented by Roland

per Agustin’s Special Power of Attorney,11 sub-chartered LCT-
Josephine to Ramon Larrazabal (Larrazabal) for the transport
of cargo consisting of sand and gravel to Leyte. The following
were agreed upon in that contract,12 to wit:
11
Exhibit “4”/“101”, Folder of Exhibits, Vol. 3, p. 3.
12
Exhibit “3”/“103”; Folder of Exhibits, Vol. 3, p. 2.
 Supreme Court E-Library

VOL. 669, JULY 13, 2011 167

Dela Torre vs. Hon. Court of Appeals, et al.

1. That the FIRST PARTY (TSL by Roland) agreed that LCT-

Josephine shall be used by the SECOND PARTY (Larrazabal)
for and in consideration on the sum of FIVE THOUSAND
FIVE HUNDRED (P5,500.00) PESOS, Philippine currency
per day charter with the following terms and conditions.
2. That the CHARTERER should pay P2,000.00 as standby pay
even that will made (sic) the vessel non-opera[xx]ble cause[d]
by natur[al] circumstances.
3. That the CHARTERER will supply the consumed crude oil
and lube oil per charter day.
4. That the SECOND PARTY (Larrazabal) is the one responsible
to supervise in loading and unloading of cargo load on the
vessel.
5. That the SECOND PARTY (Larrazabal) shall give one week
notice for such termination of contract.
6. TERMS OF PAYMENTS that the SECOND PARTY
(Larrazabal) agreed to pay 15 days in advance and the balance
should be paid weekly. [Underscoring Supplied]
On November 23, 1984, the LCT-Josephine with its cargo
of sand and gravel arrived at Philpos, Isabel, Leyte. The vessel
was beached near the NDC Wharf. With the vessel’s ramp
already lowered, the unloading of the vessel’s cargo began with
the use of Larrazabal’s payloader. While the payloader was on
the deck of the LCT-Josephine scooping a load of the cargo,
the vessel’s ramp started to move downward, the vessel tilted
and sea water rushed in. Shortly thereafter, LCT-Josephine
sank. 13
Concepcion demanded that PTSC/ Roland refloat LCT-
Josephine. The latter assured Concepcion that negotiations were
underway for the refloating of his vessel. 14 Unfortunately, this
did not materialize.
For this reason, Concepcion was constrained to institute a
complaint for “Sum of Money and Damages” against PTSC
13
CA rollo, p. 153.
14
Exhibit “D”, Folder of Exhibits, Vol. 1, p. 196.
 Supreme Court E-Library

168 PHILIPPINE REPORTS

Dela Torre vs. Hon. Court of Appeals, et al.

and Roland before the RTC. PTSC and Roland filed their answer
together with a third-party complaint against Agustin. Agustin,
in turn, filed his answer plus a fourth-party complaint against
Larrazabal. The latter filed his answer and counterclaim but
was subsequently declared in default by the RTC.15 Eventually,
the fourth-party complaint against Larrazabal was dismissed
when the RTC rendered its decision in favor of Concepcion on
July 10, 1991.16 In said RTC decision, the following observations
were written:
The testimonies of Roland de la Torre and Hubart Sungayan quoted
above, show: (1) that the payloader was used to unload the cargo of
sand and gravel; (2) that the payloader had to go inside the vessel
and scoop up a load; (3) that the ramp according to Roland de la
Torre, “was not properly put into peak (sic) such that the front line
will touch the bottom, particularly will touch the sea x x x”; (4) that
“the tires (of the payloader) will be submerged to (sic) the sea”; (5)
that according to Sungayan “the ramp of the vessel was moving down”;
(6) that the payloader had to be maneuvered by its operator who
dumped the load at the side of the vessel; (7) that the dumping of
the load changed the stability of the vessel and tilted it to the starboard
side; and (8) that the tilting caused the sliding of the cargo toward
that side and opened the manhole through which seawater rushed
in. 17

Hubart Sungayan, who was the chiefmate of LCT-Josephine

and under the employ of TSL/Agustin, also admitted at the trial
that it was TSL/Agustin, through its crew, who was in-charge
of LCT-Josephine’s operations although the responsibility of
loading and unloading the cargo was under Larrazabal. Thus,
the RTC declared that the “efficient cause of the sinking of the
LCT-JOSEPHINE was the improper lowering or positioning of
the ramp,” which was well within the charge or responsibility
of the captain and crew of the vessel.18 The fallo of the RTC
Decision reads:
15
CA rollo, pp. 86-88.
16
Id. at 100.
17
Id. at 94.
18
Id. at 94-95.
 Supreme Court E-Library

VOL. 669, JULY 13, 2011 169

Dela Torre vs. Hon. Court of Appeals, et al.

WHEREFORE, in view of all the foregoing, judgment is hereby

rendered as follows:
1. The defendants, Philippine Trigon Shipping Corporation
and Roland de la Torre, and the third-party defendant,
Agustin de la Torre, shall pay the plaintiff, jointly and
severally, the sum of EIGHT HUNDRED FORTY-ONE
THOUSAND THREE HUNDRED EIGHTY SIX PESOS
AND EIGHTY SIX CENTAVOS (P841,386.86) as the
value of the LCT JOSEPHINE with interest thereon at
the legal rate of 6% per annum from the date of demand,
that is from March 14, 1985, the date when counsel for
the defendant Philippine Trigon Shipyard Corporation
answered the demand of the plaintiff, until fully paid;
2. The defendants, Philippine Trigon Shipyard Corporation
and Roland de la Torre, shall pay to the plaintiff the sum
of NINETY THOUSAND PESOS (P90,000.00) as unpaid
rentals for the period from May 1, 1984, to November,
1984, and the sum of ONE HUNDRED SEVENTY
THOUSAND PESOS (P170,000.00) as lost rentals from
December, 1984, to April 30, 1986, with interest on both
amounts at the rate of 6% per annum also from demand
on March 14, 1985, until fully paid;
3. The defendants and the third-party defendant shall likewise
pay to the plaintiff jointly and severally the sum of
TWENTY-FIVE THOUSAND PESOS (P25,000.00) as
professional fee of plaintiff’s counsel plus FIVE HUNDRED
PESOS (P500.00) per appearance of said counsel in
connection with actual trial of this case, the number of
such appearances to be determined from the records of
this case;
4. The defendants’ counterclaim for the unpaid balance of
plaintiff’s obligation for the dry-docking and repair of
the vessel LCT JOSEPHINE in the amount of TWENTY-
FOUR THOUSAND THREE HUNDRED FOUR PESOS
AND THIRTY-FIVE CENTAVOS (P24,304.35), being
valid, shall be deducted from the unpaid rentals, with
interest on the said unpaid balance at the rate of 6% per
annum from the date of the filing of the counter-claim
on March 31, 1986;
 Supreme Court E-Library

170 PHILIPPINE REPORTS

Dela Torre vs. Hon. Court of Appeals, et al.

5. The counter-claim of the defendants in all other respects,

for lack of merit, is hereby DISMISSED;
6. The fourth-party complaint against the fourth-party
defendant, Ramon Larrazabal, being without basis, is
likewise DISMISSED; and
7. The defendants and third-party defendant shall pay the
costs.
SO ORDERED. 19

Agustin, PTSC and Roland went to the CA on appeal. The

appellate court, in agreement with the findings of the RTC,
affirmed its decision in toto.
Still not in conformity with the CA findings against them,
Agustin, PTSC and Roland came to this Court through these
petitions for review. In G.R. No. 160088, petitioner Agustin
raises the following issues:
AGUSTIN’S STATEMENT OF THE ISSUES
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THE
PROXIMATE CAUSE OF THE SINKING OF LCT JOSEPHINE
IS THE NEGLIGENCE OF THE PETITIONER (Agustin) AND
THE RESPONDENTS TRIGON (PTSC) AND DE LA TORRE
(Roland).
II
THE COURT OF APPEALS ERRED IN NOT HOLDING
RESPONDENT RAMON LARRAZABAL AS SOLELY LIABLE
FOR THE LOSS AND SINKING OF LCT JOSEPHINE.
III
THE TRIAL COURT AND THE COURT OF APPEALS GRAVELY
ERRED IN TAKING JUDICIAL NOTICE OF THE
CHARACTERISTICS OF THE LCT JOSEPHINE AND
PAYLOADER WITHOUT INFORMING THE PARTIES OF
THEIR INTENTION.

19
Id. at 99-100.
 Supreme Court E-Library

VOL. 669, JULY 13, 2011 171

Dela Torre vs. Hon. Court of Appeals, et al.

IV
THE COURT OF APPEALS ERRED IN HOLDING PETITIONER
DIRECTLY AND SOLIDARILY LIABLE WITH THE
RESPONDENTS TRIGON AND DE LA TORRE DESPITE THE
FACT THAT SUCH KIND OF LIABILITY IS NOT DULY
ALLEGED IN THE COMPLAINT OF RESPONDENT
CONCEPCION AND NOT ONE OF THE ISSUES TRIED BY THE
PARTIES.
V
THE COURT OF APPEALS ERRED IN HOLDING THAT
PETITIONER IS LIABLE BASED ON CULPA CONTRACTUAL.
VI
THE COURT OF APPEALS ERRED IN NOT EXCULPATING
PETITIONER FROM LIABILITY BASED ON THE LIMITED
LIABILITY RULE.
VII
THE COURT OF APPEALS ERRED IN NOT APPLYING THE
PROVISIONS OF THE CODE OF COMMERCE ON THE
LIABILITY OF THE SHIP CAPTAIN. 20
On the other hand, in G.R. No. 160565, PTSC and Roland
submit the following issues:
PTSC and ROLAND’S STATEMENT OF THE ISSUES
I.
DID THE HONORABLE COURT OF APPEALS ERRxx IN
APPLYING THE PROVISIONS OF THE CIVIL CODE OF THE
PHILIPPINES PARTICULARLY ON CONTRACTS, LEASE,
QUASI-DELICT AND DAMAGES INSTEAD OF THE
PROVISIONS OF THE CODE OF COMMERCE ON MARITIME
COMMERCE IN ADJUDGING PETITIONERS LIABLE TO
PRIVATE RESPONDENT CONCEPCION.
II.
DID THE HONORABLE COURT OF APPEALS ERRxx IN
UPHOLDING THE FINDINGS OF FACT OF THE TRIAL COURT.
20
Rollo (G.R. No. 160088), pp. 146-147.
 Supreme Court E-Library

172 PHILIPPINE REPORTS

Dela Torre vs. Hon. Court of Appeals, et al.

III.
DID THE HONORABLE COURT OF APPEALS COMMITxx
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
IN EXCESS OF ITS JURISDICTION IN APPRECIATING THE
FACTS OF THE CASE.
IV.
DID THE HONORABLE COURT OF APPEALS, IN
ADJUDGING PETITIONERS JOINTLY AND SEVERALLY
LIABLE WITH RESPONDENT AGUSTIN DE LA TORRE, ERRxx
WHEN IT MADE FINDINGS OF FACT AND CONCLUSIONS
OF LAW WHICH ARE BEYOND THE ISSUES SET FORTH AND
CONTEMPLATED IN THE ORIGINAL PLEADINGS OF THE
PARTIES.21
From the foregoing, the issues raised in the two petitions can
be categorized as: (1) those referring to the factual milieu of
the case; (2) those concerning the applicability of the Code of
Commerce, more specifically, the Limited Liability Rule; and
(3) the question on the solidary liability of the petitioners.
As regards the issues requiring a review of the factual findings
of the trial court, the Court finds no compelling reason to deviate
from the rule that findings of fact of a trial judge, especially
when affirmed by the appellate court, are binding before this
Court. 22 The CA, in reviewing the findings of the RTC, made
these observations:
We are not persuaded that the trial Court finding should be set
aside. The Court a quo sifted through the records and arrived at the
fact that clearly, there was improper lowering or positioning of the
ramp, which was not at “peak,” according to de la Torre and “moving
down” according to Sungayan when the payloader entered and scooped
up a load of sand and gravel. Because of this, the payloader was in
danger of being lost (‘submerged’) and caused Larrazabal to order
the operator to go back into the vessel, according to de la Torre’s
version, or back off to the shore, per Sungayan. Whichever it was,
21
Rollo (G.R. No. 160565), pp. 200-201.
22
Bormaheco, Inc. v. Malayan Insurance Co. Inc., G.R. No. 156599,
July 26, 2010, 625 SCRA 309, 318-319.
 Supreme Court E-Library

VOL. 669, JULY 13, 2011 173

Dela Torre vs. Hon. Court of Appeals, et al.

the fact remains that the ramp was unsteady (moving) and compelled
action to save the payloader from submerging, especially because
of the conformation of the sea and the shore. x x x.
xxx xxx xxx
The contract executed on June 20, 1984, between plaintiff-appellee
and defendants-appellants showed that the services of the crew of
the owner of the vessel were terminated. This allowed the charterer,
defendants-appellants, to employ their own. The sub-charter contract
between defendants-appellants Philippine Trigon Shipyard Corp. and
third-party defendant-appellant Trigon Shipping Lines showed similar
provision where the crew of Philippine Trigon had to be terminated
or rehired by Trigon Shipping Lines. As to the agreement with fourth-
party Larrazabal, it is silent on who would hire the crew of the vessel.
Clearly, the crew manning the vessel when it sunk belonged to third-
party defendant-appellant. Hubart Sungayan, the acting Chief Mate,
testified that he was hired by Agustin de la Torre, who in turn admitted
to hiring the crew. The actions of fourth-party defendant, Larrazabal
and his payloader operator did not include the operation of docking
where the problem arose. 23 [Underscoring supplied]
Similarly, the Court has examined the records at hand and
completely agree with the CA that the factual findings of the
RTC are in order.
With respect to petitioners’ position that the Limited Liability
Rule under the Code of Commerce should be applied to them,
the argument is misplaced. The said rule has been explained to
be that of the real and hypothecary doctrine in maritime law
where the shipowner or ship agent’s liability is held as merely
co-extensive with his interest in the vessel such that a total loss
thereof results in its extinction.24 In this jurisdiction, this rule is
provided in three articles of the Code of Commerce. These are:
Art. 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which may arise from the conduct
of the captain in the care of the goods which he loaded on the vessel;

23
Rollo (G.R. No. 160088), p. 50.
24
Aboitiz Shipping Corporation v. CA, G.R. Nos. 121833, 130752, 137801,
October 17, 2008, 569 SCRA 294, 307.
 Supreme Court E-Library

174 PHILIPPINE REPORTS

Dela Torre vs. Hon. Court of Appeals, et al.

but he may exempt himself therefrom by abandoning the vessel with

all her equipment and the freight it may have earned during the voyage.
---
Art. 590. The co-owners of the vessel shall be civilly liable in
the proportion of their interests in the common fund for the results
of the acts of the captain referred to in Art. 587.
Each co-owner may exempt himself from this liability by the
abandonment, before a notary, of the part of the vessel belonging to him.
---
Art. 837. The civil liability incurred by shipowners in the case
prescribed in this section, shall be understood as limited to the value
of the vessel with all its appurtenances and freightage served during
the voyage.
Article 837 specifically applies to cases involving collision
which is a necessary consequence of the right to abandon the
vessel given to the shipowner or ship agent under the first provision-
Article 587. Similarly, Article 590 is a reiteration of Article
587, only this time the situation is that the vessel is co-owned
by several persons. 25 Obviously, the forerunner of the Limited
Liability Rule under the Code of Commerce is Article 587.
Now, the latter is quite clear on which indemnities may be
confined or restricted to the value of the vessel pursuant to the
said Rule, and these are the – “indemnities in favor of third
persons which may arise from the conduct of the captain in the
care of the goods which he loaded on the vessel.” Thus, what
is contemplated is the liability to third persons who may have
dealt with the shipowner, the agent or even the charterer in
case of demise or bareboat charter.
The only person who could avail of this is the shipowner,
Concepcion. He is the very person whom the Limited Liability
Rule has been conceived to protect. The petitioners cannot
invoke this as a defense. In Yangco v. Laserna, 26 this Court,
through Justice Moran, wrote:
25
Yangco v. Laserna, 73 Phil. 330, 333 (1941).
26
Id.
 Supreme Court E-Library

VOL. 669, JULY 13, 2011 175

Dela Torre vs. Hon. Court of Appeals, et al.

The policy which the rule is designed to promote is the

encouragement of shipbuilding and investment in maritime commerce.
xxx xxx xxx.
‘Grotius, in his law of War and Peace, says that men would
be deterred from investing in ships if they thereby incurred
the apprehension of being rendered liable to an indefinite amount
by the acts of the master, x x x.’ 27
Later, in the case of Monarch Insurance Co., Inc. v. CA,28
this Court, this time through Justice Sabino R. De Leon, Jr.,
again explained:
‘No vessel, no liability,’ expresses in a nutshell the limited liability
rule. The shipowner’s or agent’s liability is merely coextensive with
his interest in the vessel such that a total loss thereof results in its
extinction. The total destruction of the vessel extinguishes maritime
liens because there is no longer any res to which it can attach. This
doctrine is based on the real and hypothecary nature of maritime
law which has its origin in the prevailing conditions of the maritime
trade and sea voyages during the medieval ages, attended by
innumerable hazards and perils. To offset against these adverse
conditions and to encourage shipbuilding and maritime commerce,
it was deemed necessary to confine the liability of the owner or
agent arising from the operation of a ship to the vessel, equipment,
and freight, or insurance, if any. 29

In view of the foregoing, Concepcion as the real shipowner

is the one who is supposed to be supported and encouraged to
pursue maritime commerce. Thus, it would be absurd to apply
the Limited Liability Rule against him who, in the first place,
should be the one benefitting from the said rule. In distinguishing
the rights between the charterer and the shipowner, the case of
Yueng Sheng Exchange and Trading Co. v. Urrutia & Co.30 is
most enlightening. In that case, no less than Chief Justice Arellano
wrote:
27
Id. at 339.
28
338 Phil. 725 (2000).
29
Id. at 751.
30
12 Phil. 747 (1909).
 Supreme Court E-Library

176 PHILIPPINE REPORTS

Dela Torre vs. Hon. Court of Appeals, et al.

The whole ground of this assignment of errors rests on the

proposition advanced by the appellant company that ‘the charterer
of a vessel, under the conditions stipulated in the charter party in
question, is the owner pro hac vice of the ship and takes upon himself
the responsibilities of the owner.’
xxx xxx xxx
If G. Urrutia & Co., by virtue of the above-mentioned contract,
became the agents of the Cebu, then they must respond for the
damages claimed, because the owner and the agent are civilly
responsible for the acts of the captain.
But G. Urrutia & Co. could not in any way exercise the powers
or rights of an agent. They could not represent the ownership of the
vessel, nor could they, in their own name and in such capacity, take
judicial or extrajudicial steps in all that relates to commerce; thus
if the Cebu were attached, they would have no legal capacity to proceed
to secure its release; speaking generally, not even the fines could
or ought to be paid by them, unless such fines were occasioned by
their orders. x x x.
The contract executed by Smith, Bell & Co., as agents for the
Cebu, and G. Urrutia & Co., as charterers of the vessel, did not put
the latter in the place of the former, nor make them agents of the
owner or owners of the vessel. With relation to those agents, they
retained opposing rights derived from the charter party of the vessel,
and at no time could they be regarded by the third parties, or by the
authorities, or by the courts, as being in the place of the owners or
the agents in matters relating to the responsibilities pertaining to
the ownership and possession of the vessel. x x x. 31

In Yueng Sheng, it was further stressed that the charterer

does not completely and absolutely step into the shoes of the
shipowner or even the ship agent because there remains conflicting
rights between the former and the real shipowner as derived
from their charter agreement. The Court again quotes Chief
Justice Arellano:
Their (the charterer’s) possession was, therefore, the uncertain
title of lease, not a possession of the owner, such as is that of the
agent, who is fully subrogated to the place of the owner in regard
31
Id. at 751-752.
 Supreme Court E-Library

VOL. 669, JULY 13, 2011 177

Dela Torre vs. Hon. Court of Appeals, et al.

to the dominion, possession, free administration, and navigation of

the vessel . 32

Therefore, even if the contract is for a bareboat or demise

charter where possession, free administration and even navigation
are temporarily surrendered to the charterer, dominion over
the vessel remains with the shipowner. Ergo, the charterer or
the sub-charterer, whose rights cannot rise above that of the
former, can never set up the Limited Liability Rule against the
very owner of the vessel. Borrowing the words of Chief Justice
Artemio V. Panganiban, “Indeed, where the reason for the rule
ceases, the rule itself does not apply.” 33
The Court now comes to the issue of the liability of the
charterer and the sub-charterer.
In the present case, the charterer and the sub-charterer through
their respective contracts of agreement/charter parties, obtained
the use and service of the entire LCT-Josephine. The vessel
was likewise manned by the charterer and later by the sub-
charterer’s people. With the complete and exclusive relinquishment
of possession, command and navigation of the vessel, the
charterer and later the sub-charterer became the vessel’s owner
pro hac vice. Now, and in the absence of any showing that the
vessel or any part thereof was commercially offered for use to
the public, the above agreements/charter parties are that of a
private carriage where the rights of the contracting parties are
primarily defined and governed by the stipulations in their
contract. 34
Although certain statutory rights and obligations of charter
parties are found in the Code of Commerce, these provisions
as correctly pointed out by the RTC, are not applicable in the
present case. Indeed, none of the provisions found in the Code
32
Id. at 747, 753.
33
Valenzuela Hardwood and Industrial Supply, Inc. v. CA, G.R. No.
102316, June 30, 1997, 274 SCRA 642, 654.
34
National Steel Corporation v. CA, 347 Phil. 345, 362 (1997); Lea
Mer Industries, Inc. v. Malayan Insurance Co., Inc., 508 Phil. 656, 663
(2005).
 Supreme Court E-Library

178 PHILIPPINE REPORTS

Dela Torre vs. Hon. Court of Appeals, et al.

of Commerce deals with the specific rights and obligations between

the real shipowner and the charterer obtaining in this case.
Necessarily, the Court looks to the New Civil Code to supply
the deficiency.35 Thus, the RTC and the CA were both correct
in applying the statutory provisions of the New Civil Code in
order to define the respective rights and obligations of the opposing
parties.
Thus, Roland, who, in his personal capacity, entered into
the Preliminary Agreement with Concepcion for the dry-docking
and repair of LCT-Josephine, is liable under Article 118936 of
the New Civil Code. There is no denying that the vessel was
not returned to Concepcion after the repairs because of the
provision in the Preliminary Agreement that the same “should”
be used by Roland for the first two years. Before the vessel
could be returned, it was lost due to the negligence of Agustin
to whom Roland chose to sub-charter or sublet the vessel.
PTSC is liable to Concepcion under Articles 166537 and 166738
of the New Civil Code. As the charterer or lessee under the
35
Article 18 of the New Civil Code:
Art. 18. In matters which are governed by the Code of Commerce
and Special Laws, their deficiency shall be supplied by the provisions
of this Code.
36
Article 1189 of the New Civil Code:
Art. 1189. When the conditions have been imposed with the intention
of suspending the efficacy of an obligation to give, the following
rules shall be observed in case of the improvement, loss or deterioration
of the thing during the pendency of the condition:
(1) x x x
(2) If the things is lost through the fault of the debtor, he
shall be obliged to pay damages; it is understood that the
thing is lost when it perishes, or goes out of commerce, or
disappears in such a way that its existence is unknown or
cannot be recovered.
xxx xxx xxx.
37
Article 1665 of the New Civil Code:
Art. 1665. The lessee shall return the thing leased, upon the termination
of the lease, just as he received it, save what has been lost or impaired
 Supreme Court E-Library

VOL. 669, JULY 13, 2011 179

Dela Torre vs. Hon. Court of Appeals, et al.

Contract of Agreement dated June 20, 1984, PTSC was contract-

bound to return the thing leased and it was liable for the
deterioration or loss of the same.
Agustin, on the other hand, who was the sub-charterer or
sub-lessee of LCT-Josephine, is liable under Article 1651 of
the New Civil Code.39 Although he was never privy to the contract
between PTSC and Concepcion, he remained bound to preserve
the chartered vessel for the latter. Despite his non-inclusion in
the complaint of Concepcion, it was deemed amended so as to
include him because, despite or in the absence of that formality
of amending the complaint to include him, he still had his day
in court40 as he was in fact impleaded as a third-party defendant
by his own son, Roland – the very same person who represented
him in the Contract of Agreement with Larrazabal.
(S)ince the purpose of formally impleading a party is to assure
him a day in court, once the protective mantle of due process of law
has in fact been accorded a litigant, whatever the imperfection in
form, the real litigant may be held liable as a party. 41

In any case, all three petitioners are liable under Article 1170
of the New Civil Code. 42 The necessity of insuring the LCT-
by the lapse of time, or by ordinary wear and tear, or from an inevitable
cause.
38
Article 1667 of the New Civil Code:
Art. 1667. The lessee is responsible for the deterioration or loss
of the thing leased, unless he proves that it took place with his fault.
This burden of proof on the lessee does not apply when the destruction
is due to earthquake, flood, storm or other natural calamity.
39
Article 1651 of the New Civil Code:
Art.1651. Without prejudice to his obligation toward the sublessor,
the sublessee is bound to the lessor for all acts which refer to the
use and preservation of the thing leased in the manner stipulated
between the lessor and the lessee.
40
HERRERA, Remedial Law, Vol. I, 2000 Edition, p. 354.
41
Balquidra v. CFI of Capiz, Branch II, L-40490, October 28, 1977,
80 SCRA 123, 133.
42
Article 1170 of the New Civil Code:
 Supreme Court E-Library

180 PHILIPPINE REPORTS

Dela Torre vs. Hon. Court of Appeals, et al.

Josephine, regardless of who will share in the payment of the

premium, is very clear under the Preliminary Agreement and
the subsequent Contracts of Agreement dated June 20, 1984
and August 1, 1984, respectively. The August 17, 1984 letter
of Concepcion’s representative, Rogelio L. Martinez, addressed
to Roland in his capacity as the president of PTSC inquiring
about the insurance of the LCT-Josephine as well as reiterating
the importance of insuring the said vessel is quite telling.
August 17, 1984
Mr. Roland de la Torre
President
Phil. Trigon Shipyard Corp.
Cebu City
Dear Sir:
In connection with your chartering of LCT JOSEPHINE effect[ive]
May 1, 1984, I wish to inquire regarding the insurance of said vessel
to wit:
1. Name of Insurance Company
2. Policy No.
3. Amount of Premiums
4. Duration of coverage already paid
Please send a Xerox copy of policy to the undersigned as soon
as possible.
In no case shall LCT JOSEPHINE sail without any insurance
coverage.
Hoping for your (prompt) action on this regard.
Truly yours,
(sgd.) ROGELIO L. MARTINEZ
Owner’s representative 43

Art.1170. Those who in the performance of their obligations are

guilty of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages.
43
Exhibit “G”, Folder of Exhibits, Vol.1, p. 203.
 Supreme Court E-Library

VOL. 669, JULY 13, 2011 181

Automotive Engine Rebuilders, Inc. (AER), et al. vs.
Progresibong Unyon ng mga Manggagawa sa AER, et al.

Clearly, the petitioners, to whom the possession of LCT

Josephine had been entrusted as early as the time when it was
dry-docked for repairs, were obliged to insure the same.
Unfortunately, they failed to do so in clear contravention of
their respective agreements. Certainly, they should now all answer
for the loss of the vessel.
WHEREFORE, the petitions are DENIED.
SO ORDERED.
Carpio, * Velasco, Jr. (Chairperson), Abad, and Sereno, **
JJ., concur.

THIRD DIVISION

[G.R. No. 160138. July 13, 2011]

AUTOMOTIVE ENGINE REBUILDERS, INC. (AER),

ANTONIO T. INDUCIL, LOURDES T. INDUCIL,
JOCELYN T. INDUCIL and MA. CONCEPCION I.
DONATO, petitioners, vs. PROGRESIBONG UNYON
NG MGA MANGGAGAWA SA AER, ARNOLD
VILLOTA, FELINO E. AGUSTIN, RUPERTO M.
MARIANO II, EDUARDO S. BRIZUELA, ARNOLD
S. RODRIGUEZ, RODOLFO MAINIT, JR., FROILAN
B. MADAMBA, DANILO D. QUIBOY, CHRISTOPHER
R. NOLASCO, ROGER V. BELATCHA, CLEOFAS
B. DELA BUENA, JR., HERMINIO P. PAPA,
WILLIAM A. RITUAL, ROBERTO CALDEO,
*
Designated as additional member in lieu of Associate Justice Diosdado
M. Peralta per Special Order No. 1029 dated June 30, 2011.
**
Designated as additional member of the Third Division per Special
Order No. 1028 dated June 21, 2011.