Aleson Shipping Lines vs. CGU International Ins. PLC. and Candado Shipping Lines, Inc.

When a subrogee-insurer’s action for damages arising from a maritime collision is based on quasi-delict (maritime tort) and the defendant is not a party to the contract of carriage, the liability of the vessel owner is governed by the Code of Commerce provisions on collision (Articles 826 and 827), and the owner must be shown to have failed to exercise ordinary diligence, not the extraordinary diligence required of common carriers under the Civil Code.

Candano Shipping Lines, Inc. time-chartered its vessel M/V Romeo to Apo Cement Corporation to transport 31,250 bags of cement (1,250 metric tons) from Cebu to Albay. The cargo was insured by CGU International Insurance PLC. On July 14, 2002, around midnight, while M/V Romeo was navigating out of Apo channel, it was struck on its mid-section by the front hull of M/V Aleson Carrier 5, a vessel owned by Aleson Shipping Lines. The collision created a gaping hole that caused M/V Romeo to sink within minutes together with the cargo. Apo Cement demanded payment from both shipping lines without success, filed an insurance claim with CGU Insurance, and was indemnified. CGU Insurance, as subrogee, then sued both Candano Shipping and Aleson Shipping for actual damages and attorney’s fees before the Regional Trial Court.

The Time Charter and Insurance: In 2002, Candano Shipping Lines time-chartered its vessel M/V Romeo to Apo Cement Corporation for the carriage of 31,250 bags of cement (1,250 metric tons) from Cebu to Albay. The cargo was insured with CGU International Insurance PLC.

The Collision: On July 14, 2002, at about midnight, M/V Romeo was exiting the Apo channel after loading when it collided with M/V Aleson Carrier 5, owned by Aleson Shipping. M/V Aleson’s front hull rammed the portside mid-section of M/V Romeo, causing a gaping hole; M/V Romeo instantly sank within five minutes, taking the entire cargo worth P3,427,500. The master of M/V Romeo died, two crew members went missing, and 14 survived.

Insurance Claim and Subrogation: Apo Cement demanded payment from both shipping lines without success, then made a claim with CGU Insurance, which was granted. CGU Insurance, as subrogee, filed an action for actual damages and attorney’s fees against both Candano Shipping and Aleson Shipping.

Testimonies at Trial:

• Teodoro R. Lopez, CGU Insurance’s surveyor and investigator, interviewed the Chief Engineer of M/V Romeo, stevedores, the port supervisor, and the captain of Apo Cement’s tugboat immediately after the incident. Based on those interviews, he testified that the port authority instructed M/V Aleson to wait until M/V Romeo had cleared the last buoy, but M/V Aleson proceeded anyway; that the captain of M/V Romeo asked M/V Aleson to slow down, but the request was ignored.
• Maria Tessie Jadulco Flores, operations manager of Candano Shipping, testified based on the account of M/V Romeo’s chief mate that under the Apo channel rule, the outgoing vessel had the right of way and incoming vessels were required to wait; M/V Aleson failed to wait.
• Captain Ramil Fermin Cabeltes, master of M/V Aleson, testified for Aleson Shipping. He admitted he knew the Apo channel cannot accommodate two vessels at a time. He acknowledged that he knew M/V Romeo was loading at the pier and that a bigger, fully loaded vessel is harder to maneuver than a smaller, empty one. He stated he received a radio message relayed by a crew member that M/V Aleson could proceed to the port, but he did not personally verify the message with the port operator. The original instruction was to “standby.” He admitted he had not checked with the radio operator, nor did he blow the vessel’s horn to alert M/V Romeo. He also conceded that approximately 200 meters of space existed on the right side where he could have maneuvered to avoid the collision, but he refrained out of fear of running aground.

Trial Court Ruling: The trial court found Aleson Shipping solely at fault and exonerated Candano Shipping. It treated the testimonies of Lopez and Flores as part of res gestae. It held that Aleson Shipping failed to overcome the common carrier’s presumption of negligence and that Captain Cabeltes’ admissions established fault. The court awarded P3,368,750.00 with interest and attorney’s fees.

Appellate Court Ruling: The Court of Appeals affirmed, holding that no strong reason existed to overturn the trial court’s findings and that Captain Cabeltes’ testimony alone was sufficient to ascribe fault to Aleson Shipping.

• Applicable Law and Presumption of Negligence: Petitioner argued that the lower courts erred by applying the Civil Code provisions on common carriers, because CGU Insurance’s cause of action against it was not based on any contract of carriage but on maritime tort. As a subrogee, CGU Insurance acquired only the rights of Apo Cement, which had no contract with petitioner. Consequently, the presumption of negligence against common carriers did not apply; the Code of Commerce provisions on collision, specifically Articles 826 and 827, governed the case.
• Exercise of Ordinary Diligence: Petitioner maintained that it exercised ordinary diligence—the standard required under the Code of Commerce. Captain Cabeltes’ testimony showed that M/V Aleson requested and obtained a port-to-port passing agreement from M/V Romeo, but M/V Romeo did not alter course. Petitioner contended that Captain Cabeltes ordered the engine stopped in a last effort to avoid the collision, and that his testimony had been twisted and misinterpreted by the trial court.
• Admissibility of Respondents’ Testimonies: Petitioner contended that the trial court erred in admitting the testimonies of Flores and Lopez under the res gestae rule because both lacked personal knowledge of the incident and their statements were hearsay. Flores was not an expert witness and was permitted to inject an opinion on fault. Lopez’s information was second-hand, obtained from non-presented sources.
• Solidary Liability in the Alternative: Petitioner argued that, even assuming negligence on its part, respondent Candano Shipping was concurrently at fault; thus, under Article 827 of the Code of Commerce, both vessels should be held jointly and severally liable for the cargo damage.
• Credibility of Captain Cabeltes: Petitioner asserted that Captain Cabeltes’ testimony should be given full credence because he was the sole witness with first-hand knowledge of the events, and respondents had full opportunity to cross-examine him.

• Factual Questions Not Reviewable: Respondent CGU Insurance countered that the petition raised only questions of fact, which are beyond the scope of a Rule 45 petition, and that the factual findings of the trial court, affirmed by the Court of Appeals, were final and conclusive. Respondent Candano Shipping similarly pointed out that the petition sought to re-litigate factual findings.
• Negligence Solely Attributable to Petitioner: CGU Insurance argued that the evidence unequivocally showed M/V Aleson rammed M/V Romeo; the channel could not accommodate two vessels simultaneously; M/V Romeo had the right of way; Captain Cabeltes failed to blow his horn in violation of collision regulations, and he admitted having the last clear chance to avoid the collision but chose not to maneuver. Candano Shipping emphasized that the trial court’s finding of its own exercise of extraordinary diligence as a common carrier was supported by evidence.
• Inconsistent and Inculpatory Admissions of Captain Cabeltes: CGU Insurance detailed Captain Cabeltes’ contradictory statements—claiming it was his first time in the channel, then admitting eight prior visits; denying knowledge of vessels, then acknowledging M/V Romeo; and retracting earlier statements about vessel maneuverability. He admitted he did not verify the radio message and that “standby” meant only to start the engine, not to move. These admissions demonstrated reckless operation, not ordinary diligence.
• Immateriality of the Common Carrier Presumption: Candano Shipping argued that any error in applying the common carrier presumption of negligence was immaterial because the record independently established petitioner’s sole fault through its own witness.

• Review of Factual Findings: Whether the petition may properly raise questions of fact in a Rule 45 review.
• Admissibility of Testimonies (Res Gestae): Whether the trial court erred in admitting the testimonies of respondents’ witnesses Flores and Lopez under the res gestae exception to the hearsay rule.
• Applicable Law and Cause of Action: Whether the lower courts erred in applying the Civil Code provisions on common carriers and the presumption of extraordinary diligence, when CGU Insurance’s cause of action against petitioner was based on maritime tort (quasi-delict) and not on a contract of carriage.
• Diligence Exercised: Whether petitioner exercised the degree of diligence required under the applicable law.

• Review of Factual Findings: The petition necessarily required a re-evaluation of the lower courts’ factual findings and an assessment of the evidence, which are generally not permissible in a Rule 45 petition; petitioner failed to allege and demonstrate that the case fell under any of the recognized exceptions. The factual findings of the trial court, affirmed by the Court of Appeals, were binding.
• Admissibility of Testimonies (Res Gestae): The testimonies of Lopez and Flores were properly admitted under the res gestae exception to the hearsay rule. The collision and sinking of M/V Romeo was a startling occurrence. The declarants—the Chief Engineer, stevedores, port supervisors, and chief mate—witnessed the incident and made their statements to Lopez and Flores only hours later, before any opportunity to contrive or fabricate. The statements concerned the immediate circumstances of the collision, satisfying the elements of spontaneity, temporal proximity, and logical connection to the principal act. Even if those testimonies were disregarded, Captain Cabeltes’ own admissions furnished sufficient evidence of petitioner’s liability.
• Applicable Law and Cause of Action: The lower courts’ application of the Civil Code provisions on common carriers was not determinative. CGU Insurance’s cause of action against Aleson Shipping was grounded in tort, not contract, because petitioner was a stranger to the time charter and the insurance contract. Where the action is based on quasi-delict arising from a maritime collision, the matter is not specifically regulated by the Civil Code; thus, the supplementary provisions of the Code of Commerce on collision—Articles 826 and 827—govern. The standard of care required is ordinary diligence, not the extraordinary diligence imposed on common carriers under a contract of carriage.
• Diligence Exercised: Petitioner failed to observe ordinary diligence. Captain Cabeltes’ own testimony established that he knew M/V Romeo was still at the pier, received only a relayed message to proceed without verifying its accuracy, ignored the initial “standby” instruction, navigated into a channel he knew could not accommodate two vessels simultaneously, failed to sound any horn signal in violation of collision regulations, and consciously declined to use approximately 200 meters of available space to avoid the collision out of fear of grounding—even though M/V Aleson was smaller and easier to maneuver than the fully loaded M/V Romeo. These lapses demonstrated a lack of the caution expected of an ordinarily prudent captain. The collision’s severe impact, which instantly sank M/V Romeo, belied the claim that M/V Aleson was proceeding at a slow, careful speed. The lower courts’ appreciation of Captain Cabeltes’ credibility and demeanor was entitled to the highest respect and was not shown to be tainted by any clear misappreciation.

• Res Gestae — Spontaneous Statements — A declaration is admissible as part of the res gestae if: (1) the principal act is a startling occurrence; (2) the statement was made before the declarant had time to contrive or devise; and (3) the statement concerns the occurrence and its immediately attending circumstances. Spontaneity is critical because the stress of nervous excitement produced by the startling event stills reflective faculties, making the utterance a sincere and uncontrolled reaction. Applied here, the collision and sinking were startling; the statements of surviving crew and port personnel were obtained within hours, before fabrication could occur.
• Code of Commerce Collision Provisions vs. Civil Code Common Carrier Rules — When an action for damages from a vessel collision is based on a contract of carriage, the Civil Code provisions on common carriers and extraordinary diligence apply. However, when the action is based on quasi-delict (maritime tort) and the defendant is not a party to the contract of carriage, the matter falls among those not specifically regulated by the Civil Code; accordingly, the Code of Commerce provisions on collision (Articles 826 and 827) govern, and only ordinary diligence is required of the vessel owner.
• Ordinary Diligence Standard — Ordinary diligence is that which an ordinarily prudent person would exercise with regard to his or her own property. In vessel operation, it demands deliberate and calculated decisions to guarantee the safety of the vessel and those nearby. A captain’s failure to personally verify critical navigational instructions, to sound required signals, and to use available space to avoid collision constitutes a breach.
• Presumption of Common Carrier Negligence — Inapplicable to Tort-Based Actions Against Non-Carriers — The presumption of negligence against common carriers under Article 1735 of the Civil Code arises from a breach of the contract of carriage. Where the defendant is not a common carrier with respect to the plaintiff and the suit sounds in tort, the presumption does not attach.
• Review of Factual Findings on Appeal — The trial court’s assessment of witness credibility and the factual findings affirmed by the Court of Appeals are generally conclusive and not reviewable under Rule 45, absent any clear showing of misappreciation or a recognized exception.

• “The spontaneity of the utterance and its logical connection with the principal event, coupled with the fact that the utterance was made while the declarant was still ‘strong’ and subject to the stimulus of the nervous excitement of the principal event, are deemed to preclude contrivance, deliberation, design or fabrication, and to give to the utterance an inherent guaranty of trustworthiness.” — quoting People v. Cudal, this passage encapsulates the rationale for the res gestae exception and was central to upholding the admissibility of Lopez’s and Flores’ testimonies.
• “[I]f the cause of action is based on maritime tort, the provisions of the Code of Commerce are applicable. An action based on quasi-delict resulting from maritime collision is not specifically regulated by the Civil Code, but by the Code of Commerce.” — This statement distills the critical distinction that determined the applicable substantive law and standard of care.
• “Due diligence demands that Captain Cabeltes ensures that every decision he made is deliberate and calculated to guarantee the safety of M/V Aleson and nearby vessels.” — The passage concretizes the ordinary diligence standard in operational terms and was directly applied to Captain Cabeltes’ numerous lapses.

• Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp., 750 Phil. 95 (2015) — Cited for the rules on common carriers’ extraordinary diligence and the prima facie evidentiary value of a clean bill of lading, establishing the baseline for cases where the action is contract-based. Distinguished because the instant case sounded in tort, not contract.
• Maritime Co. of the Philippines v. Court of Appeals, 253 Phil. 50 (1989) — Applied to illustrate that when a bill of lading-based cause of action exists, common carrier provisions govern; this case was distinguished because here, CGU Insurance had no contractual nexus with Aleson.
• National Development Company v. Court of Appeals, 247 Phil. 560 (1988) — Followed for the principle that a collision-based claim not specifically regulated by the Civil Code is governed by the Code of Commerce, and that the cause of action’s origin in tort determines the applicable law and the nature of the liability.
• Regional Container Lines of Singapore v. The Netherlands Insurance Co. (Philippines), 614 Phil. 485 (2009) — Cited for the codified enumeration of the rules on a common carrier’s liability under Article 1734 of the Civil Code, used to frame the inapplicability of those rules to a tort action against a non-carrier.
• People v. Cudal, 536 Phil. 1164 (2006) — Relied upon for the doctrinal explanation of the spontaneity requirement in res gestae, which was directly applied to sustain the admissibility of the investigator’s and operations manager’s testimonies.

• Code of Commerce, Articles 826 and 827 — Article 826 imposes liability on the vessel owner when a collision results from the fault, negligence, or lack of skill of the captain or crew. Article 827 provides for joint and several liability of both vessels for cargo damage when both are at fault. Applied to determine petitioner’s sole liability, as fault was exclusively attributed to M/V Aleson.
• Civil Code, Article 1173 — Defines ordinary diligence as that expected of a good father of a family when the law or contract does not specify the degree of diligence. Served as the standard against which Captain Cabeltes’ conduct was measured.
• Civil Code, Articles 1733, 1734, 1759 — Impose extraordinary diligence on common carriers and create the presumption of negligence upon loss of goods. Held inapplicable to petitioner because no contract of carriage bound it to the subrogee-insurer.
• Rules of Court, Rule 130, Section 42 (Part of Res Gestae) — Governs the admissibility of spontaneous statements and verbal acts. Applied to admit the statements made by surviving crew and port personnel shortly after the collision.
• Code of Commerce, Article 612(7) — Requires the captain to be on deck upon sighting land and to take command when entering or leaving ports. Invoked to underscore Captain Cabeltes’ failure to personally verify navigational instructions before entering the channel.

Gesmundo, Carandang, Zalameda, and Gaerlan, JJ., concurred.