Smith Bell and Company (Philippines), Inc. vs. Court of Appeals

A minute resolution of the Supreme Court denying a petition for review for lack of merit is an adjudication on the merits, and the doctrine of res judicata in its aspect of conclusiveness of judgment precludes relitigation of an issue actually determined in that resolution in a subsequent suit between substantially identical parties, even where the subject matter differs, as long as there is identity of cause of action. A compromise agreement does not constitute an admission of liability by the payor. In a meeting end‑on situation, the duty of each power‑driven vessel to alter course to starboard under Rule 18(a) of the International Rules of the Road is absolute, and failure to comply, together with the absence of a proper lookout and incompetent command, renders the offending vessel solely liable for the resulting collision.

In the early morning of 3 May 1970, the inter‑island vessel M/V “Don Carlos,” owned by Carlos A. Go Thong and Company, was outbound from Manila to Cebu when it collided with the inbound Japanese merchant vessel M/S “Yotai Maru” near Caballo Island. The “Don Carlos” rammed the port side of the “Yotai Maru,” flooding a hatch and damaging cargo. Cargo consignees received payment from their insurers, who, subrogated to the consignees’ rights, sued Go Thong for damages. The collision spawned multiple litigations and administrative proceedings, including two civil actions in the Court of First Instance of Manila, an investigation by the Board of Marine Inquiry, and a compromise agreement between the shipowners.

The Collision: At 0350 hours on 3 May 1970, the M/V “Don Carlos,” an 11‑knot inter‑island vessel owned by private respondent Carlos A. Go Thong and Company, was southbound from Manila to Cebu. The M/S “Yotai Maru,” a 13‑knot Japanese‑registered merchant vessel, was inbound from Kobe, Japan, approaching the port of Manila. The bow of the “Don Carlos” struck the port side of the “Yotai Maru,” opening a three‑centimeter hole near Hatch No. 3, causing seawater to flood the hatch and bottom tanks and damaging all cargo stowed there.

The Insurance Suits: The consignees of the damaged cargo were indemnified by their respective insurers. Exercising their right of subrogation, the insurers filed two separate civil actions against Go Thong in the Court of First Instance of Manila. Civil Case No. 82567 was filed by Smith Bell and Sumitomo Marine and Fire Insurance Co., Ltd.; Civil Case No. 82556 by Smith Bell and Tokyo Marine and Fire Insurance Co., Inc. The parties stipulated that the collision evidence adduced in one case would be adopted in the other.

Trial Court Findings: Both trial judges—Judge Fernandez and Judge Cuevas—found that the officers and crew of the “Don Carlos” had been negligent, that such negligence was the proximate cause of the collision, and that Go Thong was liable for the resulting cargo damage.

The First Set of Appeals (C.A.-G.R. No. 61320‑R): The Court of Appeals through Justice Reyes, L.B., affirmed Judge Fernandez’s decision. Go Thong’s Petition for Review to the Supreme Court (G.R. No. L‑48839) was denied by minute Resolution dated 6 December 1978 for lack of merit, and reconsideration was denied on 24 January 1979. The Reyes Decision thus became final and executory.

The Second Appeal (C.A.-G.R. No. 61206‑R): Almost two years after the Reyes Decision had been affirmed by the Supreme Court, the Court of Appeals through Justice Sison, P.V., reversed Judge Cuevas’s decision. It held that the officers of the “Yotai Maru” were at fault, dismissed the insurers’ complaint, and effectively absolved Go Thong. This decision gave decisive weight to the fact that the “Yotai Maru” had sighted the “Don Carlos” at a distance of eight miles when there was “no danger at all” of collision, yet failed to take timely precautionary measures and to stop or reverse engines when the “Don Carlos” gave no reply signal. The Sison Decision also treated a compromise agreement between the shipowners as proof that the “Yotai Maru” was at fault.

The Compromise Agreement: Sanyo Shipping Company, owner of the “Yotai Maru,” and Go Thong, owner of the “Don Carlos,” entered into a compromise under which Sanyo paid Go Thong ₱268,000.00. The agreement contained no admission or concession of fault on the part of the “Yotai Maru.”

Administrative Proceedings: The Board of Marine Inquiry (BMI) investigated the collision in BMI Case No. 228. On 12 July 1971, the BMI found both vessels negligent. On motion for reconsideration, the Philippine Coast Guard (PCG) Commandant amended the decision on 19 May 1980, absolving the officers of the “Yotai Maru” and imposing no further penalty on the officers of the “Don Carlos.” Go Thong’s subsequent appeal to the Ministry of National Defense was filed out of time; the PCG decision had become final and executory. Nevertheless, the Ministry of Defense reversed the PCG, and the Office of the President denied reconsideration, under the misapprehension that the Sison Decision and an unappealed Cebu trial court judgment (which had merely approved the compromise) constituted supervening events that had determined the “Yotai Maru” to be at fault.

• Res Judicata: Petitioners maintained that the Supreme Court’s minute Resolution in G.R. No. L‑48839, which dismissed Go Thong’s Petition for Review of the Reyes Decision, constituted a final adjudication on the merits that settled the question of the “Don Carlos” negligence. They argued that the Sison Decision disregarded the rule on res judicata by reaching a contrary conclusion on the identical issue of fault.

• Compromise Agreement: Petitioners contended that the Sison Decision erred in treating the compromise payment by the “Yotai Maru” owner as an admission of fault. They argued that an offer of compromise is not an admission of liability and is inadmissible in evidence to prove fault.

• Negligence of the “Yotai Maru”: Petitioners assailed the factual finding that the “Yotai Maru” was negligent. They insisted that the “Don Carlos” alone was at fault for violating the International Rules of the Road and that the evidence did not support the conclusion that the “Yotai Maru” failed to take proper action.

• Effect of the Minute Resolution: Go Thong argued that the Supreme Court’s minute Resolution merely denied the Petition for Review for lack of merit but did not affirm the Reyes Decision in toto. It distinguished between denial and affirmance, contending that the Resolution did not constitute an adjudication that the “Don Carlos” was negligent.

• Absence of Identity for Res Judicata: Go Thong asserted that res judicata could not apply because there was no identity of parties (the co‑petitioner insurers differed) and no identity of subject matter (the damaged cargoes were not the same) between C.A.-G.R. No. 61206‑R and C.A.-G.R. No. 61320‑R.

• Compromise as Proof of Fault: Go Thong maintained that the compromise agreement, under which the “Yotai Maru” owner paid a substantial sum, effectively settled that the “Yotai Maru” had been at fault.

• Negligence of the “Yotai Maru”: Go Thong argued, and the Sison Decision held, that the “Yotai Maru” saw the “Don Carlos” at a safe distance and bore the primary duty to avoid collision; its failure to stop or reverse engines when the “Don Carlos” gave no reply signal constituted negligence.

• Res Judicata: Whether the rule of res judicata barred the Court of Appeals in C.A.-G.R. No. 61206‑R from reaching a conclusion on fault contrary to the final and executory Reyes Decision in C.A.-G.R. No. 61320‑R, as affirmed by the Supreme Court in G.R. No. L‑48839.

• Effect of the Compromise: Whether the compromise agreement between the shipowners constituted an admission that the “Yotai Maru” was at fault.

• Negligence: Whether the “Don Carlos” or the “Yotai Maru” was negligent in the collision, and which vessel’s negligence was the proximate cause.

• Res Judicata: The minute Resolution denying the Petition for Review in G.R. No. L‑48839 was an adjudication on the merits. The Supreme Court agreed with the findings and conclusions of the Court of Appeals in the Reyes Decision; denial for lack of merit meant the decision under review was correct. The doctrine of res judicata in its aspect of conclusiveness of judgment applied even though the subject matter (the particular damaged cargo) differed, because there was substantial identity of parties and identity of cause of action. In both cases, the same insured interest (cargo owners versus the shipowner) was represented, the same defendant was sued, and the same right of cargo owners to safe carriage was violated by the same collision. The issue of which vessel was negligent had been actually, directly, and expressly litigated and determined in the prior case and was conclusively settled. The Court of Appeals in C.A.-G.R. No. 61206‑R committed reversible error in disregarding that final determination.

• Effect of the Compromise: The compromise agreement did not constitute an admission of fault by the owner of the “Yotai Maru.” An offer of compromise is not an admission that anything is due, nor is it admissible in evidence against the person making the offer. The compromise was entered into to avoid further litigation and expense, not to concede liability. The Office of the President’s reliance on a supposed Cebu court judgment that held the “Yotai Maru” solely liable was erroneous; that trial court had merely approved the compromise and dismissed the case.

• Negligence: The “Don Carlos” was solely negligent, and its negligence was the proximate cause of the collision. Three principal factors established this. First, the “Don Carlos” violated Rule 18(a) of the International Rules of the Road. The vessels were in an end‑on or nearly end‑on meeting situation involving risk of collision, which required each vessel to alter course to starboard. Instead of turning starboard, Second Mate German turned the “Don Carlos” five degrees to port while overtaking another vessel, and failed to give the required two‑short‑blast signal. The “Yotai Maru,” in contrast, turned starboard and sounded one short blast. Second, the “Don Carlos” failed to keep a proper lookout as required by Rule 29. The vessel had no crew member assigned solely to the duty of lookout; the lookout function was improperly performed by the navigating officer, who also had other duties. Third, at the time of the collision the “Don Carlos” was under the command of Second Mate German, not the captain or chief mate, in violation of Article 633 of the Code of Commerce. German lacked the experience, judgment, and technical knowledge required to recognize and cope with the risk of collision. The Court of Appeals’ reliance on G. Urrutia & Co. v. Baco River Plantation Co. was misplaced because that case involved a power‑driven vessel and a sailing vessel, whereas both vessels here were power‑driven with comparable speeds. The “Yotai Maru” took last‑minute measures by going hard starboard, stopping engines, and putting engines full astern.

• Conclusiveness of Judgment (Res Judicata) — The doctrine of res judicata has two aspects: “bar by former judgment” and “conclusiveness of judgment.” Bar by former judgment applies where there is identity of parties, subject matter, and cause of action; it absolutely bars a subsequent action. Conclusiveness of judgment, embodied in Section 49(c) of Rule 39 of the Revised Rules of Court, applies where a second action between the same parties is upon a different claim or demand. It precludes relitigation of a particular fact or issue that was actually, directly, and expressly determined in the prior final judgment, as long as the issue is material and essential to the judgment. The rule extends to matters necessarily implied in the final judgment. The issue of the “Don Carlos” negligence was conclusively determined in the Reyes Decision, barring its relitigation in the Sison Decision.

• Effect of a Supreme Court Minute Resolution Denying a Petition for Review — A minute resolution denying a petition for review for lack of merit constitutes an adjudication on the merits. It signifies that the Supreme Court agrees with or adopts the findings and conclusions of the Court of Appeals, and the decision sought to be reviewed is correct. Such a resolution has the same binding effect as a full‑blown decision.

• Compromise Agreement as Admission — An offer of compromise is not an admission that anything is due and is inadmissible in evidence against the person making the offer. A compromise is a mutual adjustment of differences to avoid litigation, and it does not imply an acknowledgement of legal liability.

• Duty in End‑on Situation under Rule 18(a) of the International Rules of the Road — When two power‑driven vessels are meeting end‑on or nearly end‑on involving risk of collision, each must alter course to starboard so that each may pass on the port side of the other. A vessel that turns to port instead of starboard in such a situation violates the rule.

• Proper Lookout under Rule 29 — A proper lookout is one trained solely for that duty, stationed where he can best see and hear, with no other duties, and in good communication with the officer in charge. The navigating officer cannot serve as a proper lookout. Failure to maintain a proper lookout renders the vessel responsible for all consequences that result from the deficiency.

• Command by a Qualified Officer — Under Article 633 of the Code of Commerce, the second mate may command only in case of the inability or disqualification of the captain and sailing mate. Allowing an inexperienced second mate to command without such contingency is evidence of negligence.

• “A minute Resolution denying a Petition for Review of a Decision of the Court of Appeals can only mean that the Supreme Court agrees with or adopts the findings and conclusions of the Court of Appeals, in other words, that the Decision sought to be reviewed and set aside is correct.”

• “Where the second action between the same parties is upon a different claim or demand, the judgment in the prior action operates as an estoppel only as to those matters in issue or points controverted, upon the determination of which the finding or judgment was rendered. In fine, the previous judgment is conclusive in the second case, only as those matters actually and directly controverted and determined and not as to matters merely involved therein. This is the rule on ‘conclusiveness of judgment.’”

• “An offer to compromise does not, in legal contemplation, involve an admission on the part of a defendant that he is legally liable, nor on the part of a plaintiff that his claim or demand is groundless or even doubtful, since the compromise is arrived at precisely with a view to avoiding further controversy and saving the expenses of litigation.”

• “The ‘look‑out’ should have no other duty to perform. … The navigating officer is not a sufficient ‘look‑out.’ … Neither the captain nor the [helmsman] in the pilothouse can be considered to be a ‘look‑out’ within the meaning of the maritime law.”

• Tayag et al. v. Yuseco, et al., 105 Phil. 484 (1959) — Cited for the rule that a minute Resolution of the Supreme Court denying a petition for review means the Court agrees with and adopts the appellate court’s decision.

• Commercial Union Assurance Ltd. v. Lepanto Consolidated Mining Company, 86 SCRA 79 (1978) — Followed to affirm that a minute Resolution dismissing a petition for review is an adjudication on the merits.

• Tingson v. Court of Appeals, 49 SCRA 429 (1973) — Quoted extensively for the distinction between “bar by former judgment” and “conclusiveness of judgment.”

• Lopez v. Reyes, 76 SCRA 179 (1977) — Relied upon for the principle that conclusiveness of judgment extends to questions necessarily involved in an issue and necessarily adjudicated or implied in the final judgment.

• Rovero v. Amparo, 91 Phil. 228 (1952) — Cited for the definition and nature of a compromise agreement as a mutual adjustment to avoid litigation, not an admission of liability.

• G. Urrutia & Co. v. Baco River Plantation Co., 26 Phil. 632 (1913) — Distinguished; applied only to collisions between a power‑driven vessel and a sailing vessel, not to two power‑driven vessels.

• Rule 18(a), International Rules of the Road — When two power‑driven vessels are meeting end‑on or nearly end‑on so as to involve risk of collision, each shall alter course to starboard. Applied to hold that the “Don Carlos” violated this rule by turning to port.

• Rule 28(c), International Rules of the Road — Vessel altering course to port must give two short horn blasts. The “Don Carlos” gave no such signal, compounding its violation.

• Rule 29, International Rules of the Road — All consequences of a failure to keep a proper lookout are borne by the delinquent vessel. The “Don Carlos” lacked a dedicated lookout, placing responsibility for the collision upon it.

• Article 633, Code of Commerce — The second mate takes command only upon inability or disqualification of the captain and sailing mate. The unauthorized command of the “Don Carlos” by the second mate evidenced negligence.

• Section 24, Rule 130, Revised Rules of Court — An offer of compromise is not an admission that anything is due and is inadmissible in evidence against the person making the offer. Used to reject the argument that the shipowners’ compromise proved fault.

• Section 49(c), Rule 39, Revised Rules of Court — Conclusiveness of judgment; in a subsequent action on a different claim, the prior judgment is conclusive only as to matters actually and directly determined. Applied to bar relitigation of negligence.

Fernan, C.J., Narvasa, Melencio‑Herrera, Gutierrez, Jr., Cruz, Paras, Gancayco, Padilla, Bidin, Sarmiento, Griño‑Aquino, Medialdea, Regalado, and Davide, Jr., JJ., concurred.