G.R. No. 56294 - Smith Bell and Co. , Inc. vs. Court of Appeals

Case Summary (G.R. No. 56294)

Civil Suits and Conflicting Appellate Outcomes

Two civil cases were filed in the Court of First Instance of Manila. Civil Case No. 82567 was filed on 13 March 1971 in Branch 3, presided by Judge Bernardo P. Fernandez, by Smith Bell and Company (Philippines), Inc. and Sumitomo Marine and Fire Insurance Company Ltd. against Go Thong. Civil Case No. 82556 was filed on 15 March 1971 in Branch 4, presided by then Judge Serafin R. Cuevas, by Smith Bell and Company (Philippines), Inc. and Tokyo Marine and Fire Insurance Company, Inc. against the same defendant, Go Thong. The cases were tried under the same issues and evidence, with the parties agreeing that evidence presented in one case would be adopted in the other.

The trial court rulings were for the insurers in both cases. In Civil Case No. 82567, Judge Fernandez held that the officers and crew of the “Don Carlos” were negligent, that the negligence was the proximate cause of the collision, and awarded P19,889.79 with legal interest plus P3,000.00 as attorney’s fees. In Civil Case No. 82556, Judge Cuevas similarly held Go Thong liable and awarded, on the respective claims, either US$68,640.00 or its equivalent in Philippine currency plus P30,000.00 attorney’s fees, and P19,163.02 plus P5,000.00 as attorney’s fees.

Appeals and Supreme Court Resolution in One Case

Go Thong appealed the Fernandez decision in C.A.-G.R. No. 61320-R. On 8 August 1978, the Court of Appeals, through Reyes, L.B., J., affirmed the trial court. Go Thong then filed a Petition for Review before the Supreme Court, docketed as G.R. No. L-48839. The Supreme Court denied the petition in a Resolution dated 6 December 1978 for lack of merit, and later denied Go Thong’s motion for reconsideration on 24 January 1979.

Reversal in the Other Case and the Present Petition

In the Cuevas case, Go Thong likewise appealed, and the matter was docketed as C.A.-G.R. No. 61206-R. However, the Court of Appeals, through Sison, P.V., J., rendered a different outcome. On 26 November 1980, it reversed the Cuevas decision, held the officers of the “Yotai Maru” at fault, and dismissed the insurers’ complaint. Petitioners sought reconsideration, but it was denied.

Petitioners then came to the Supreme Court via a Petition for Review on Certiorari, assailing the Sison decision in C.A.-G.R. No. 61206-R.

Issues Raised by Petitioners

Petitioners assigned three principal errors. First, they argued that the Sison decision disregarded the doctrine of res judicata, contending that the question of the “Don Carlos” liability had already been settled by the Supreme Court’s 6 December 1978 Resolution in G.R. No. 48839 affirming the Reyes decision. Second, they argued that Sison committed serious reversible error when it accepted Go Thong’s defense that the fault question had been settled by a compromise agreement between the owner of the “Yotai Maru” and Go Thong as owner of the “Don Carlos.” Third, they argued that Sison erred in holding that the “Yotai Maru” was negligent and at fault.

Res Judicata and Conclusiveness of Judgment

The Court rejected Go Thong’s attempt to draw a distinction between a Supreme Court minute resolution denying a petition and an outright affirmance. The Court held that the use of a minute resolution rests within the Supreme Court’s discretion, and that a minute resolution denying a Petition for Review on certiorari constitutes an adjudication on the merits. The Court reasoned that the denial could only mean that the Supreme Court agreed with or adopted the Court of Appeals’ findings and conclusions.

The Court also rejected Go Thong’s res judicata objection premised on lack of identity of parties and cause of action between the two Court of Appeals cases. The Court found substantial identity of parties, noting that both cases involved Smith Bell and insurance interests represented cargo owners against the shipowner, and that both suits were against the same defendant, Go Thong, as owner of the “Don Carlos.” While the Court acknowledged that the subject matter—the specific damaged cargo—was not identical, it ruled that res judicata may still apply when there is substantial identity of parties and identity of cause of action, because both cases involved the same right of the cargo owners’ interest violated by the same casualty: the ramming of the “Yotai Maru” by the “Don Carlos.”

Citing the distinction between “bar by former judgment” and “conclusiveness of judgment,” the Court explained that where the second action involves a different claim or demand, the prior judgment operates as an estoppel only as to those matters actually and directly controverted and determined. The Court treated the issue of which vessel’s negligence proximately caused the collision as a matter actually and directly litigated in C.A.-G.R. No. 61320-R, resolved by Reyes, L.B., J., and affirmed by the Supreme Court in G.R. No. L-48839. Because that issue had been conclusively settled prior to the promulgation of Sison’s decision, the Court held that it could no longer be relitigated in C.A.-G.R. No. 61206-R.

Accordingly, the Court held that the Court of Appeals in C.A.-G.R. No. 61206-R committed clear and reversible error when it disregarded the Reyes decision as affirmed by the Supreme Court.

Compromise Agreement Argument Deemed Legally Ineffective

The Court further rejected the contention that a compromise between the owners of the “Yotai Maru” and the “Don Carlos” effectively settled that the “Yotai Maru” had been at fault. The Court observed that while the owner of the “Yotai Maru” paid P268,000.00 to Go Thong, the compromise agreement contained no admission that the “Yotai Maru” was at fault. The Court invoked the rule that an offer to compromise does not constitute an admission of legal liability, since a compromise is made to avoid further controversy and litigation expense.

Administrative Proceedings and the Flawed Reliance on Subsequent Administrative Developments

The Court also discussed the administrative history before the Board of Marine Inquiry (BMI) and later administrative tribunals. It noted that the collision was investigated in BMI Case No. 228, and on 12 July 1971 the BMI found both vessels negligent. After reconsideration motions were resolved nine years later, on 19 May 1980 the Philippine Coast Guard (PCG) Commandant, Commodore Simeon M. Alejandro, amended the decision and absolved the officers of the “Yotai Maru” from responsibility while leaving the penalties imposed upon the officers of the “Don Carlos.”

The Court emphasized that the PCG Commandant’s decision had become final and executory due to the failure to appeal within the prescribed period under the Philippine Merchant Marine Rules and Regulations, characterizing those rules as having the force and effect of law. It further noted that although the Ministry of National Defense later reversed that administrative decision, the Office of the President ultimately affirmed the modification, treating later judicial pronouncements and a supposed Cebu judgment as supervening reasons. The Court held that the Office of the President’s approach was deeply flawed: it failed to recognize the finality and binding effect of the earlier Reyes decision as affirmed by the Supreme Court, it treated Sison’s decision (the very case under review) as though it were already final, and it mistakenly believed that the Cebu court had held the “Yotai Maru” solely responsible when the Cebu action had been dismissed based on the compromise agreement.

Given these misapprehensions and the continuing effect of the PCG finding against the “Don Carlos,” the Court treated the administrative modification as not warranting further consideration.

Review of the Substantive Maritime Negligence Findings

Although the Court found the res judicata issue dispositive, it nevertheless proceeded to evaluate the competing negligence findings, because the issue of fault under admiralty law produced conflicting conclusions in Reyes and Sison, and because the Supreme Court had earlier affirmed the Reyes decision without a detailed written examination.

The Court agreed with the trial court findings and the Reyes decision that the “Don Carlos” was negligent and that its negligence was the sole proximate cause of the collision and resulting damages. It identified three principal factors supporting negligence attributed to the “Don Carlos.”

First, the Court found failure to comply with Rule 18(a) of the International Rules of the Road. The evidence showed that at the time of an end-on or nearly end-on meeting situation involving risk of collision, the “Don Carlos” altered course to the left instead of to starboard, contrary to what Rule 18(a) required. The Court further relied on the narrative that the maneuver creating the collision risk was the left turn at 0343 hours, and that the “Don Carlos” also violated Rule 28(c) for failing to give the required two-short-blast signal indicating a port course alteration. The Court contrasted this with the “Yotai Maru,” which complied with the Rule by turning starboard and giving the required signal, and which, upon seeing the port turn, ordered hard starboard, stopped engines, and proceeded full astern.

Second, the Court held that the “Don Carlos” failed to have a proper look-out as required by the Rules. It accepted the trial court’s and Cuevas decision’s reasoning defining a proper look-out and emphasized that the evidence showed the “look-out” on the “Don Carlos” was not a dedicated person solely tasked with lookout duties and that navigating officers or the captain or helmsman in the pilothouse could not substitute for a true look-out.

Third, the Court attributed negligence to the fact that Second Mate Benito German was in command immediately before and during the collision, and found that the defense did not adequately explain why Captain Rivera was not in command despite being present and not shown to be under disability. It invoked Article 633 of the Code of

Case Syllabus (G.R. No. 56294)

The petitioners were SMITH BELL AND COMPANY (PHILIPPINES), INC. and TOKYO MARINE AND FIRE INSURANCE CO., INC., and the respondent was Carlos A. Go Thong and Company.
The dispute arose from a maritime collision on 3 May 1970 at 0350 hours near Caballo Island involving the vessel M/V "Don Carlos" and the vessel M/S "Yotai Maru".
The petitioners sought Petition for Review on Certiorari challenging the Court of Appeals decision in C.A.-G.R. No. 61206-R.
The Supreme Court resolved to reverse and set aside the Court of Appeals decision and to reinstate and affirm the trial court’s judgment in Civil Case No. 82556.

Parties and Procedural Posture

Petitioners filed separate damages suits in the Court of First Instance of Manila against Go Thong, based on the same collision and adopted evidence.
Civil Case No. 82567 was filed on 13 March 1971 in Branch 3 and was presided over by Judge Bernardo P. Fernandez.
Civil Case No. 82556 was filed on 15 March 1971 in Branch 4 and was presided over by then Judge Serafin R. Cuevas.
Both civil cases were tried under the same issues and evidence, as the parties agreed that the collision evidence in one case would be adopted in the other.
In Civil Case No. 82567, Judge Fernandez ruled that Don Carlos’ officers and crew were negligent, that such negligence was the proximate cause, and held Go Thong liable.
In Civil Case No. 82556, Judge Cuevas similarly held Go Thong liable and awarded damages to the insurance plaintiffs.
Go Thong appealed to the Court of Appeals in C.A.-G.R. No. 61320-R (Fernandez case) and C.A.-G.R. No. 61206-R (Cuevas case).
The Court of Appeals in C.A.-G.R. No. 61320-R affirmed Judge Fernandez’s decision through Reyes, L.B., J.
Go Thong then filed a petition for review to the Supreme Court docketed as G.R. No. L-48839, challenging C.A.-G.R. No. 61320-R.
The Supreme Court denied G.R. No. L-48839 through a Resolution dated 6 December 1978, and later denied a motion for reconsideration on 24 January 1979.
In C.A.-G.R. No. 61206-R, the Court of Appeals through Sison, P.V., J. reversed Judge Cuevas’s decision and dismissed the insurance companies’ complaint.
Petitioners later came to the Supreme Court via the present Petition for Review on Certiorari, assailing the Sison decision.

Key Factual Allegations

The collision occurred at 0350 hours on 3 May 1970 on the approaches to the port of Manila near Caballo Island.
The vessel M/V "Don Carlos" was an inter-island vessel owned and operated by Go Thong and was sailing southbound leaving Manila for Cebu.
The vessel M/S "Yotai Maru" was a merchant vessel of Japanese registry approaching Manila from Kobe, Japan.
The bow of Don Carlos rammed the portside of Yotai Maru, producing a three (3) cm. gaping hole near Hatch No. 3.
Seawater flooded the hatch and bottom tanks, damaging all cargo stowed therein.
The consignees of the damaged cargo were paid by their insurance companies, and the insurance companies were subrogated to the cargo owners’ interests.
The insurance companies sued Go Thong for damages sustained by the various shipments involved in the cargo damage from the collision.

Trial Court Findings

The Manila Court of First Instance in both civil cases found negligence on the part of the officers and crew of Don Carlos.
The trial court further found that Don Carlos negligence was the proximate cause of the collision and resulting cargo damage.
Judge Fernandez awarded P19,889.79 with legal interest plus P3,000.00 attorney’s fees in Civil Case No. 82567.
Judge Cuevas awarded in Civil Case No. 82556 on two claims, namely US$68,640.00 or its equivalent and attorney’s fees of P30,000.00, and P19,163.02 plus P5,000.00 attorney’s fees.

Court of Appeals Divergent Outcome

In C.A.-G.R. No. 61320-R, the Court of Appeals affirmed Judge Fernandez’s ruling that the Don Carlos officers and crew were negligent and that their negligence proximately caused the collision.
Go Thong’s petition for review of the Fernandez affirmance was denied by the Supreme Court in G.R. No. L-48839.
In contrast, in C.A.-G.R. No. 61206-R, the Court of Appeals reversed Judge Cuevas’s decision.
The Sison decision held the officers of Yotai Maru at fault and dismissed the insurance companies’ complaint.
Petitioners argued that the Sison decision was inconsistent with prior final adjudications on the negligence question.

Res Judicata Issue Framing

Petitioners’ principal contention was that the Sison decision disregarded the doctrine of res judicata.
Petitioners asserted that the Supreme Court’s Resolution dated 6 December 1978 in G.R. No. 48839 effectively settled the issue of liability and that Sison should have followed it.
Go Thong countered that the Supreme Court’s minute resolution merely denied the petition for review for lack of merit and did not affirm the Court of Appeals decision in toto.
The Supreme Court rejected Go Thong’s distinction between denial for lack of merit and affirmance, holding that a minute resolution denying a petition for review on certiorari constitutes an adjudication on the merits.
The Supreme Court explained that the denial of a petition for review on certiorari in a minute resolution means agreement with the findings and conclusions of the Court of Appeals.
Go Thong also argued that res judicata did not apply because of supposed lack of identity of parties and causes of action between the two Court of Appeals cases.
The Supreme Court rejected this by finding substantial identity of parties through the common participation of cargo-interest insurance plaintiffs and the common defendant Go Thong.
The Supreme Court treated the causes of action as the same in substance because both suits arose from the same casualty and the cargo owners’ right to the safety and integrity of cargo violated by the same collision.
The Supreme Court ruled that the absence of exact identity of subject matter did not preclude res judicata where substantial identity of parties and identity of cause of action existed.

Res Judicata Doctrinal Rules

The Supreme Court distinguished the two aspects of res judicata: bar by former judgment and conclusiveness of judgment.
The Court held that where the second action is on a different claim, the prior judgment operates as an estoppel only as to matters in issue or points controverted and determined.
The Court invoked the rule that conclusiveness of judgment bars relitigation of particular facts or issues in a later action between the same parties.
The Court stated that a prior final judgment is conclusive in the second case only as to matters actually and directly controverted and determined.
The Court held that issues necessarily involved and implied in the final judgment are treated as settled even absent specific findings.
Applying the rule, the Court held that the question of which vessel was negligent and whether such negligence proximately caused the collision was actually, directly, and expressly litigated in the earlier Court of Appeals case.
The Supreme Court concluded that the earlier ruling had become final and executory before the Sison decision was promulgated, thus making relitigation impermissible.
The Court therefore found clear and revers