Banco Vitalicio de España, Compañía Anónima de Seguros (BVE) filed a claim against Atlantic Navigation International Corp (Atlantic) and Lavinia Corp (Lavinia), claiming ESP 53 million as a result of damage caused to a consignment of frozen fish and cephalopods transported on the Atlantic from the Congasa, Cambaroya II and Cambaroya III fishing vessels.

The Court of first instance held Atlantic and Lavinia jointly and severally liable for the loss of the cargo, finding that the cause of the damage produced was the poor stowage of the cargo in the holds. Stowage was the exclusive responsibility of the charterer, Lavinia. Although the master failed to report on the type of damage that required the ship's repair in the port of Río Grande, the Court held that this malicious omission on the part of the master 'does not allow us to specify the relationship or extent that it could have had in relation to the damage caused to the transported cargo'; but that this did not imply that the master and the shipowner, Atlantic, could be exonerated from liability. The amount of damages was left to be determined in execution of the judgment.

Atlantic and Lavinia appealed to the Provincial Court of La Coruña, which partially confirmed and partially revoked the judgment of the Court of first instance, upholding BVE's claim only against the charterer Lavinia, and dismissing its claim against the shipowner, Atlantic. The appellate Court rejected BVE's argument regarding the unseaworthiness of the vessel, finding that the fundamental cause of the damage was the defective stowage of the cephalopods and frozen fish at the incorrect temperature. Under the terms and conditions of the Baltime time charterparty, Lavinia, as the charterer, was responsible for cargo stowage. Finally, the Court rejected Lavinia's invocation of limitation of liability under the LLMC 1976, holding that contractual liability was not included within art 2 of the Convention.

BVE and Lavinia appealed to the Supreme Court. BVE argued that in finding that cargo stowage was the sole responsibility of the charterer, the appellate Court disregarded the documentary evidence, which demonstrated that the master himself acknowledged his lack of vigilance in checking the stowage, that the master was in charge, in that he indicated how he wanted the stowage to be done, and that it was done as he ordered and to his satisfaction, so that the master was also responsible for the poor stowage.

Lavinia also appealed against the finding that it was solely responsible for stowage of the cargo. Lavinia further argued that the appealed judgment failed to apply art 2.4 of the MLM Convention 1926 in relation to arts 1.1.f and 3.5 [sic: 3.4?] of the Arrest Convention 1952, on the basis that the Atlantic was arrested upon arrival at the port of Vigo, and was then released on the basis of a guarantee in accordance with the provisions of art 5 of the Arrest Convention 1952. Given the arrest of the ship, it would therefore be illogical if the claim was not admitted against the shipowner, Atlantic. Finally, Lavinia argued that the appealed judgment erred in not allowing limitation of liability under the LLMC 1976.

Held: BVE's appeal is upheld. The Provincial Court judgment is annulled and the first instance Court judgment confirmed to the extent of the amount claimed by BVE. Lavinia's appeal is dismissed.

The master did not act in compliance with his obligations regarding surveillance of the stowage of the ship. In art 612.5 of the Code of Commerce (CCom), it is strictly prescribed that the following obligations are inherent to the position of master: to remain constantly on the ship with the crew while the cargo is on board, and to carefully monitor the cargo's stowage. According to what was previously admitted by the master, that duty to monitor cargo stowage carefully was violated. Therefore, art 618 CCom is fully applicable to the present case, in the sense of establishing that the master will be civilly liable towards the shipper and third parties which have contracted with it, for all damage that occurs to the cargo due to inexperience or carelessness on the master's part. The master's responsibility is imputed to the shipowner, Atlantic. Atlantic must bear responsibility for acts of the master which have caused damage to third parties. The terms and conditions of the time charter only affect the relationship between the parties to it.

As to Lavinia's argument regarding the MLM Convention 1926 and the Arrest Convention 1952, this raises a truly novel matter which was not previously argued in the litigation, so it must be rejected. Lavinia's argument regarding the LLMC 1976 cannot be accepted, because art 2 of the Convention does not include contractual liability. It is obvious that art 2.1.a states that limitation of liability will always refer to claims related to damage to property, occurring on board or in direct connection with the exploitation of the ship. On a literal interpretation, that limitation of liability cannot be projected onto contractual claims such as this.