(a)

The doctrine of limited liability, Art.

587
Manila Steamship v. Abdulhaman,
supra
Yangco v. Lasena, 73 Phil 330

EN BANC
[G.R. Nos. 47447-47449. October 29, 1941.]
TEODORO R. YANGCO, ETC., petitioner,
LASERNA, ET AL., respondents.
Claro M. Recto, for petitioner.
Powell & Vega, for respondents.

vs.

MANUEL

SYLLABUS
SHIPS AND SHIPPING; COLLISIONS OR SHIPWRECKS; CIVIL LIABILITY
OF SHIPOWNER FOR INJURY TO OR DEATH OF PASSENGERS ARISING
FROM NEGLIGENCE OF CAPTAIN. If the shipowner or agent may
in any way be held civilly liable at all for injury to or death of
passengers arising from the negligence of the captain in cases of
collisions or shipwrecks, his liability is merely co-extensive with his
interest in the vessel such that a total loss thereof results in its
extinction. In arriving at this conclusion, the fact is not ignored that
the ill-fated S. S. Negros, as a vessel engaged in interisland trade,
is a common carrier, and that the relationship between the
petitioner and the passengers who died in the mishap rests on a
contract of carriage. But assuming that petitioner is liable for a
breach of contract of carriage, the exclusively "real and
hypothecary nature" of maritime law operates to limit such liability
to the value of the vessel, or to the insurance thereon, if any. In the
instant case it does not appear that the vessel was insured.
DECISION
MORAN, J p:
At about one o'clock in the afternoon of May 26, 1927, the steamer
S. S. Negros, belonging to petitioner here, Teodoro R. Yangco, left
the port of Romblon on its return trip to Manila. Typhoon signal No.
2 was then up, of which fact the captain was duly advised and his
attention thereto called by the passengers themselves before the
vessel set sail. The boat was overloaded as indicated by the
loadline which was 6 to 7 inches below the surface of the water.

Baggage, trunks and other equipments were heaped on the upper

deck, the hold being packed to capacity. In addition, the vessel
carried thirty sacks of crushed marble and about one hundred sacks
of copra and some lumber. The passengers, numbering about 180,
were overcrowded, the vessel's capacity being limited to only 123
passengers. After two hours of sailing, the boat encountered strong
winds and rough seas between the islands of Banton and Simara,
and as the waves splashed the ladies' dresses, the awnings were
ordered lowered. As the sea became increasingly violent, the
captain ordered the vessel to turn left, evidently to return to port,
but in the maneuver, the vessel was caught sidewise by a big wave
which caused it to capsize and sink. Many of the passengers died in
the mishap, among them being Antolin Aldaa and his son
Victorioso, husband and son, respectively, of Emilia Bienvenida
who, together with her other children and a brother- in-law, are
respondents in G. R. No. 47447; Casiana Laserna, the daughter of
respondents Manuel Laserna and P. A. de Laserna in G. R. No.
47448; and Genaro Basaa, son of Filomeno Basaa, respondent in
G. R. No. 47449. These respondents instituted in the Court of First
Instance of Capiz separate civil actions against petitioner here to
recover damages for the death of the passengers aforementioned.
The court awarded the heirs of Antolin and Victorioso Aldaa the
sum of P2,000; the heirs of Casiana Laserna, P590; and those of
Genaro Basaa, also P590. After the rendition of the judgment to
this effect, petitioner, by a verified pleading, sought to abandon the
vessel to the plaintiffs in the three cases, together with all its
equipments, without prejudice to his right to appeal. The
abandonment having been denied, an appeal was taken to the
Court of Appeals, wherein all the judgments were affirmed except
that which awarded to the Aldaas the sum of P2,000, which sum
was increased to P4,000. Petitioner, now deceased, appealed and is
here represented by his legal representative.
Brushing aside the incidental issues, the fundamental question here
raised is: May the shipowner or agent, notwithstanding the total
loss of the vessel as a result of the negligence of its captain, be
properly held liable in damages for the consequent death of its
passengers? We are of the opinion and so hold that this question is
controlled by the provision of article 587 of the Code of Commerce.
Said article reads:
"The agent shall also be civilly liable for the indemnities in favor of
third persons which arise from the conduct of the captain in the
care of the goods which the vessel carried; but he may exempt
himself therefrom by abandoning the vessel with all her
equipments and the freight he may have earned during the
voyage."

The provision accords a shipowner or agent the right of

abandonment; and by necessary implication, his liability is confined
to that which he is entitled as of right to abandon - "the vessel with
all her equipments and the freight it may have earned during the
voyage." It is true that the article appears to deal only with the
limited liability of shipowners or agents for damages arising from
the misconduct of the captain in the care of the goods which the
vessel carries, but this is a mere deficiency of language and in no
way indicates the true extent of such liability. The consensus of
authorities is to the effect that notwithstanding the language of the
aforequoted provision, the benefit of limited liability therein
provided for, applies in all cases wherein the shipowner or agent
may properly be held liable for the negligent or illicit acts of the
captain. Dr. Jose Ma. Gonzalez de Echavarri y Vivanco, commenting
on said article, said:
"La letra del Codigo, en el articulo 587, presenta una gravisima
cuestion. El derecho de abandono, si se atiende a lo escrito, solo se
refiere a las indemnizaciones a que diere lugar la conducta del
Capitan en la custodia de los efectos que cargo en el buque.
"Es ese el espiritu del legislador? No; habra derecho de abandono
en las responsabilidades nacidas de obligaciones contraidas por el
Capitan y de otros actos de este? Lo reputamos evidente y, para
fortalecer nuestra opinion, basta copiar el siguiente parrafo de la
Exposicion de motivos:
" 'El proyecto, al aplicar estos principios, se inspira tambien en los
intereses del comercio maritimo, que quedaran mas asegurados
ofreciendo a todo el que contrata con el naviero o Capitan del
buque, la garantia real del mismo, cualesquiera que sean las
facultades o atribuciones de que se hallen investidos.'" (Echavarri,
Codigo de Comercio, Tomo 4, 2.a ed., pags. 483-484.)
A cursory examination will disclose that the principle of limited
liability of a shipowner or agent is provided for in but three articles
of the Code of Commerce - article 587 aforequoted and articles 590
and 837. Article 590 merely reiterates the principle embodied in
article 587, where the vessel is owned by several persons. Article
837 applies the same principle in cases of collision, and it has been
observed that said article is but "a necessary consequence of the
right to abandon the vessel given to the shipowner in article 587 of
the Code, and it is one of the many superfluities contained in the
Code." (Lorenzo Benito, Lecciones 352, quoted in Philippine
Shipping Co. vs. Garcia, 6 Phil., 281, 282.) In effect, therefore, only
articles 587 and 590 are the provisions contained in our Code of
Commerce on the matter, and the framers of said code had
intended those provisions to embody the universal principle of
limited liability in all cases. Thus, in the "Exposicion de Motivos" of
the Code of Commerce, we read:

"The present code (1829) does not determine the juridical status of
the agent where such agent is not himself the owner of the vessel.
This omission is supplied by the proposed code, which provides in
accordance with the principles of maritime law that by agent it is to
be understood the person intrusted with the provisioning of the
vessel, or the one who represents her in the port in which she
happens to be. This person is the only one who represents the
vessel that is to say, the only one who represents the interests of
the owner of the vessel. This provision has therefore cleared the
doubt which existed as to the extent of the liability, both of the
agent and of the owner of the vessel. Such liability is limited by the
proposed code to the value of the vessel and other things
appertaining thereto."
In Philippine Shipping Co. vs. Garcia (6 Phil., 281, 284-286), we
have expressed ourselves in such a comprehensive manner as to
leave no room for doubt on the applicability of our ratio decidendi
not only to cases of collision but also to those of shipwrecks, etc.
We said:
"This is the difference which exists between the lawful acts and
lawful obligations of the captain and the liability which he incurs on
account of any unlawful act committed by him. In the first case, the
lawful acts and obligations of the captain beneficial to the vessel
may be enforced as against the agent for the reason that such
obligations arise from the contract of agency (provided, however,
that the captain does not exceed his authority), while as to any
liability incurred by the captain through his unlawful acts, the ship
agent is simply subsidiarily civilly liable. This liability of the agent is
limited to the vessel and it does not extend further. For this reason
the Code of Commerce makes the agent liable to the extent of the
value of the vessel, as the codes of the principal maritime nations
provide, with the vessel, and not individually. Such is also the spirit
of our Code.
"The spirit of our code is accurately set forth in a treatise on
maritime law, from which we deem proper to quote the following as
the basis of this decision:
"'That which distinguishes the maritime from the civil law and even
from the mercantile law in general is the real and hypothecary
nature of the former, and the many securities of a real nature that
maritime customs from time immemorial, the laws, the codes, and
the later jurisprudence, have provided for the protection of the
various and conflicting interests which are ventured and risked in
maritime expeditions, such as the interests of the vessel and of the
agent, those of the owners of the cargo and consignees, those who
salvage the ship, those who make loans upon the cargo, those of
the sailors and members of the crew as to their wages, and those of
a constructor as to repairs made to the vessel.

"'As evidence of this real nature of the maritime law we have (1)
the limitation of the liability of the agents to the actual value of the
vessel and the freight money, and (2) the right to retain the cargo
and the embargo and detention of the vessel even in cases where
the ordinary civil law would not allow more than a personal action
against the debtor or person liable. It will be observed that these
rights are correlative, and naturally so, because if the agent can
exempt himself from liability by abandoning the vessel and freight
money, thus avoiding the possibility of risking his whole fortune in
the business, it is also just that his maritime creditor may for any
reason attach the vessel itself to secure his claim without waiting
for a settlement of his rights by a final judgment, even to the
prejudice of a third person.
"'This repeals the civil law to such an extent that, in certain cases,
where the mortgaged property is lost no personal action lies
against the owner or agent of the vessel. For instance, where the
vessel is lost the sailors and members of the crew cannot recover
their wages; in case of collision, the liability of the agent is limited
as aforesaid, and in case of shipwreck, those who loan their money
on the vessel and cargo lose all their rights and cannot claim
reimbursement under the law.
"'There are two reasons why it is impossible to do away with these
privileges, to wit: (1) The risk to which the thing is exposed, and (2)
the real nature of the maritime law, exclusively real, according to
which the liability of the parties is limited to a thing which is at the
mercy of the waves. If the agent is only liable with the vessel and
freight money and both may be lost through the accidents of
navigation it is only just that the maritime creditor have some
means to obviating this precarious nature of his rights by detaining
the ship, his only security, before it is lost."'The liens, tacit or legal,
which may exist upon the vessel and which a purchaser of the
same would be obliged to respect and recognize are in addition
to those existing in favor of the State by virtue of the privileges
which are granted to it by all the laws pilot, tonnage, and port
dues and other similar charges, the wages of the crew earned
during the last voyage as provided in article 646 of the Code of
Commerce, salvage dues under article 842, the indemnification due
to the captain of the vessel in case his contract is terminated on
account of the voluntary sale of the ship and the insolvency of the
owner as provided in article 608, and all other liabilities arising from
collisions under articles 837 and 838.'"
We are shared in this conclusion by the eminent commentators on
the subject. Agustin Vicente y Gella, asserting, in his "Introduccion
al Derecho Mercantil Comparado" 1929 (pages 374-375), the like
principle of limited liability of shipowners or agent in cases of
accidents, collisions, shipwrecks, etc., said:

"De las responsabilidades que pueden resultar como consequencia

del comercio maritimo, y no solo por hechos propios sino tambien
por las que se ocasionen por los del capitan y la tripulacion,
responde frente a tercero el naviero que representa el buque; pero
el derecho maritimo es sobre todo tradicional y siguiendo un viejo
principio de la Edad Media la responsabilidad del naviero se
organiza de un modo especifico y particularisimo que no encuentra
similar en el derecho general de las obligaciones.
"Una forma corrientisima de verificarse el comercio maritimo
durante la epoca medieval, era prestar un propietario su navio para
que cargase en el mercancias determinada persona, y se hiciese a
la mar, yendo al frente de la expedicion un patron del buque, que
llegado al puerto de destino se encargaba de venderlas y retornaba
al de salida despues de adquirir en aquel otros efectos que
igualmente revendia a su regreso, verificado lo cual los beneficios
de la expedicion se repartian entre el dueo del buque, el cargador
y el capitan y tripulantes en la proporcion estipulada. El derecho
maritimo empezo a considerar la asociacion asi formada como una
verdadera sociedad mercantil, de responsabilidad limitada, y de
acuerdo con los principios que gobiernan aquella en los casos de
accidentes, abordajes, naufragios, etc., se resolvia que el dueo del
buque perdia la nave, el cargador las mercancias embarcadas y el
capitan y la tripulacion su trabajo, sin que en ningn caso el tercer
acreedor pudiese reclamar mayor cantidad de ninguno de ellos,
porque su responsabilidad quedaba limitada a lo que cada uno
aporto a la sociedad. Recogidas estas ideas en el derecho comercial
de tiempos posteriores, la responsabilidad del naviero se edifico
sobre aquellos principios, y derogando la norma general civil de
que del cumplimiento de sus obligaciones responde el deudor con
todos sus bienes presentes y futuros, la responsabilidad maritima
se considero siempre limitada ipso jure al patrimonio de mar. Y este
es el origen de la regla trascendental de derecho maritimo segn la
cual el naviero se libera de toda responsabilidad abandonado el
buque y el flete a favor de los acreedores.".
From the Enciclopedia Juridica Espaola, Vol. 23, p. 347, we read:
"Ahora bien: hasta donde se extiende esta responsabilidad del
naviero? sobre que bienes pueden los acreedores resarcirse? Esta
es otra especialidad del Derecho maritimo; en el Derecho comn la
responsabilidad es limitada; tambien lo era en el antiguo Derecho
maritimo romano; se daba la actio exercitoria contra el exercitor
navis sin ninguna restriccion, pero en la Edad Media una idea nueva
se introdujo en los usos maritimos. Las cargas resultantes de las
expediciones maritimas se consideraron limitadas por los
propietarios de las naves a los valores comprometidos por ellos en
cada expedicion; se separo ficticiamente el patrimonio de los
navieros en dos partes que todavia se designan de una manera

bastante exacta; fortuna de tierra y fortuna de mar o flotante; y se

admitio la teoria de que esta era la que respondia solo de las
deudas provinientes de los actos del capitan o de la tripulacion, es
decir, que el conjunto del patrimonio del naviero escaparia a estas
cargas desde el momento en que abandonara la nave y los fletes a
los acreedores. . . .".
Escriche in his Diccionario de la Legislacion y Jurisprudencia, Vol. 1,
p. 38, observes:
"La responsabilidad del naviero, en el caso expuesto, se funda en el
principio de derecho comn de ser responsable todo el que pone al
frente de un establecimiento a una persona, de los daos o
perjuicios que ocasionare esta desempeando su cometido, y en
que estando facultado el naviero para la eleccion de capitan de la
nave, viene a tener indirectamente culpa en la negligencia o actos
de este que o casionaron daos o perjuicios, puesto que no se
aseguro de su pericia o buena fe. Limitase, sin embargo, la
responsabilidad del naviero a la perdida de la nave, sus aparejos, y
fletes devengados durante el viaje; porque no pudiendo vigilar de
un modo directo e inmediato la conducta del capitan, hubiera sido
duro hacerla extensiva a todos sus bienes que podria comprometer
el capitan con sus faltas o delitos."
The views of these learned commentators, including those of
Estasen (Derecho Mercantil, Vol. 4, p. 259) and Supino (Derecho
Mercantil, pp. 463-464), leave nothing to be desired and nothing to
be doubted on the principle. It only remains to be noted that the
rule of limited liability provided for in our Code of Commerce
reflects merely, or is but a restatement, imperfect though it is, of
the almost universal principle on the subject. While previously
under the civil or common law, the owner of a vessel was liable to
the full amount for damages caused by the misconduct of the
master, by the general maritime law of modern Europe, the liability
of the shipowner was subsequently limited to his interest in the
vessel. (Norwich & N. Y. Trans. Co. v. Wright, 80 U. S. 104, 20 Law.
ed. 585.) A similar limitation was placed by the British Parliament
upon the liability of English shipowners through a series of statutes
beginning in 1734 with the Act of 7 George II, chapter 15. The
legislatures of Massachusetts and Maine followed suit in 1818 and
1821, and finally, Congress enacted the Limited Liability Act of
March 3, 1851, embodying most of the provisions contained in the
British Statutes (see 24 R. C. L. pp. 1387-1389). Section 4283 of the
Revised Statutes (sec. 183, Tit. 46, Code of Laws of U. S. A.) reads:
"LIABILITY OF OWNER NOT TO EXCEED INTEREST. The liability of
the owner of any vessel, for any embezzlement, loss, or
destruction, by any person, of any property, goods, or merchandise,
shipped or put on board of such vessel, or for any loss, damage, or
injury by collision, or for any act, matter or thing, loss, damage, or

forfeiture, done, occasioned, or incurred without the privity, or

knowledge of such owner or owners, shall in no case exceed the
amount or value of the interest of such owner in such vessel, and
her freight then pending."
The policy which the rule is designed to promote is the
encouragement of shipbuilding and investment in maritime
commerce. (Vide: Norwich & N. Y. Trans. Co. v. Wright, supra; The
Main v. Williams, 152 U. S. 122; 58 C. J. 634.) And it is in that spirit
that the American courts construed the Limited Liability Act of
Congress whereby the immunities of the Act were applied to claims
not only for lost goods but also for injuries and "loss of life of
passengers, whether arising under the general law of admiralty, or
under Federal or State statutes." (The City of Columbus, 22 Fed.
460; The Longfellow, 104 Fed. 360; Butler v. Boston & Savannah
Steamship Co., 32 Law. ed. 1017; Craig v. Continental Insurance
Co., 35 Law. ed. 836.) The Supreme Court of the United States in
Norwich & N. Y. Trans. Co. v. Wright, 80 U. S. 104, 20 Law. ed. 585,
589-590, accounting for the history of the principle, clinches our
exposition of the supporting authorities:
"The history of the limitation of liability of shipowners is matter of
common knowledge. The learned opinion of Judge Ware in the case
of The Rebecca, 1 Ware, 187-194, leaves little to be desired on the
subject. He shows that it originated in the maritime law of modern
Europe; that whilst the civil, as well as the common law, made the
owner responsible to the whole extent of damage caused by the
wrongful act or negligence of the master or crew, the maritime law
only made them liable (if personally free from blame) to the
amount of their interest in the ship. So that, if they surrendered the
ship, they were discharged.
"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 and, therefore, in Holland, they had never
observed the Roman Law on that subject, but had a regulation that
the ship owners should be bound no farther than the value of their
ship and freight. His words are: 'Navis et corum quare in navi sunt,'
'the ship and goods therein.' But he is speaking of the owner's
interest; and this, as to the cargo, is the freight thereon, and in that
sense he is understood by the commentators. Boulay Paty, Droit
Maritime, tit. 3, sec. 1, p. 276; Book II, c. XI, sec. XIII. The maritime
law, as codified in the celebrated French Ordinance de la Marine, in
1681, expressed the rule thus: 'The proprietors of vessels shall be
responsible for the acts of the master, but they shall be discharged
by abandoning the ship and freight.' Valin, in his commentary on
this passage, lib. 2, tit. 8, art. 2, after specifying certain
engagements of the master which are binding on the owners,

without any limit of responsibility, such as contracts for the benefit

of the vessel, made during the voyage (except contracts of
bottomry) says: 'With these exceptions it is just that the owner
should not be bound for the acts of the master, except to the
amount of the ship and freight. Otherwise he would run the risk of
being ruined by the bad faith or negligence of his captain, and the
apprehension of this would be fatal to the interests of navigation. It
is quite sufficient that he be exposed to the loss of his ship and of
the freight, to make it his interest, independently of any goods he
may have on board to select a reliable captain.' Pardessus says:
'The owner is bound civilly for all delinquencies committed by the
captain within the scope of his authority, but he may discharge
himself therefrom by abandoning the ship and freight; and, if they
are lost, it suffices for his discharge, to surrender all claims in
respect of the ship and its freight,' such as insurance, etc. Droit
Commercial, part 3, tit. 2, c. 3, sec. 2.
"The same general doctrine is laid down by many other writers on
maritime law. So that it is evident that, by this law, the owner's
liability was coextensive with his interest in the vessel and its
freight, and ceased by his abandonment and surrender of these to
the parties sustaining loss."
In the light of all the foregoing, we therefore hold that if the
shipowner or agent may in any way be held civilly liable at all for
injury to or death of passengers arising from the negligence of the
captain in cases of collisions or shipwrecks, his liability is merely coextensive with his interest in the vessel such that a total loss
thereof results in its extinction. In arriving at this conclusion, we
have not been unmindful of the fact that the ill-fated steamship
Negros, as a vessel engaged in interisland trade, is a common
carrier (De Villata v. Stanley, 32 Phil., 541), and that the as a vessel
engaged in interisland trade, is a common carrier (De Villata v.
Stanley, 32 Phil., 541), and that the relationship between the
petitioner and the passengers who died in the mishap rests on a
contract of carriage. But assuming that petitioner is liable for a
breach of contract of carriage, the exclusively "real and
hypothecary nature" of maritime law operates to limit such liability
to the value of the vessel, or to the insurance thereon, if any. In the
instant case it does not appear that the vessel was insured.
Whether the abandonment of the vessel sought by the petitioner in
the instant case was in accordance with law or not, is immaterial.
The vessel having totally perished, any act of abandonment would
be an idle ceremony.
Judgment is reversed and petitioner is hereby absolved of all the
complaints, without costs.

Avancea, C.J., Abad Santos, Diaz, Laurel, Horrilleno and Ozaeta, JJ.,
concur.

Abueg v. San Diego, 77 Phil 730

EN BANC
[CA-No. 773. December 17, 1946.]
DIONISIA
ABUEG,
ET
AL.,
plaintiffs-appellees,
vs.
BARTOLOME SAN DIEGO, defendant-appellant.
[CA-No. 774. December 17, 1946.]
MARCIANA DE SALVACION, ET AL., plaintiffs-appellees, vs.
BARTOLOME SAN DIEGO, defendant-appellant.
[CA-No. 775. December 17, 1946.]
ROSARIO
OCHING,
ET
AL.,
plaintiffs-appellees,
vs.
BARTOLOME SAN DIEGO, defendant-appellant.
Lichauco, Picazo & Mejia, for appellant.
Cecilio I. Lim and Roberto P. Ancog, for appellees.
SYLLABUS
1.
MARITIME LAW; SHIPOWNER OR AGENT, ORIGIN OF REAL
AND HYPOTHECARY NATURE OF LIABILITY OF. The real and
hypothecary nature of the liability of the shipowner or agent
embodied in provisions of the Maritime Law, Book III, Code of
Commerce, had 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, so that if the

shipowner or agent abandoned the ship, equipment, and freight,

his liability was extinguished.
2.
WORKMEN'S COMPENSATION ACT; PROVISIONS OF CODE OF
COMMERCE REGARDING MARITIME COMMERCE WITHOUT EFFECT IN
APPLICATION OF. The provisions of the Code of Commerce
regarding maritime commerce have no room in the application of
the Workmen's Compensation Act which seeks to improve, and
aims at the amelioration of, the condition of laborers and
employees. Said Act creates a liability to compensate employees
and laborers in cases of injury received by or inflicted upon them,
while engaged in the performance of their work or employment, or
the heirs and dependents of such laborers and employees in the
event of death caused by their employment.
3.
ID.; INDUSTRIAL EMPLOYEES; OFFICERS OF MOTOR SHIPS
ENGAGED IN FISHING EXCEPTIONS. The officers of motor ships
engaged in fishing are industrial employees within the purview of
section 39, paragraph (d), as amended, for industrial employment
"includes all employment or work at a trade, occupation or
profession exercised by an employer for the purpose of gain." The
only exceptions recognized by the Workmen's Compensation Act
are agriculture, charitable institutions and domestic service. Even
employees engaged in agriculture for the operation of mechanical
implements, are entitled to the benefits of the Workmen's
Compensation Act.
4.
ID.; COASTWISE AND INTERISLAND TRADE, MEANING OF;
FISHING, WHEN A TRADE . The term "coastwise and interisland
trade" does not have such a narrow meaning as to confine it to the
carriage for hire of passengers and/or merchandise on vessels
between ports and places in the Philippines because while fishing is
an industry, if the catch is brought to a port for sale, it is at the
same time a trade.
DECISION
PADILLA, J p:
This is an appeal from a judgment rendered by the Court of First
Instance of Manila in the above-entitled cases awarding plaintiffs
the compensation provided for in the Workmen's Compensation
Act.
The record of the cases was forwarded the Court of Appeals for
review, but as there was no question of fact involved in the appeal,
said court forwarded the record to this Court. The appeal was
pending when the Pacific War broke out, and continued pending
until after liberation, because the record of the cases was destroyed

as a result of the battle waged by the forces of liberation against

the enemy. As provided by law, the record was reconstituted and
we now proceed to dispose of the appeal.
Appellant, who was the owner of the motor ships San Diego II and
Bartolome S, states in his brief the following:
There is no dispute as to the facts involved in these cases and they
may be gathered from the pleadings and the decision of the trial
Court. In case CA-G. R. No. 773, Dionisia Abueg is the widow of the
deceased, Amado Nuez; who was a machinist on board the M/S
San Diego II belonging to the defendant-appellant. In case CA-G. R.
NO. 774, plaintiff-appellee, Marciana S. dc Salvacion, is the widow
of the deceased, Victoriano Salvacion, who was a machinist on
board the M/S Bartolome S also belonging to the defendantappellant. In case CA-G. R. NO. 775, the plaintiff-appellee, Rosario
R. Oching is the widow of Francisco Oching who was captain or
patron of the defendant-appellant's M/S Bartolome S.
The M/S San Diego II and the M/S Bartolome, while engaged in
fishing operations around Mindoro Island on Oct. 1, 1941 were
caught by a typhoon as a consequence of which they were sunk
and totally lost. Amado Nuez, Victoriano Salvacion and Francisco
Oching while acting in their capacities perished in the
shipwreck(Appendix A, p. IV).
It is also undisputed that the above-named vessels were not
covered by any insurance. (Appendix A, p. IV.)
Counsel for the appellant cite article 587 of the Code of Commerce
which provides that if the vessel together with all her tackle and
freight money earned during the voyage are abandoned, the
agent's liability to third persons for tortuous acts of the captain in
the care of the goods which the ship carried is extinguished (Yangco
vs. Laserna, 73 Phil., 330); article 837 of the same Code which
provides that in cases of collision, the shipowners' liability is limited
to the value of the vessel with all her equipment and freight during
the voyage (Philippines Shipping Company vs. Garcia, 6 Phil., 281);
and article 643 of the same Code which provides that if the vessels
and freight are totally lost, the agent's liability for wages of the
crew is extinguished. From these premises counsel draw the
conclusion that appellant's liability, as owner of the two motor ships
lost or sunk as a result of the typhoon that lashed the island of
Mindoro on October 1, 1941, was extinguished.
The real and hypothecary nature of the liability of the shipower or
agent embodied in the provisions of the Maritime Law, Book III,
Code of Commerce, had 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, so that if the
shipowner or agent abandoned the ship, equipment, and freight,
his liability was extinguished.
But the provisions of the Code of Commerce invoked by appellant
have no room in the application of the Workmen's Compensation
Act which seeks to improve, and aims at the amelioration of, the
condition of laborers and employees. It is not the liability for the
damage or loss of the cargo or injury to, or death of, a passenger
by or through the misconduct of the captain or master of the ship;
nor the liability for the loss of the ship as a result of collision; nor
the responsibility for w ages of the crew, but a liability created by a
statute to compensate employees and laborers in cases of injury
received by or inflicted upon them, while engaged in the
performance of their work or employment, or the heirs and
dependents of such laborers and employees in the event of death
caused by their employment Such Compensation has nothing to do
with the provisions of the Code of Commerce regarding maritime
commerce. It is an item in the costs of production which must be
included in the budget of any well-managed industry.
Appellant's assertion that in the case of Francisco vs. Dy Liaco (57
Phil., 446), and Murillo vs. Mendoza (66 Phil., 689), the question of
the extinction of the shipowner's liability due to abandonment of
the ship by him was not fully discussed, as in the case of Yangco vs.
Laserna, supra, is not entirely correct. In the last mentioned case,
the limitation of the shipowner's liability to the value of the ship,
equipment, freight, and insurance, if any, was the lis mota. In the
case of Francisco vs. Dy-Liacco, supra, the application of the
Workmen's Compensation Act to a master or patron who perished
as a result of the sinking of the motorboat of which he was the
master, was the controversy submitted to the court for decision.
This Court held in that case that "It has been repeatedly stated that
the Workmen's Compensation Act was enacted to abrogate the
common law and our Civil Code upon culpable acts and omissions,
and that the employer need not be guilty of neglect or fault, in
order that responsibility may attach to him" (pp. 449-450); and that
the shipowner was liable to pay compensation provided for in the
Workmen's Compensation Act, notwithstanding the fact that the
motorboat was totally lost. In the case of Murillo vs. Mendoza,
supra, this Court held that "The rights and responsibilities defined
in said Act must be governed by its own peculiar provisions in
complete disregard of other similar provisions of the civil as well as
the mercantile law. If an accident is compensable under the
Workmen's Compensation Act, it must be compensated even when
the workman's right is not recognized by or is in conflict with other
provisions of the Civil Code or of the Code of Commerce. The

reason behind this principle is that the Workmen's Compensation

Act was enacted by the Legislature in abrogation of the other
existing laws." This quoted part of the decision is in answer to the
contention that it was not the intention of the Legislature to repeal
articles 643 and 837 of the Code of Commerce with the enactment
of the Workmen's Compensation Act.
In the memorandum filed by counsel for the appellant, a new point
not relied upon in the court below is raised. They contend that the
motorboats engaged in fishing could not be deemed to be in the
coastwise and interisland trade, as contemplated in section 38 of
the Workmen's Compensation Act (No. 3428), as amended by Act
No. 3812, in as much as, according to counsel, a craft engaged in
the coastwise and interisland trade is one that carries passengers
and/or merchandise for hire between ports and places in the
Philippine Islands.
This new point raised by counsel for the appellant is inconsistent
with the first, for, if the motor ships in question while engaged in
fishing, were to be considered as not engaged in interisland and
coastwise trade, the provisions or the Code of Commerce invoked
by them regarding limitation of the shipowner's liability or
extinction thereof when the shipowner abandons the ship, cannot
be applied Lopez vs. Duruelo, 52 Phil., 229). Granting however, that
the motor ships run and operated by the appellant were not
engaged in the coastwise and interisland trade, as contemplated in
section 38 of the Workmen's compensation Act, as amended, still
the deceased officers of the motor ships in question were industrial
employees within the purview of section 39, paragraph (d), as
amended, for industrial employment "includes all employment or
work at a trade, occupation or profession exercised by an employer
for the purpose of gain." The only exceptions recognized by the Act
are agriculture, charitable institutions and domestic service. Even
employees engaged in agriculture for the operation of mechanical
implements, are entitled to the benefits of the Workmen's
Compensation Act Francisco vs. Consing, 63 Phil., 354). In Murillo
vs. Mendoza, supra, this Court held that "our Legislature has
deemed it advisable to include in the Workmen's Compensation Act
all accidents that may occur to workmen or employees in factories,
shops and other industrial and agricultural workplaces as well as in
the interisland seas of the Archipelago." But we do not believe that
the term "coastwise and interisland trade" has such a narrow
meaning as to confine it to the carriage for hire of passengers
and/or merchandise, on vessels between Ports and Places in the
Philippines, because while fishing is an industry, if the catch is
brought to a port for sale, it is at the same time a trade.
Finding no merit in the appeal filed in these cases, we affirm the
judgment of the lower court, with costs against the appellant.

Moran, C.J., Feria, Pablo, Perfecto, Hilado Bengzon, Briones and

Tuazon, JJ., concur.

Aboitiz Shipping v. General Accident

Fire and Life Assurance Corporation,
Ltd. 217 SCRA 359
THIRD DIVISION
[G.R. No. 100446. January 21, 1993.]

ABOITIZ SHIPPING CORPORATION, petitioner, vs. GENERAL

ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, LTD.,
respondent.
Sycip, Salazar, Hernandez & Gatmaitan Law Office for
petitioner.
Napoleon Rama collaborating counsel for petitioner.
Dollete, Blanco, Ejercito & Associates for private
respondent.
SYLLABUS
1.
REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; STAY OF
EXECUTION OF JUDGMENT; GROUNDS THEREFOR. This Court has
always been consistent in its stand that the very purpose for its
existence is to see to the accomplishment of the ends of justice.
Consistent with this view, a number of decisions have originated
herefrom, the tenor of which is that no procedural consideration is
sacrosanct if such shall result in the subverting of substantial
justice. The right to an execution after finality of a decision is
certainly no exception to this. Thus, in Cabrias v. Adil (135 SCRA
355 [1985]), this Court ruled that: ". . . It is a truism that every
court has the power 'to control, in the furtherance of justice, the
conduct of its ministerial officers, and of all other persons in any
manner connected with a case before it, in every manner
appertaining thereto.' It has also been said that: '. . . every court
having jurisdiction to render a particular judgment has inherent
power to enforce it, and to exercise equitable control over such
enforcement. The court has authority to inquire whether its
judgment has been executed, and will remove obstructions to the
enforcement thereof. Such authority extends not only to such
orders and such writs as may be necessary to carry out the
judgment into effect and render it binding and operative, but also
to such orders and such writs as may be necessary to prevent an
improper enforcement of the judgment. If a judgment is sought to
be perverted and made a medium of consummating a wrong the
court on proper application can prevent it.'" (at p. 359) and again in
the case of Lipana v. Development Bank of Rizal (154 SCRA 257
[1987]), this Court found that: "The rule that once a decision
becomes final and executory, it is the ministerial duty of the court
to order its execution, admits of certain exceptions as in cases of
special and exceptional nature where it becomes the imperative in
the higher interest of justice to direct the suspension of its
execution (Vecine v. Geronimo, 59 OG 579); whenever it is
necessary to accomplish the aims of justice (Pascual v. Tan, 85 Phil.
164); or when certain facts and circumstances transpired after the

judgment became final which would render the execution of the

judgment unjust (Cabrias v. Adil, 135 SCRA 354)." (at p. 201)
2.
COMMERCIAL LAW; CODE OF COMMERCE; REAL AND
HYPOTHECARY NATURE OF MARITIME LAW; MEANING; ORIGIN AND
PURPOSE. The real and hypothecary nature of maritime law
simply means that the liability of the carrier in connection with
losses related to maritime contracts is confined to the vessel, which
is hypothecated for such obligations or which stands as the
guaranty for their settlement. It has its origin by reason of the
conditions and risks attending maritime trade in its earliest years
when such trade was replete with innumerable and unknown
hazards since vessels had to go through largely uncharted waters
to ply their trade. It was designed to offset such adverse conditions
and to encourage people and entities to venture into maritime
commerce despite the risks and the prohibitive cost of shipbuilding.
Thus, the liability of the vessel owner and agent arising from the
operation of such vessel were confined to the vessel itself, its
equipment, freight, and insurance, if any, which limitation served to
induce capitalists into effectively wagering their resources against
the consideration of the large profits attainable in the trade. It
might be noteworthy to add in passing that despite the
modernization of the shipping industry and the development of
high-technology safety devices designed to reduce the risks
therein, the limitation has not only persisted, but is even practically
absolute in well-developed maritime countries such as the United
States and England where it covers almost all maritime casualties.
Philippine maritime law is of Anglo-American extraction, and is
governed by adherence to both international maritime conventions
and generally accepted practices relative to maritime trade and
travel.
3.
ID.; ID.; LIMITED LIABILITY RULE; WHEN RULE NOT
APPLICABLE; WHEN RULE PROPERLY INVOKED; CASE AT BAR. In
this jurisdiction, on the other hand, its application has been wellnigh constricted by the very statute from which it originates. The
Limited Liability Rule in the Philippines is taken up in Book III of the
Code of Commerce, particularly in Articles 587, 590, and 837,
hereunder quoted in toto: "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 coowners of a 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 (on collisions),
shall be understood as limited to the value of the vessel with all its
appurtenances and freightage served during the voyage." Taken
together with related articles, the foregoing cover only liability for
injuries to third parties (Art. 587), acts of the captain (Art. 590) and
collisions (Art. 837). In view of the foregoing, this Court shall not
take the application of such limited liability rule, which is a matter
of near absolute application in other jurisdictions, so lightly as to
merely "imply" its inapplicability, because as could be seen, the
reasons for its being are still apparently much in existence and
highly regarded. We now come to its applicability in the instant
case. In the few instances when the matter was considered by this
Court, we have been consistent in this jurisdiction in holding that
the only time the Limited Liability Rule does not apply is when there
is an actual finding of negligence on the part of the vessel owner or
agent (Yango v. Laserna, 73 Phil. 330 [1941]; Manila Steamship Co.,
Inc. v. Abdulhanan, 101 Phil. 32 [1957]; Heirs of Amparo delos
Santos v. Court of Appeals, 186 SCRA 649 [1967]) . . . We must
stress that the matter of the Limited Liability Rule as discussed was
never in issue in all prior cases, including those before the RTCs and
the Court of Appeals. As discussed earlier, the "limited liability" in
issue before the trial courts referred to the package limitation
clauses in the bills of lading and not the limited liability doctrine
arising from the real and hypothecary nature of maritime trade. The
latter rule was never made a matter of defense in any of the cases
a quo, as properly it could not have been made so since it was not
relevant in said cases. The only time it could come into play is
when any of the cases involving the mishap were to be executed,
as in this case. Then, and only then, could the matter have been
raised, as it has now been brought before the Court.
4.
ID.; ID.; ID.; RIGHTS OF VESSEL OWNER OR AGENT AKIN TO
RIGHTS OF SHAREHOLDERS TO LIMITED LIABILITY UNDER
CORPORATION LAW; RIGHTS OF CLAIMANTS AGAINST VESSEL
OWNER OR AGENT COMPARED TO RIGHTS OF CREDITORS AGAINST
INSOLVENT CORPORATION WITH SUFFICIENT ASSETS. The rights
of a vessel owner or agent under the Limited Liability Rule are akin
to those of the rights of shareholders to limited liability under our
corporation law. Both are privileges granted by statute, and while
not absolute, must be swept aside only in the established existence
of the most compelling of reasons. In the absence of such reasons,
this Court chooses to exercise prudence and shall not sweep such
rights aside on mere whim or surmise, for even in the existence of
cause to do so, such incursion is definitely punitive in nature and
must never be taken lightly. More to the point, the rights of parties
to claim against an agent or owner of a vessel may be compared to

those of creditors against an insolvent corporation whose assets

are not enough to satisfy the totality of claims as against it. While
each individual creditor may, and in fact shall, be allowed to prove
the actual amounts of their respective claims, this does not mean
that they shall all be allowed to recover fully thus favoring those
who filed and proved their claims sooner to the prejudice of those
who come later. In such an instance, such creditors too would not
also be able to gain access to the assets of the individual
shareholders, but must limit their recovery to what is left in the
name of the corporation. Thus, in the case of Lipana v.
Development Bank of Rizal earlier cited, We held that: "In the
instant case, the stay of execution of judgment is warranted by the
fact that respondent bank was placed under receivership. To
execute the judgment would unduly deplete the assets of
respondent bank to the obvious prejudice of other depositors and
creditors, since, as aptly stated in Central Bank v. Morfe (63 SCRA
114), after the Monetary Board has declared that a bank is
insolvent and has ordered it to cease operations, the Board
becomes the trustee of its assets for the equal benefit of all
creditors, and after its insolvency, one cannot obtain an advantage
or preference over another by an attachment, execution or
otherwise." In both insolvency of a corporation and the sinking of a
vessel, the claimants or creditors are limited in their recovery to the
remaining value of accessible assets. In the case of an insolvent
corporation, these are the residual assets of the corporation left
over from its operations. In the case of a lost vessel, these are the
insurance proceeds and pending freightage for the particular
voyage.
5.
ID.; ID.; ID.; COLLATION OF ALL CLAIMS PREPARATORY TO
SETTLEMENT OUT OF INSURANCE PROCEEDS ON VESSEL; NO
CLAIMANT GIVEN PRECEDENCE OVER OTHERS; CASE AT BAR. In
the instant case, there is, therefore, a need to collate all claims
preparatory to their satisfaction from the insurance proceeds on the
vessel M/V P. Aboitiz and its pending freightage at the time of its
loss. No claimant can be given precedence over the others by the
simple expedience of having filed or completed its action earlier
than the rest. Thus, execution of judgment in earlier completed
cases, even those already final and executory, must be stayed
pending completion of all cases occasioned by the subject sinking.
Then and only then can all such claims be simultaneously settled,
either completely or pro-rata should the insurance proceeds and
freightage be not enough to satisfy all claims . . . In fairness to the
claimants, and as a matter of equity, the total proceeds of the
insurance and pending freightage should now be deposited in trust.
Moreover, petitioner should institute the necessary limitation and
distribution action before the proper admiralty court within 15 days

from the finality of this decision, and thereafter deposit with it the
proceeds from the insurance company and pending freightage in
order to safeguard the same pending final resolution of all
incidents, for final pro-rating and settlement thereof.
DECISION
MELO, J p:
This refers to a petition for review which seeks to annul and set
aside the decision of the Court of Appeals dated June 21, 1991, in
CA G.R. SP No. 24918. The appellate court dismissed the petition
for certiorari filed by herein petitioner, Aboitiz Shipping Corporation,
questioning the Order of April 30, 1991 issued by the Regional Trial
Court of the National Capital Judicial Region (Manila, Branch IV) in
its Civil Case No. 144425 granting private respondent's prayer for
execution for the full amount of the judgment award. The trial court
in so doing swept aside petitioner's opposition which was grounded
on the real and hypothecary nature of petitioner's liability as ship
owner. The application of this established principle of maritime law
would necessarily result in a probable reduction of the amount to
be recovered by private respondent, since it would have to share
with a number of other parties similarly situated in the insurance
proceeds on the vessel that sank.
The basic facts are not disputed.
Petitioner is a corporation organized and operating under Philippine
laws and engaged in the business of maritime trade as a carrier. As
such, it owned and operated the ill-fated "M/V P. ABOITIZ," a
common carrier which sank on a voyage from Hongkong to the
Philippines on October 31, 1980. Private respondent General
Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC), on the
other hand, is a foreign insurance company pursuing its remedies
as a subrogee of several cargo consignees whose respective cargo
sank with the said vessel and for which it has priorly paid.
The incident of said vessel's sinking gave rise to the filing of suits
for recovery of lost cargo either by the shippers, their successor-ininterest, or the cargo insurers like GAFLAC as subrogees. The
sinking was initially investigated by the Board of Marine Inquiry
(BMI Case No. 466, December 26, 1984), which found that such
sinking was due to force majeure and that subject vessel, at the
time of the sinking was seaworthy. This administrative finding
notwithstanding, the trial court in said Civil Case No. 144425 found
against the carrier on the basis that the loss subject matter therein
did not occur as a result of force majeure. Thus, in said case,
plaintiff GAFLAC was allowed to prove, and was later awarded, its
claim. This decision in favor or GAFLAC was elevated all the way up
to this Court in G.R. No. 89757 (Aboitiz v. Court of Appeals, 188
SCRA 387 [1990]), with Aboitiz, like its ill-fated vessel, encountering
rough sailing. The attempted execution of the judgment award in

said case in the amount of P1,072,611.20 plus legal interest has

given rise to the instant petition.
On the other hand, other cases have resulted in findings upholding
the conclusion of the BMI that the vessel was seaworthy at the time
of the sinking, and that such sinking was due to force majeure. One
such ruling was likewise elevated to this Court in G.R. No. 100373,
Country Bankers Insurance Corporation v. Court of Appeals, et al.,
August 28, 1991 and was sustained. Part of the task resting upon
this Court, therefore, is to reconcile the resulting apparent contrary
findings in cases originating out of a single set of facts.
It is in this factual milieu that the instant petition seeks a
pronouncement as to the applicability of the doctrine of limited
liability on the totality of the claims vis a vis the losses brought
about by the sinking of the vessel MV P. ABOITIZ, as based on the
real and hypothecary nature of maritime law. This is an issue which
begs to be resolved considering that a number of suits alleged in
the petition number about 110 (p. 10 and pp. 175 to 183, Rollo) still
pend and whose resolution shall well-nigh result in more confusion
than presently attends the instant case.
In support of the instant petition, the following arguments are
submitted by the petitioner:
1.
The Limited Liability Rule warrants immediate stay of
execution of judgment to prevent impairment of other creditors'
shares;
2.
The finding of unseaworthiness of a vessel is not necessarily
attributable to the shipowner; and
3.
The principle of "Law of the Case" is not applicable to the
present petition. (pp. 2-26, Rollo.)
On the other hand, private respondent opposes the foregoing
contentions, arguing that: LexLib
1.
There is no limited liability to speak of or applicable real and
hypothecary rule under Articles 587, 590, and 837 of the Code of
Commerce in the face of the facts found by the lower court (Civil
Case No. 144425), upheld by the Appellate Court (CA G.R. No.
10609), and affirmed in toto by the Supreme Court in G.R. No.
89757 which cited G.R. No. 88159 as the Law of the Case; and
2.
Under the doctrine of the Law of the Case, cases involving
the same incident, parties similarly situated and the same issues
litigated should be decided in conformity therewith following the
maxim stare decisis et non quieta movere. (pp. 225 to 279, Rollo.).
Before proceeding to the main bone of contention, it is important to
determine first whether or not the Resolution of this Court in G.R.
No. 88159, Aboitiz Shipping Corporation vs. The Honorable Court of
Appeals and Allied Guaranty Insurance Company, Inc., dated
November 13, 1989 effectively bars and precludes the instant
petition as argued by respondent GAFLAC.

An examination of the November 13, 1989 Resolution in G.R. No.

88159 (pp. 280 to 282, Rollo) shows that the same settles two
principal matters, first of which is that the doctrine of primary
administrative jurisdiction is not applicable therein; and second is
that a limitation of liability in said case would render inefficacious
the extraordinary diligence required by law of common carriers.
It should be pointed out, however, that the limited liability
discussed in said case is not the same one now in issue at bar, but
an altogether different aspect. The limited liability settled in G.R.
No. 88159 is that which attaches to cargo by virtue of stipulations
in the Bill of Lading, popularly known as package limitation clauses,
which in that case was contained in Section 8 of the Bill of Lading
and which limited the carrier's liability to US$500.00 for the cargo
whose value was therein sought to be recovered. Said resolution
did not tackle the matter of the Limited Liability Rule arising out of
the real and hypothecary nature of maritime law, which was not
raised therein, and which is the principal bone of contention in this
case. While the matters threshed out in G.R. No. 88159, particularly
those dealing with the issues on primary administrative jurisdiction
and the package liability limitation provided in the Bill of Lading are
now settled and should no longer be touched, the instant case
raises a completely different issue. It appears, therefore, that the
resolution in G.R. 88159 adverted to has no bearing other than
factual to the instant case.
This brings us to the primary question herein which is whether or
not respondent court erred in granting execution of the full
judgment award in Civil Case No. 14425 (G.R. No. 89757), thus
effectively denying the application of the limited liability enunciated
under the appropriated articles of the Code of Commerce. The
articles may be ancient, but they are timeless and have remained
to be good law. Collaterally, determination of the question of
whether execution of judgments which have become final and
executory may be stayed is also an issue.
We shall tackle the latter issue first. This Court has always been
consistent in its stand that the very purpose for its existence is to
see to the accomplishment of the ends of justice. Consistent with
this view, a number of decisions have originated herefrom, the
tenor of which is that no procedural consideration is sacrosanct if
such shall result in the subverting of substantial justice. The right to
an execution after finality of a decision is certainly no exception to
this. Thus, in Cabrias v. Adil (135 SCRA 355 [1985]), this Court ruled
that: LLjur
". . . It is a truism that every court has the power 'to control, in the
furtherance of justice, the conduct of its ministerial officers, and of
all other persons in any manner connected with a case before it, in
every manner appertaining thereto.' It has also been said that:

'. . . every court having jurisdiction to render a particular judgment

has inherent power to enforce it, and to exercise equitable control
over such enforcement. The court has authority to inquire whether
its judgment has been executed, and will remove obstructions to
the enforcement thereof. Such authority extends not only to such
orders and such writs as may be necessary to carry out the
judgment into effect and render it binding and operative, but also
to such orders and such writs as may be necessary to prevent an
improper enforcement of the judgment. If a judgment is sought to
be perverted and made a medium of consummating a wrong the
court on proper application can prevent it.'" (at p. 359)
and again in the case of Lipana v. Development Bank of Rizal (154
SCRA 257 [1987]), this Court found that:
"The rule that once a decision becomes final and executory, it is the
ministerial duty of the court to order its execution, admits of certain
exceptions as in cases of special and exceptional nature where it
becomes the imperative in the higher interest of justice to direct
the suspension of its execution (Vecine v. Geronimo, 59 OG 579);
whenever it is necessary to accomplish the aims of justice (Pascual
v. Tan, 85 Phil. 164); or when certain facts and circumstances
transpired after the judgment became final which would render the
execution of the judgment unjust (Cabrias v. Adil, 135 SCRA 354)."
(at p. 201)
We now come to the determination of the principal issue as to
whether the Limited Liability Rule arising out of the real and
hypothecary nature of maritime law should apply in this and related
cases. We rule in the affirmative. Cdpr
In deciding the instant case below, the Court of Appeals took refuge
in this Court's decision in G.R. No. 89757 upholding private
respondent's claims in that particular case, which the Court of
Appeals took to mean that this Court has "considered, passed upon
and resolved Aboitiz's contention that all claims for the losses
should first be determined before GAFLAC's judgment may be
satisfied," and that such ruling "in effect necessarily negated the
application of the limited liability principle" (p. 175, Rollo). Such
conclusion is not accurate. The decision in G.R. No. 89757
considered only the circumstances peculiar to that particular case,
and was not meant to traverse the larger picture herein brought to
fore, the circumstances of which heretofore were not relevant. We
must stress that the matter of the Limited Liability Rule as
discussed was never in issue in all prior cases, including those
before the RTCs and the Court of Appeals. As discussed earlier, the
"limited liability" in issue before the trial courts referred to the
package limitation clauses in the bills of lading and not the limited
liability doctrine arising from the real and hypothecary nature of
maritime trade. The latter rule was never made a matter of defense

in any of the cases a quo, as properly it could not have been made
so since it was not relevant in said cases. The only time it could
come into play is when any of the cases involving the mishap were
to be executed, as in this case. Then, and only then, could the
matter have been raised, as it has now been brought before the
Court.
The real and hypothecary nature of maritime law simply means
that the liability of the carrier in connection with losses related to
maritime contracts is confined to the vessel, which is hypothecated
for such obligations or which stands as the guaranty for their
settlement. It has its origin by reason of the conditions and risks
attending maritime trade in its earliest years when such trade was
replete with innumerable and unknown hazards since vessels had
to go through largely uncharted waters to ply their trade. It was
designed to offset such adverse conditions and to encourage
people and entities to venture into maritime commerce despite the
risks and the prohibitive cost of shipbuilding. Thus, the liability of
the vessel owner and agent arising from the operation of such
vessel were confined to the vessel itself, its equipment, freight, and
insurance, if any, which limitation served to induce capitalists into
effectively wagering their resources against the consideration of
the large profits attainable in the trade.
It might be noteworthy to add in passing that despite the
modernization of the shipping industry and the development of
high-technology safety devices designed to reduce the risks
therein, the limitation has not only persisted, but is even practically
absolute in well-developed maritime countries such as the United
States and England where it covers almost all maritime casualties.
Philippine maritime law is of Anglo-American extraction, and is
governed by adherence to both international maritime conventions
and generally accepted practices relative to maritime trade and
travel. This is highlighted by the following excerpts on the limited
liability of vessel owners and/or agents: prLL
"SECTION 183.
The liability of the owner of any vessel,
whether American or foreign, for any embezzlement, loss, or
destruction by any person of any person or any property, goods, or
merchandise shipped or put on board such vessel, or for any loss,
damage, or forfeiture, done, occasioned, or incurred, without the
privity or knowledge of such owner or owners shall not exceed the
amount or value of the interest of such owner in such vessel, and
her freight then pending." (Section 183 of the US Federal Limitation
of Liability Act)
and
"1.
The owner of a sea-going ship may limit his liability in
accordance with Article 3 of this Convention in respect of claims
arising from any of the following occurrences, unless the

occurrence giving rise to the claim resulted from the actual fault or
privity of the owner;
(a)
loss of life of, or personal injury to, any person being carried
in the ship, and loss of, or damage to, any property on board the
ship.
(b)
loss of life of, or personal injury to, any other person,
whether on land or on water, loss of or damage to any other
property or infringement of any rights caused by the act, neglect or
default the owner is responsible for, or any person not on board the
ship for whose act, neglect or default the owner is responsible:
Provided, however, that in regard to the act, neglect or default of
this last class of person, the owner shall only be entitled to limit his
liability when the act, neglect or default is one which occurs in the
navigation or the management of the ship or in the loading,
carriage or discharge of its cargo or in the embarkation, carriage or
disembarkation of its passengers.
(c)
any obligation or liability imposed by any law relating to the
removal of wreck and arising from or in connection with the raising,
removal or destruction of any ship which is sunk, stranded or
abandoned (including anything which may be on board such ship)
and any obligation or liability arising out of damage caused to
harbor works, basins and navigable waterways." (Section 1, Article I
of the Brussels International Convention of 1957)
In this jurisdiction, on the other hand, its application has been wellnigh constricted by the very statute from which it originates. The
Limited Liability Rule in the Philippines is taken up in Book III of the
Code of Commerce, particularly in Articles 587, 590, and 837,
hereunder quoted in toto:
"ARTICLE 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. cdrep
"ARTICLE 590. The co-owners of a 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"
"ARTICLE 837. The civil liability incurred by shipowners in the case
prescribed in this section (on collisions), shall be understood as
limited to the value of the vessel with all its appurtenances and
freightage served during the voyage." (Emphasis supplied)

Taken together with related articles, the foregoing cover only

liability for injuries to third parties (Art. 587), acts of the captain
(Art. 590) and collisions (Art. 837).
In view of the foregoing, this Court shall not take the application of
such limited liability rule, which is a matter of near absolute
application in other jurisdictions, so lightly as to merely "imply" its
inapplicability, because as could be seen, the reasons for its being
are still apparently much in existence and highly regarded.
We now come to its applicability in the instant case. In the few
instances when the matter was considered by this Court, we have
been consistent in this jurisdiction in holding that the only time the
Limited Liability Rule does not apply is when there is an actual
finding of negligence on the part of the vessel owner or agent
(Yango v. Laserna, 73 Phil. 330 [1941]; Manila Steamship Co., Inc. v.
Abdulhanan, 101 Phil. 32 [1957]; Heirs of Amparo delos Santos v.
Court of Appeals, 186 SCRA 649 [1967]). The pivotal question, thus,
is whether there is a finding of such negligence on the part of the
owner in the instant case.
A careful reading of the decision rendered by the trial court in Civil
Case No. 144425 (pp. 27-33, Rollo) as well as the entirety of the
records in the instant case will show that there has been no actual
finding of negligence on the part of petitioner. In its Decision, the
trial court merely held that:
". . . Considering the foregoing reasons, the Court holds that the
vessel M/V 'Aboitiz' and its cargo were not lost due to fortuitous
event or force majeure." (p. 32, Rollo)
The same is true of the decision of this Court in G.R. No. 89757 (pp.
71-86, Rollo) affirming the decision of the Court of Appeals in CAG.R. CV No. 10609 (pp. 34-50, Rollo) since both decisions did not
make any new and additional finding of fact. Both merely affirmed
the factual findings of the trial court, adding that the cause of the
sinking of the vessel was because of unseaworthiness due to the
failure of the crew and the master to exercise extraordinary
diligence. Indeed, there appears to have been no evidence
presented sufficient to form a conclusion that petitioner shipowner
itself was negligent, and no tribunal, including this Court, will add
or subtract to such evidence to justify a conclusion to the contrary.
LLjur
The qualified nature of the meaning of "unseaworthiness," under
the peculiar circumstances of this case is underscored by the fact
that in the Country Bankers case, supra, arising from the same
sinking, the Court sustained the decision of the Court of Appeals
that the sinking of the M/V P. Aboitiz was due to force majeure.
On this point, it should be stressed that unseaworthiness is not a
fault that can be laid squarely on petitioner's lap, absent a factual
basis for such a conclusion. The unseaworthiness found in some

cases where the same has been ruled to exist is directly

attributable to the vessel's crew and captain, more so on the part of
the latter since Article 612 of the Code of Commerce provides that
among the inherent duties of a captain is to examine a vessel
before sailing and to comply with the laws of navigation. Such a
construction would also put matters to rest relative to the decision
of the Board of Marine Inquiry. While the conclusion therein
exonerating the captain and crew of the vessel was not sustained
for lack of basis, the finding therein contained to the effect that the
vessel was seaworthy deserves merit. Despite appearances, it is
not totally incompatible with the findings of the trial court and the
Court of Appeals, whose finding of "unseaworthiness" clearly did
not pertain to the structural condition of the vessel which is the
basis of the BMI's findings, but to the condition it was in at the time
of the sinking, which condition was a result of the acts of the
captain and the crew.
The rights of a vessel owner or agent under the Limited Liability
Rule are akin to those of the rights of shareholders to limited
liability under our corporation law. Both are privileges granted by
statute, and while not absolute, must be swept aside only in the
established existence of the most compelling of reasons. In the
absence of such reasons, this Court chooses to exercise prudence
and shall not sweep such rights aside on mere whim or surmise, for
even in the existence of cause to do so, such incursion is definitely
punitive in nature and must never be taken lightly.
More to the point, the rights of parties to claim against an agent or
owner of a vessel may be compared to those of creditors against an
insolvent corporation whose assets are not enough to satisfy the
totality of claims as against it. While each individual creditor may,
and in fact shall, be allowed to prove the actual amounts of their
respective claims, this does not mean that they shall all be allowed
to recover fully thus favoring those who filed and proved their
claims sooner to the prejudice of those who come later. In such an
instance, such creditors too would not also be able to gain access
to the assets of the individual shareholders, but must limit their
recovery to what is left in the name of the corporation. Thus, in the
case of Lipana v. Development Bank of Rizal earlier cited, We held
that:
"In the instant case, the stay of execution of judgment is warranted
by the fact that respondent bank was placed under receivership. To
execute the judgment would unduly deplete the assets of
respondent bank to the obvious prejudice of other depositors and
creditors, since, as aptly stated in Central Bank v. Morfe (63 SCRA
114), after the Monetary Board has declared that a bank is
insolvent and has ordered it to cease operations, the Board
becomes the trustee of its assets for the equal benefit of all

creditors, and after its insolvency, one cannot obtain an advantage

or preference over another by an attachment, execution or
otherwise." (at p. 261)
In both insolvency of a corporation and the sinking of a vessel, the
claimants or creditors are limited in their recovery to the remaining
value of accessible assets. In the case of an insolvent corporation,
these are the residual assets of the corporation left over from its
operations. In the case of a lost vessel, these are the insurance
proceeds and pending freightage for the particular voyage. LLpr
In the instant case, there is, therefore, a need to collate all claims
preparatory to their satisfaction from the insurance proceeds on the
vessel M/V P. Aboitiz and its pending freightage at the time of its
loss. No claimant can be given precedence over the others by the
simple expedience of having filed or completed its action earlier
than the rest. Thus, execution of judgment in earlier completed
cases, even those already final and executory, must be stayed
pending completion of all cases occasioned by the subject sinking.
Then and only then can all such claims be simultaneously settled,
either completely or pro-rata should the insurance proceeds and
freightage be not enough to satisfy all claims.
Finally, the Court notes that petitioner has provided this Court with
a list of all pending cases (pp. 175 to 183, Rollo), together with the
corresponding claims and the pro-rated share of each. We likewise
note that some of these cases are still with the Court of Appeals,
and some still with the trial courts and which probably are still
undergoing trial. It would not, therefore, be entirely correct to
preclude the trial courts from making their own findings of fact in
those cases and deciding the same by allotting shares for these
claims, some of which, after all, might not prevail, depending on
the evidence presented in each. We, therefore, rule that the prorated share of each claim can only be found after all the cases shall
have been decided.
In fairness to the claimants, and as a matter of equity, the total
proceeds of the insurance and pending freightage should now be
deposited in trust. Moreover, petitioner should institute the
necessary limitation and distribution action before the proper
admiralty court within 15 days from the finality of this decision, and
thereafter deposit with it the proceeds from the insurance company
and pending freightage in order to safeguard the same pending
final resolution of all incidents, for final pro-rating and settlement
thereof.
ACCORDINGLY, the petition is hereby GRANTED, and the Orders of
the Regional Trial Court of Manila, Branch IV dated April 30, 1991
and the Court of Appeals dated June 21, 1991 are hereby set aside.
The trial court is hereby directed to desist from proceeding with the
execution of the judgment rendered in Civil Case No. 144425

pending determination of the totality of claims recoverable from the

petitioner as the owner of the M/V P. Aboitiz. Petitioner is directed to
institute the necessary action and to deposit the proceeds of the
insurance of subject vessel as above-described within fifteen (15)
days from finality of this decision. The temporary restraining order
issued in this case dated August 7, 1991 is hereby made
permanent.
SO ORDERED.
Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ ., concur.
(b)

Specific rights and prerogatives

Arts. 575, 593, 594, 596, 601

ARTICLE 575. Co-owners of vessels shall have the right of

repurchase and redemption in sales made to strangers, but they
may exercise the same only within the nine days following the
inscription of the sale in the registry, and by depositing the price at
the same time.
ARTICLE 593. The owners of a vessel shall have preference in her
charter over other persons, under the same conditions and price. If
two or more of them should claim this right, the one having the
greater interest shall be preferred; and should they have equal
interests, the matter shall be decided by lot.
ARTICLE 594. The part owners shall elect the manager who is to
represent them in the capacity of agent.
The appointment of director or agent shall be revocable at the will
of the members.
ARTICLE 596. The agent may discharge the duties of captain of
the vessel, subject, in every case, to the provisions contained in
Article 609.
If two or more co-owners request the position of captain, the
disagreement shall be decided by a vote of the members; and if the
vote should result in a tie, the position shall be given to the part
owner having the larger interest in the vessel.
If the interest of the petitioners should be the same, and there
should be a tie, the matter shall be decided by lot.

ARTICLE 601. Should there be any profits, the co-owners may

demand of the managing agent the amount due them, by means of
an executory action without further requisites than the
acknowledgment of the signatures of the instrument approving the
account.
1.

Captains and Masters

(a)

Qualifications and licensing

Rep. Act 5173, Sec 3
Art. 609

REPUBLIC ACT No. 5173

all types of motorized watercraft plying in Philippine waters;

issue certificates of inspection and of permits indicating the
approval of vessels for operation; issue certificates of
Philippine registry of vessels; administer load line
requirements; promulgate and enforce other provisions for
the safety of life and property on vessels; and determine the
numbering of undocumented vessels: Provided, That
certification and approval of any plans, equipment and any
vessel by internationally known classification societies which
are recognized by the Philippine Government shall be
deemed to have complied with this section;

AN
ACT
CREATING
A
PHILIPPINE
COAST
GUARD,
PRESCRIBING
ITS
POWERS
AND
FUNCTIONS,
APPROPRIATING THE NECESSARY FUNDS THEREFOR, AND
FOR OTHER PURPOSES.

(e) To issue licenses and certificates to officers, pilots, major

and minor patrons and seamen, as well as suspend and
revoke such licenses and certificates;

Section 3. Specific Functions. The Philippine Coast Guard shall

perform the following functions:

(f) To investigate marine casualties and disasters including

those arising from marine protests filed with the Bureau of
Customs relative to the liability of shipowners and officers;

(a) To prevent and suppress illegal entry, smuggling, other

customs frauds and violations of other maritime laws that
may be committed within the waters subject to the
jurisdiction of the Republic of the Philippines, and for the
purpose surveillance by the Philippine Coast Guard may be
made on vessels entering and/or leaving the Philippine
territory;
(b) To assist in the suppression of fishing by means of
dynamite, explosives or toxic substances or other methods
as may be declared destructive by proper authorities;
(c) To promulgate and enforce rules for lights, signals,
speed, steering, sailing, passing, anchorage, movement and
towlines of vessels and lights and signals on bridges;
(d) To approve plans for the construction, repair, or
alteration of vessels; approve materials, equipment and
appliances of vessels; approved the classification of vessels;
inspect vessels and their equipment and appliances; register

(g) To enforce laws, rules and regulations governing

manning, citizenship and mustering and drilling of crews
requirements, control of logbooks, shipment, discharge,
protection, and welfare merchant seamen;
(h) To enforce laws requiring the performance of duties of
shipowners and officers after accidents;
(i) To prescribe and enforce regulations for outfitting and
operation of motorboats and the licensing of motorboat
operators;
(j) To regulate regattas and marine parades;
(k) To render aid to distressed persons or vessels on the high
seas and on waters subject to the jurisdiction of the
Philippines, and, in this connection, the Philippine Coast
Guard may perform any and all acts necessary to rescue
and aid persons; furnish clothing, food, lodging, medicine
and other necessary supplies and services to persons

succored; protect, save, and take charge of all property

saved from marine disasters until such property is delivered
to persons authorized to receive it or is otherwise disposed
of in accordance with law or applicable regulations; and
collect and take charge of bodies of those who may perish in
such disasters;
(l) To develop, establish, maintain, and operate aids to
maritime navigation. In the performance of these functions,
the Philippine Coast Guard is authorized to destroy or tow in
port sunken of floating dangers to navigation;
(m) To supervise nautical schools with reference to activities
relative to navigation, seamanship, marine engineering and
other allied matters, in coordination with the Department of
Education;
(n) To perform functions pertaining to maritime
communications which are not specifically delegated to
some other office or department; and
(o) To assist, within its capabilities and upon request of the
appropriate authorities, other Government agencies in the
performance of their functions, within the waters subject to
the jurisdiction of the Philippines, relating to matters and
activities not specifically mentioned in this section:
Provided, That in the exercise of these functions, personnel
of the Philippine Coast Guard shall be deemed to be acting
as agents of the particular departments, bureau, office,
agency or instrumentality charged with the enforcement and
administration of the particular law. Members of the
Philippine Coast Guard are peace officers for all purposes of
this Act and shall be, and shall act, as law enforcement
agents of the Bureau of Customs, and the Bureau of
Immigration, the Bureau of Internal Revenue, the Fisheries
Commission, and such other departments, bureaus or offices
in the enforcement of pertinent laws, rules and regulations.
ARTICLE 609. Captains and masters of vessels must be Spaniards
* having legal capacity to bind themselves in accordance with this

Code, and must prove that they have the skill, capacity, and
qualifications required to command and direct the vessel, as
established by marine laws, ordinances, or regulations, or by those
of navigation, and that they are not disqualified according to the
same for the discharge of the duties of that position. cdt
If the owner of a vessel desires to be the captain thereof and does
not have the legal qualifications therefor, he shall limit himself to
the financial administration of the vessel, and shall intrust her
navigation to a person possessing the qualifications required by
said ordinances and regulations.

(b)

Powers and Duties

Arts. 610, 611, 612, 622, 624, 625

ARTICLE 610. The following powers are inherent in the position of

captain or master of a vessel:
1.
To appoint or make contracts with the crew in the absence of
the agent and propose said crew, should said agent be present; but
the agent shall not be permitted to employ any member against
the captain's express refusal.
2.
To command the crew and direct the vessel to the port of its
destination, in accordance with the instructions he may have
received from the agent.
3.
To impose, in accordance with the agreements and the laws
and regulations of the merchants marine, on board the vessel,
correctional punishment upon those who do not comply with his
orders or who conduct themselves against discipline, holding a
preliminary investigation on the crimes committed on board the
vessel on the high seas, which shall be turned over to the
authorities, who are to take cognizance thereof, at the first port
touched.
4.
To make contracts for the charter of the vessel in the
absence of the agent or of her consignee, acting in accordance with
the instructions received and protecting the interests of the owner
most carefully.
5.
To adopt all the measures which may be necessary to keep
the vessel well supplied and equipped, purchasing for the purpose
all that may be necessary, provided there is no time to request
instructions of the agent.

6.
To make, in similar urgent cases and on a voyage, the
repairs to the hull and engines of the vessel and to her rigging and
equipment which are absolutely necessary in order for her to be
able to continue and conclude her voyage; but if she should arrive
at a point where there is a consignee of the vessel, he shall act in
concurrence with the latter.
ARTICLE 611. In order to comply with the obligations mentioned
in the foregoing article, the captain, when he has no funds and
does not expect to receive any from the agent, shall procure the
same in the successive order stated below:
1.
By requesting said funds of the consignees or
correspondents of a vessel.
2.
By applying to the consignees of the cargo or to the persons
interested therein.
3.
By drawing on the agent.
4.
By borrowing the amount required by means of a bottomry
bond.
5.
By selling a sufficient amount of the cargo to cover the
amount absolutely necessary to repair the vessel, and to equip her
to pursue the voyage. cd
In the two latter cases he must apply to the judicial authority of the
port, if in Spain * and to the Spanish * consul, if in a foreign
country; and where there should be none, to the local authority,
proceeding in accordance with the prescriptions of Article 583, and
with the provisions of the law of civil procedure.
ARTICLE 612. The following obligations are inherent in the office of
captain:
1.
To have on board before starting on a voyage a detailed
inventory of the hull, engines, rigging, tackle, stores, and other
equipments of the vessel; the navigation certificate; the roll of the
persons who make up the crew of the vessel, and the contracts
entered into with the crew; the list of passengers; the health
certificate; the certificate of the registry proving the ownership of
the vessel, and all the obligations which encumber the same up to
that date; the charters or authenticated copies thereof; the invoices
or manifest of the cargo, and the instrument of the expert visit or
inspection, should it have been made at the port of departure.
2.
To have a copy of this Code on board.
3.
To have three folioed and stamped books, placing at the
beginning of each one a note of the number of folios it contains,
signed by the maritime official, and in his absence by the
competent authority.

In the first book, which shall be called "log book," he shall

enter every day the condition of the atmosphere, the prevailing
winds, the course sailed, the rigging carried, the horsepower of the
engines, the distance covered, the maneuvers executed, and other
incidents of navigation. He shall also enter the damage suffered by
the vessel in her hull, engines, rigging, and tackle, no matter what
is its cause, as well as the imperfections and averages of the cargo,
and the effects and consequence of the jettison, should there be
any; and in cases of grave resolutions which require the advice or a
meeting of the officers of the vessel, or even of the passengers and
crew, he shall record the decision adopted. For the informations
indicated he shall make use of the binnacle book, and of the steam
or engine book kept by the engineer.
In the second book, called the "accounting book," he shall
enter all the amounts collected and paid for the account of the
vessel, entering specifically article by article, the sources of the
collection, and the amounts invested in provisions, repairs,
acquisition of rigging or goods, fuel, outfits, wages, and all other
expenses. He shall furthermore enter therein a list of all the
members of the crew, stating their domiciles, their wages and
salaries, and the amounts they may have received on account,
either directly or by delivery to their families.
In the third book, called "freight book," he shall record the
entry and exit of all the goods, stating their marks and packages,
names of the shippers and of the consignees, ports of loading and
unloading, and the freight earned. In the same book he shall record
the names and places of sailing of the passengers and the number
of packages of which their baggage consists, and the price of the
passage.
4.
To make, before receiving the freight, with the officers of the
crew, and the two experts, if required by the shippers and
passengers, an examination of the vessel, in order to ascertain
whether she is watertight, and whether the rigging and engines are
in good condition; and if she has the equipment required for good
navigation, preserving a certificate of the memorandum of this
inspection, signed by all the persons who may have taken part
therein, under their liability.
The experts shall be appointed one by the captain of the
vessel and the other one by the persons who request the
examination, and in case of disagreement a third shall be
appointed by the marine authority of the port.
5.
To remain constantly on board the vessel with the crew
during the time the freight is taken on board and carefully watch
the stowage thereof; not to consent to any merchandise or goods of
a dangerous character to be taken on, such as inflammable or
explosive substances, without the precautions which are

recommended for their packing, management and isolation; not to

permit that any freight be carried on deck which by reason of its
disposition, volume, or weight makes the work of the sailors
difficult, and which might endanger the safety of the vessel; and if,
on account of the nature of the merchandise, the special character
of the shipment, and principally the favorable season it takes place,
he allows merchandise to be carried on deck, he must hear the
opinion of the officers of the vessel, and have the consent of the
shippers and of the agent.
6.
To demand a pilot at the expense of the vessel whenever
required by navigation, and principally when a port, canal, or river,
or a roadstead or anchoring place is to be entered with which
neither he, the officers nor the crew are acquainted.
7.
To be on deck at the time of sighting land and to take
command on entering and leaving ports, canals, roadsteads, and
rivers, unless there is a pilot on board discharging his duties. He
shall not spend the night away from the vessel except for serious
causes or by reason of official business. cdtai
8.
To present himself, when making a port in distress, to the
maritime authority if in Spain * and to the Spanish * consul if in a
foreign country, before twenty-four hours have elapsed, and make
a statement of the name, registry, and port of departure of the
vessel, of its cargo, and reason of arrival, which declaration shall be
vised by the authority or by the consul if after examining the same
it is found to be acceptable, giving the captain the proper
certificate in order to show his arrival under stress and the reasons
therefor. In the absence of marine officials or of the consul, the
declaration must be made before the local authority.
9.
To take the steps necessary before the competent authority
in order to enter in the certificate of the Commercial Registry of the
vessel the obligations which he may contract in accordance with
Article 583.
10.
To put in a safe place and keep all the papers and
belongings of any members of the crew who might die on the
vessel, drawing up a detailed inventory, in the presence of
passengers as witnesses, and, in their absence, of members of the
crew.
11.
To conduct himself according to the rules and precepts
contained in the instructions of the agent, being liable for all that
he may do in violation thereof.
12.
To give an account to the agent from the port where the
vessel arrives, of the reason thereof, taking advantage of the
semaphore, telegraph, mail, etc., according to the cases; notify him
the freight he may have received, stating the name and domicile of
the shippers, freight earned, and amounts borrowed on bottomry

bond, advise him of his departure, and give him any information
and data which may be of interest.
13.
To observe the rules on the situation of lights and evolutions
to prevent collisions.
14.
To remain on board in case of danger to the vessel, until all
hope to save her is lost, and before abandoning her to hear the
officers of the crew, abiding by the decision of the majority; and if
he should have to take a boat he shall take with him, before
anything else, the books and papers, and then the articles of most
value, being obliged to prove in case of the loss of the books and
papers that he did all he could to save them.
15.
In case of wreck he shall make the proper protest in due
form at the first port reached, before the competent authority or
the Spanish * consul, within twenty-four hours, stating therein all
the incidents of the wreck, in accordance with case 8 of this article.
16.
To comply with the obligations imposed by the laws and
rules of navigation, customs, health, and others.
ARTICLE 622. If when on a voyage the captain should receive
news of the appearance of privateers or men of war against his
flag, he shall be obliged to make the nearest neutral port, inform
his agent or shippers, and await an occasion to sail under convoy or
until the danger is over or to receive final orders from the agent or
shippers.
ARTICLE 624.
A captain whose vessel has gone through a
hurricane or who believes that the cargo has suffered damages or
averages, shall make a protest thereon before the competent
authority at the first port he touches within the twenty-four hours
following his arrival, and shall ratify it within the same period when
he arrives at the place of his destination, immediately preceding
with the proof of the facts, it not being permitted to open the
hatches until this has been done.
The captain shall proceed in the same manner if, the vessel having
been wrecked, he is saved alone or with part of his crew, in which
case he shall appear before the nearest authority, and make a
sworn statement of the facts.
The authority or the consul abroad shall verify the said facts,
receiving a sworn statement of the members of the crew and
passengers who may have been saved, and taking the other steps
which may assist in arriving at the facts, drafting a certificate of the
result of the proceedings in the log book and in that of the sailing
mate, and shall deliver the original records of the proceedings to
the captain, stamped and folioed, with a memorandum of the folios,
which he must rubricate, for their presentation to the judge or court
of the port of destination.

The statement of the captain shall be believed if it is in accordance

with those of the crew and passengers; if they disagree, the latter
shall be accepted, unless there is proof to the contrary.
ARTICLE 625. The captain, under his personal liability, as soon as
he arrives at the port of destination, obtains the necessary
permission from the health and customs officers and fulfills the
other formalities required by the regulations of the administration,
shall turn over the cargo, without any defalcation, to the
consignees, and, in a proper case, the vessel, rigging, and freights
to the agent.
If, by reason of the absence of the consignee or on account of the
nonappearance of a legal holder of the invoices, the captain does
not know to whom he is to make the legal delivery of the cargo, he
shall place it at the disposal of the proper judge or court or
authority, in order that he may decide with regard to its deposit,
preservation, and custody.

Inter Orient v. NLRC, 235 SCRA 269

THIRD DIVISION
[G.R. No. 115286. August 11, 1994.]
INTER-ORIENT MARITIME ENTERPRISES, INC., SEA HORSE
SHIP MANAGEMENT, INC. and TRENDA WORLD SHIPPING
(MANILA),
INC.,
petitioners,
vs.
NATIONAL
LABOR
RELATIONS COMMISSION and RIZALINO D. TAYONG,
respondents.
SYLLABUS
1.
LABOR LAWS AND SOCIAL LEGISLATION; CONDITIONS OF
EMPLOYMENT; CAPTAIN OF VESSEL A CONFIDENTIAL AND
MANAGERIAL EMPLOYEE. It is well settled in this jurisdiction that
confidential and managerial employees cannot be arbitrarily
dismissed at any time, and without cause as reasonably established
in an appropriate investigation. Such employees, too, are entitled
to security of tenure, fair standards of employment and the
protection of labor laws. The captain of a vessel is a confidential
and managerial employee within the meaning of the above
doctrine. A master or captain, for purposes of maritime commerce,
is one who has command of a vessel. A captain commonly performs
three (3) distinct roles: (1) he is a general agent of the shipowner;
(2) he is also commander and technical director of the vessel; and
(3) he is a representative of the country under whose flag he
navigates. Of these roles, by far the most important is the role
performed by the captain as commander of the vessel; for such role
(which, to our mind, is analogous to that of "Chief Executive
Officer" [CEO] of a present-day corporate enterprise) has to do with
the operation and preservation of the vessel during its voyage and
the protection of the passengers (if any) and crew and cargo. In his
role as general agent of the shipowner, the captain has authority to
sign bills of lading, carry goods aboard and deal with the freight

earned, agree upon rates and decide whether to take cargo. The
ship captain, as agent of the shipowner, has legal authority to enter
into contracts with respect to the vessel and the trading of the
vessel, subject to applicable limitations established by statute,
contract or instructions and regulations of the shipowner. To the
captain is committed the governance, care and management of the
vessel. Clearly, the captain is vested with both management and
fiduciary functions.
2.
ID.; TERMINATION OF EMPLOYMENT; ILLEGAL DISMISSAL
ESTABLISHED IN CASE AT BAR. It is plain from the records of the
present petition that Captain Tayong was denied any opportunity to
defend himself. Petitioners curtly dismissed him from his command
and summarily ordered his repatriation to the Philippines without
informing him of the charge or charges levelled against him, and
much less giving him a change to refute any such charge. In fact, it
was only on 26 October 1989 that Captain Tayong received a
telegram dated 24 October 1989 from Inter-Orient requiring him to
explain why he delayed sailing to South Africa. We also find that the
principal contention of petitioners against the decision of the NLRC
pertains to facts, that is, whether or not there was actual and
sufficient basis for the alleged loss of trust or confidence. We have
consistently held that a question of "fact" is, as a general rule, the
concern solely of an administrative body, so long as there is
substantial evidence of record to sustain its action. The record
requires us to reject petitioners' claim that the NLRC's conclusion of
fact were not supported by substantial evidence. Petitioner's rely on
self-serving affidavits of their own officers and employees
predictably tending to support petitioners' allegation that Captain
Tayong had performed acts inimical to petitioners' interests for
which, supposedly, he was discharged. The official report of Mr.
Clark, petitioners' representative, in fact supports the NLRC's
conclusion that private respondent Captain did not arbitrarily and
maliciously delay the voyage to South Africa. There had been, Mr.
Clark stated, a disruption in the normal functioning of the vessel's
turbo charger and economizer and that had prevented the full or
regular operation of the vessel. Thus, Mr. Clark relayed to Captain
Tayong instructions to "maintain reduced RPM" during the voyage
to South Africa, instead of waiting in Singapore for the supplies that
would permit shipboard repair of the malfunctioning machinery and
equipment. Under all the circumstances of this case, we, along with
the NLRC, are unable to hold that Captain Tayong's decision
(arrived at after consultation with the vessel's Chief Engineer) to
wait seven (7) hours in Singapore for the delivery on board the
Oceanic Mindoro of the requisitioned supplies needed for the
welding-repair, on board the ship, of the turbo-charger and the
economizer equipment of the vessel, constituted merely arbitrary,

capricious or grossly insubordinate behavior on his part. In the view

of the NLRC, that decision of Captain Tayong did not constitute a
legal basis for the summary dismissal of Captain Tayong and for
termination of his contract with petitioners prior to the expiration of
the term thereof. We cannot hold this conclusion of the NLRC to be
a grave abuse of discretion amounting to an excess or loss of
jurisdiction; indeed, we share that conclusion and make it our own.
Clearly, petitioners were angered at Captain Tayong's decision to
wait for delivery of the needed supplied before sailing from
Singapore, and may have changed their estimate of their ability to
work with him and of his capabilities as a ship captain. Assuming
that to be petitioners' management prerogative, that prerogative is
nevertheless not to be exercised, in the case at bar, at the cost of
loss of Captain Tayong's rights under his contract with petitioner's
and under Philippine law.
3.
COMMERCIAL LAW; CODE OF COMMERCE; CAPTAIN'S
CONTROL OF VESSEL AND REASONABLE DISCRETION AS TO ITS
NAVIGATION. A ship's captain must be accorded a reasonable
measure of discretionary authority to decide what the safety of the
ship and of its crew and cargo specifically requires on a stipulated
ocean voyage. The captain is held responsible, and properly so, for
such safety. He is right there on the vessel, in command of its and
(it must be presumed) knowledgeable as to the specific
requirements of seaworthiness and the particular risks and perils of
the voyage he is to embark upon. The applicable principle is that
the captain has control of all departments of service in the vessel,
and reasonable discretion as to its navigation. It is the right and
duty of the captain, in the exercise of sound discretion and in good
faith, to do all things with respect to the vessel and its equipment
and conduct of the voyage which are reasonably necessary for the
protection and preservation of the interests under his charge,
whether those be of the shipowner, charterers, cargo owners or of
underwriters. It is a basic principle of admiralty law that in
navigating a merchantman, the master must be left free to exercise
his own best judgment. The requirements of safe navigation compel
us to reject any suggestion that the judgment and discretion of the
captain of a vessel may be confined within a straitjacket, even in
this age of electronic communications. Indeed, if the ship captain is
convinced, as a reasonably prudent and competent mariner acting
in good faith that the shipowner's or ship agent's instructions
(insisted upon by radio or telefax from their officers thousand of
miles away) will result, in the very specific circumstances facing
him, in imposing unacceptable risks of loss or serious danger to
ship or crew, he cannot casually seek absolution from his
responsibility, if a marine casualty occurs, in such instructions.
Compagnie de Commerce v. Hamburg is instructive in this

connection. There, this Court recognized the discretionary authority

of the master of a vessel and his right to exercise his best
judgment, with respect to navigating the vessel he commands. In
Compagnie de Commerce, a charger party was executed between
Compagnie de Commerce and the owners of the vessel Sambia,
under which the former as charterer loaded on board the Sambia,
at the port of Saigon, certain cargo destined for the Ports of Dunkirk
and Hamburg in Europe. The Sambia flying the German flag, could
not, in the judgment of its master, reach its ports of destination
because war (World War I) had been declared between Germany
and France. The master of the Sambia decided to deviate from the
stipulated voyage and sailed instead for the Port of Manila.
Compagnie de Commerce sued in the Philippines for damages
arising from breach of the charter party and unauthorized sale of
the cargo. In affirming the decision of the trial court dismissing the
complaint, our Supreme Court held that the master of the Sambia
had reasonable grounds to apprehend that the vessel was in
danger of seizure or capture by the French authorities in Saigon
was justified by necessity to elect the course which the took i.e.,
to flee Saigon for the Port of Manila with the result that the
shipowner was relieved from liability for the deviation from the
stipulated route and from liability for damage to the cargo.
4.
ID.; ID.; COMMERCIAL LAW; CODE OF COMMERCE; CAPTAIN'S
CONTROL OF VESSEL AND REASONABLE DISCRETION AS TO ITS
NAVIGATION. "The danger from which the master of the Sambia
fled was a real and not merely an imaginary one as counsel for
shipper contends. Seizure at the hands of an 'enemy of the King',
though not inevitable, was a possible outcome of a failure to leave
the port of Saigon; and we cannot say that under the conditions
existing at the time when the master elected to flee from that port,
there were no grounds for a 'reasonable apprehension of danger'
from seizure by the French authorities, and therefore no necessity
for flight. The word 'necessity' when applied to mercantile affairs,
where the judgment must in the nature of things be exercised,
cannot, of course, mean an irresistible compelling power. what is
meant by it in such cases is the force of circumstances which
determine the course of a man ought to take. Thus, where by the
force of circumstances, a man has the duty cast upon him of taking
some action for another, and under that obligation adopts a course
which, to the judgment of a wise and prudent man, is apparently
the best for the interest of the persons for whom he acts in a given
emergency, it may properly be said of the course so taken that it
was in a mercantile sense necessary to take it." Compagnie de
Commerce contended that the shipowner should, at all events, be
held responsible for the deterioration in the value of the cargo
incident to its long stay on board the vessel from the date of its

arrival in Manila until the cargo was sold. The Supreme Court, in
rejecting this contention also, declared that: "But it is clear that the
master could not be required to act on the very day of his arrival; or
before he had a reasonable opportunity to ascertain whether he
could hope to carry out his contract and earn his freight; and that
he should not be held responsible for a reasonable delay incident to
an effort to ascertain the wishes of the freighter, and upon failure
to secure prompt advice, to decide for himself as to the course
which he should adopt to secure the interests of the absent owner
of the property aboard the vessel. The master is entitled to delay
for such a period as may be reasonable under the circumstances,
before deciding on the course he will adopt. he may claim a fair
opportunity of carrying out a contract, and earning the freight,
whether by repairing or transshipping. should the repair of the ship
be undertaken, it must be proceeded with diligently; and if so done,
the freighter will have no ground of complaint, although the
consequent delay be a long one, unless, indeed, the cargo is
perishable, and likely to be injured by the delay. Where that is the
case, it ought to be forwarded, or sold, or given up, as the case
may be, without waiting for repairs. A shipowner or shipmaster (if
communication with the shipowner is impossible), will be allowed a
reasonable time in which to decide what course he will adopt in
such cases as those under discussion; time must be allowed to him
to ascertain the facts, and to balance the conflicting interests
involved, of shipowner, cargo owner, underwriter on ship and
freight. But once the time has elapsed, he is bound to act promptly
according as he has elected either to repair, or abandon the
voyage, or tranship. If he delays, and owing to that delay a
perishable cargo suffers damage; he cannot escape that obligation
by pleading the absence of definite instructions from the owners of
the cargo or their underwriters, since he has control of the cargo
and is entitled to elect."
DECISION
FELICIANO, J p:
Private respondent Rizalino Tayong, a licensed Master Mariner with
experience in commanding ocean-going vessels, was employed on
6 July 1989 by petitioners Trenda World Shipping (Manila), Inc. and
Sea Horse Ship Management, Inc. through petitioner Inter-Orient
Maritime Enterprises, Inc. as Master of the vessel M/V Oceanic
Mindoro, for a period of one (1) year, as evidenced by an
employment contract. On 15 July 1989, Captain Tayong assumed
command of petitioners' vessel at the port of Hongkong. His
instructions were to replenish bunker and diesel fuel, to said

forthwith to Richard Bay, South Africa, and there to load 120,000

metric tons of coal.
On 16 July 1989, while at the Pork of Hongkong and in the process
of unloading cargo, Captain Tayong received a weather report that
a storm code-named "Gordon" would shortly hit Hongkong.
Precautionary measures were taken to secure the safety of the
vessel, as well as its crew, considering that the vessel's turbocharger was leaking and the vessel was fourteen (14) years old.
On 21 July 1989, Captain Tayong followed-up the requisition by the
former captain of the Oceanic Mindoro for supplies of oxygen and
acetylene, necessary for the welding-repair of the turbo-charger
and the economizer. 1 This requisition had been made upon request
of the Chief Engineer of the vessel and had been approved by the
shipowner. 2
On 25 July 1989, the vessel sailed from Hong Kong for Singapore. In
the Master's sailing message, Captain Tayong reported a water leak
from M.E. Turbo Charger No. 2 Exhaust gas casing. He was
subsequently instructed to block off the cooling water and maintain
reduced RPM unless authorized by the owners. 3
On 29 July 1989, while the vessel was en route to Singapore,
Captain Tayong reported that the vessel had stopped in mid-ocean
for six (6) hours and forty-five (45) minutes due to a leaking
economizer. He was instructed to shut down the economizer and
use the auxiliary boiler instead. 4
On 31 July 1989 at 0607 hrs., the vessel arrived at the port of
Singapore. 5 The Chief Engineer reminded Captain Tayong that the
oxygen and acetylene supplies had not been delivered. 6 Captain
Tayong inquired from the ship's agent in Singapore about the
supplies. The ship agent stated that these could only be delivered
at 0800 hours on August 1, 1989 as the stores had closed. 7
Captain Tayong called the shipowner, Sea Horse Ship Management,
Ltc., in London and informed them that the departure of the vessel
for South Africa may be affected because of the delay in the
delivery of the supplies. 8
Sea Horse advised Captain Tayong to contact its Technical Director,
Mr. Clark, who was in Tokyo and who could provide a solution for
the supply of said oxygen and acetylene. 9
On the night of 31 July 1989, Mr. Clark received a call from Captain
Tayong informing him that the vessel cannot said without the
oxygen and acetylene for safety reasons due to the problems with
the turbo charger and economizer. Mr. Clark responded that by
shutting off the water to the turbo charger and using the auxiliary
boiler, there should be no further problem. According to Mr. Clark,
Captain Tayong agreed with him that the vessel could sail as
scheduled on 0100 hours on 1 August 1989 for South Africa. 10

According to Captain Tayong, however, he communicated to Sea

Horse his reservations regarding proceeding to South Africa without
the requested supplied, 11 and was advised by Sea Horse to wait
for the supplies at 0800 hrs. of 1 August 1989, which Sea Horse had
arranged to be delivered on board the Oceanic Mindoro. 12 At 0800
hours on 1 August 1989, the requisitioned supplies were delivered
and Captain Tayong immediately sailed for Richard Bay.
When the vessel arrived at the port of Richard Bay, South Africa on
16 August 1989, Captain Tayong was instructed to turn-over his
post to the new captain. He was thereafter repatriated to the
Philippines, after serving petitioners for a little more than two
weeks. 13 He was not informed of the charges against him. 14
On 5 October 1989, Captain Tayong instituted a complaint for illegal
dismissal
before
the
Philippine
Overseas
Employment
Administration ("POEA"), claiming his unpaid salary for the
unexpired portion of the written employment contract, plus
attorney's fees.
Petitioners, in their answer to the complaint, denied that they had
illegally dismissed Captain Tayong. Petitioners alleged that he had
refused to said immediately to South Africa to the prejudice and
damage of petitioners. According to petitioners, as a direct result of
Captain Tayong's delay, petitioners' vessel was placed "off-hire" by
the charterers refused to pay the charter hire or compensation
corresponding to twelve (12) hours, amounting to US $15,500.00,
due to time lost in the voyage. They stated that they had dismissed
private respondent for loss of trust and confidence.
The POEA dismissed Captain Tayong's complaint and held that
there was valid cause for his untimely repatriation. The decision of
the POEA placed considerable weight on petitioners' assertion that
all the time lost as a result of the delay was caused by Captain
Tayong and that his concern for the oxygen and acetylene was not
legitimate as these supplies were not necessary or indispensable
for running the vessel. The POEA believed that the Captain had
unreasonably refused to follow the instructions of petitioners and
their representative, despite petitioner's firm assurances that the
vessel was seaworthy for the voyage to South Africa.
On appeal, the National Labor Relations Commission ("NLRC")
reversed and set aside the decision of the POEA. The NLRC found
that Captain Tayong had not been afforded an opportunity to be
heard and that no substantial evidence was adduced to establish
the basis for petitioners' loss of trust or confidence in the Captain.
The NLRC declared that he had only acted in accordance with his
duties to maintain the seaworthiness of the vessel and to insure the
safety of the ship and the crew. The NLRC directed petitioners to
pay the Captain (a) his salary for the unexpired portion of the
contract at US$1,900.00 a month, plus one (1) month leave benefit;

and (b) attorney's fees equivalent to ten percent (10%) of the total
award due.
Petitioners, before this Court, claim that the NLRC had acted with
grave abuse of discretion. Petitioners allege that they had adduced
sufficient evidence to establish the basis for private respondent's
discharge, contrary to the conclusion reached by the NLRC.
Petitioners insist that Captain Tayong, who must protect the interest
of petitioners, had caused them unnecessary damage, and that
they, as owners of the vessel, cannot be compelled to keep in their
employ a captain of a vessel in whom they have lost their trust and
confidence. Petitioners finally contend that the award to the
Captain of his salary corresponding to the unexpired portion of the
contract and one (1) month leave pay, including attorney's fees,
also constituted grave abuse of discretion.
The petition must fail.
We note preliminary that petitioners failed to attach a clearly
legible, properly certified, true copy of the decision of the NLRC
dated 23 April 1994, in violation of requirement no. 3 of Revised
Circular No. 1-88. On this ground alone, the petition could have
been dismissed. But the Court chose not to do so, in view of the
nature of question here raised and instead required private
respondent to file a comment on the petition. Captain Tayong
submitted his comment. The Office of the Solicitor General asked
for an extension of thirty (30) days to file its comment on behalf of
the NLRC. We consider that the Solicitor General's comment may be
dispensed with in this case.
It is well settled in this jurisdiction that confidential and managerial
employees cannot be arbitrarily dismissed at any time, and without
cause as reasonably established in an appropriate investigation. 15
Such employees, too, are entitled to security of tenure, fair
standards of employment and the protection of labor laws.
The captain of a vessel is a confidential and managerial employee
within the meaning of the above doctrine. A master or captain, for
purposes of maritime commerce, is one who has command of a
vessel. A captain commonly performs three (3) distinct roles: (1) he
is a general agent of the shipowner; (2) he is also commander and
technical director of the vessel; and (3) he is a representative of the
country under whose flag he navigates. 16 Of these roles, by far
the most important is the role performed by the captain as
commander of the vessel; for such role (which, to our mind, is
analogous to that of "Chief Executive Officer" [CEO] of a presentday corporate enterprise) has to do with the operation and
preservation of the vessel during its voyage and the protection of
the passengers (if any) and crew and cargo. In his role as general
agent of the shipowner, the captain has authority to sign bills of

lading, carry goods aboard and deal with the freight earned, agree
upon rates and decide whether to take cargo. The ship captain, as
agent of the shipowner, has legal authority to enter into contracts
with respect to the vessel and the trading of the vessel, subject to
applicable limitations established by statute, contract or
instructions and regulations of the shipowner. 17 To the captain is
committed the governance, care and management of the vessel. 18
Clearly, the captain is vested with both management and fiduciary
functions.
It is plain from the records of the present petition that Captain
Tayong was denied any opportunity to defend himself. Petitioners
curtly dismissed him from his command and summarily ordered his
repatriation to the Philippines without informing him of the charge
or charges levelled against him, and much less giving him a change
to refute any such charge. In fact, it was only on 26 October 1989
that Captain Tayong received a telegram dated 24 October 1989
from Inter-Orient requiring him to explain why he delayed sailing to
South Africa.
We also find that the principal contention of petitioners against the
decision of the NLRC pertains to facts, that is, whether or not there
was actual and sufficient basis for the alleged loss of trust or
confidence. We have consistently held that a question of "fact" is,
as a general rule, the concern solely of an administrative body, so
long as there is substantial evidence of record to sustain its action.
The record requires us to reject petitioners' claim that the NLRC's
conclusion of fact were not supported by substantial evidence.
Petitioner's rely on self-serving affidavits of their own officers and
employees predictably tending to support petitioners' allegation
that Captain Tayong had performed acts inimical to petitioners'
interests for which, supposedly, he was discharged. The official
report of Mr. Clark, petitioners' representative, in fact supports the
NLRC's conclusion that private respondent Captain did not
arbitrarily and maliciously delay the voyage to South Africa. There
had been, Mr. Clark stated, a disruption in the normal functioning of
the vessel's turbo charger 19 and economizer and that had
prevented the full or regular operation of the vessel. Thus, Mr. Clark
relayed to Captain Tayong instructions to "maintain reduced RPM"
during the voyage to South Africa, instead of waiting in Singapore
for the supplies that would permit shipboard repair of the
malfunctioning machinery and equipment.
More importantly, a ship's captain must be accorded a reasonable
measure of discretionary authority to decide what the safety of the
ship and of its crew and cargo specifically requires on a stipulated
ocean voyage. The captain is held responsible, and properly so, for
such safety. He is right there on the vessel, in command of it and (it
must be presumed) knowledgeable as to the specific requirements

of seaworthiness and the particular risks and perils of the voyage

he is to embark upon. The applicable principle is that the captain
has control of all departments of service in the vessel, and
reasonable discretion as to its navigation. 20 It is the right and duty
of the captain, in the exercise of sound discretion and in good faith,
to do all things with respect to the vessel and its equipment and
conduct of the voyage which are reasonably necessary for the
protection and preservation of the interests under his charge,
whether those be of the shipowners, charterers, cargo owners or of
underwriters. 21 It is a basic principle of admiralty law that in
navigating a merchantman, the master must be left free to exercise
his own best judgment. The requirements of safe navigation compel
us to reject any suggestion that the judgment and discretion of the
captain of a vessel may be confined within a straitjacket, even in
this age of electronic communications. 22 Indeed, if the ship
captain is convinced, as a reasonably prudent and competent
mariner acting in good faith that the shipowner's or ship agent's
instructions (insisted upon by radio or telefax from their officers
thousand of miles away) will result, in the very specific
circumstances facing him, in imposing unacceptable risks of loss or
serious danger to ship or crew, he cannot casually seek absolution
from his responsibility, if a marine casualty occurs, in such
instructions. 23
Compagnie de Commerce v. Hamburg 24 is instructive in this
connection. There, this Court recognized the discretionary authority
of the master of a vessel and his right to exercise his best
judgment, with respect to navigating the vessel he commands. In
Compagnie de Commerce, a charter party was executed between
Compagnie de Commerce and the owners of the vessel Sambia,
under which the former as charterer loaded on board the Sambia,
at the port of Saigon, certain cargo destined for the Ports of Dunkirk
and Hamburg in Europe. The Sambia flying the German flag, could
not, in the judgment of its master, reach its ports of destination
because war (World War I) had been declared between Germany
and France. The master of the Sambia decided to deviate from the
stipulated voyage and sailed instead for the Port of Manila.
Compagnie de Commerce sued in the Philippines for damages
arising from breach of the charter party and unauthorized sale of
the cargo. In affirming the decision of the trial court dismissing the
complaint, our Supreme Court held that the master of the Sambia
had reasonable grounds to apprehend that the vessel was in
danger of seizure or capture by the French authorities in Saigon
was justified by necessity to elect the course which the took i.e.,
to flee Saigon for the Port of Manila with the result that the
shipowner was relieved from liability for the deviation from the

stipulated route and from liability for damage to the cargo. The
Court said:
"The danger from which the master of the Sambia fled was a real
and not merely an imaginary one as counsel for shipper contends.
Seizure at the hands of an 'enemy of the King', though not
inevitable, was a possible outcome of a failure to leave the port of
Saigon; and we cannot say that under the conditions existing at the
time when the master elected to flee from that port, there were no
grounds for a 'reasonable apprehension of danger' from seizure by
the French authorities, and therefore no necessity for flight.
The word 'necessity' when applied to mercantile affairs, where the
judgment must in the nature of things be exercised, cannot, of
course, mean an irresistible compelling power. What is meant by it
in such cases is the force of circumstances which determine the
course of a man ought to take. Thus, where by the force of
circumstances, a man has the duty cast upon him of taking some
action for another, and under that obligation adopts a course
which, to the judgment of a wise and prudent man, is apparently
the best for the interest of the persons for whom he acts in a given
emergency, it may properly be said of the course so taken that it
was in a mercantile sense necessary to take it."
25 (Emphasis
supplied)
Compagnie de Commerce contended that the shipowner should, at
all events, be held responsible for the deterioration in the value of
the cargo incident to its long stay on board the vessel from the date
of its arrival in Manila until the cargo was sold. The Supreme Court,
in rejecting this contention also, declared that:
"But it is clear that the master could not be required to act on the
very day of his arrival; or before he had a reasonable opportunity to
ascertain whether he could hope to carry out his contract and earn
his freight; and that he should not be held responsible for a
reasonable delay incident to an effort to ascertain the wishes of the
freighter, and upon failure to secure prompt advice, to decide for
himself as to the course which he should adopt to secure the
interests of the absent owner of the property aboard the vessel.
The master is entitled to delay for such a period as may be
reasonable under the circumstances, before deciding on the course
he will adopt. He may claim a fair opportunity of carrying out a
contract, and earning the freight, whether by repairing or
transshipping. Should the repair of the ship be undertaken, it must
be proceeded with diligently; and if so done, the freighter will have
no ground of complaint, although the consequent delay be a long
one, unless, indeed, the cargo is perishable, and likely to be injured
by the delay. Where that is the case, it ought to be forwarded, or
sold, or given up, as the case may be, without waiting for repairs.

A shipowner or shipmaster (if communication with the shipowner is

impossible), will be allowed a reasonable time in which to decide
what course he will adopt in such cases as those under discussion;
time must be allowed to him to ascertain the facts, and to balance
the conflicting interests involved, of shipowner, cargo owner,
underwriter on ship and freight. But once the time has elapsed, he
is bound to act promptly according as he has elected either to
repair, or abandon the voyage, or tranship. If he delays, and owing
to that delay a perishable cargo suffers damage, the shipowner will
be liable for that damage; he cannot escape that obligation by
pleading the absence of definite instructions from the owners of the
cargo or their underwriters, since he has control of the cargo and is
entitled to elect." 26 (Emphasis supplied)
The critical question, therefore, is whether or not Captain Tayong
had reasonable grounds to believe that the safety of the vessel and
the crew under his command or the possibility of substantial delay
at sea required him to wait for the delivery of the supplies needed
for the repair of the turbo-charger and the economizer before
embarking on the long voyage from Singapore to South Africa.
In this connection, it is especially relevant to recall that, according
to the report of Mr. Robert Clark, Technical Director of petitioner Sea
Horse Ship Management, Inc., the Oceanic Mindoro had stopped in
mid-ocean for six (6) hours and forty-five (45) minutes on its way to
Singapore because of its leaking economizer. 27 Equally relevant is
the telex dated 2 August 1989 sent by Captain Tayong to Sea Horse
after Oceanic Mindoro had left Singapore and was en route to South
Africa. In this telex, Captain Tayong explained his decision to Sea
Horse in the following terms:
"I CAPT R.D. TAYONG RE: UR PROBLEM IN SPORE (SINGAPORE) I
EXPLAIN AGN TO YOU THAT WE ARE INSECURITY/DANGER TO SAIL
IN SPORE W/OUT HAVING SUPPLY OF OXY/ACET. PLS UNDERSTAND
HV PLENTY TO BE DONE REPAIR FM MAIN ENGINE LIKE TURBO
CHARGER PIPELINE, ECONOMIZER LEAKAGE N ETC WE COULD NOT
FIX IT W/OUT OXY/ACET ONBOARD. I AND MR. CLARK WE
CONTACTED EACH OTHER BY PHONE IN PAPAN N HE ADVSED US TO
SAIL TO RBAY N WILL SUPPLY OXY/ACET UPON ARRIVAL RBAY HE
ALSO EXPLAINED TO MY C/E HOW TO FIND THE REMEDY W/OUT
OXY/ACET BUT C/E HE DISAGREED MR. CLARK IDEA, THAT IS WHY
WE URG REQUEST[ED] YR KIND OFFICE TO ARRANGE SUPPLY
OXY/ACET BEFORE SAILING TO AVOID RISK/DANGER OR DELAY AT
SEA N WE TOOK PRECAUTION UR TRIP FOR 16 DAYS FM SPORE TO
RBAY. PLS. UNDERSTAND UR SITUATION." 28 (Emphasis partly in
source and partly supplied)
Under all the circumstances of this case, we, along with the NLRC,
are unable to hold that Captain Tayong's decision (arrived at after
consultation with the vessel's Chief Engineer) to wait seven (7)

hours in Singapore for the delivery on board the Oceanic Mindoro of

the requisitioned supplies needed for the welding-repair, on board
the ship, of the turbo-charger and the economizer equipment of the
vessel, constituted merely arbitrary, capricious or grossly
insubordinate behavior on his part. In the view of the NLRC, that
decision of Captain Tayong did not constitute a legal basis for the
summary dismissal of Captain Tayong and for termination of his
contract with petitioners prior to the expiration of the term thereof.
We cannot hold this conclusion of the NLRC to be a grave abuse of
discretion amounting to an excess or loss of jurisdiction; indeed, we
share that conclusion and make it our own.
Clearly, petitioners were angered at Captain Tayong's decision to
wait for delivery of the needed supplies before sailing from
Singapore, and may have changed their estimate of their ability to
work with him and of his capabilities as a ship captain. Assuming
that to be petitioners' management prerogative, that prerogative is
nevertheless not to be exercised, in the case at bar, at the cost of
loss of Captain Tayong's rights under his contract with petitioner's
and under Philippine law.
ACCORDINGLY, petitioners having failed to show grave abuse of
discretion amounting to loss or excess of jurisdiction on the part of
the NLRC in rendering its assailed decision, the Petition for
Certiorari is hereby DISMISSED, for lack of merit. Costs against
petitioners.
SO ORDERED.
Bidin, Romero, Melo and Vitug, JJ., concur.
Footnotes
1.
A "turbo-charger" is a centrifugal blower driven by exhaust
gas turbines and used to supercharge an engine, or to supply a
charge to the intake of an internal-combustion engine at a pressure
higher than that of the surrounding atmosphere (Webster's New
World Dictionary (1974), p. 1532).
An "economizer" is a device in which water is heated
preliminary to entering the boiler proper. The heat which was used
in raising the temperature of the water contained in the boiler to
boiling point is utilized, instead of being wasted, for the purpose of
raising the water in the economizer to a high temperature before it
enters the boiler. an increase in the feed water temperature will
raise boiler efficiency. (Ithaca Traction Corp. vs. Traveler's Indemnity
Co., 177 N.Y.S. 753 [1919]).
2.
NLRC Decision, p. 3.
3.
Report of Mr. Robert B. Clark, p. 1; Records; p. 104.
4.
Id., p. 2; Records, p. 103.

5.
Id., p. 1; Records, p. 104.
6.
Memorandum of appeal of Captain Tayong, p. 3; Records, p.
197.
7.
NLRC Decision, p. 3.
8.
Memorandum of appeal of Captain Tayong, p. 3; Records, p.
197.
9.
Id., pp. 3-4; Records, pp. 196-197.
10.
Report of Mr. Clark, p. 1; Records, p. 103.
11.
Memorandum of Appeal, p. 4; Records, p. 196.
12.
Id., p. 4; Records, p. 196.
13.
NLRC Decision, p. 3.
14.
Memorandum of appeal, p. 4; Records, p. 196.
15.
Lawrence vs. National Labor Relations Commission, 205
SCRA 737 (1992); Hellenic Philippine Shipping vs. Siete, 195 SCRA
179 (1991); Anscor Transport & Terminals vs. National Labor
Relations Commission, 190 SCRA 147 (1990).
16.
See Hernandez and Penasales, Philippine Admiralty and
Maritime Law, p. 388 (1987).
17.
Article 610, Code of Commerce.
18.
See Article 610, Code of Commerce. See Fitz vs. The Galiot
Amelie, 73 US 18, 18 L Ed 806 (1867); Steamship Styria vs. Morgan,
186 US 1, 46 L Ed 1027 (1901); McAndrews vs. Thatcher, 70 US
347, 18 L Ed 155 (1865); The Propeller Niagara vs. Cordes, 62 US 7,
16 L Ed 41 91858).
19.
The official statement of Mr. Clark reported that there was "a
water leak from M.E. Turbo-Charger No. 2 Exhaust gas outlet
casing." (Petition, Rollo, p. 6.).
20.
American-Hawaiian S.S. Co. v. Pacific S.S. Co., 41 F 2d 718
(1930); The Princess Sophia, 61 F 2D 339 (1932).
21.
The Styria, 186 US 1, 46 L Ed 1027 91901); Grays Harbor
Country vs. Brimanger (1933), 18 P2d 25; Wandtke vs. Anderson,
74 F 2d 381 (1934); The Balsa, 10 F 2d 408 (1926); The Pomare, 92
F Supp 185 (1950); The Vulcan, 60 F Supp 158 (1945); Farmlington,
69 F 2d 300 (1934); United British Steamship Company, Ltd. v.
Newfoundland Export and Shipping, 292 US 651, 78 L Ed 1500
(1934); The Dampskibsselskabet Atalanta A/S v. US, 31 F 2d 961
(1929); Ralli vs. Troop, 157 US 386 (1894).
22.
E.g., The Lusitania, 251 F 715 (1918).
23.
See, generally, The Dampskibsselskabet Atalanta A/S v. U.S.,
31 F. 2d 961 (1929); Ralli v. Troop, 157 US 386 (1894); Johnson v.
U.S., 74 F 2d 703 (1935); Palmer v. United States, 85 F supp 764
(1949); Roberts v. United Fisheries Vessels Co., 141 F 2d 288
(1944).
24.
36 Phil. 590 (1917).
25.
36 Phil. at 626-627.
26.
36 Phil. at 631-632.

27.
Supra, note 4.
28.
As quoted in the Comment of respondent Rizalino D. Tayong,
dated 10 July 1994, p. 4.

(c)

Prohibited acts and transactions

Art. 613, 614, 615, 617, 621, 583

ARTICLE 613.
A captain who navigates for freight in
common or on shares can not make any transaction for his
exclusive account, and should he do so the profit shall belong to
the other persons in interest, and the losses shall be for his own
exclusive account.
ARTICLE 614.
A captain who, having made an agreement to
make a voyage, should not fulfill his obligation, without being
prevented by an accident case or by force majeure, shall pay for all
the losses his action may cause, without prejudice to criminal
penalties which may be proper.
ARTICLE 615.
Without the consent of the agent, the captain
can not have himself substituted by another person; and should he
do so, besides being liable for all the acts of the substitute and
bound to the indemnities mentioned in the foregoing article, the
substitute as well as the captain may be discharged by the agent.
ARTICLE 617.
The captain can not contract loans on
respondentia, and should he do so the contracts shall be void.
Neither can he borrow money on bottomry for his own transactions,
except on the portion of the vessel he owns, provided no money
has been previously borrowed on the whole vessel, and provided
there does not exist any other kind of lien or obligation thereon.

When he is permitted to do so, he must necessarily state what

interest he has in the vessel.
In case of violation of this article the principal, interest, and costs
shall be charged to the private account of the captain, and the
agent may furthermore have the right to discharge him.
ARTICLE 621.
A captain who borrows money on bottomry, or
who pledges or sells merchandise or provisions in other cases and
without the formalities prescribed in this Code, shall be liable for
the principle, interest, and costs, and shall indemnify for the
damages he may cause.
The captain who commits fraud in his accounts shall reimburse the
amount defrauded, and shall be subject to the provisions contained
in the Penal Code.
ARTICLE 583.
If the ship being on a voyage the captain
should find it necessary to contract one or more of the obligations
mentioned in Nos. 8 and 9 of Article 580, he shall apply to the
judge or court if he is in Spanish * territory, and otherwise to the
consul of Spain, * should there be one, and, in his absence to the
judge or court or to the proper local authority, presenting the
certificate of the registry of the vessel treated of in Article 612, and
the instruments proving the obligation contracted.
The judge or court, the consul or the local authority as the case
may be, in view of the result of the proceedings instituted, shall
make a temporary memorandum in the certificate of their result, in
order that it may be recorded in the registry when the vessel
returns to the port of her registry, or so that it can be admitted as a
legal and preferred obligation in case of sale before the return, by
reason of the sale of the vessel by virtue of a declaration of
unseaworthiness.

thereof not to exceed one-fifth of the total crew. If in foreign ports

the captain should not find a sufficient number of Spanish * sailors,
he may make up the crew with foreigners, with the consent of the
consul or marine authorities.
The agreements which the captain may make with the members of
the crew and others who go to make up the complement of the
vessels, to which reference is made in Article 612, must be reduced
to writing in the account book without the intervention of a notary
public or clerk, signed by the parties thereto, and vised by the
marine authority if they are executed in Spanish * territory, or by
the consuls or consular agents of Spain * if executed abroad,
stating therein all the obligations which each one contracts and all
the rights they acquire, said authorities taking care that these
obligations and rights are recorded in a concise and clear manner,
which will not give rise to doubts or claims.
The captain shall take care to read to them the articles of this Code,
which concern them, stating that they were read in the said
document.
If the book includes the requisites prescribed in Article 612, and
there should not appear any signs of alterations in its clauses, it
shall be admitted as evidence in questions which may arise
between the captain and the crew with regard to the agreements
contained therein and the amounts paid on account of the same.
Every member of the crew may request a copy of the captain,
signed by the latter, of the agreement and of the liquidation of his
wages, as they appear in the book.
(b)

Duties and liabilities, Art. 635

The lack of this formality shall make the captain personally liable to
the creditors who may be prejudiced through his fault.

2.

Other Officers and Crew

(a)

Contracts and formalities, Art. 634

ARTICLE 634.
The captain may make up his crew with the
number he may consider advisable, and in the absence of Spanish *
sailors he may ship foreigners residing in the country, the number

ARTICLE 635.
A sailor who has been contracted to serve on
a vessel can not rescind his contract nor fail to comply therewith
except by reason of a legitimate impediment which may have
occurred.
Neither can he pass from the service of one vessel to another
without obtaining the written consent of the vessel on which he
may be.
If, without obtaining said permission, the sailor who has signed for
one vessel should sign for another one, the second contract shall
be void, and the captain may choose between forcing him to fulfill

the service to which he first bound himself or look for a person to

substitute him at his expense.
Said sailor shall furthermore lose the wages earned on his first
contract to the benefit of the vessel for which he may have signed.
A captain who, knowing that a sailor is in the service of another
vessel, should have made a new agreement with him, without
having requested the permission referred to in the foregoing
paragraphs, shall be personally liable to the captain of the vessel to
which the sailor first belonged for that part of the indemnity,
referred to in the third paragraph of this article, which the sailor
could not pay.
(c)

Rights, Arts. 636 to 647

ARTICLE 636.
Should a fixed period for which a sailor has
signed not be stated, he can not be discharged until the end of the
return voyage to the port where he enrolled.
ARTICLE 637.
Neither can the captain discharge a sailor
during the time of his contract except for sufficient cause, the
following being considered as such:
1.
The perpetration of a crime which disturbs order on the
vessel.
2.
Repeated offenses of insubordination, against discipline, or
against the fulfillment of the service.
3.
Repeated incapacity or negligence in the fulfillment of the
service to be rendered.
4.
Habitual drunkenness.
5.
Any occurrence which incapacitates the sailor to carry out
the work under his charge, with the exception of the provisions
contained in Article 644.
6.
Desertion.
The captain may, however, before setting out on a voyage and
without giving any reason whatsoever, refuse to permit a sailor he
may have engaged from going on board and may leave him on
land, in which case he will be obliged to pay him his wages as if he
had rendered services.
This indemnity shall be paid from the funds of the vessel if the
captain should have acted for reasons of prudence and in the
interest of the safety and good service of the former. Should this
not be the case, it shall be paid by the captain personally. aisadc

After the vessel has sailed, and during the voyage and until the
conclusion thereof, the captain can not abandon any member of his
crew on land or on the sea, unless, by reason of being guilty of
some crime, his imprisonment and delivery to the competent
authority is proper in the first port touched, which will be obligatory
on the captain.
ARTICLE 638.
If, the crew having been engaged, the voyage
is revoked by the will of the agent or of the charterers before or
after the vessel has put to sea or if the vessel is in the same
manner given a different destination than that fixed in the
agreement with the crew, the latter shall be indemnified because of
the rescission of the contract according to the case, viz:
1.
If the revocation of the voyage should be decided before the
departure of the vessel from the port, each sailor engaged shall be
given one month's salary, besides what may be due him in
accordance with his contract, for the services rendered to the
vessel up to the date of the revocation.
2.
If the agreement should have been for a fixed amount for
the whole voyage, there shall be graduated what may be due for
said month and days, calculating the same in proportion to the
estimated duration of the voyage, in the judgment of experts, in
the manner established in the law of civil procedure; and if the
proposed voyage should be of such short duration that it is
calculated at one month more or less, the indemnity shall be fixed
for fifteen days, discounting in all cases the sums advanced.
3.
If the revocation should take place after the vessel has put
to sea, the sailors engaged for a fixed amount for the voyage shall
receive the salary which may have been offered them in full as if
the voyage had terminated, and those engaged by the month shall
receive the amount corresponding to the time they might have
been on board and to the time they may require to arrive at the
port of destination, the captain being obliged, furthermore, to pay
said sailors the passage to the said port or to the port of sailing of
the vessel, as may be convenient for them.
4.
If the agent or the charterers of the vessel should give said
vessel a destination other than that fixed in the agreement, and the
members of the crew should not agree thereto, they shall be given
by way of indemnity half the amount fixed in case No. 1, besides
what may be owed them for the part of the monthly wages
corresponding to the days which have elapsed from the date of
their agreements.
If they accept the change, and the voyage, on account of the
greater distance or for other reasons, should give rise to an

increase of wages, the latter shall be privately regulated, or

through amicable arbitrators in case of disagreement. Even though
the voyage may be to a nearer point, this shall not give rise to a
reduction in the wages agreed upon.
If the revocation or change of the voyage should originate from the
shippers or charterers, the agent shall have a right to demand of
them the indemnity which is justly due.
ARTICLE 639.
If the revocation of the voyage should arise
from a just cause independent of the will of the agent or charterers,
and the vessel should not have left the port, the members of the
crew shall not have any other right than to receive the wages
earned up to the day on which the revocation took place.
ARTICLE 640.
The following shall be just causes for the
revocation of the voyage:
1.
A declaration of war or interdiction of commerce with the
power to whose territory the vessel was bound.
2.
The blockade of the port of destination or the breaking out
of an epidemic after the agreement.
3.
The prohibition to receive in said port the goods which make
up the cargo of the vessel.
4.
The detention or embargo of the same by order of the
Government, or for any other reason independent of the will of the
agent.
5.
The inability of the vessel to navigate.
ARTICLE 641.
If, after a voyage has been begun, any of the
first three causes mentioned in the foregoing article should occur,
the sailors shall be paid at the port the captain may deem it
advisable to make for the benefit of the vessel and cargo, according
to the time they may have served thereon; but if the vessel is to
continue the voyage, the captain and the crew may mutually
demand the enforcement of the contract.
In case of the occurrence of the fourth cause, the crew shall
continue to be paid half wages, if the agreement is by month but if
the detention should exceed three months, the engagement shall
be rescinded and the crew shall be paid what they should have
earned, according to the contract, if the voyage had been made.
And if the agreement had been made for a fixed sum for the
voyage, the contract must be complied within the terms agreed
upon.
In the fifth case, the crew shall not have any other right than be
entitled to recover the wages earned; but if the disability of the

vessel should have been caused by the negligence or lack of skill of

the captain, engineer, or sailing mate, they shall indemnify the
crew for the loss suffered, always reserving the criminal liability
which may be proper.
ARTICLE 642.
If the crew has been engaged to work on
shares they shall not be entitled, by reason of the revocation,
delay, or greater extension of the voyage, to anything but the
proportionate part of the indemnity paid into the common funds of
the vessel by the persons liable for said occurrences.
ARTICLE 643.
If the vessel and her freight should be totally
lost, by reason of capture or wreck, all rights of the crew to demand
any wages whatsoever shall be extinguished, as well as that of the
agent for the recovery of the advances made.
If a portion of the vessel or freight should be saved, or part of
either, the crew engaged on wages, including the captain, shall
retain their rights on the salvage, so far as they go, on the
remainder of the vessel as well as value of the freightage or the
cargo saved; but sailors who are engaged on shares shall not have
any right whatsoever to the salvage of the hull, but only on the
portion of the freightage saved. If they should have worked to
collect the remainder of the ship-wrecked vessel, they shall be
given an award in proportion to the efforts made and to the risks
encountered in order to accomplish the salvage.
ARTICLE 644.
A sailor who falls sick shall not lose his right to
wages during the voyage, unless the sickness is the result of his
own fault. At any rate, the costs of the attendance and cure shall be
defrayed from the common funds, in the form of a loan.
If the sickness should be caused by an injury received in the service
or defense of the vessel the sailor shall be attended and cured from
the common funds, there being deducted before anything else from
the proceeds of the freight, the cost of the attendance and cure.
ARTICLE 645.
If a sailor should die during the voyage his
heir shall be given the wages earned and not received, according to
his engagement and the reason for his death, namely
If he should have died a natural death and should have been
engaged on wages there shall be paid what may have been earned
up to the date of his death.
If the engagement had been made for a fixed sum for the whole
voyage there shall be paid half the amount earned if the sailor died

on the voyage out, and the whole amount if he died on the return
voyage.
And if the engagement had been made on shares and the death
should have occurred after the voyage was begun, the heirs shall
be paid the entire portion due the sailor; but should the latter have
died before the departure of the vessel from the port, the heirs
shall not be entitled to claim anything.
If the death should have occurred in the defense of the vessel, the
sailor shall be considered as living, and his heirs shall be paid, at
the end of the voyage, the full amount of wages or the full part of
the profits due him as to the others of his grade.
The sailor shall likewise be considered as present in the event of his
capture when defending the vessel, in order to enjoy the same
benefits as the rest; but should he have been captured on account
of carelessness or other accident not related to the service, he shall
only receive the wages due up to the day of his capture.
ARTICLE 646.
The vessel with her engines, rigging,
equipment, and freights shall be liable for the wages earned by the
crew engaged per month or for the trip, the liquidation and
payment ought to take place between one voyage and the other.
After a new voyage has been undertaken, credits such as the
former shall lose their right of preference.
ARTICLE 647.
The officers and the crew of the vessel shall
be exempted from all obligations contracted, if they deem it proper,
in the following cases:
1.
If, before the beginning of the voyage, the captain attempts
to change it, or there occurs a naval war with the power to which
the vessel was destined.
2.
If a disease should break out and be officially declared
epidemic in the port of destination.

3.

If the vessel should change owner or captain.

3.

Supercargoes, Arts. 649-651

ARTICLE 649.
Supercargoes shall discharge on board the
vessel the administrative duties which the agent or shippers may
have assigned them; they shall keep an account and record of their
transactions in a book which shall have the same conditions and
requisites as required for the accounting book of the captain, and
shall respect the latter in his duties as chief of the vessel.
The powers and liabilities of the captain shall cease, when there is
a supercargo, with regard to that part of the administration
legitimately conferred upon the latter, but shall continue in force for
all acts which are inseparable from his authority and office.
ARTICLE 650.
All the provisions contained in the second
section of Title III, Book II, with regard to qualifications, manner of
making contracts, and liabilities of factors shall be applicable to
supercargoes.
ARTICLE 651.
Supercargoes can not, without special
authorization or agreement, make any transaction for their own
account during the voyage, with the exception of the ventures
which, in accordance with the custom of the port of destination,
they are permitted to do.
Neither shall they be permitted to invest in the return trip more
than the profits from the ventures, unless there is a special
authorization thereto from the principals.