G.R. No.

L-25599
HOME INSURANCE COMPANY, plaintiff-appellee,
vs.
AMERICAN STEAMSHIP AGENCIES, INC. and LUZON STEVEDORING
CORPORATION, defendants,
AMERICAN STEAMSHIP AGENCIES, INC., defendant-appellant.
William H. Quasha and Associates for plaintiff-appellee.
Ross, Selph, Salcedo and Associates for defendant-appellant.
BENGZON, J.P., J.:
"Consorcio Pesquero del Peru of South America" shipped freight pre-paid at Chimbate, Peru,
21,740 jute bags of Peruvian fish meal through SS Crowborough, covered by clean bills of
lading Numbers 1 and 2, both dated January 17, 1963. The cargo, consigned to San Miguel
Brewery, Inc., now San Miguel Corporation, and insured by Home Insurance Company for
$202,505, arrived in Manila on March 7, 1963 and was discharged into the lighters of Luzon
Stevedoring Company. When the cargo was delivered to consignee San Miguel Brewery Inc.,
there were shortages amounting to P12,033.85, causing the latter to lay claims against
Luzon Stevedoring Corporation, Home Insurance Company and the American Steamship
Agencies, owner and operator of SS Crowborough.
Because the others denied liability, Home Insurance Company paid the consignee
P14,870.71 the insurance value of the loss, as full settlement of the claim. Having been
refused reimbursement by both the Luzon Stevedoring Corporation and American Steamship
Agencies, Home Insurance Company, as subrogee to the consignee, filed against them on
March 6, 1964 before the Court of First Instance of Manila a complaint for recovery of
P14,870.71 with legal interest, plus attorney's fees.
In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the
goods in the same quantity and quality that it had received the same from the carrier. It also
claimed that plaintiff's claim had prescribed under Article 366 of the Code of Commerce
stating that the claim must be made within 24 hours from receipt of the cargo.
American Steamship Agencies denied liability by alleging that under the provisions of the
Charter party referred to in the bills of lading, the charterer, not the shipowner, was
responsible for any loss or damage of the cargo. Furthermore, it claimed to have exercised
due diligence in stowing the goods and that as a mere forwarding agent, it was not
responsible for losses or damages to the cargo.
On November 17, 1965, the Court of First Instance, after trial, absolved Luzon Stevedoring
Corporation, having found the latter to have merely delivered what it received from the
carrier in the same condition and quality, and ordered American Steamship Agencies to pay
plaintiff P14,870.71 with legal interest plus P1,000 attorney's fees. Said court cited the
following grounds:
(a) The non-liability claim of American Steamship Agencies under the charter party contract
is not tenable because Article 587 of the Code of Commerce makes the ship agent also
civilly liable for damages in favor of third persons due to the conduct of the captain of the
carrier;
(b) The stipulation in the charter party contract exempting the owner from liability is against
public policy under Article 1744 of the Civil Code;
(c) In case of loss, destruction or deterioration of goods, common carriers are presumed at
fault or negligent under Article 1735 of the Civil Code unless they prove extraordinary
diligence, and they cannot by contract exempt themselves from liability resulting from their
negligence or that of their servants; and
(d) When goods are delivered to the carrier in good order and the same are in bad order at
the place of destination, the carrier is prima facie liable.
Disagreeing with such judgment, American Steamship Agencies appealed directly to Us. The
appeal brings forth for determination this legal issue: Is the stipulation in the charter party of
the owner's non-liability valid so as to absolve the American Steamship Agencies from
liability for loss?

The bills of lading,1 covering the shipment of Peruvian fish meal provide at the back thereof
that the bills of lading shall be governed by and subject to the terms and conditions of the
charter party, if any, otherwise, the bills of lading prevail over all the agreements. 2 On the of
the bills are stamped "Freight prepaid as per charter party. Subject to all terms, conditions
and exceptions of charter party dated London, Dec. 13, 1962."
A perusal of the charter party3 referred to shows that while the possession and control of the
ship were not entirely transferred to the charterer,4 the vessel was chartered to its full and
complete capacity (Exh. 3). Furthermore, the, charter had the option to go north or south
or vice-versa,5 loading, stowing and discharging at its risk and expense.6 Accordingly, the
charter party contract is one of affreightment over the whole vessel rather than a demise. As
such, the liability of the shipowner for acts or negligence of its captain and crew, would
remain in the absence of stipulation.
Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or
damage to the goods caused by personal want of due diligence on its part or its manager to
make the vessel in all respects seaworthy and to secure that she be properly manned,
equipped and supplied or by the personal act or default of the owner or its manager. Said
paragraph, however, exempts the owner of the vessel from any loss or damage or delay
arising from any other source, even from the neglect or fault of the captain or crew or some
other person employed by the owner on board, for whose acts the owner would ordinarily be
liable except for said paragraph..
Regarding the stipulation, the Court of First Instance declared the contract as contrary to
Article 587 of the Code of Commerce making the ship agent civilly liable for indemnities
suffered by third persons arising from acts or omissions of the captain in the care of the
goods and Article 1744 of the Civil Code under which a stipulation between the common
carrier and the shipper or owner limiting the liability of the former for loss or destruction of
the goods to a degree less than extraordinary diligence is valid provided it be reasonable,
just and not contrary to public policy. The release from liability in this case was held
unreasonable and contrary to the public policy on common carriers.
The provisions of our Civil Code on common carriers were taken from Anglo-American
law.7 Under American jurisprudence, a common carrier undertaking to carry a special cargo
or chartered to a special person only, becomes a private carrier. 8 As a private carrier, a
stipulation exempting the owner from liability for the negligence of its agent is not against
public policy,9 and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on common carriers should not
be applied where the carrier is not acting as such but as a private carrier. The stipulation in
the charter party absolving the owner from liability for loss due to the negligence of its
agent would be void only if the strict public policy governing common carriers is applied.
Such policy has no force where the public at large is not involved, as in the case of a ship
totally chartered for the use of a single party.
And furthermore, in a charter of the entire vessel, the bill of lading issued by the master to
the charterer, as shipper, is in fact and legal contemplation merely a receipt and a document
of title not a contract, for the contract is the charter party. 10 The consignee may not claim
ignorance of said charter party because the bills of lading expressly referred to the same.
Accordingly, the consignees under the bills of lading must likewise abide by the terms of the
charter party. And as stated, recovery cannot be had thereunder, for loss or damage to the
cargo, against the shipowners, unless the same is due to personal acts or negligence of said
owner or its manager, as distinguished from its other agents or employees. In this case, no
such personal act or negligence has been proved.
WHEREFORE, the judgment appealed from is hereby reversed and appellant is absolved from
liability to plaintiff. No costs. So ordered.
[G.R. No. L-9534. September 29, 1956.]
MANILA STEAMSHIP CO., INC., Petitioner, vs. INSA ABDULHAMAN (MORO) and LIM HONG
TO, Respondents.
DECISION

REYES, J. B. L., J.:

This case was begun in the Court of First Instance of Zamboanga (Civil Case No. 170) by Insa
Abdulhaman against the Manila Steamship Co., owner of the M/S Bowline Knot, and Lim
Hong To, owner of the M/L Consuelo V, to recover damages for the death of his (Plaintiffs)
five children and loss of personal properties on board the M/L Consuelo V as a result of a
maritime collision between said vessel and the M/S Bowline Knot on May 4, 1948, a few
kilometers distant from San Ramon Beach, Zamboanga City.
On appeal, the Court of Appeals found the following facts to have been established:
From 7: 00 to 8: 00 oclock in the evening of May 4, 1948, the M/L Consuelo V, laden
with cargoes and passengers left the port of Zamboanga City bound for Siokon under the
command of Faustino Macrohon. She was then towing a kumpit, named Sta. Maria Bay.
The weather was good and fair. Among her passengers were the Plaintiff Insa Abdulhaman,
his wife Carimla Mora and their five children already mentioned. The Plaintiff and his wife
paid their fare before the voyage started.
On that same night the M/S Bowline Knot was navigating from Maribojoc towards
Zamboanga.
Between 9: 30 to 10: 00 in the evening the dark clouds bloated with rain began to fall
and the gushing strong wind began to blow steadily harder, lashing the waves into a choppy
and roaring sea. Such weather lasted for about an hour and then it became fair although it
was showering and the visibility was good enough.
When some of the passengers of the M/L Consuelo V were then sleeping and some were
lying down awake, all of a sudden they felt the shocking collision of the M/L Consuelo V
and a big motorship, which later on was identified as the M/V Bowline Knot.
Because the M/L Consuelo V capsized, her crew and passengers, before realizing what had
happened, found themselves swimming and floating on the crest of the waves and as a
result of which nine (9) passengers were dead and missing and all the cargoes carried on
said boat, including those of the Plaintiff as appear in the list, Exhibit A, were also lost.
Among the dead passengers found were Maria, Amlasa, Bidoaya and Bidalla, all surnamed
Inasa, while the body of the child Abdula Inasa of 6 years of age was never recovered.
Before the collision, none of the passengers were warned or informed of the impending
danger as the collision was so sudden and unexpected. All those rescued at sea were
brought by the M/V Bowline Knot to Zamboanga City. (Decision of C. A., pp. 5-6).
As the cause of the collision, the Court of Appeals affirmed the findings of the Board of
Marine Inquiry, that the commanding officer of the colliding vessels had both been negligent
in operating their respective vessels. Wherefore, the Court held the owners of both vessels
solidarily liable to Plaintiff for the damages caused to him by the collision, under Article 827
of the Code of Commerce;
but exempted Defendant Lim Hong To from liability by reason
of the sinking and total loss of his vessel, the M/L Consuelo V, while the other Defendant,
the Manila Steamship Co., owner of the M/S Bowline Knot, was ordered to pay all
of Plaintiffs damages in the amount of P20,784.00 plus one-half of the costs. It is from this
judgment that Defendant Manila Steamship Co. had appealed to this Court.
Petitioner Manila Steamship Co. pleads that it is exempt from any liability to Plaintiff under
Article 1903 of the Civil Code because it had exercised the diligence of a good father of a
family in the selection of its employees, particularly Third Mate Simplicio Ilagan, the officer
in command of its vessels, the M/S Bowline Knot, at the time of the collision. This defense
is untenable. While it is true that Plaintiffs action against Petitioner is based on a tort or
quasi-delict, the tort in question is not a civil tort under the Civil Code but a maritime tort
resulting in a collision at sea, governed by Articles 826-939 of the Code of Commerce. Under
Article 827 of the Code of Commerce, in case of collision between two vessels imputable to
both of them, each vessel shall suffer her own damage and both shall be solidarily liable for
the damages occasioned to their cargoes. The characteristic language of the law in making
the vessels solidarily liable for the damages due to the maritime collision emphasizes the
direct nature of the responsibilities on account of the collision incurred by the shipowner
under maritime law, as distinguished from the civil law and mercantile law in general. This
direct responsibility is recognized in Article 618 of the Code of Commerce under which the
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captain shall be civilly liable to the ship agent, and the latter is the one liable to third
persons, as pointed out in the collision case of Yueng Sheng Exchange & Trading Co. vs.
Urrutia & Co., 12 Phil. 747, 753:
The responsibility involved in the present action is that derived from the management of
the vessel, which was defective on account of lack of skill, negligence, or fault, either of the
captain or of the crew, for which the captain is responsible to the agent, who in his turn is
responsible to the third party prejudiced or damaged. (Article 618, Code of Commerce).
In fact, it is a general principle, well established maritime law and custom, that shipowners
and ship agents are civilly liable for the acts of the captain (Code of Commerce, Article 586)
and for the indemnities due the third persons (Article 587);
so that injured parties may
immediately look for reimbursement to the owner of the ship, it being universally recognized
that the ship master or captain is primarily the representative of the owner (Standard Oil Co.
vs. Lopez Castelo, 42 Phil. 256, 260). This direct liability, moderated and limited by the
owners right of abandonment of the vessel and earned freight (Article 587), has been
declared to exist, not only in case of breached contracts, but also in cases of tortious
negligence (Yu Biao Sontua vs. Osorio, 43 Phil. 511, 515):
In the second assignment of error, the Appellant contends that the Defendant ought not to
be held liable for the negligence of his agents and employees.
It is proven that the agents and employees, through whose negligence the explosion and fire
in question occurred, were agents, employees and mandatories of the Defendant. Where the
vessel is one of freight, a public concern or public utility, its owner or agents is liable for the
tortious acts of his agents (Articles 587, 613, and 618 Code of Commerce;
and Article
1902, 1903, 1908, Civil Code). This principle has been repeatedly upheld in various decisions
of this court.
The doctrines cited by the Appellant in support of his theory have reference to the relations
between principal and agent in general, but not to the relations between ship agent and his
agents and employees;
for this reason they cannot be applied in the present case.
It is easy to see that to admit the defense of due diligence of a bonus paterfamilias (in the
selection and vigilance of the officers and crew) as exempting the shipowner from any
liability for their faults, would render nugatory the solidary liability established by Article 827
of the Code of Commerce for the greater protection of injured parties. Shipowners would be
able to escape liability in practically every case, considering that the qualifications and
licensing of ship masters and officers are determined by the State, and that vigilance is
practically impossible to exercise over officers and crew of vessels at sea. To compel the
parties prejudiced to look to the crew for indemnity and redress would be an illusory remedy
for almost always its members are, from captains down, mere wage earners.
We, therefore, find no reversible error in the refusal of the Court of Appeals to consider the
defense of the Manila Steamship Co., that it is exempt from liability for the collision with the
M/L Consuelo V due to absence of negligence on its parts in the selection and supervision
of the officers and crew of the M/S Bowline Knot.
The case of Walter S. Smith & Co. vs. Cadwallader Gibson Lumber Co., 55 Phil. 517, invoked
by Petitioner, is not the point. Said case treated of a civil tort, in that the vessel of
the Defendant, allegedly negligently managed by its captain in the course of its maneuvers
to moor at Plaintiffs wharf, struck the same and partially demolished it, causing damage
to Plaintiff. Because the tort allegedly committed was civil, the provisions of Article 1903 of
the Civil Code were correctly applied. The present case, on the other hand, involves tortious
conduct resulting in a maritime collision;
wherefore, the liability of the shipowner is, as
already stated, governed by the provisions of the Code of Commerce and not by the Civil
Code.
We agree, however, with Petitioner-Appellant, that the Court of Appeals was in error in
declaring the Respondent Lim Hong To, owner of the M/L Consuelo V, exempt from liability
to the original Plaintiff, Abdulhaman, in view of the total loss of his own vessel, that sank as
a result of the collision. It is to be noted that both the master and the engineer of the motor
launch Consuelo V were not duly licensed as such (Exh. 2). In applying for permission to
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operate, despite the lack of properly trained and experienced, crew, Respondent Lim Hong
To gave as a reason
that the income derived from the vessel is insufficient to pay licensed officers who demand
high salaries,
and expressly declared:
That in case of any accident, damage or loss, I shall assume full risk and responsibility for
all the consequences thereof. (Exhibit 2).
His permit to operate, in fact, stipulated
that in case of any accident, damage or loss, the registered owner thereof shall assume full
risk and responsibility for all the consequences thereof, and that said vessel shall be held
answerable for any negligence, disregard or violation of any of the conditions herein
imposed and for any consequence arising from such negligence, disregard or violations.
(Exhibit 3.)
The Court of Appeals held that neither the letter (Exhibit 2) nor the permit (Exhibit 3)
contained any waiver of the right of Respondent Lim Hong To to limit his liability to the value
of his motor launch and that he did not lose the statutory right to limit his liability by
abandonment of the vessel, as conferred by Article 587 of the Code of Commerce.
We find the ruling untenable. Disregarding the question whether mere inability to meet the
salary demands of duly licensed masters and engineers constitutes non-availability thereof
that would excuse noncompliance with the law and authorize operation without licensed
officers under Act 3553, the fact remains that by operating with an unlicensed master, Lim
Hong To deliberately increased the risk to which the passengers and shippers of cargo
aboard the Consuelo V would be subjected. In his desire to reap greater benefits in the
maritime trade, Lim Hong To willfully augmented the dangers and hazards to his vessels
unwarry passengers, who would normally assume that the launch officers possessed the
necessary skill and experience to evade the perils of the sea. Hence, the liability of
said Respondent cannot be the identical to that of a shipowner who bears in mind the safety
of the passengers and cargo by employing duly licensed officers. To hold, as the Court of
Appeals has done, that Lim Hong To may limit his liability to the value of his vessels, is to
erase all difference between compliance with law and the deliberate disregard thereof. To
such proposition we cannot assent.
The international rule is to the effect that the right of abandonment of vessels, as a legal
limitation of a shipowners liability, does not apply to cases where the injury or the average
is due to shipowners own fault. Faria (Derecho Comercial Maritimo, Vol. I, pp. 122-123), on
the authority of judicial precedents from various nations, sets the rule to be as follows:
Esta generalmente admitido que el propietario del buque no tiene derecho a la limitacion
legal de responsibilidad si los daos o averias que dan origen a la limitacion provienen de
sus propias culpas. El Convenio de Bruselas de 25 de agosto de 1924 tambien invalida la
limitacion en el caso de culpa personal en los accidentes o averas sobrevenidos (Art. 2).
To the same effect, a noted French author states:
La limitacion de la responsabilidad maritima ha sido admitida para proteger a los
armadores contra los actos abusivos de sus encargados y no dejar su patrimonio entero a la
discrecion del personal de sus buques, porque este personal cumple sus obligaciones en
condiciones especiales; pero los armadores no tienen por sobre los demas derecho a ser
amparados contra ellos mismos ni a ser protegidos contra sus propios actos.
(Danjon, Derecho Maritimo, Vol. 2, p. 332). (Emphasis supplied.)
That Lim Hong To understood that he would incur greater liability than that normally borne
by shipowners, is clear from his assumption of full risk and responsibility for all the
consequences of the operation of the M/L Consuelo V;
a responsibility expressly
assumed in his letter Exhibit 2, and imposed in his special permit, in addition to the vessel
itself being held answerable. This express assumption of full risk and responsibility would
be meaningless unless intended to broaden the liability of Respondent Lim Hong To beyond
the value of his vessel.
In resume, we hold:
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(1) That the Manila Steamship Co., owner of the M/S Bowline Knot, is directly and
primarily responsible in tort for the injuries caused to the Plaintiff by the collision of said
vessel with the launch Consuelo V, through the negligence of the crews of both vessels,
and it may not escape liability on the ground that it exercised due diligence in the selection
and supervision of the officers and crew of the Bowline Knot;
(2) That Lim Hong To, as owner of the motor launch Consuelo V, having caused the same
to sail without licensed officers, is liable for the injuries caused by the collision over and
beyond the value of said launch;
(3) That both vessels being at fault, the liability of Lim Hong To and Manila Steamship Co. to
the Plaintiff herein is in solidum, as prescribed by Article 827 of the Code of Commerce.
In view of the foregoing, the decision of the Court of Appeals is modified, and that of the
Court of First Instance affirmed, in the sense of declaring both original Defendants solidarily
liable to Plaintiff Insa Abdulhaman in the sum of P20,784.00 and the cost of the litigation,
without prejudice to the right of the one who should pay the judgment in full to demand
contribution from his co-Defendant.