Definition and Concept

Charter party carta partita (divided document)

- Ancient practice of writing out the terms and conditions of the
contract in duplicate on one piece of parchment and then
dividing it down the middle thus providing each party with a
copy
- A contract whereby an entire ship, or some principal part of
the said ship, is let by the owner thereof to a merchant or
other person for a specified time or use for the conveyance
of good, in consideration of the payment of freight.
- Often referred to as a form of mercantile lease for it involves
a charterer, who is most often a merchant himself or herself,
who desires to lease ship or a vessel owned by another for
the transport of his or her goods for commercial purposes.

The term reasonable dispatch is a common law term defining the customary and ordinary
obligations of a carrier to transport shipments. The term is found in the uniform and standard
bills of lading, and it is accompanied by language that:

No carrier is bound to transport said property in time for any particular market or otherwise
than with reasonable dispatch.

Under traditional cargo liability concepts, a carrier may be held liable for inordinate delay.
But in the absence of acceptance of liability for special and consequential damages, a carrier
is not liable for a missed appointment.

Typically, regular-route general commodity carriers have transit time holding out between
terminals or locations, offering second- or third-morning service between defined points, but
offering no guarantee of service or penalty for deliveries that are one or two days late.

SANTIAGO LIGHTERAGE CORPORATION, petitioner, vs.

COURT OF APPEALS

Antecedent Facts
C-Square filed a complaint for damages against Pelaez before the trial court.
C-Square signed a single voyage charter agreement 4 with Pelaez, who
represented himself as the disponent owner 5 of MV Christine Gay. Pelaez
warranted that MV Christine Gay was seaworthy and can undertake a voyage
to South Korea. Since MV Christine Gay failed to start the voyage, C-Square
asked the trial court to hold Pelaez liable for actual, moral, and exemplary
damages, plus attorney's fees.
Petitioner argued that Pelaez has no cause of action against petitioner
because MV Christine Gay was seaworthy at the time of delivery.
Following an examination of the evidence presented by the parties, the trial
court summarized the facts thus:
defendant-third party plaintiff Manuel A. Pelaez as sole proprietor of
the firm M.A.P. Trading offered to plaintiff the vessel "MV Christine
Gay" for the use of the latter in shipping and exporting its milled
chromite ores in bulk to Pohang Port, South Korea. Pelaez assured
the "MV Christine Gay" was seaworthy. Because it needed a vessel
to transport its milled chromite ores to its buyer in South Korea,
plaintiff accepted the offer of Pelaez and it entered into a [Voyage]
Charter Agreement with Pelaez, it being specifically agreed upon
that the [Voyage] Charter Agreement shall "automatically be
considered rescinded and inoperative" if the "(v)essel is found not
seaworthy to undertake a safe voyage to Korea" or if the defendant
should fail to "(g)et the necessary permits and/or shipping documents
to allow said voyage to Korea."
the "MV Christine Gay" was turned over by Santiago Lighterage
Corporation to Pelaez in Manila. The new set of crew members
boarded and took possession of the vessel to determine her actual
condition. After boarding the vessel, they immediately proceeded to
Masinloc, Zambales from Manila.
From the time they started their voyage from Manila to Masinloc,
Zambales, Marine Chief Engineer Simeon Panaguiton observed that
the engine of the vessel was not in good condition because heavy
smoke was going out from the exhaust manifold. Engr. Panaguiton,
however, allowed the vessel to make the voyage to Zambales,
because he was assured that the vessel will be repaired in Masinloc.
At Masinloc, Zambales, the chromite ores of plaintiff were loaded on
the vessel while repairs on the vessel were also being made by the
men of third party defendants Santiago Lighterage Corporation and
Robert Tan. A Report was made by Capt. Beltran Sorongon, the
master of the vessel, about the condition of the hull and
superstructures of the vessel. Because of the inadequacy of the
repairs, Engr. Panaguiton recommended to Pelaez that the vessel
may not be able to continue with her voyage to South Korea. He also
informed Capt. Sorongon that the vessel was not seaworthy. Capt.
Sorongon's "reaction was that, it was not really seaworthy."
Thereafter, it was decided that the vessel which was already loaded
with chromite ores will sail back towards Manila instead of proceeding
to Korea as sailing to Korea would be very dangerous. At about 2:00
o'clock to 3:00 o'clock in the afternoon of 22 September 1989, the
engines of the vessel suddenly stopped, thus, making the vessel stop
in the middle of the sea. Because of this, Capt. Sorongon allowed
Maximo Alvarez, the ship purser, to board a passing fishing boat, and
instructed Alvarez to inform plaintiff, Pelaez, and Tan about what
happened to the vessel. Capt. Sorongon also had a handwritten note
for Atty. Paculdo of plaintiff-corporation, informing the latter that the
 vessel was drifting on the sea because some of the pistons and
piston rings of the engines of the vessel were damaged. DHESca

Also on 22 September 1989, the plaintiff served a notice of rescission

of the Charter Agreement upon Pelaez who gave his conformity
thereto.
Thereafter, the plaintiff sent a demand letter dated 24 September
1989 informing Pelaez that the former suffered damages in the
amount of at least P2,000,000 because the vessel lacked the
documentation and that the vessel was not seaworthy.
Pelaez wrote a letter to the Maritime Industry Authority (MARINA)
requesting for a re-investigation of the seaworthiness of the vessel.
The re-investigation was conducted by a MARINA surveyor. MARINA
issued a report stating that the "MV Christine Gay" was a "dead" ship
at the time of inspection.
Consequently, plaintiff had to contract with other companies to
transport its chromite ores to South Korea, and this entailed
additional expenses. Moreover, the ores had to be unloaded from the
vessel "MV Christine Gay." And, plaintiff spent for the salaries of the
officers and crew members of the vessel, provisions, fuel, and other
things needed.
Issue: The only issue presented by the parties to the trial court for resolution
was whether MV Christine Gay was seaworthy when Pelaez signed the
bareboat charter agreement to undertake a voyage to South Korea.
The Ruling of the Court
We find no merit in the appeal.
Interpretation of the Charter Party Agreement
Petitioner challenges the trial and appellate courts' appreciation of the Charter
Party Agreement as part of the evidence in this case. Petitioner asserts that
delivery of the MV Christine Gay to Pelaez and Pelaez's subsequent takeover
of the vessel is already a full performance of petitioner's obligations. Petitioner
berthed MV Christine Gay in the port of Manila as early as 26 August 1989
and Pelaez had the opportunity to inspect her from that date until 1 September
1989, when Pelaez took over the vessel. 12 Thus, petitioner is not liable for
defects in MV Christine Gay after the delivery and turn over. The pertinent part
of the bareboat charter agreement between petitioner and Pelaez reads:
The OWNER shall before and at the time of delivery exercise due
diligence to make the VESSEL seaworthy and in every respect ready
in hull, machinery and equipment for service hereunder. The VESSEL
shall be properly documented at time of delivery.
The mere physical transfer of MV Christine Gay from petitioner to Pelaez does
not constitute full performance of its obligation under their bareboat charter
agreement. Neither is it considered a delivery. Under the agreement, physical
transfer of a seaworthy vessel is necessary to satisfy delivery. 14 Paragraph 3
of the bareboat charter agreement expressly requires petitioner "to make the
VESSEL seaworthy" at the time of delivery. Since petitioner did not deliver a
seaworthy vessel, petitioner failed to perform his obligation to Pelaez under
the agreement. ECTAHc

Seaworthiness is a relative term. Petitioner claims that MV Christine Gay later

undertook voyages within the Philippines. 15 However, such subsequent
voyages in the Philippines do not prove the vessel's seaworthiness to
withstand a voyage to South Korea. We quote from authorities in Maritime
Law:
To be seaworthy, a vessel "must have that degree of fitness which an
ordinary, careful and prudent owner would require his vessel to have
at the commencement of her voyage, having regard to all the
probable circumstances of it." Thus the degree of seaworthiness
varies in relation to the contemplated voyage. Crossing the Atlantic
calls for stronger equipment than sailing across the Visayan Sea. It is
essential to consider that once the necessary degree of
seaworthiness has been ascertained, this obligation is an absolute
one, i.e. the undertaking is that the vessel actually is seaworthy. It is
no excuse that the shipowner took every possible precaution to make
her so, if in fact he failed.
In examining what is meant by seaworthiness we must bear in mind
the dual nature of the carrier's obligations under a contract of
affreightment. To satisfy these duties the vessel must (a) be efficient
as an instrument of transport and (b) as a storehouse for her cargo.
The latter part of the obligation is sometimes referred to as
cargoworthiness.
A ship is efficient as an instrument of transport if its hull, tackle and
machinery are in a state of good repair, if she is sufficiently provided
with fuel and ballast, and is manned by an efficient crew.
And a vessel is cargoworthy if it is sufficiently strong and equipped to
carry the particular kind of cargo which she has contracted to carry,
and her cargo must be so loaded that it is safe for her to proceed on
her voyage. A mere right given to the charterer to inspect the vessel
before loading and to satisfy himself that she was fit for the
contracted cargo does not free the shipowner from his obligation to
provide a cargoworthy ship. (Emphasis added) 16
Seaworthiness of MV Christine Gay
Petitioner asserts that MV Christine Gay is "sufficient in materials,
construction, equipment and outfit" as shown by the documents the Philippine
Coast Guard ("Coast Guard") and the Maritime Industry Authority ("MARINA")
issued to petitioners. 17 Petitioner presents the following documents to show
MV Christine Gay's seaworthiness: Certificate of Inspection No. 2361-89,
Cargo Ship Safety Equipment Certificate No. 561-89 dated 11 September
1989, Cargo Ship Safety Construction Certificate No. 538-89, Manning
Certificate for Vessels on International Trade, and Special Permit No. 0313-89
dated 1 September 1989. 18 Petitioner overlooks that these documents are
mere prima facie evidence of the facts stated and contrary proof can overturn
such prima facie evidence. 19
Prima facie evidence is evidence which, standing alone unexplained or
uncontroverted, is sufficient to maintain the proposition affirmed. It is evidence
sufficient to establish a fact, and if not rebutted, remains sufficient for that
purpose. 20
We affirm the trial and appellate courts' finding that MV Christine Gay was
unseaworthy for the purpose intended in the bareboat charter agreement.

Kinds of Charter Parties

a) Bareboat Charter- shipowner leases to the charterer the whole vessel,
transferring to the latter the entire command, possession and
consequent control over the vessels navigation, including the master
and the crew, who thereby become the charterers servants.

The person who hires a ship (or several ships) in bareboat charter or in time
charter is called a disponent owner
The charterer becomes the owner of the vessel pro hac vice, just for that one
particular purpose only. Because the charterer is treated as owner pro hac
vice, the charterer assumes the customary rights and liabilities of the
shipowner to third persons and is held liable for the expense of the voyage
and the wages of the seamen.

LITONJUA SHIPPING INC., petitioners, vs. NATIONAL

SEAMEN BOARD

SYLLABUS

1. MERCANTILE LAW; MARITIME COMMERCE; CHARTER PARTY;

TYPES. In modern maritime law and usage, there are three (3)
distinguishable types of charter parties: (a) the "bareboat" or "demise" charter;
(b) the "time" charter; and (c) the "voyage" or "trip" charter.
2. ID.; ID.; ID.; BAREBOAT OR DEMISE CHARTER. A bareboat or demise
charter is a demise of a vessel, much as a lease of an unfurnished house is a
demise of real property. The shipowner turns over possession of his vessel to
the charterer, who then undertakes to provide a crew and victuals and
supplies and fuel for her during the term of the charter. The shipowner is not
normally required by the terms of a demise charter to provide a crew, and so
the charterer gets the "bare boat", i.e., without a crew. Sometimes, of course,
the demise charter might provide that the shipowner is to furnish a master and
crew to man the vessel under the charterer's direction, such that the master
and crew provided by the shipowner become the agents and servants or
employees of the charterer, and the charterer (and not the owner) through the
agency of the master, has possession and control of the vessel during the
charter period.
3. ID.; ID.; ID.; TIME CHARTER. A time charter, upon the other hand, like a
demise charter, is a contract for the use of a vessel for a specified period of
time or for the duration of one or more specified voyages. In this case,
however, the owner of a time- chartered vessel (unlike the owner of a vessel
under a demise or bare- boat charter), retains possession and control through
the master and crew who remain his employees. What the time charterer
acquires is the right to utilize the carrying capacity and facilities of the vessel
and to designate her destinations during the term of the charter.
4. ID.; ID.; ID.; VOYAGE CHARTER. A voyage charter, or trip charter, is
simply a contract of affreightment, that is, a contract for the carriage of goods,
from one or more ports of loading to one or more ports of unloading, on one or
on a series of voyages. In a voyage charter, master and crew remain in the
employ of the owner of the vessel.
5. ID.; ID.; ID.; DEMISE OR BAREBOAT CHARTER; PERSONS LIABLE FOR
EXPENSES OF THE VOYAGE INCLUDING THE WAGES OF THE SEAMEN.
In a demise or bare boat charter, the charterer is treated as owner pro hac
vice of the vessel, the charterer assuming in large measure the customary
rights and liabilities of the shipowner in relation to third persons who have
dealt with him or with the vessel. In such case, the Master of the vessel is the
agent of the charterer and not of the shipowner. The charterer or owner pro
hac vice, and not the general owner of the vessel, is held liable for the
expenses of the voyage including the wages of the seamen.
6. ID.; ID.; ID.; ID.; ID.; AGENT OF THE CHARTERER HELD LIABLE ON
THE CONTRACT FOR EMPLOYMENT BETWEEN THE SHIP CAPTAIN AND
THE SEAMEN RECRUITED; CASE AT BAR. It is important to note that
petitioner Litonjua did not place into the record of this case a copy of the
charter party covering the M/V Dufton Bay. We must assume that petitioner
Litonjua was aware of the nature of a bareboat or demise charter and that if
petitioner did not see fit to include in the record a copy of the charter party,
which had been entered into by its principal, it was because the charter party
and the provisions thereof were not supportive of the position adopted by
petitioner Litonjua in the present case, position diametrically opposed to the
legal consequence of a bareboat charter. Treating Fairwind as owner pro hac
vice, petitioner Litonjua having failed to show that it was not such, we believe
and so hold that petitioner Litonjua, as Philippine agent of the charterer, may
be held liable on the contract of employment between the ship captain and the
private respondent.
Facts:
Petitioner Litonjua is the duly appointed local crewing Managing Office of the
Fairwind Shipping Corporation ("Fairwind"). The M/V Dufton Bay is an ocean-
going vessel of foreign registry owned by the R.D. Mullion Ship Broking
Agency Ltd. ("Mullion"). On 11 September 1976, while the Dufton Bay was in
the port of Cebu and while under charter by Fairwind, the vessel's master
contracted the services of, among others, private respondent Gregorio
Candongo to serve as Third Engineer for a period of twelve (12) months with a
monthly wage of US$500.00. This agreement was executed before the Cebu
Area Manning Unit of the NSB. Thereafter, private respondent boarded the
vessel. On 28 December 1976, before expiration of his contract, private
respondent was required to disembark at Port Kelang, Malaysia, and was
returned to the Philippines on 5 January 1977. The cause of the discharge
was described in his Seaman's Book as "by owner's arrange" 1
Shortly after returning to the Philippines, private respondent filed a complaint
before public respondent NSB, which complaint was docketed as NSB-1331-
77, for violation of contract, against Mullion as the shipping company and
petitioner Litonjua as agent of the shipowner and of the charterer of the
vessel.
At the initial hearing, the NSB hearing officer held a conference with the
parties, at which conference petitioner Litonjua was represented by one of its
supercargos, Edmond Cruz. Edmond Cruz asked, in writing, that the hearing
be postponed for a month upon the ground that the employee of Litonjua in
charge of the case was out of town. The hearing officer denied this request
and then declared petitioner Litonjua in default. At the hearing, private
respondent testified that when he was recruited by the Captain of the Dufton
Bay, the latter was accompanied to the NSB Cebu Area Manning Unit by two
(2) supercargos sent by petitioner Litonjua to Cebu, and that the two (2)
supercargos Edmond Cruz and Renato Litonjua assisted private respondent in
the procurement of his National Investigation and Security Agency
(NISA)clearance. Messrs. Cruz and Litonjua were also present during private
respondent's interview by Captain Ho King Yiu of the Dufton Bay.
On 17 February 1977, the hearing officer of the NSB rendered a judgment by
default, 2 the dispositive portion of which read:
"Wherefore, premises considered, judgment is hereby rendered
ordering the respondents R.D. Mullion Shipbrokers Co., Ltd., and
Litonjua Shipping Co., Inc., jointly and solidarily to pay the
complainant the sum of four thousand six hundred fifty seven dollars
and sixty three cents ($4,657.63) or its equivalent in the Phil.
currency within 10 days from receipt of the copy of this Decision the
payment of which to be coursed through the then NSB"
The above conclusion was rationalized in the following terms:
 "From the evidence on record it clearly appears that there was no
sufficient or valid cause for the respondents to terminate the services
of complainant prior to 17 September 1977, which is the expiry date
of the contract. For this reason the respondents have violated the
conditions of the contract of employment which is a sufficient
justification for this Board to render award in favor of the complainant
of the unpaid salaries due the latter as damages corresponding to the
unexpired portion of the contract including the accrued leave pay
computed on the basis of five [5] days pay for every month of service.
In the instant Petition for Certiorari, petitioner Litonjua assails the decision of
public respondent NSB declaring the charterer Fairwind as employer of private
respondent, and for whose liability petitioner was made responsible, as
constituting a grave abuse of discretion amounting to lack of jurisdiction. The
principal if not the sole issue to be resolved here is whether or not the
charterer Fairwind was properly regarded as the employer of private
respondent Candongo.
Petitioner Litonjua makes two (2) principal submissions in support of its
contention, to wit:
"1) As a general rule, admiralty law as embodied in the Philippine
Code of Commerce fastens liability for payment of the crew's wages
upon the ship owner, and not the charterer; and
2) The evidence of record is grossly inadequate to shift such liability
from the shipowner to the petitioner. 6
Petitioner Litonjua contends that the shipowner, not the charterer, was the
employer of private respondent; and that liability for damages cannot be
imposed upon petitioner which was a mere agent of the charterer. It is insisted
that private respondent's contract of employment and affidavit of undertaking
clearly showed that the party with whom he had contracted was none other
than Mullion, the shipowner, represented by the ship's master 7 Petitioner also
argues that its supercargos merely assisted Captain Ho King Yiu of the Dufton
Bay in hiring private respondent as Third Engineer. Petitioner also points to
the circumstance that the discharge and the repatriation of private respondent
was specified in his Seaman's Book as having been "by owner's arrange."
Petitioner Litonjua thus argues that being the agent of the charterer and not of
the shipowner, it accordingly should not have been held liable on the contract
of employment of private respondent.
We are not persuaded by petitioner's argument. We believe that there are two
(2) grounds upon which petitioner Litonjua may be held liable to the private
respondent on the contract of employment.
The first basis is the charter party which existed between Mullion, the
shipowner, and Fairwind, the charterer.
It is well settled that in a demise or bare boat charter, the charterer is treated
as owner pro hac vice of the vessel, the charterer assuming in large measure
the customary rights and liabilities of the shipowner in relation to third persons
who have dealt with him or with the vessel. 10 In such case, the Master of the
vessel is the agent of the charterer and not of the shipowner. 11 The charterer
or owner pro hac vice, and not the general owner of the vessel, is held liable
for the expenses of the voyage including the wages of the seamen. 12
It is important to note that petitioner Litonjua did not place into the record of
this case a copy of the charter party covering the M/V Dufton Bay. We must
assume that petitioner Litonjua was aware of the nature of a bareboat or
demise charter and that if petitioner did not see fit to include in the record a
copy of the charter party, which had been entered into by its principal, it was
because the charter party and the provisions thereof were not supportive of
the position adopted by petitioner Litonjua in the present case, position
diametrically opposed to the legal consequence of a bareboat
charter. 13 Treating Fairwind as owner pro hac vice, petitioner Litonjua having
failed to show that it was not such, we believe and so hold that petitioner
Litonjua, as Philippine agent of the charterer, may be held liable on the
contract of employment between the ship captain and the private respondent.
There is a second and ethically more compelling basis for holding petitioner
Litonjua liable on the contract of employment of private respondent. The
charterer of the vessel, Fairwind, clearly benefitted from the employment of
private respondent as Third Engineer of the Dufton Bay, along with the ten
(10) other Filipino crew members recruited by Captain Ho in Cebu at the same
occasion. 14 If private respondent had not agreed to serve as such Third
Engineer, the ship would not have been able to proceed with its voyage. The
equitable consequence of this benefit to the charterer is, moreover, reinforced
by convergence of other circumstances of which the Court must take account.
There is the circumstance that only the charterer, through the petitioner, was
present in the Philippines. Secondly, the scope of authority or the
responsibility of petitioner Litonjua was not clearly delimited. Petitioner as
noted, took the position that its commission was limited to taking care of
vessels owned by Fairwind. But the documentary authorization read into the
record of this case does not make that clear at all. The words "our ships" may
well be read to refer both to vessels registered in the name of Fairwind and
vessels owned by others but chartered by Fairwind. Indeed the commercial,
operating requirements of a vessel for crew members and for supplies and
provisions have no relationship to the technical characterization of the vessel
as owned by or as merely chartered by Fairwind. In any case, it is not clear
from the authorization given by Fairwind to petitioner Litonjua that vessels
chartered by Fairwind (and owned by some other companies) were not to be
taken care of by petitioner Litonjua should such vessels put into a Philippine
port. The statement of account which the Dufton Bay's Master had signed and
which pertained to the salary of private respondent had referred to a Philippine
agency which would take care of disbursing or paying such account. There is
no question that the Philippine agency was the Philippine agent of the
charterer Fairwind. Moreover, there is also no question that petitioner Litonjua
did assist the Master of the vessel in locating and recruiting private
respondent as Third Engineer of the vessel as well as ten (10) other Filipino
seamen as crew members. In so doing, petitioner Litonjua certainly in effect
represented that it was taking care of the crewing and other requirements of a
vessel chartered by its principal, Fairwind. 15

Last, but certainly not least, there is the circumstance that extreme hardship
would result for the private respondent if petitioner Litonjua, as Philippine
agent of the charterer, is not held liable to private respondent upon the
contract of employment. Clearly, the private respondent, and the other Filipino
crew members of the vessel, would be defenseless against a breach of their
respective contracts. While wages of crew members constitute a maritime lien
upon the vessel, private respondent is in no position to enforce that lien. If
only because the vessel, being one of foreign registry and not ordinarily doing
business in the Philippines or making regular calls on Philippine ports cannot
be effectively held to answer for such claims in a Philippine forum. Upon the
other hand, it seems quite clear that petitioner Litonjua, should it be held liable
to private respondent for the latter's claims, would be better placed to secure
reimbursement from its principal Fairwind. In turn, Fairwind would be in an
infinitely better position (than private respondent) to seek and obtain recourse
from Mullion, the foreign shipowner, should Fairwind feel entitled to
reimbursement of the amounts paid to private respondent through petitioner
Litonjua.
We conclude that private respondent was properly regarded as an employee
of the charterer Fairwind and that petitioner Litonjua may beheld to answer to
private respondent for the latter's claims as the agent in the Philippines of
Fairwind.

[G.R. No. 187701. July 23, 2014.]

PHILAM INSURANCE COMPANY, INC. (now CHARTIS

PHILIPPINES INSURANCE, INC.), * petitioner, vs. HEUNG-A
SHIPPING CORPORATION and WALLEM PHILIPPINES
SHIPPING, INC., respondents.

[G.R. No. 187812. July 23, 2014.]

HEUNG-A SHIPPING CORPORATION and WALLEM

PHILIPPINES SHIPPING, INC., petitioners, vs. PHILAM
INSURANCE COMPANY, INC. (now CHARTIS PHILIPPINES
INSURANCE, INC.), respondent.
 The Factual Antecedents
On December 19, 2000, Novartis Consumer Health Philippines, Inc.
(NOVARTIS) imported from Jinsuk Trading Co. Ltd., (JINSUK) in South Korea,
19 pallets of 200 rolls of Ovaltine Power 18 G laminated plastic packaging
material.
In order to ship the goods to the Philippines, JINSUK engaged the services of
Protop Shipping Corporation (PROTOP), a freight forwarder likewise based in
South Korea, to forward the goods to their consignee, NOVARTIS. ASHECD

PROTOP shipped the cargo through Dongnama Shipping Co. Ltd.

(DONGNAMA) which in turn loaded the same on M/V Heung-A Bangkok V-019
owned and operated by Heung-A Shipping Corporation, (HEUNG-A), a Korean
corporation, pursuant to a 'slot charter agreement' whereby a space in the
latter's vessel was reserved for the exclusive use of the former. Wallem
Philippines Shipping, Inc. (WALLEM) is the ship agent of HEUNG-A in the
Philippines.
NOVARTIS insured the shipment with Philam Insurance Company, Inc. against
all loss, damage, liability, or expense before, during transit and even after the
discharge of the shipment from the carrying vessel until its complete delivery to
the consignee's premises.
The vessel arrived at the port of Manila, South Harbor, on December 27, 2000
and the subject shipment contained in Sea Van Container No. DNAU 420280-
9 was discharged without exception into the possession, custody and care of
Asian Terminals, Inc. (ATI) as the customs arrastre operator.
The shipment was thereafter withdrawn on January 4, 2001, by NOVARTIS'
appointed broker, Stephanie Customs Brokerage Corporation (STEPHANIE)
from ATI's container yard.
The shipment reached NOVARTIS' premises on January 5, 2001 and was
thereupon inspected by the company's Senior Laboratory Technician, Annie
Rose Caparoso (Caparoso). 5 HSIADc

Upon initial inspection, Caparoso found the container van locked with its load
intact. After opening the same, she inspected its contents and discovered that
the boxes of the shipment were wet and damp. further observed that parts of
the container van were damaged and rusty. There were also water droplets on
the walls and the floor was wet. Since the damaged packaging materials might
contaminate the product they were meant to hold, Caparoso rejected the entire
shipment.
All 17 pallets of the 184 cartons/rolls contained in the sea van were found
wet/water damaged.. The survey report further stated that the "wetting
sustained by the shipment may have reasonably be attributed to the water
seepage that gain entry into the sea van container damage roofs (minutes hole)
during transit period [sic]". 9
SAGAWA refuted the allegation that it is the ship agent of PROTOP and argued
that a ship agent represents the owner of the vessel and not a mere freight
forwarder like PROTOP. SAGAWA averred that its only role with respect to the
shipment was to inform NOVARTIS of its arrival in the Philippines and to
facilitate the surrender of the original bill of lading issued by PROTOP.
SAGAWA further remarked that it was deprived an opportunity to examine and
investigate the nature and extent of the damage while the matter was still fresh
so as to safeguard itself from false/fraudulent claims because NOVARTIS failed
to timely give notice about the loss/damage. 15
SAGAWA admitted that it has a non-exclusive agency agreement with
PROTOP to serve as the latter's delivery contact person in the Philippines with
respect to the subject shipment. DIETcH

ATI averred that it exercised due care and diligence in handling the subject
container. Also, NOVARTIS, through PHILAM, is now barred from filing any
claim for indemnification because the latter failed to file the same within 15 days
from receipt of the shipment. 17
Meanwhile, STEPHANIE asserted that its only role with respect to the shipment
was its physical retrieval from ATI and thereafter its delivery to NOVARTIS. That
entire time, the seal was intact and not broken. Also, based on the Certificate
of Survey, the damage to the shipment was due to salt water which means that
it could not have occurred while STEPHANIE was in possession thereof during
its delivery from ATI's container yard to NOVARTIS' premises. STEPHANIE
counterclaimed for moral damages and attorney's fees. 18
WALLEM alleged that the damage and shortages in the shipment were the
responsibility of the shipper, JINSUK, because it was taken on board on a
"shipper's load and count" basis which means that it was the shipper that
packed, contained and stuffed the shipment in the container van without the
carrier's participation. The container van was already sealed when it was loaded
on the vessel and hence, the carrier was in no position to verify the condition
and other particulars of the shipment.
WALLEM also asserted that the shipment was opened long after it was
discharged from the vessel and that WALLEM or HEUNG-A were not present
during the inspection, examination and survey.
WALLEM pointed the blame to PROTOP because its obligation to the shipper
as freight forwarder carried the concomitant responsibility of ensuring the
shipment's safety from the port of loading until the final place of delivery.
WALLEM claimed to have exercised due care and diligence in handling the
shipment.
HEUNG-A argued that it is not the carrier insofar as NOVARTIS is concerned.
The carrier was either PROTOP, a freight forwarder considered as a non-vessel
operating common carrier or DONGNAMA which provided the container van to
PROTOP. 20 HEUNG-A denied being the carrier of the subject shipment and
asserted that its only obligation was to provide DONGNAMA a space on board
M/V Heung-A Bangkok V-019.
PROTOP failed to file an answer to the complaint despite having been
effectively served with alias summons. It was declared in default in the RTC
Order dated June 6, 2002. 21
Ruling of the RTC
HEUNG-A was adjudged as the common carrier of the subject shipment by
virtue of the admissions of WALLEM's witness, Ronald Gonzales (Gonzales)
that despite the slot charter agreement with DONGNAMA, it was still the
obligation of HEUNG-A to transport the cargo from Busan, Korea to Manila and
thus any damage to the shipment is the responsibility of the carrier to the
consignee.
IEDAC

The RTC discounted the slot charter agreement between HEUNG-A and
DONGNAMA, and held that it did not bind the consignee who was not a party
thereto. Further, it was HEUNG-A's duty to ensure that the container van was
in good condition by taking an initiative to state in its contract and demand from
the owner of the container van that it should be in a good condition all the time.
Such initiative cannot be shifted to the shipper because it is in no position to
demand the same from the owner of the container van.
WALLEM was held liable as HEUNG-A's ship agent in the Philippines while
PROTOP was adjudged liable because the damage sustained by the shipment
was due to the bad condition of the container van. Also, based on the statement
at the back of the bill of lading, it assumed responsibility for loss and damage
as freight forwarder, viz.:
6.1 The responsibility of the Freight Forwarder for the goods under
these conditions covers the period from the time the Freight Forwarder
has taken the goods in his charge to the time of the delivery.
6.2 The Freight Forwarde[r] shall be liable for loss or damage to the
goods as well as for delay in delivery if the occurrence which caused
the loss, damage, delay in delivery took place while the goods were in
his charge as defined in clause 2.1.a unless the Freight Forwarder
proves that no fault or neglect of his own servants or agents or any
other person referred to in Clause 2.2 has caused or contributed to
such loss, damage or delay. However, the Freight Forwarder shall only
be liable for loss following from delay in delivery if the Consignor has
made a declaration of interest in timely delivery which has been
accepted by the Freight Forwarder and stated in this FBL. 23
ATI and STEPHANIE were exonerated from any liability. SAGAWA was likewise
adjudged not liable for the loss/damage to the shipment by virtue of the phrase
"Shipper's Load and Count" reflected in the bill of lading issued by PROTOP.
Since the container van was packed under the sole responsibility of the shipper
in Korea, SAGAWA, which is based in the Philippines, had no chance to check
if the contents were in good condition or not. The RTC concluded that SAGAWA
cannot be expected to observe the diligence or care required of a carrier or ship
agent. DSEaHT

Issues
(1) Whether the shipment sustained damage while in the possession and
custody of HEUNG-A, and if so, whether HEUNG-A's liability can be limited to
US$500 per package pursuant to the COGSA
(2) Whether or not NOVARTIS/PHILAM failed to file a timely claim against
HEUNG-A and/or WALLEM.

Ruling of the Court

Based on the laboratory examination results, the contents of the van were
drenched by sea water, an element which is highly conspicuous in the high
seas. It can thus be reasonably concluded that negligence occurred while the
container van was in transit, in HEUNG-A's possession, control and custody as
the carrier. IEcDCa

Although the container van had defects, they were not, however, so severe as
to accommodate heavy saturation of sea water. The holes were tiny and the
rusty portions did not cause gaps or tearing. Hence, the van was still in a
suitable condition to hold the goods and protect them from natural weather
elements or even the normal flutter of waves in the seas.
HEUNG-A's failure to demonstrate how it exercised due diligence in handling
and preserving the container van while in transit, it is liable for the damages
sustained thereby.
As the carrier of the subject shipment, HEUNG-A was bound to exercise
extraordinary diligence in conveying the same and its slot charter agreement
with DONGNAMA did not divest it of such characterization nor relieve it of any
accountability for the shipment.
Clearly then, despite its contract of affreightment with DONGNAMA, HEUNG-A
remained responsible as the carrier, hence, answerable for the damages
incurred by the goods received for transportation.
Here, HEUNG-A failed to rebut this prima facie presumption when it failed to
give adequate explanation as to how the shipment inside the container van was
handled, stored and preserved to forestall or prevent any damage or loss while
the same was in its possession, custody and control.
PROTOP is solidarily liable with HEUNG-A for the lost/damaged shipment in
view of the bill of lading the former issued to NOVARTIS. "A bill of lading is a
written acknowledgement of the receipt of goods and an agreement to transport
and to deliver them at a specified place to a person named or on his or her
order. It operates both as a receipt and as a contract. It is a receipt for the goods
shipped and a contract to transport and deliver the same as therein
stipulated."43 PROTOP breached its contract with NOVARTIS when it failed to
deliver the goods in the same quantity, quality and description as stated in Bill
of Lading No. PROTAS 200387.
The CA did not err in applying the provisions of the COGSA specifically, the rule
on Package Liability Limitation. CAacTH

Under Article 1753 of the Civil Code,the law of the country to which the goods
are to be transported shall govern the liability of the common carrier for their
loss, destruction or deterioration. Since the subject shipment was being
transported from South Korea to the Philippines, the Civil Code provisions shall
apply. In all matters not regulated by the Civil Code,the rights and obligations
of common carriers shall be governed by the Code of Commerce and by special
laws, 44 such as the COGSA.
While the Civil Code contains provisions making the common carrier liable for
loss/damage to the goods transported, it failed to outline the manner of
determining the amount of such liability. Article 372 of the Code of
Commerce fills in this gap, thus:
Article 372. The value of the goods which the carrier must pay in
cases if loss or misplacement shall be determined in
accordance with that declared in the bill of lading, the shipper
not being allowed to present proof that among the goods
declared therein there were articles of greater value and money.
In case, however, of the shipper's failure to declare the value of the goods in
the bill of lading, Section 4, paragraph 5 of the COGSA provides:
Neither the carrier nor the ship shall in any event be or become liable
for any loss or damage to or in connection with the transportation of
goods in an amount exceeding $500 per package lawful money of the
United States, or in case of goods not shipped in packages, per
customary freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been declared by the
shipper before shipment and inserted in the bill of lading. This
declaration, if embodied in the bill of lading shall be prima
facie evidence, but shall be conclusive on the carrier.
Hence, when there is a loss/damage to goods covered by contracts of carriage
from a foreign port to a Philippine port and in the absence a shipper's
declaration of the value of the goods in the bill of lading, as in the present case,
the foregoing provisions of the COGSA shall apply. The CA, therefore, did not
err in ruling that HEUNG-A, WALLEM and PROTOP's liability is limited to $500
per package or pallet. 45 EHcaAI

The Court likewise affirms the CA in pronouncing HEUNG-A, WALLEM and

PROTOP liable only for the lost/damaged 17 pallets instead of 19 pallets stated
in the bill of lading. This is because, per the "Shipper's Load and Count"
arrangement, the contents are not required to be checked and inventoried by
the carrier at the port of loading or before said carrier enters the port of
unloading in the Philippines since it is the shipper who has the sole
responsibility for the quantity, description and condition of the cargoes shipped
in container vans. 46 As such, the carrier cannot be held responsible for any
discrepancy if the description in the bill of lading is different from the actual
contents of the container. 47DSAICa

It was further ruled in Asian Terminals that pursuant to the foregoing COGSA
provision, failure to comply with the notice requirement shall not affect or
prejudice the right of the shipper to bring suit within one year after delivery of
the goods.
The consignee, NOVARTIS, received the subject shipment on January 5, 2001.
PHILAM, as the subrogee of NOVARTIS, filed a claim against PROTOP on
June 4, 2001, against WALLEM on October 12, 2001 and against HEUNG-A on
December 11, 2001, or all within the one-year prescriptive period. Verily then,
despite NOVARTIS' failure to comply with the three-day notice requirement, its
subrogee PHILAM is not barred from seeking reimbursement from PROTOP,
HEUNG-A and WALLEM because the demands for payment were timely
filed.
HCSDca

Trip charter. When a charterer wishes to employ a vessel for a voyage but does
not wish to take the risk of having to pay demurrage, for example, he may
charter the vessel on time-charter terms but specify the voyage and the
expected duration of the voyage.

PLANTERS PRODUCTS, INC., petitioner, vs. COURT OF

APPEALS, SORIAMONT STEAMSHIP AGENCIES AND
KYOSEI KISEN KABUSHIKI KAISHA, respondents.

Does a charter-party 1 between a shipowner and a charterer transform a

common carrier into a private one as to negate the civil law presumption of
negligence in case of loss or damage to its cargo?
Planters Products, Inc. (PPI), purchased from Mitsubishi International
Corporation (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T)
of Urea 46% fertilizer
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V
"Sun Plum" pursuant to the Uniform General Charter 2 was entered into
between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo,
Japan.
It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel by one or more
persons, provided the charter is limited to the ship only, as in the case of a
time-charter or voyage-charter. It is only when the charter includes both the
vessel and its crew, as in a bareboat or demise that a common carrier
becomes private, at least insofar as the particular voyage covering the
charter-party is concerned. Indubitably, a shipowner in a time or voyage
charter retains possession and control of the ship, although her holds may, for
the moment, be the property of the charterer. 28

Persons who may make charterparty

Charterer- charterer, by himself, may subcharter the entire vessel to a third
person but only in the event that there is no prohibition in the
original charter regarding any subcharter
- There subcharter , where entered into, is an independent
contract by itself involving only the charterer and the
subcharter and therefore does not give rise to any
contractual relation between the general owner and the
subcharter.
Part Owners- are not precluded from chartering the same for their own
commercial purposes.
-enjoy preference in the charter of the vessel over other persons
who offer equal conditions and freight
Ship Agent- not allowed to make contracts for a new charter unless he is
properly or duly authorized by the owner, or by virtue of a n
authority given by a resolution of the majority of the co-owners.
- He may do so if authority has been extended to him in his
certificate of appointment.
Captain or Master- has inherent powers to enter into valid and binding charter
parties, but only in the event of absence of the ship agent or
consignee, and only if he acts in accordance with the instructions
of the agent or owner and protects the latters interests.
-validity of the charter is not affected if he violated the orders of
the agent or owner. Agent or owner shall have a right of action to
recover damages against the erring captain or master.
Requisites of a Valid Charter Party
a) Consent of the contracting parties
b) An existing vessel which should be placed at the disposition of the
shipper
c) Freight
d) Compliance with the formal requirements prescribed under Art. 652 of
the Code of Commerce which include the requirement that the charter
party must be (a) in writing, (2) drawn in duplicate and (3) signed by the
parties
 MARKET DEVELOPERS, INC. (MADE), petitioner, vs. HON.
INTERMEDIATE APPELLATE COURT and GAUDIOSO
UY, respondents.

petitioner Market Developers, Inc. (MADE) entered into a written barging and
towage contract with private respondent Gaudioso Uy for the shipment of the
former's cargo from Iligan City to Kalibo, Aklan. The petitioner was allowed 4
lay days and agreed to pay demurrage at the rate of P5,000.00 for every day
of delay, or in excess of the stipulated allowance. 5 On June 26, 1978, Uy sent
a barge and a tugboat to Iligan City and loading of the petitioner's cargo
began immediately. It is not clear who made the request, but upon completion
of the loading on June 29, 1978, the parties agreed to divert the barge to
Culasi, Roxas City, with the cargo being consigned per bill of lading to Modern
Hardware in that city. 6 This new agreement was not reduced to writing. The
shipment arrived in Roxas City on July 13, 1978, and the cargo was eventually
unloaded and duly received by the consignee. There is some dispute as to the
time consumed for such unloading. At any rate, about six months later, Uy
demanded payment of demurrage charges in the sum of P40,855.40 for an
alleged delay of eight days and 4/25 hours.7
Agreeing with the trial court, the respondent court held that since the
diversion of the cargo to Roxas City was not covered by a new written
agreement, the original agreement must prevail.
It is this conclusion that is now disputed by the petitioner, which contends that
the first written contract was replaced by a new verbal agreement that did not
contain any stipulation for demurrage. There is the further insistence that the
alleged delay in the unloading of the cargo in Roxas City should not have
been readily assumed as a fact by the trial and respondent courts because it
had not been established by competent evidence and was based on mere
hearsay. The petitioner also argues that the claim for demurrage was barred
by laches, the private respondent having asserted it tardily and obviously only
as an afterthought. 9
After considering the issues and the arguments of the parties, we find that it
was erroneous for the respondent courts to affirm that the original contract
concluded on June 20, 1978, continued to regulate the relations of the parties.
What it should have held instead was that the first written contract had been
cancelled and replaced by the second verbal contract because of the change
in the destination of the cargo.
LLphil
In his testimony, the private respondent said he felt there was no need to draft
another agreement as anyway the rates remained unchanged at P1.45 per
sack of the petitioner's cargo. He did not consider, however, that there was a
substantial difference between Roxas City and Kalibo, Aklan, as ports of
destination, that affected the continued existence of the first contract.
As correctly pointed out by the petitioner, Roxas City is a much busier port
than Kalibo, Aklan, where unloading of its cargo could have been
accomplished faster because of the lighter traffic. That is why he agreed to
pay demurrage charges under the original contract but not under the revised
verbal agreement. Testifying for the petitioner, Julian Chua, its sales manager,
declared that he had expressed misgivings about paying demurrage charges
in Roxas City but was assured by Uy that there would be no such
charges. 10 This testimony was never denied by the private respondent.

Indeed, it would have been foolhardy for the petitioner to assume demurrage
charges in Roxas City, considering the crowded condition of the port in that
place. Such assumption should not have been lightly inferred, especially since
it is based on the resurrection of a contract already voided because of the
change in the port of destination. To hold that the old agreement was still valid
and subsisting notwithstanding this substantial change was to impose upon
the petitioner a condition he had not, and would not have, accepted under the
new agreement. prLL

Isssue: Was the second contract invalid because it was not in writing?
Article 1356 of the Civil Code provides:
Contracts shall be obligatory in whatever form they may have been
entered into, provided all the essential requisites for their validity are
present. However, when the law requires that a contract be in some
form in order that it may be valid or enforceable, or that a contract be
proved in a certain way, that requirement is absolute and
indispensable . . .
.The general rule, therefore, is that a contract may be oral or written."
Article 652 of the Code of Commerce provides that "a charter party must be
drawn in duplicate and signed by the contracting parties" and enumerates the
conditions and information to be embodied in the contract, including "the lay
days and extra lay days to be allowed and the demurrage to be paid for each
of them."
But while the rule clearly shows that this kind of contract must be in writing,
the succeeding Article 653 just as clearly provides:
If the cargo should be received without a charter party having been
signed, the contract shall be understood as executed in accordance
with what appears in the bill of lading, the sole evidence of title with
 regard to the cargo for determining the rights and obligations of the
ship agent, of the captain and of the charterer.
We see no reason why the second agreement of the parties to deliver the
petitioner's cargo to Roxas City instead of Kalibo, Aklan, should not be
recognized simply because it was not in writing. Law and jurisprudence
support the validity of such a contract. And there is no justification either to
incorporate in such contract the stipulation for demurrage in the original
written contract which provided for a different port of destination than that later
agreed upon by the parties. It was precisely this vital change in the second
contract that rendered that first contract ineffectual.
The parol evidence rule is clearly inapplicable because that involves the
verbal modification usually not allowed of a written agreement admittedly
still valid and subsisting. In the case at bar, the first written agreement had not
merely been modified but actually replaced by the second verbal agreement,
which is perfectly valid even if not in writing like the first. As has been correctly
held:
No principle of law makes it necessary that a new contract upon the
same subject between the same persons shall be reduced to writing
because the old contract was written. 14
Safe-ports clause- shipowner reserves the right to decline to risk his vessel
in unsafe port.

Demurrage the sum fixed in the charter party as a remuneration to the owner of the ship
for the detention of his vessel beyond the number of days allowed by the charter party for
loading or unloading or for sailing.

[G.R. No. 87958. April 26, 1990.]

NATIONAL UNION FIRE INSURANCE COMPANY OF

PITTSBURG, PA/AMERICAN INTERNATIONAL UNDERWRITER
(PHIL.) INC., petitioners, vs. STOLT-NIELSEN PHILIPPINES, INC.
and COURT OF APPEALS, respondents.

We uphold the ruling of respondent Court of Appeals that the claim or dispute
herein is arbitrable.
On 9 January 1985, United Coconut Chemicals, Inc. (hereinafter referred to as
SHIPPER) shipped 404.774 metric tons of distilled C6-C18 fatty acid on board
MT "Stolt Sceptre," a tanker owned by Stolt-Nielsen Philippines Inc.
(hereinafter referred to as CARRIER), from Bauan, Batangas, Philippines,
consigned to "Nieuwe Matex" at Rotterdam, NetherlandsIt appears that the Bill
of Lading issued by the CARRIER contained a general statement of
incorporation of the terms of a Charter Party between the SHIPPER and
Parcel Tankers, Inc., entered into in Greenwich, Connecticut, U.S.A.
Upon receipt of the cargo by the CONSIGNEE in the Netherlands, it was
found to be discolored and totally contaminated.
The CARRIER moved to dismiss/suspend the proceedings on the ground that
the RTC had no jurisdiction over the claim the same being an arbitrable one;
that as subrogee of the SHIPPER-ASSURED, the INSURER is subject to the
provisions of the Bill of Lading, which includes a provision that the shipment is
carried under and pursuant to the terms of the Charter Party, dated 21
December 1984, between the SHIPPER-ASSURED and Parcel Tankers, Inc.
providing for arbitration.
The INSURER opposed the dismissal/suspension of the proceedings on the
ground that it was not legally bound to submit the claim for arbitration
inasmuch as the arbitration clause provided in the Charter Party was not
incorporated into the Bill of Lading, and that the arbitration clause is void for
being unreasonable and unjust.
First, herein petitioner-INSURER alleges that the RTC Order deferring
resolution of the CARRIER's Motion to Dismiss constitutes an interlocutory
order, which can not be the subject of a special civil action on certiorari and
prohibition.
Generally, this would be true. However, the case before us falls under the
exception. While a Court Order deferring action on a motion to dismiss until
the trial is interlocutory and cannot be challenged until final judgment, still,
where it clearly appears that the trial Judge or Court is proceeding in excess
or outside of its jurisdiction, the remedy of prohibition would lie since it would
be useless and a waste of time to go ahead with the proceedings
Issue: Are the terms of the Charter Party, particularly the provision on
arbitration, binding on the INSURER?
The INSURER postulates that it cannot be bound by the Charter Party
because, as insurer, it is subrogee only with respect to the Bill of Lading; that
only the Bill of Lading should regulate the relation among the INSURER, the
holder of the Bill of Lading, and the CARRIER; and that in order to bind it, the
arbitral clause in the Charter Party should have been incorporated into the Bill
of Lading.cdphil

We rule against that submission.

The pertinent portion of the Bill of Lading in issue provides in part:
"This shipment is carried under and pursuant to the terms of the
Charter dated December 21st 1984 at Greenwich, Connecticut,
U.S.A. between Parcel Tankers, Inc. and United Coconut Chemicals,
Ind. as Charterer and all the terms whatsoever of the said
Charter except the rate and payment of freight specified therein apply
to and govern the rights of the parties concerned in this shipment.
 Copy of the Charter may be obtained from the Shipper or Charterer."
(Emphasis ours)
While the provision on arbitration in the Charter Party reads:
"H. Special Provisions.
xxx xxx xxx
4. Arbitration. Any dispute arising from the making, performance or
termination of this Charter Party shall be settled in New York, Owner
and Charterer each appointing an arbitrator, who shall be a merchant,
broker or individual experienced in the shipping business; the two
thus chosen, if they cannot agree, shall nominate a third arbitrator
who shall be an admiralty lawyer. Such arbitration shall be conducted
in conformity with the provisions and procedure of the United States
arbitration act, and a judgment of the court shall be entered upon any
award made by said arbitrator. Nothing in this clause shall be
deemed to waive Owner's right to lien on the cargo for freight, deed
of freight, or demurrage."
Clearly, the Bill of Lading incorporates by reference the terms of the Charter
Party. It is settled law that the charter may be made part of the contract under
which the goods are carried by an appropriate reference in the Bill of Lading
(Wharton Poor, Charter Parties and Ocean Bills of Lading (5th ed., p. 71). This
should include the provision on arbitration even without a specific stipulation to
that effect. The entire contract must be read together and its clauses
interpreted in relation to one another and not by parts. Moreover, in cases
where a Bill of Lading has been issued by a carrier covering goods shipped
aboard a vessel under a charter party, and the charterer is also the holder of
the bill of lading, "the bill of lading operates as the receipt for the goods, and
as document of title passing the property of the goods, but not as varying the
contract between the charterer and the shipowner" The Bill of Lading
becomes, therefore, only a receipt and not the contract of carriage in a charter
of the entire vessel, for the contract is the Charter Party, and is the law
between the parties who are bound by its terms and condition provided that
these are not contrary to law, morals, good customs, public order and public
policy (Article 1306, Civil Code).
As the respondent Appellate Court found, the INSURER "cannot feign
ignorance of the arbitration clause since it was already charged with notice of
the existence of the charter party due to an appropriate reference thereof in
the bill of lading and, by the exercise of ordinary diligence, it could have easily
obtained a copy thereof either from the shipper or the charterer."
We hold, therefore, that the INSURER cannot avoid the binding effect of the
arbitration clause. By subrogation, it became privy to the Charter Party as fully
as the SHIPPER before the latter was indemnified, because as subrogee, it
stepped into the shoes of the SHIPPER-ASSURED and is subrogated merely
to the latter's rights.
Stated otherwise, as the subrogee of the SHIPPER, the INSURER is
contractually bound by the terms of the Charter party. Any claim of
inconvenience or additional expense on its part should not render the
arbitration clause unenforceable. prcd

Arbitration, as an alternative mode of settling disputes, has long been

recognized and accepted in our jurisdiction (Chapter 2, Title XIV, Book IV,
Civil Code). Republic Act No. 876 (The Arbitration Law) also expressly
authorizes arbitration of domestic disputes. Foreign arbitration as a system of
settling commercial disputes of an international character was likewise
recognized when the Philippines adhered to the United Nations "Convention
on the Recognition and the Enforcement of Foreign Arbitral Awards of 1958,"
under the 10 May 1965 Resolution No. 71 of the Philippine Senate, giving
reciprocal recognition and allowing enforcement of international arbitration
agreements between parties of different nationalities within a contracting
state. Thus, it pertinently provides:
"1. Each Contracting State shall recognize an agreement in writing
under which the parties undertake to submit to arbitration all or any
differences which have arisen or which may arise between them in
respect of a defined legal relationship, whether contractual or not,
concerning a subject matter capable of settlement by arbitration.
"2. The term 'agreement in writing shall include an arbitral clause in a
contract or an arbitration agreement, signed by the parties or
contained in an exchange of letters or telegrams.
"3. The court of a Contracting State, when seized of an action in a
matter in respect of which the parties have made an agreement within
the meaning of this article, shall, at the request of one of the parties,
refer the parties to arbitration, unless it finds that the said agreement
is null and void, inoperative or incapable of being performed."
It has not been shown that the arbitral clause in question is null and void,
inoperative, or incapable of being performed. Nor has any conflict been
pointed out between the Charter Party and the Bill of Lading.
In fine, referral to arbitration in New York pursuant to the arbitration clause,
and suspension of the proceedings in Civil Case No. 13498 below, pending
the return of the arbitral award, is, indeed called for.
Rights and CHARTERER
Obligations of
Parties SHIPOWNER
OR SHIP AGENT

1. If the vessel is 1. To pay the agreed

chartered wholly, not charter price;
to accept cargo from 2. To pay freightage
others; on unboarded cargo;
2. To observe 3. To pay losses to
represented capacity; others for loading
3. To unload cargo uncontracted cargo
clandestinely placed and illicit cargo;
4. To substitute 4. To wait if the vessel
another vessel if load needs repair;
is less than 3/5 of 5. To pay expenses for
capacity; deviation. (Arts. 679-
5. To leave the port if 687)
the charterer does not
bring the cargo within
the lay days and extra
lay days allowed;
6. To place in a vessel
in a condition to
navigate;
7. to bring cargo to
nearest neutral port in
case of war or
blockade. (Arts. 669-
678)

Effect of Bill of Lading if a bill of lading was issued by the shipowner to the
charterer, the charter party still governs their rights and the bill of lading may
be used as proof of receipt of the goods. As between the parties, the bill of
lading is still proof of receipt of the goods but the terms and conditions of the
contract are in the charter part.
a) while the bill of lading does not operate as a new contract or modify the
charter party as between the shipowner and the charterer, the bill of
lading does constitute a contract between the vessel and the consignee,
and neither he nor his endorsee is bound by the terms of the charter
party of which he has no notice or knowledge.
b) If the bill of lading (together with a charter party) that is issued by the
shipowner is a negotiable document of title, the bill of lading is binding
in favour of a subsequent holder for value. As this third person, there is
no other contract but the bill of lading.
c) The Code of Commerce provides that if the cargo should be received
without the charter party having been signed, the contract shall be
understood as executed in accordance with what appears in the bill of
lading, the sole evidence of title with regard to the cargo for determining
the rights and obligations of the ship agent, of the captain, and of the
charterer.
d) In a bareboat charter, the charter himself controls the master, and bills
of lading are issued just as they would be if the ship were under the
 hand of her general owner; the personal liability, however, is that of the
demise charterer.

O'FARREL Y CIA., doing business under the name of

MALAYSIAN NAVIGATION COMPANY, plaintiff-appellant, vs.
THE MANILA ELECTRIC COMPANY, defendant-appellee.

It appears that the Societ Francaise des Charbonnages du Tonkin

(hereinafter referred to as the coal company) is engaged in mining coal in
Hongay, Tongking, China while the Manila Electric Company is operating a
plant for the generation of electricity in the City of Manila. At the same time
O'Farrel y Cia. (Malaysian Navigation Company) was, during the period
with which we are here concerned, a shipping company engaged in
operating freight vessels in Oriental seas. In the operation of its plant the
defendant company consumers large quantities of coal, and in years past it
has taken its supplies in part from the coal company in Hongay. The old
arrangement under which the defendant had been purchasing coal from
said company having been found to be unsatisfactory, for some reason or
other, to the defendant, a new contract was entered into, in the month of
August, 1923, whereby the coal company agreed to sell and the defendant
agreed to buy, in the period from September 1, 1923, to August 31, 1924,
75,000 tons of dust coal, with a margin of 10 per cent more or less. In this
contract it was agreed that delivery should be taken by the defendant in
lots of about from 2,000 to 4,000 tons at regular intervals, as could best be
arranged to suit both purchasers and sellers, the purchasers agreeing to
take not less than about 6,000 tons per month and to send not more than
one steamer to be loaded at the same time. It was also stipulated that the
dust coal, the subject of the sale, should be loaded either in the stream or
alongside the wharf or quay at Hongay, at the option of the coal company,
"with quick despatch, vessels taking their turn in loading." As neither the
coal company nor the Manila Electric Company was engaged in operating
seagoing vessels, it became necessary for the defendant to make
arrangement with some shipping company for the service necessary to
transport the coal to Manila. This need being apparent, Gaston O'Farrel,
the agent of the coal company, in Manila, directed the attention of the
defendant company to the Malaysian Navigation Company, the trade-name
of O'Farrel y Cia., as operating vessels that would be available for
transporting the coal. In this connection it should be noted that O'Farrel
was agent both of the coal company and the Malaysian Navigation
Company.
 The contract between the plaintiff and the defendant for the
transportation of the coal purchased by the defendant from the coal
company was, in substance, as follows:
1. The Malaysian Navigation Co. undertakes to transport seventy-
five thousand tons of coal (10 per cent more or less), from Hongay to
Manila at the freight rate of four pesos and fifty centavos (P4.50), per ton of
1,016 kilos, less a rebate of 1 per cent.
2. Freight to be paid on arrival of each shipment at Manila as per
B/L.
3. Loading to be for account and risk of shippers according to
customary quick despatch subject to turn of mines.
4. For discharging at Manila the Manila Electric Co. will provide
sufficient lighters to receive the coal at ship side as fast as the ship can
discharge. Demurrage, if any, to be at the rate of P600 per day of fraction
thereof; it is understood that the Manila Electric Co. will not be compelled
to pay demurrage for days when it shall have received at least 500 tons of
coal.
The practice followed by the parties in the performance of this
contract was that, upon the receipt of information in Manila by the
defendant company from the coal company, advising that a cargo of coal
was, or soon would be available in Hongay, the message was turned over
to O'Farrel y Cia., and the latter company made the arrangements for the
sending of a boat to Hongay. But delay in the taking on of coal occurred in
Hongay, owing to the inability of the coal company to deliver the coal to the
waiting boats. The preponderance of the proof shows that this delay was
due to the fact that the cranes of the coal company at Hongay were
defective and often out of order. At any rate the result was that the
plaintiff's boats were frequently kept waiting in the port; and it in fact
appears that altogether they were held there idle one hundred twenty-three
days, to say nothing of the time occupied in the lading of the ships after
their turn had come for taking cargo. There can be no doubt, we think, that
these delays were attributable to the coal company.
It appears that, upon the visits that plaintiff's ships made to Hongay,
the coal necessary for the operation of said ships was there taken on board
with the assent of the coal company; and in the end the plaintiff became
indebted, to the coal company, on account of such advances of coal, in the
amount of $21,817.79, Hongkong currency. As a result of the inability of
the plaintiff to liquidate this claim for coal advanced to the plaintiff, the
officers of the latter became reluctant to send its vessels any longer to
Hongay, for fear that the ships would be libeled for the coal company's
claim.
Owing to the causes above suggested, deliveries of coal to the
defendant company under its contract with the coal company amounted in
June, 1924, only to about 41,375 tons, or some 18,625 tons less than the
amount that should have been delivered; and the only delivery thereafter
made to the defendant was a shipment that came on the Sealda in the
latter part of August, 1924. This boat did not belong to the Malaysian
Navigation Company but was obtained by tit from another owner. Upon
giving notice of the dispatch of the Sealda for coal in the latter part of
August, 1924, the general manager of the Manila Electric Company called
the attention of the coal company to the fact that that company was short
nearly 20,000 tons in its contractual deliveries, and in view of this fact the
coal company was advised to consider the contract closed. This step
received the approval of the coal company, and contractual relations
between it and the defendant terminated. In a conversation that occurred at
about this time between an officer of the defendant and a representative of
the Malaysian Navigation Company, the latter communicated to the former
the fact that it would be unable to proceed further under the contract for the
transportation of coal, herein-above quoted, and, on behalf of the
Malaysian Navigation Company, he acquiesced in the termination of the
contract existing between them.
In the plaintiff's complaint three separate causes of action are stated,
in the first of which the plaintiff seeks to recover the sum of P80,190, as
compensation which the plaintiff would have received had all of the coal
been delivered to it for transportation, as contemplated in the contract
between the plaintiff and the defendant. In the second cause of action the
plaintiff seeks to recover the sum of P73,800, being the amount
represented by the demurrage claimed by the plaintiff, at the rate of P600
per day, for the one hundred twenty-three days during which its ships were
detained in Hongay awaiting their turn to take on coal. In the third cause of
action the plaintiff seeks to recover the sum of P10,000 for demurrage of a
boat at Hongay which had to sail for Saigon in ballast and without cargo.

Directing our attention to the plaintiff's three causes of action in the

order in which they are stated in the complaint, we are of the opinion that
the trial court committed no error in holding that the plaintiff is not entitled
to recover damages against the defendant for breach of the contract for the
transportation of coal, for mere than one reason, namely, first, because the
plaintiff, the Malaysian Navigation Company, was unable to fulfill its
contract to supply ships for the transportation of the coal and desisted
therefrom; and, secondly, because in the end the contract was in effect
cancelled by mutual consent. The difficulty in which the plaintiff found itself
was due evidently to the failure of the coal company to make prompt
deliveries of coal aboard the plaintiff's boats at Hongay. But the defendant
was in no wise chargeable with either the causes or consequences of
these delays, as will be more clearly seen in our discussion of the second
cause of action. The theory underlying the plaintiff's case throughout is that
the coal company was agent of the defendant in the matters affecting the
performance of the contract between the plaintiff and the defendant. We
are unable to see any basis for this contention; and, on the contrary, the
position of O'Farrel as agent both of the coal company and of the plaintiff
indicates the impropriety of considering the coal company as the agent of
the defendant. No error was in our opinion committed in denying damages
to the plaintiff under the first cause of action.
The heart of the controversy is, we think, more properly found in the
issue presented under the second cause of action, which raises the
question of the responsibility of the defendant for demurrage of the
plaintiff's vessels at Hongay. In connection with this matter it will be noted,
upon careful inspection of the contract between the plaintiff and the
defendant, that the stipulation for demurrage at the rate of P600 per day, or
fraction thereof, is found in the paragraph of the contract which deals
especially with the discharge of coal at Manila. There is no stipulation for
demurrage incident to delay at Hongay; and, on the contrary, it is
stipulated, in the third paragraph of the contract, that loading at Hongay
should be "according to customary quick despatch subject to turn of
mines." In appellant's brief emphasis has been placed upon the
words customary quick despatch and the other words subject to turn of
mineshave not been taken so much into account. It appears in the proof
that the vessels desirous of landing coal at Hongay were laden according
to the custom of the port, in strict rotation, except in one instance where a
Malaysian ship was given preference over, two other ships whose owners
did not object. The expression "subject to turn of mines" should be
interpreted, we think, to mean that the lading of the vessels should be
subject to the output of the mines and that vessels should be subject to the
output of the mines and that vessels should take their turn in taking on the
coal. It results that the lading of the coal was dependent upon the output of
the mines and the order of ships seeking cargo at the loading places. The
expression "subject to turn of mines" was no doubt inserted in the contract
in lieu of a stipulation for demurrage. The insertion of that expression in
clause 3 made the Malaysian ships dependent upon the loading facilities of
the coal company at Hongay, and relieved the defendant from any liability
for demurrage by reason of delays that might occur in the port incident to
the obtaining and loading of the coal.
The plaintiff here invokes article 656 of the Code of Commerce,
which reads as follows:
"If in the charter party the time in which the loading and
unloading is to take place is not stated, the customs of the port where
these acts take place shall be observed. After the period stipulated or
the customary one has passed, and should there not be in the freight
contract an express clause fixing the indemnification for the delay, the
captain shall be entitled to demand demurrage for the usual and extra
lay days which may have elapsed in loading and unloading."
We are of the opinion, however, that the stipulation of the contract
making the loading of coal subject to the turn of mines renders article 656
 inapplicable, this being a special stipulation determining the order of
loading. It results that the defendant cannot be held responsible for the
delay that occurred.
The point just determined is fatal also to the third cause of action, in
which recovery is sought for delay incurred by one ship which left without
cargo.
The judgment appealed from, in our opinion, is without error, and the
same will be affirmed, with costs against the appellant. So ordered.
(O'Farrel y Cia. v. Manila Electric Co., G.R. No. 31222, [October 29, 1929],
|||

54 PHIL 1-10)
[G.R. No. 131166. September 30, 1999.]

CALTEX (PHILIPPINES), INC., petitioner, vs. SULPICIO

LINES, INC., GO SIOC SO, ENRIQUE S. GO, EUSEBIO S.
GO, CARLOS S. GO, VICTORIANO S. GO, DOMINADOR S.
GO, RICARDO S. GO, EDWARD S. GO, ARTURO S. GO,
EDGAR S. GO, EDMUND S. GO, FRANCISCO SORIANO,
VECTOR SHIPPING CORPORATION, TERESITA G.
CAEZAL AND SOTERA E. CAEZAL, respondents.

Platon Martinez Flores San Pedro & Leano for petitioner.

Arturo D. Lim for Sulpicio Lines.
Reynaldo Umali for T. Caezal, et al.
Cruz and Pascual for F. Soriano & Vector Shipping Corp.

SYNOPSIS

On December 19, 1987, the MV Doa Paz, a passenger ship bound for Manila
colided with motor tanker MT Vector. MT Vector carried on board oil products
owned by Caltex by virtue of a charter contract. Numerous people died in that
accident including public school teacher Sebastian Caezal and his 11 year
old daughter. In 1989, Caezal's wife and mother filed a complaint for
"Damages arising from Breach of Contract of Carriage" against Sulpicio Lines,
Inc. Sulpicio Lines, in turn, filed a third party complaint against Vector
Shipping, Inc. and Caltex Phils. The trial court rendered decision against
Sulpicio Lines and dismissed the third-party complaint. On appeal, the Court
of Appeals modified the trial court's ruling and held Vector Shipping Co. and
Caltex Phils., Inc., equally liable. Hence, this petition. ATHCac

Caltex Phils. and Vector entered into a contract of affreightment also known
as a voyage charter. In a voyage charter, the charter party provides for the
hire of the vessel only, the ship owner to supply the ship's store, pay for the
wages of the master of the crew, and defray the expenses for the
maintenance of the ship. If the charter is a contract of affreightment, which
leaves the general owner in possession of the ship as owner for the voyage,
the rights and the responsibilities of ownership rest on the owner. The
Charterer is free from liability to third persons in respect of the ship.
The charterer of a vessel has no obligation before transporting all legal
requirements. The duty rests upon the common carrier simply for being
engaged in public service.

SYLLABUS

1. COMMERCIAL LAW; TRANSPORTATION; CONTRACT OF CARRIAGE;

RESPECTIVE RIGHTS AND DUTIES OF PARTIES, HOW DETERMINED.
The respective rights and duties of a shipper and the carrier depends not on
whether the carrier is public or private, but on whether the contract of carriage
is a bill of lading or equivalent shipping documents on the one hand, or a
charter party or similar contract on the other.
2. ID.; ID.; ID.; CHARTER PARTY DIFFERENTIATED FROM CONTRACT OF
AFFREIGHTMENT. A charter party is a contract by which an entire ship, or
some principal part thereof, is let by the owner to another person for a
specified time or use; a contract of affreightment is one by which the owner of
a ship or other vessel lets the whole or part of her to a merchant or other
person for the conveyance of goods, on a particular voyage, in consideration
of the payment of freight.
3. ID.; ID.; ID.; CONTRACT OF AFFREIGHTMENT; CATEGORIES. A
contract of affreightment may be either time charter, wherein the leased
vessel is leased to the charterer for a fixed period of time, or voyage charter,
wherein the ship is leased for a single voyage. In both cases, the charter-party
provides for the hire of the vessel only, either for a determinate period of time
or for a single or consecutive voyage, the ship owner to supply the ship's
store, pay for the wages of the master of the crew, and defray the expenses
for the maintenance of the ship.
4. ID.; ID.; ID.; ID.; WHERE CHARTER IS ONE OF AFFREIGHTMENT,
CHARTERER FREE FROM LIABILITY TO THIRD PERSONS. If the
charter is a contract of affreightment, which leaves the general owner in
possession of the ship as owner for the voyage, the rights and the
responsibilities of ownership rest on the owner. The charterer is free from
liability to third persons in respect of the ship.
5. ID.; ID.; COMMON CARRIER; REMAINS AS SUCH NOTWITHSTANDING
CHARTER OF WHOLE OR PORTION OF VESSEL. In this case, the
charter party agreement did not convert the common carrier into a private
carrier. The parties entered into a voyager charter, which retains the character
of the vessel as a common carrier. In Planters Products, Inc. vs. Court of
Appeals, we said: "It is therefore imperative that a public carrier shall remain
as such, notwithstanding the charter of the whole or portion of a vessel by one
or more persons, provided the charter is limited to the ship only, as in the case
of a time-charter or voyage charter. It is only when the charter includes both
the vessel and its crew, as in a bareboat or demise that a common carrier
becomes private, at least insofar as the particular voyage covering the
charter-party is concerned. Indubitably, a ship-owner in a time or voyage
charter retains possession and control of the ship, although her holds may, for
the moment, be the property of the charterer." Later, we ruled in Coastwise
Lighterage Corporation vs. Court of Appeals. "Although a charter party may
transform a common carrier into a private one, the same however is not true in
a contract of affreightment . . ."
6. ID.; ID.; ID.; SEAWORTHINESS, IMPLIEDLY WARRANTED. A common
carrier is a person or corporation whose regular business is to carry
passenger or property for all persons who may choose to employ and to
remunerate him. MT Vector fits the definition of a common carrier under
Article 1732 of the Civil Code. Thus, the carriers are deemed to warrant
impliedly the seaworthiness of the ship. For a vessel to be seaworthy, it must
be adequately equipped for the voyage and manned with a sufficient number
of competent officers and crew. The failure of a common carrier to maintain in
seaworthy condition the vessel involved in its contract of carriage is a clear
breach of its duty prescribed in Article 1755 of the Civil Code. The provisions
owed their conception to the nature of the business of common carriers. This
business is impressed with a special public duty. The public must of necessity
rely on the care and skill of common carriers in the vigilance over the goods
and safety of the passengers, especially because with the modern
development of science and invention, transportation has become more rapid,
more complicated and somehow more hazardous. For these reasons, a
passenger or a shipper of goods is under no obligation to conduct an
inspection of the ship and its crew, the carrier being obliged by law to impliedly
warrant its seaworthiness. IDAEHT

7. ID.; ID.; ID.; NEGLIGENCE, CONSTRUED. In Southeastern College,

Inc. vs. Court of Appeals, we said that negligence, as commonly understood,
is conduct which naturally or reasonably creates undue risk or harm to others.
It may be the failure to observe that degree of care, precaution, and vigilance,
which the circumstances justly demand, or the omission to do something
which ordinarily regulate the conduct of human affairs, would do.
8. ID.; ID.; ID.; ID.; CHARTERER WITH NO OBLIGATION TO ENSURE
VESSEL COMPLIED WITH ALL LEGAL REQUIREMENTS. The charterer
of a vessel has no obligation before transporting its cargo to ensure that the
vessel it chartered complied with all legal requirements. The duty rests upon
the common carrier simply for being engaged in "public service." The Civil
Code demands diligence which is required by the nature of the obligation and
that which corresponds with the circumstances of the persons, the time and
the place. Hence, considering the nature of the obligation between Caltex and
MT Vector, the liability as found by the Court of Appeals is without basis.
9. ID.; ID.; ID.; ID.; ID.; CASE AT BAR. The relationship between the
parties in this case is governed by special laws. Because of the implied
warranty of seaworthiness, shippers of goods, when transacting with common
carriers, are not expected to inquire into the vessel's seaworthiness,
genuineness of its licenses and compliance with all maritime laws. To demand
more from shippers and hold them liable in case of failure exhibits nothing but
the futility of our maritime laws insofar as the protection of the public in
general is concerned. By the same token, we cannot expect passengers to
inquire every time they board a common carrier, whether the carrier
possesses the necessary papers or that all the carrier's employees are
qualified. Such a practice would be an absurdity in a business where time is
always of the essence. Considering the nature of transportation business,
passengers and shippers alike customarily presume that common carriers
possess all the legal requisites in its operation. Thus, the nature of the
obligation of Caltex demands ordinary diligence like any other shipper in
shipping his cargoes.

DECISION

PARDO, J : p

Is the charterer of a sea vessel liable for damages resulting from a collision
between the chartered vessel and a passenger ship? Cdpr

When MT Vector left the port of Limay, Bataan, on December 19, 1987
carrying petroleum products of Caltex (Philippines), Inc. (hereinafter Caltex)
no one could have guessed that it would collide with MV Doa Paz, killing
almost all the passengers and crew members of both ships, and thus resulting
in one of the country's worst maritime disasters.
The petition before us seeks to reverse the Court of Appeals
decision 1 holding petitioner jointly liable with the operator of MT Vector for
damages when the latter collided with Sulpicio Lines, Inc.'s passenger ship
MV Doa Paz.
The facts are as follows:
On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about
8:00 p.m., enroute to Masbate, loaded with 8,800 barrels of petroleum
products shipped by petitioner Caltex. 2 MT Vector is a tramping motor tanker
owned and operated by Vector Shipping Corporation, engaged in the business
of transporting fuel products such as gasoline, kerosene, diesel and crude oil.
During that particular voyage, the MT Vector carried on board gasoline and
other oil products owned by Caltex by virtue of a charter contract between
them. 3

On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doa Paz
left the port of Tacloban headed for Manila with a complement of 59 crew
members including the master and his officers, and passengers totaling 1,493
as indicated in the Coast Guard Clearance. 4 The MV Doa Paz is a
passenger and cargo vessel owned and operated by Sulpicio Lines, Inc.
plying the route of Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/
Tacloban/ Manila, making trips twice a week.
At about 10:30 p.m. of December 20, 1987, the two vessels collided in the
open sea within the vicinity of Dumali Point between Marinduque and Oriental
Mindoro. All the crewmembers of MV Doa Paz died, while the two survivors
from MT Vector claimed that they were sleeping at the time of the incident.
The MV Doa Paz carried an estimated 4,000 passengers; many indeed,
were not in the passenger manifest. Only 24 survived the tragedy after having
been rescued from the burning waters by vessels that responded to distress
calls. 5Among those who perished were public school teacher Sebastian
Caezal (47 years old) and his daughter Corazon Caezal (11 years old), both
unmanifested passengers but proved to be on board the vessel.
On March 22, 1988, the board of marine inquiry in BMI Case No. 653-87 after
investigation found that the MT Vector, its registered operator Francisco
Soriano, and its owner and actual operator Vector Shipping Corporation, were
at fault and responsible for its collision with MV Doa Paz. 6
On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian
Caezal's wife and mother respectively, filed with the Regional Trial Court,
Branch 8, Manila, a complaint for "Damages Arising from Breach of Contract
of Carriage" against Sulpicio Lines, Inc. (hereafter Sulpicio). Sulpicio, in turn,
filed a third party complaint against Francisco Soriano, Vector Shipping
Corporation and Caltex (Philippines), Inc. Sulpicio alleged that Caltex
chartered MT Vector with gross and evident bad faith knowing fully well that
MT Vector was improperly manned, ill-equipped, unseaworthy and a hazard to
safe navigation; as a result, it rammed against MV Doa Paz in the open sea
setting MT Vector's highly flammable cargo ablaze. llcd

On September 15, 1992, the trial court rendered decision dismissing the third
party complaint against petitioner. The dispositive portion reads:
"WHEREFORE, judgment is hereby rendered in favor of plaintiffs and
against defendant - 3rd party plaintiff Sulpicio Lines, Inc., to wit:
"1. For the death of Sebastian E. Caezal and his 11-year old
daughter Corazon G. Caezal, including loss of future
earnings of said Sebastian, moral and exemplary damages,
 attorney's fees, in the total amount of P1,241,287.44 and
finally;
"2. The statutory costs of the proceedings.
"Likewise, the 3rd party complaint is hereby DISMISSED for want of
substantiation and with costs against the 3rd party plaintiff.
"IT IS SO ORDERED.
"DONE IN MANILA, this 15th day of September 1992.
"ARSENIO M. GONONG
"Judge" 7
On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on April
15, 1997, the Court of Appeal modified the trial court's ruling and included
petitioner Caltex as one of the those liable for damages. Thus:
"WHEREFORE, in view of all the foregoing, the judgment rendered
by the Regional Trial Court is hereby MODIFIED as follows:
"WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the
heirs of Sebastian E. Caezal and Corazon Caezal:
"1. Compensatory damages for the death of Sebastian E. Caezal
and Corazon Caezal the total amount of ONE HUNDRED
THOUSAND PESOS (P100,000);
"2. Compensatory damages representing the unearned income of
Sebastian E. Caezal, in the total amount of THREE
HUNDRED SIX THOUSAND FOUR HUNDRED EIGHTY
(P306,480.00) PESOS;
"3. Moral damages in the amount of THREE HUNDRED THOUSAND
PESOS (P300,000.00);
"4. Attorney's fees in the concept of actual damages in the amount of
FIFTY THOUSAND PESOS (P50,000.00);
"5. Costs of the suit.
"Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc.
are held equally liable under the third party complaint to
reimburse/indemnify defendant Sulpicio Lines, Inc. of the above-
mentioned damages, attorney's fees and costs which the latter is
adjudged to pay plaintiffs, the same to be shared half by Vector
Shipping Co. (being the vessel at fault for the collision) and the other
half by Caltex (Phils.), Inc. (being the charterer that negligently
caused the shipping of combustible cargo aboard an unseaworthy
vessel).
"SO ORDERED.
"JORGE S. IMPERIAL
"Associate Justice
"WE CONCUR:
"RAMON U. MABUTAS. JR. PORTIA ALIO HERMACHUELOS
"Associate Justice Associate Justice" 8
Hence, this petition.
We find the petition meritorious.
First: The charterer has no liability for damages under Philippine Maritime
laws.
The respective rights and duties of a shipper and the carrier depends not on
whether the carrier is public or private, but on whether the contract of carriage
is a bill of lading or equivalent shipping documents on the one hand, or a
charter party or similar contract on the other. 9
Petitioner and Vector entered into a contract of affreightment, also known as a
voyage charter. 10
A charter party is a contract by which an entire ship, or some principal part
thereof, is let by the owner to another person for a specified time or use; a
contract of affreightment is one by which the owner of a ship or other vessel
lets the whole or part of her to a merchant or other person for the conveyance
of goods, on a particular voyage, in consideration of the payment of freight. 11
A contract of affreightment may be either time charter, wherein the leased
vessel is leased to the charterer for a fixed period of time, or voyage charter,
wherein the ship is leased for a single voyage. In both cases, the charter-party
provides for the hire of the vessel only, either for a determinate period of time
or for a single or consecutive voyage, the ship owner to supply the ship's
store, pay for the wages of the master of the crew, and defray the expenses
for the maintenance of the ship. 12
Under a demise or bareboat charter on the other hand, the charterer mans the
vessel with his own people and becomes, in effect, the owner for the voyage
or service stipulated, subject to liability for damages caused by negligence. prLL

If the charter is a contract of affreightment, which leaves the general owner in

possession of the ship as owner for the voyage, the rights and the
responsibilities of ownership rest on the owner. The charterer is free from
liability to third persons in respect of the ship. 13
Second: MT Vector is a common carrier
Charter parties fall into three main categories: (1) Demise or bareboat, (2)
time charter, (3) voyage charter. Does a charter party agreement turn the
common carrier into a private one? We need to answer this question in order
to shed light on the responsibilities of the parties.
In this case, the charter party agreement did not convert the common carrier
into a private carrier. The parties entered into a voyage charter, which retains
the character of the vessel as a common carrier.
In Planters Products, Inc. vs. Court of Appeals, 14 we said:
 "It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel by one
or more persons, provided the charter is limited to the ship only, as in
the case of a time-charter or voyage charter. It is only when the
charter includes both the vessel and its crew, as in a bareboat or
demise that a common carrier becomes private, at least insofar as
the particular voyage covering the charter-party is concerned.
Indubitably, a ship-owner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the
moment, be the property of the charterer."
Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals: 15
"Although a charter party may transform a common carrier into a
private one, the same however is not true in a contract of
affreightment . . ."
A common carrier is a person or corporation whose regular business is to
carry passengers or property for all persons who may choose to employ and
to remunerate him. 16 MT Vector fits the definition of a common carrier
under Article 1732 of the Civil Code. In Guzman vs. Court of Appeals, 17 we
ruled:
"The Civil Code defines "common carriers" in the following terms:
"ARTICLE 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers for passengers or goods or both, by land, water, or air for
compensation, offering their services to the public."
"The above article makes no distinction between one
whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary activity
(in local idiom, as "a sideline"). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one
offering such services on a an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering
its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from
a narrow segment of the general population. We think that Article
1733 deliberately refrained from making such distinctions. cdasia

"It appears to the Court that private respondent is properly

characterized as a common carrier even though he merely "back-
hauled" goods for other merchants from Manila to Pangasinan,
although such backhauling was done on a periodic, occasional rather
than regular or scheduled manner, and even though
respondent's principal occupation was not the carriage of goods for
others. There is no dispute that private respondent charged his
customers a fee for hauling their goods; that the fee frequently fell
below commercial freight rates is not relevant here."
Under the Carriage of Goods by Sea Act:
SECTION 3. (1) The carrier shall be bound before and at the
beginning of the voyage to exercise due diligence to
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
xxx xxx xxx
Thus, the carriers are deemed to warrant impliedly the seaworthiness of the
ship. For a vessel to be seaworthy, it must be adequately equipped for the
voyage and manned with a sufficient number of competent officers and crew.
The failure of a common carrier to maintain in seaworthy condition the vessel
involved in its contract of carriage is a clear breach of its duty prescribed
in Article 1755 of the Civil Code. 18
The provisions owed their conception to the nature of the business of common
carriers. This business is impressed with a special public duty. The public
must of necessity rely on the care and skill of common carriers in the vigilance
over the goods and safety of the passengers, especially because with the
modern development of science and invention, transportation has become
more rapid, more complicated and somehow more hazardous. 19 For these
reasons, a passenger or a shipper of goods is under no obligation to conduct
an inspection of the ship and its crew, the carrier being obliged by law to
impliedly warrant its seaworthiness.
This aside, we now rule on whether Caltex is liable for damages under the
Civil Code.
Third: Is Caltex liable for damages under the Civil Code?
We rule that it is not.
Sulpicio argues that Caltex negligently shipped its highly combustible fuel
cargo aboard an unseaworthy vessel such as the MT Vector when Caltex:
1. Did not take steps to have M/T Vector's certificate of inspection
and coastwise license renewed;
2. Proceeded to ship its cargo despite defects found by Mr. Carlos
Tan of Bataan Refinery Corporation;
3. Witnessed M/T Vector submitting fake documents and certificates
to the Philippine Coast Guard.
Sulpicio further argues that Caltex chose MT Vector to transport its cargo
despite these deficiencies:
1. The master of M/T Vector did not possess the required Chief Mate
license to command and navigate the vessel;
 2. The second mate, Ronaldo Tarife, had the license of a Minor
Patron, authorized to navigate only in bays and rivers when
the subject collision occurred in the open sea;
3. The Chief Engineer, Filoteo Aguas, had no license to operate the
engine of the vessel;
4. The vessel did not have a Third Mate, a radio operator and a
lookout; and
5. The vessel had a defective main engine. 20

As basis for the liability of Caltex, the Court of Appeals relied on Articles 20
and 2176 of the Civil Code, which provide:
"ARTICLE 20. Every person who contrary to law, willfully or
negligently causes damage to another, shall indemnify the latter for
the same.
"ARTICLE 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter."
And what is negligence?
The Civil Code provides: cdrep

"ARTICLE 1173. The fault or negligence of the obligor consists in the

omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of
the time and of the place. When negligence shows bad faith, the
provisions of Article 1171 and 2201 paragraph 2, shall apply.
If the law does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall
be required."
In Southeastern College, Inc. vs. Court of Appeals, 21 we said that negligence,
as commonly understood, is conduct which naturally or reasonably creates
undue risk or harm to others. It may be the failure to observe that degree of
care, precaution, and vigilance, which the circumstances justly demand, or the
omission to do something which ordinarily regulate the conduct of human
affairs, would do.
The charterer of a vessel has no obligation before transporting its cargo to
ensure that the vessel it chartered complied with all legal requirements. The
duty rests upon the common carrier simply for being engaged in "public
service." 22The Civil Code demands diligence which is required by the nature
of the obligation and that which corresponds with the circumstances of the
persons, the time and the place. Hence, considering the nature of the
obligation between Caltex and MT Vector, the liability as found by the Court of
Appeals is without basis.
The relationship between the parties in this case is governed by special laws.
Because of the implied warranty of seaworthiness, 23 shippers of goods, when
transacting with common carriers, are not expected to inquire into the vessel's
seaworthiness, genuineness of its licenses and compliance with all maritime
laws. To demand more from shippers and hold them liable in case of failure
exhibits nothing but the futility of our maritime laws insofar as the protection of
the public in general is concerned. By the same token, we cannot expect
passengers to inquire every time they board a common carrier, whether the
carrier possesses the necessary papers or that all the carrier's employees are
qualified. Such a practice would be an absurdity in a business where time is
always of the essence. Considering the nature of transportation business,
passengers and shippers alike customarily presume that common carriers
possess all the legal requisites in its operation.
Thus, the nature of the obligation of Caltex demands ordinary diligence like
any other shipper in shipping his cargoes.
A cursory reading of the records convinces us that Caltex had reasons to
believe that MT Vector could legally transport cargo that time of the year.
"Atty. Poblador: Mr. Witness, I direct your attention to this portion
here containing the entries here under "VESSEL'S DOCUMENTS
1. Certificate of Inspection No. 1290-85, issued December 21, 1986,
and Expires December 7, 1987", Mr. Witness, what steps did you
take regarding the impending expiry of the C.I. or the Certificate of
Inspection No. 1290-85 during the hiring of MT Vector?
"Apolinar Ng: At the time when I extended the Contract, I did nothing
because the tanker has a valid C.I. which will expire on December 7,
1987 but on the last week of November, I called the attention of Mr.
Abalos to ensure that the C.I. be renewed and Mr. Abalos, in turn,
assured me they will renew the same.
"Q: What happened after that? LexLib

"A: On the first week of December, I again made a follow-up from Mr.
Abalos, and said they were going to send me a copy as soon
as possible, sir. 24
xxx xxx xxx
"Q: What did you do with the C.I.?
"A: We did not insist on getting a copy of the C.I. from Mr. Abalos on
the first place, because of our long business relation, we trust
Mr. Abalos and the fact that the vessel was able to sail
indicates that the documents are in order. . . ." 25
On cross examination
"Atty. Sarenas:
This being the case, and this being an admission by you, this
Certificate of Inspection has expired on December 7. Did it
 occur to you not to let the vessel sail on that day because of
the very approaching date of expiration?
"Apolinar Ng:
No sir, because as I said before, the operation Manager assured us
that they were able to secure a renewal of the Certificate of
Inspection and that they will in time submit us a copy." 26
Finally, on Mr. Ng's redirect examination:
"Atty. Poblador:
Mr. Witness, were you aware of the pending expiry of the Certificate
of Inspection in the coastwise license on December 7, 1987.
What was your assurance for the record that this document
was renewed by the MT Vector?
"Atty. Sarenas:
...
"Atty. Poblador:
The certificate of Inspection?
"A: As I said, firstly, we trusted Mr. Abalos as he is a long time
business partner; secondly, those three years, they were
allowed to sail by the Coast Guard. That are some that make
me believe that they in fact were able to secure the necessary
renewal.
"Q: If the Coast Guard clears a vessel to sail, what would that mean?
"Atty. Sarenas:
Objection.
"Court:
He already answered that in the cross examination to the effect that
if it was allowed, referring to MV Vector, to sail, where it is
loaded and that it was scheduled for a destination by the Coast
Guard, it means that it has Certificate of Inspection extended
as assured to this witness by Restituto Abalos. That in no case
MV Vector will be allowed to sail if the Certificate of Inspection
is, indeed, not to be extended. That was his repeated
explanation to the cross-examination. So, there is no need to
clarify the same in the re-direct examination." 27
Caltex and Vector Shipping Corporation had been doing business since 1985,
or for about two years before the tragic incident occurred in 1987. Past
services rendered showed no reason for Caltex to observe a higher degree of
diligence.
Clearly, as a mere voyage charterer, Caltex had the right to presume that the
ship was seaworthy as even the Philippine Coast Guard itself was convinced
of its seaworthiness. All things considered, we find no legal basis to hold
petitioner liable for damages.
As Vector Shipping Corporation did not appeal from the Court of Appeals'
decision, we limit our ruling to the liability of Caltex alone. However, we
maintain the Court of Appeals' ruling insofar as Vector is concerned.
WHEREFORE, the Court hereby GRANTS the petition and SETS ASIDE the
decision of the Court of Appeals in CA-G. R. CV No. 39626, promulgated on
April 15, 1997, insofar as it held Caltex liable under the third party complaint to
reimburse/indemnify defendant Sulpicio Lines, Inc. the damages the latter is
adjudged to pay plaintiffs-appellees. The Court AFFIRMS the decision of the
Court of Appeals insofar as it orders Sulpicio Lines, Inc. to pay the heirs of
Sebastian E. Caezal and Corazon Caezal damages as set forth therein.
Third-party defendant-appellee Vector Shipping Corporation and Francisco
Soriano are held liable to reimburse/indemnify defendant Sulpicio Lines, Inc.
whatever damages, attorneys' fees and costs the latter is adjudged to pay
plaintiffs-appellees in the case.

No costs in this instance.

(Caltex (Philippines), Inc. v. Sulpicio Lines, Inc., G.R. No. 131166,
|||

[September 30, 1999], 374 PHIL 325-341)

Chapter 9 collisions
COLLISION
Impact of two vessels both of which are moving.
Allision
Impact between a moving vessel and a stationary one.
Zones in Collision

3 Divisions of time or zones:

a) Covers all the time up to the moment when the risk of collision may be said to have
begun. Within this zone no rule is applicable because none is necessary.
b) Covers the time bet. The moment when the risk of collision begins and the moment
when it has become a practical certainty.
c) Covers the time of actual contact
Error in Extremis - sudden movement made by a faultless vessel during the third zone of
collision with another vessel which is at fault during the 2nd zone. Even if such sudden
movement is wrong, no responsibility will fall on said faultless vessel.

[G.R. No. 7675. March 25, 1913.]

A URRUTIA & CO., plaintiff-appellee, vs. BACO RIVER

PLANTATION CO., defendant-appellee, M. GARZA, intervener-
appellant.

Antonio Sanz, for plaintiff.

Hartford Beaumont, for defendant.
Recaredo M.a Calvo, for intervener.

SYLLABUS

1. SHIPS AND SHIPPING; COLLISION; ZONES OF TIME. In all

collisions between vessels at sea there exist three divisions or zones of
time: (1) The first division covers all the time up to the moment when the
risk of collision may be said to have begun. (2) The second division covers
the time between the moment when the risk of collision begins and the
moment when it has become practically certain. (3) The third zone covers
the time between the moment when the collision has become a practical
certainty and the moment of actual contact.
2. ID.; ID.; ID.; NAUTICAL RULES. Nautical rules requires that,
where a steamship and sailing vessel are approaching each other from
opposite directions, or on intersecting lines, the steamship, from the
moment the sailing vessel is seen, shall watch with the highest diligence
her course and movements so as to be able to adopt such timely means of
 precaution as will necessarily prevent the two boats from coming in
contact.
3. ID.; ID.; ID.; ID. Nautical rules also require that, where a
steamship and a sailing vessel are approaching each other from opposite
directions, or on intersecting lines, the sailing vessel is required to keep her
course unless the circumstances are such as to render a departure from
the rule necessary in order to avoid immediate danger. Where a steamship
and a sailing vessel are approaching each other bow on, or on intersecting
lines, the steamship must give way. In case of a collision between such
vessels the steamship is prima facie in fault.
4. ID.; ID.; ID.; DAMAGES. Fault on the part of the sailing vessel
at the moment preceding a collision, that is, during the third division of
time, does not absolve the steamship which has suffered herself and a
sailing vessel to get into such dangerous proximity as to cause inevitable
alarm and confusion, and a collision results as a consequence. The
steamer having incurred a far greater fault in allowing such proximity to be
brought about is chargeable with all the damage resulting from the
collision; and the act of the sailing vessel having been done in extremis,
even if wrong, it is not responsible for the result.
5. ID.; ID.; ID.; ID. The responsibility of the owner of a steamship
for the damage caused by a collision between the steamer and a sailing
vessel brought about by the negligence of the steamship is extinguished
where said steamship is sunk totally lost by reason of the collision.
6. ID.; ID.; ID.; ID. Where, however, such steamship is insured
and the insurance is collected by the owner, the insurance substitutes the
vessel and the owner becomes responsible for the injuries caused the
sailing vessel to the extent of the insurance collected.
7. ID.; ID.; ID.; ID. In an action brought by a steamship owner
against the owner of a sailing vessel for damages caused to the steamship
by a collision, a passenger who suffered a loss of baggage and freight by
reason of such collision cannot intervene in the action for the adjudication
of his rights. He has "no legal interest in the matter in litigation, or in the
success of either of the parties, or an interest against both."

DECISION

MORELAND, J : p

This action springs from a collision between the steamship Nuestra

Senora del Pilar, owned by the plaintiff, and the schooner Mangyan, owned
by defendant, which occurred in the early morning of the 8th of April, 1910,
in Verde Island North Passage. The sail vessel was sailing with a fresh
breeze dead astern, her sails wing and wing. The steamer was seen by
those on board the sailing vessel some time before the actual collision,
sailing erratically. The sail vessel kept her course steady until just before
the actual contract when her helmsman threw her hard to port in an effort
to avoid the collision. The movement, however, was unsuccessful and the
sail vessel rammed the steamer sank and eight lives were lost. The sail
vessel was considerably injured.
This action was brought by the owners of the steamship against the
owners of the sail vessel, to recover the value of the destroyed steamer
and the damages caused by reason of its destruction, alleging as a basis
therefore the negligence of the sail vessel. The defendant denied the
material allegations of the complaint and set up a counterclaim for
damages, alleging as grounds therefore that the injuries sustained by the
sail vessel were due to the gross negligence of those handling plaintiff's
steamer.
Before the action was tried, M. Garza made an application to
intervene under the provisions of section 121 of the Code of Civil
Procedure, he alleging in support of his application thousand pesos' worth
of merchandise as freight, which was lost as a result of the collision. He
was permitted to intervene and accordingly filed a complaint setting up the
loss of the his merchandise and the value thereof and alleging, as the
basis for his right to recover, the negligence of one or the other of the
vessels, without specifying which, and praying that the court award him
damages against the vessel the negligence of which, upon the trial, was
shown to have caused hi loss.
The case turns upon the question which of the vessels was
negligence in failing to conform to the International Rules for the
Prevention of Collisions at Sea. The learned trial court found that those
managing the steamer were guilty of gross negligence and that for that
reason plaintiff could recover nothing.
An examination of the record leaves no doubt that the finding of the
trial court that steamer was handled in a grossly negligent manner is
clearly and fully supported by the evidence. No other finding could be
sustained.
Relative to the alleged negligence of the sail vessel the learned trial
court said:
"I am satisfied beyond any reasonable doubt that the
steamer Ntra. Sra. del Pilar was sailing erratically, that it did not have
a proper watch on board, and that it therefore contributed neglect to
the collision.
"I am also thoroughly satisfied that the sailing
vessel Mangyan had its lights properly on it long before the time the
collision occurred, and that the lights were so arranged upon the
rigging of the vessel as to comply with the rules, and that they were
visible and were seen by the crew of the steamer Elcano and could
 have been seen by the watchman or the chief officer of the
steamer Ntra. Sra. del Pilar, if they had been on the lookout for them;
"That the steamer Ntra. Sra. del Pilar, being bound to keep out
of the course of the sailing vessel and suddenly seeing the sailing
vessel very close, went over hard to port and crossed the course of
the sailing vessel.
"I also find that the sailing vessel, notwithstanding the erratic
movements of the steamer, proceeded directly on its course
regardless of consequences when with all the searoom there was it
could easily have maneuvered so as to very avoid the collision, and
thereby having contributed neglect to the collision, neither is entitled
to recover from the other any damages which may have occurred."
These facts and circumstances clearly appear in the record and fully
sustain the conclusions reached.
We are of the opinion that under the facts stated in the decision of
the trial court the defendant was entitled to recover upon its counterclaim.
It being clear from the evidence that the gross negligence of those
managing the steamer brought it into such close proximity to the sail vessel
that a collision was apparently inevitable, the questions is whether or not
the sail vessel was negligent in continuing its course without variation up to
the moment that it found itself in extremis.
Article 20 of the International Rules for the Prevention of Collisions at
Sea is as follows: "If two ships, one of which is a sailing ship and the other
as steam ship, are proceeding in such directions as to involve risk of
collision, the steam ship shall keep out of the way of the sailing ship."
Article 21 is as follows: "Where by any of these rules one of two
vessels is to keep out of the way, the other shall keep her course and
speed."
Generally speaking, in collisions between vessels there exist there
divisions of time, or zones: The first division covers all the time up to the
moment when the risk of collision may be said to have begun. Within this
zone no rule is applicable because none is necessary. Each vessel is free
to direct its course as it deems best without reference to the movements of
the other vessel. The second division covers the time between the moment
when the risk of collision begins and the moment when it has become a
practical certainty. The third division covers the time between the moment
of actual contact.
It was during the time when the sail vessel was passing through the
third zone that it changed its course to port in order to avoid, if possible, the
collision. This act may be said to have been done in extremis, and, even if
wrong, the sailing vessel is not responsible for the result.
The question before us, as presented by the finding of the trial court,
arises wholly over the action of the schooner in keeping her course through
the second zone, that is, during the period when there was a risk of
collision. In resolving this question we have to note the well-established
presumption which favors the sail vessel in cases of this character. The
rule relative to this presumption is conservatively stated in volume 25 of the
American and English Encyclopedia of Law, page 926:
"Subject to the general rules of evidence in collision cases as
to the burden of proof, in the case of a collision between a steam
vessel and a sail vessel, the presumption is against the steam vessel,
and she must show that she took the proper measures to avoid a
collision."

Hughes on Admiralty, page 242, declares the law thus:

"A steamer must keep out of the way of a sail vessel. In doing
so she must allow the sail vessel a wide berth . . .
"A steamer may take her own method of passing a sail vessel.
The mere approach of the two vessels does not bring about risk of
collision. The steamer may assume that the sail vessel will do her
duty and do nothing to embarrass her. Hence the steamer may shape
her course so as to avoid the sail vessel . . .
"This rule that vessel may each assume that the other will
obey the law is one of the most important in the law of collision. Were
it otherwise and were vessels required to take all sorts of measures
to keep out of the way, when they are not in each other's way,
navigation would be impossible . . . There is, however, one important
qualification which must be borne in mind. It is that a steamer must
not approach so near a sailing vessels, and on such a course as to
alarm a man of ordinary skill and prudence. If the man on the sailing
vessel makes an improper maneuver, he is not responsible. It is what
is called an 'error in extremis.' . . . The leading case on the subject
is The Lucille (15 Wallace, 676). In that case a steamer and schooner
were approaching on converging courses only half a point apart, so
that they would have come within thirty yards of each other, and that
in Chesapeake Bay. The court held that this was too close and
condemned the steamer."
On page 245 the same author says:
"Article 21 . . . renders it obligatory on the vessel which has the
right of way to pursue her course . . . She must rely on the other
vessel to avoid the collision and not embarrass her by any maneuver.
All she need do is to do nothing. Then the other vessel knows what to
expect and navigates accordingly . . .
"In collisions between steam and sail vessels the steamer's
defense is almost invariably that the sail vessel changed her course."
On page 255 of the same work appears the following:
"In The Clara Davidson (42 Feb., 763), the court said: "But I do
not find myself at liberty to ignore the inquiry whether a statutory rule
of navigation was violated by the schooner. These rules are the law
of laws in cases of collision. They admit of no option or choice. No
 navigator is at liberty to set up his discretion against them. If these
rules were subject to the caprice or election of master and pilots, they
would be not only useless, but worse than useless. The rules are
imperative. They yield to necessity, indeed, but only to actual and
obvious necessity. It is not stating the principles too strongly to say
that nothing but imperious necessity or some overpowering vis
major will excuse a sail vessel in changing her course when in the
presence of a steamer in motion.' "
Spencer on Marine Collisions, page 154, says:
"The duties imposed upon vessels are of a mutual character;
and where the statute directs on to give way to the other, it imposes
an equal duty upon the latter to continue to its would be for the other
to refuse to yield the right of way . . .
"It is one of the conditions of the duty 'to keep out of the way,'
that the vessel shall act intelligently, and afford dispath evidence of
her intention; while it is doubtful what the other will do, the former
should hold her course. Like all other rules for the prevention of
collisions at sea, there may be special circumstances which would
warrant a ship in departing from her course, where collision appears
inevitable by pursuing it; indeed, it is no other alternative, a vessel
should hold her course when in a position required to do so by the
statute."
On page 181 the same author says:
"The duty of one vessel to keep her course is not intended by
the rules as a privilege conferred, but as a obligation imposed, in
order to enable the other vessel with certainly that the other is not
doing her duty, and that the situation imperatively demands a
departure form the rules. It is the duty of the vessel required to keep
out of the way to give an early and intelligible expression of her
intentions to do so; and while there is any doubt as to what her
actions will be, the vessel required to hold her course may presume
that the other will act intelligently and lawfully, and she should hold
her course until the contrary appears. It is no excuse for a vessel
taking a course forbidden by law that the unlawful course was the
best one."
In the American and English Encyclopedia of law (vol. 25, p. 925) the
rule is stated as follows:
"But it must be a strong case which puts the sail vessel in the
wrong for obeying the rule to hold her course, for the court must
clearly see, not only that a deviation from the rule would have
prevented the collision, but that the officer in charge of the sail vessel
was guilty of negligence or a culpable want of seamanship in not
perceiving the necessity for a departure form the rule and acting
accordingly. The sail vessel is justified in holding her course to the
last minute possible for the steamship to avoid her by making the
necessary maneuver."
 In the case of St. John vs. Paine (10 How., 557), the collision was
between a schooner and a steamer. The schooner had no lights visible; the
night was starlight and clear. The court reviewed the rules governing the
management of sail vessels at some length, explained the rules applicable
to the management of steam vessels, and gave the reasons why the rules
which govern travelers on the highways of the sea should be strictly
enforced. After showing the greater facility of maneuvering which a
steamer has cover a sail vessel and, therefore, the greater ability to avoid
collisions, the court said:
"As a general rule, therefore, when meeting a sailing vessel,
whether close hauled or with the wind free, the latter has a right to
keep her course, and it is the duty of the steamer to adopt such
precautions as will avoid her. (Cities cases.)
"By an adherence to this rule on the part of the sailing vessel
the steamer with proper lookout will be enabled, when approaching in
an opposite direction, to adopt the necessary measures to avoid the
danger, and she will have a right to assume that the sailing vessel will
keep her course. If the latter fails to do this, the fault will be
attributable to her, and the master of the steamer will be responsible
only for as fair exertion of the power of his vessel to avoid the
collision under unexpected change of the course of the other vessel,
and the circumstances of the case."
A similar case is that of The Genesee Chief vs. Fitzhugh (12 How.,
443). This pertains also to a collision between a steamer, The Genesee
Chief, and a sail vessel. The two watched each other for some time before
the collision. The sailing vessel kept her course until in extremis when she
made a wrong maneuver. The court said:
"The collision took place in the open lake. It was a starlight
night, and although there was haze near the surface of the lake, it
was not sufficient to conceal the Cuba from those on board of the
propeller . . .
"The lake was smooth. The steamboat had the entire
command of her course and a wide water, by which she might have
passed the Cuba on either side, and at a safe distance. She was
going at the rate of eight miles an hour. And if proper care had been
taken on board the Genesee Chief, after the schooner was first seen,
it would seem to be almost impossible that a collision could have
happened with a vessel moving so slowly and sluggishly through the
water even if she was carelessly or injudiciously managed. There was
no necessity for passing so near her as to create the hazard. The
steamboat could choose its own distance . . .
"And the captain and crew of the Cuba appear to have been
watchful and attentive from the time the propeller was discovered.
Nor do we deem it material to inquire whether the order of the captain
at the moment of collision was judicious or not. He saw the
steamboat coming directly upon him; her speed not diminished; nor
any measures taken to avoid a collision. And if, in the excitement and
 alarm of the moment, a different order might have been more
fortunate, it was the fault of the propeller to have placed him a
situation where there was no time for thought; and she is responsible
for the consequences. She had the power to have passed at a safer
distance, and has no right to place the schooner in such jeopardy,
that the error of a moment might cause her destruction, and endanger
the lives of those on board. And if an error was committed under such
circumstances it was not a fault."
In the case of The Ottawa (3 Wall., 269), the court said:
"Rules of navigation are obligatory from the time the necessity
for precaution begins, and continue to be applicable as the vessels
advance, so long as the means and opportunity to avoid the danger
remain; but they do not apply to a vessel required to keep her course
after the approach is so near that the collision is inevitable, and are
equally inapplicable to vessels of every description while they are yet
so distant from each other that measures of precaution have not
become necessary."
This case exemplifies the three-zone theory already referred to. In
the first zone no rules apply. In the second the burden is on the vessel
required to keep away and void the danger. The third zone covers the
period in which errors in extremis occur; and the rule is that the vessel
which has forced the privileged vessel into danger is responsible even if
the privileged vessel has committed an error within that zone.
The duty of the sailing vessel to keep her course is well exemplified
in the leading case of the Lucille vs. Respass (15 Wall., 676), which was a
collision between a schooner and a steamer. Both vessels saw each other
in time to have avoided the collisions. The court said:
"The principles of law applicable to the case are well settled.
They are not disputed by either party. In the case of The Carrol (8
Wall., 302), it is thus laid down, 'Nautical rules require that where a
steamship and sailing vessel are approaching each other from
opposite directions, or on intersecting line, the steamship from the
moment the sailing vessel is seen, shall watch with the highest
diligence her course and movements so as to be able to adopt such
timely means of precaution as will necessarily prevent the two boats
from coming in contract. Fault on the part of the sailing vessel at the
moment preceding a collision does not absolve a steamer which has
suffered herself and a sailing vessel to get in such dangerous
proximity as to cause inevitable alarm and confusion and collision as
a consequence. The steamer, as having committed a far greater fault
in allowing such proximity to be brought about, is chargeable with all
the damages resulting from a collision.'

"The rule laid down in the case of The Fannie (11 Wal., 238) is
still more applicable to the case before us. It was held that a
schooner meeting a steamer approaching her on a parallel line, with
the difference of half a point in the course of the two, ought to have
kept in her course; that a steamer approaching a sailing vessel is
bound to keep out of her way, and to allow her a free and
unobstructed passage. Whatever is necessary for his it is her duty to
do, and avoid whatever obstructs or endangers the sailing vessel in
her course. If, therefore, the sailing vessel does not change her
course so as to embarrass the steamer, and render it difficult for her
to avoid a collision, the steamer alone is answerable for the damage
of a collision, if there is one."
In the case of The Sea Gull (23 Wall., 165), the court said:
"Steamer approaching a sail ship in such a direction as to
involve risk of collision are required to keep out of the way of the sail
ship; but the sail ship is required to keep her course unless the
circumstances are such as to render a departure from the rule
necessary in order to avoid immediate danger.
"Vessels with sails being required to keep their course, the
duty of adopting the necessary measures of precaution to keep out of
the way is devolved upon the steamer subject only to the condition
that the sail ship shall keep her course and do not act to embarrass
the steamer in her efforts to perform her duty. Doubtless the steamer
may go to the right or left if she can keep out of the way, but if not
and the approach is such as to involve risk of collision she is required
to slacken he speed, or, if necessary, stop and reverse, and if she
fails to perform her duty as required by the rules of navigation she is
responsible for the consequences if the sail vessel is without fault . . .
"Attempt is made in argument to show that the schooner also
was in fault and that the case falls within the rule which requires that
the damages shall be divided.
"Support to that charge is attempted to be drown from the
assumed fact that the schooner changed her course in violation of the
rule of navigation which requires the sail ship to keep her course, as
a correlative duty to that of the steamer whenever the latter is
required to keep out of the way . . .
"Two answers are made by the libelants to that defense, either
of which, if found to be true, is sufficient to exonerate the schooner: . .
. (2) That the schooner made no change in her course until the
collision was inevitable, nor until it became indispensably necessary
in order to avoid immediate danger caused by the fault of the steamer
...
"Rules of navigation continue to be applicable as long as the
means and opportunity remain to avoid the danger, but they do not
apply to a vessel required to keep her course after the wrongful
approach of the opposite vessel is so near that a collision is inevitable
...
"Nor will an error committed by the sail vessel under such
circumstances of peril, if she is otherwise without fault, impair the
right of the sail vessel to recover for the injuries occasioned by the
collision, for the plain reason that those who produce the peril and put
 the sail vessel in that situation are chargeable with the error and must
answer for the consequences. (Steamship Co. vs. Rumball, 21 How.,
383.)
"Subject to that exception the sail vessel must keep he
course."
In the case of The Benefactor (102 U. S., 214), the court laid down
the following conclusions:
"1. Upon the steamship and schooner discovering each other
proceeding in such directions as to involve risk of collision, as stated
in the foregoing findings of fact, it was the right and duty of the
schooner to keep her course, and the duty of the steamship was in
fault in failing to perform that duty.
"2. It was also the duty of the steamship under the
circumstances stated, to pursue a course which should not
needlessly put the schooner in imminent peril; and the steamship was
in fault in failing to perform that duty.
"3. It was duty of the steamship, before the time when she did
so, to slacken her speed or stop, and the steamship was in fault in
failing to perform that duty.
"4. If, when a collision had become imminent by reason of the fault of
the steamship, any error was committed in extremis by those in charge of
the schooner, the schooner is not responsible therefor.
"5. The steamship had no right, under the circumstance stated,
needlessly to place herself in such close proximity to the schooner
that the error of a moment would bring destruction.
"6. The collision was occasioned by the fault of the steamship,
and the steamship should be condemned therefor."
In the case of The Badger State (8 Fed. Rep., 526), the court said:
"Where a sailing vessel and one propelled by steam are
approaching each other bow on, the steamer must give way. In case
of a collision between such vessels, the steamer is prima facie in
fault."
In the case of The Gate City (90 Fed. Rep., 314), the court held,
according to the syllabus:
"The rule requiring a sailing vessel meeting a steamer to hold
her course is a broad and general one intended to put the burden of
avoiding a collision upon the steamer; and, if the sailing vessel
departs from the injunction the burden is on her to show some
reasonable excuse therefor.
"A disregard of the rule not demanded by a clearly existing
exigency should not be excused.
"Therefore, she will not held in fault for adhering to her course,
although the steamer seems to be maneuvering in an uncertain and
dangerous way."
 We are satisfied from the authorities that, under the facts stated in
the opinion of the trial court, the defendant is entitled to recover such
damages as reasonably and naturally flowed from the collision. There is
sufficient evidence in the record to fix such damages with reasonable
accuracy. It was proved upon the trial that it would require an expenditure
of P3,525 to put the sail vessel in the condition in which it was before the
injury; that it cost P245 to get the vessel to Manila after the injury; that the
value of the supplies lost was P240.99. The evidence relative to the loss of
earnings is not sufficient to permit the court to formulate any conclusion in
relation thereto, even if it be considered a proper item of damage.
We think the judgment of the trial court correct in dismissing the
complaint of intervention. The intervener had no "legal interest in the matter
in litigation, or in the success of either of the parties, or an interest against
both." Their action was personal, involved no rights in property which
extended beyond their immediate selves, and touched no third party in any
of the ramifications of those rights.
The judgment of the court below, in so far as it finds against the
plaintiff and the intervener, is hereby affirmed. As to that portion which
dismisses the counterclaim of the defendant, the Baco River Plantation
Company, the judgment is reversed and the cause remanded, with
instructions to the trial court to enter judgment in favor of the defendant, the
Baco River Plantation Company, and against the plaintiff, G. Urrutia &
Company, for the sum of P4,010.99, and costs. No costs on this appeal.
While it was held in the case of Philippine Shipping Co. vs. Vergara
(6 Phil. Rep., 281), that, in accordance with articles 837 and 826 of the
Code of Commerce, the defendant in an action such as the one at bar
cannot be held responsible in damages when the ship causing the injury
was wholly lost by reason of the accident, we do not apply it in this case for
the reason that the vessel lost was insured and that defendant collected
the insurance. That being the case, the insurance money substitutes the
vessel and must be used, so far as necessary, to pay the judgment
rendered in this case.
In coming to this conclusion we have not lost sight of the case of
Place vs. Nortwich and N. Y. Trans. Co. (118 U. S., 468), in which it was
held that, under the provision of the Act of Congress relative thereto,
insurance money obtained by reason of the loss of a vessel causing
damages, as in the case at bar, was not subject to the payment of the
damages sustained by the negligence of the vessel lost by reason of the
accident in which the damages occurred. We do not follow that case
because we are met in this jurisdiction with article 1186 of the Civil Code,
which provides that "after the obligation is extinguished by the loss of the
thing, all the actions which the debtor may have against third persons, by
reason thereof, shall pertain to the creditor," and with article 2 of the Code
of Commerce, which provides that where the Code of Commerce is silent
 as to the law relating to the matters of which it treats those matters shall be
governed by the provisions of the Civil Code.
That said article 1186 is, under the Spanish jurisprudence,
applicable to money obtained from the insurance of the thing lost or
destroyed, there can be no doubt. (Manresa, vol. 8, 353.)
The judgment in this case is, therefore, collectible, but the amount
collected cannot exceed the amount of insurance money actually received.
The writer of this opinion had doubts of the applicability of article
1186, referred to; but has yielded to the learning of the majority relative to
the Roman and Spanish jurisprudence on this point.

Applicable Law
Liability for negligence in the absence of contract is governed by Art. 2176 of the New Civil
Code- the provision on quasi-delict. However, liabilities of shipowners and ship agents as
well as the captain or crew in collision is governed by the Code of Commerce on Collision

1. One vessel at fault

Vessel at fault is liable for damage caused to innocent vessel as well as damages suffered
by the owners of cargo of both vessels. (Art. 826)
2. Both vessels at fault

Each vessel must bear its own loss, but the shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art. 827)
3. Vessel at fault not known

Each vessel must bear its own loss, but the shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art. 828)
Doctrine of Inscrutable Fault In case of collision where it cannot be determined which
between the two vessels was at fault, both vessels bear their respective damage, but both
should be solidarily liable for damage to the cargo of both vessels.

4. Third vessel at fault

The third vessel will be liable for losses and damages. (Art. 831)
5. Fortuitous event/force majeure

No liability. Each bears its own loss. (Art. 830)

The doctrine of res ipsa loquitur applies in case a moving vessel strikes a stationary
object, such as a bridge post, dock, or navigational aid.
Doctrine of Last Clear Chance and Rule on Contributory Negligence cannot be applied in
collision cases because of Art.827 of the Code of Commerce.

[G.R. No. 56294. May 20, 1991.]

SMITH BELL AND COMPANY (PHILIPPINES), INC. and

TOKYO MARINE AND FIRE INSURANCE CO.,
INC., petitioners, vs. THE COURT OF APPEALS and CARLOS
A. GO THONG AND CO., respondents.
Bito, Misa & Lozada for petitioners.
Rodriguez, Relova & Associates for private respondent.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; SUPREME COURT

NOT COMPELLED TO ADOPT A DEFINITE AND STRINGENT RULE ON
HOW ITS JUDGMENT SHALL BE FRAMED; EFFECT OF DISMISSAL OR
GRANT OF A PETITION FOR REVIEW ON CERTIORARI BY A MINUTE
RESOLUTION OF THE COURT. That this Court denied Go Thong's
Petition for Review in a minute Resolution did not in any way diminish the
legal significance of the denial so decreed by this Court. The Supreme Court
is not compelled to adopt a definite and stringent rule on how its judgment
shall be framed. It has long been settled that this Court has discretion to
decide whether a "minute resolution" should be used in lieu of a full-blown
decision in any particular case and that a minute Resolution of dismissal of a
Petition for Review on Certiorari constitutes an adjudication on the merits of
the controversy or subject matter of the Petition. It has been stressed by the
Court that the grant of due course to a Petition for Review is "not a matter of
right, but of sound judicial discretion; and so there is no need to fully explain
the Court's denial. For one thing, the facts and law are already mentioned in
the Court of Appeals' opinion." A minute Resolution denying a Petition for
Review of a Decision of the Court of Appeals can only mean that the Supreme
Court agrees with or adopts the findings and conclusions of the Court of
Appeals, in other words, that the Decision sought to be reviewed and set
aside is correct.
2. ID.; ID.; ID.; RES JUDICATA; ABSENCE OF IDENTITY OF SUBJECT
MATTER, THERE BEING SUBSTANTIAL IDENTITY OF PARTIES AND
IDENTITY OF CAUSE OF ACTION, WILL NOT PRECLUDE APPLICATION
THEREOF. It is conceded by petitioners that the subject matters of the two
(2) suits were not identical, in the sense that the cargo which had been
damaged in the one case and for which indemnity was sought, was not the
very same cargo which had been damaged in the other case indemnity for
which was also sought. The cause of action was, however, the same in the
two (2) cases, i.e., the same right of the cargo owners to the safety and
integrity of their cargo had been violated by the same casualty, the ramming of
the "Yotai Maru" by the "Don Carlos." The judgments in both cases were final
judgments on the merits rendered by the two (2) divisions of the Court of
Appeals and by the Supreme Court, the jurisdiction of which has not been
questioned. Under the circumstances, we believe that the absence of identity
of subject matter, there being substantial identity of parties and identity of
cause of action, will not preclude the application of res judicata.
3. ID.; ID.; ID.; ID.; CASE AT BAR. In the case at bar, the issue of which
vessel ("Don Carlos" or "Yotai Maru") had been negligent, or so negligent as
to have proximately caused the collision between them, was an issue that was
actually, directly and expressly raised, controverted and litigated in C.A.-G.R.
No. 61320-R. Reyes, L.B., J. resolved that issue in his Decision and held the
"Don Carlos" to have been negligent rather than the "Yotai Maru" and, as
already noted, that Decision was affirmed by this Court in G.R. No. L-48839 in
a Resolution dated 6 December 1978. The Reyes Decision thus became final
and executory approximately two (2) years before the Sison Decision, which is
assailed in the case at bar, was promulgated. Applying the rule of
conclusiveness of judgment, the question of which vessel had been negligent
in the collision between the two (2) vessels, had now long been settled by this
Court and could no longer be relitigated in C.A.-G.R. No. 61206-R. Private
respondent Go Thong was certainly bound by the ruling or judgment of Reyes,
L.B., J. and that of this Court. The Court of Appeals fell into clear and
reversible error when it disregarded the Decision of this Court affirming the
Reyes Decision.
4. ID.; EVIDENCE; ADMISSIONS; RULE ON COMPROMISES, EXPLAINED;
RULE ANCHORED ON PUBLIC POLICY THAT INCIDENCE OF LITIGATION
SHOULD BE REDUCED AND ITS DURATION SHORTENED TO THE
MAXIMUM EXTENT FEASIBLE. The familiar rule is that "an offer of
compromise is not an admission that anything is due, and is not admissible in
evidence against the person making the offer." A compromise is an agreement
between two (2) or more persons who, in order to forestall or put an end to a
law suit, adjust their differences by mutual consent, an adjustment which
every one of them prefers to the hope of gaining more, balanced by the
danger of losing more. An offer to compromise does not, in legal
contemplation, involve an admission on the part of a defendant that he is
legally liable, not on the part of a plaintiff that his claim or demand is
groundless or even doubtful, since the compromise is arrived at precisely with
a view to avoiding further controversy and saving the expenses of litigation. It
is of the very nature of an offer of compromise that it is made tentatively,
hypothetically and in contemplation of mutual concessions. The above rule on
compromises is anchored on public policy of the most insistent and basic kind:
that the incidence of litigation should be reduced and its duration shortened to
the maximum extent feasible.
5. CIVIL LAW; QUASI-DELICT; NEGLIGENCE; FACTORS CONSTITUTIVE
THEREOF WHICH NEGLIGENCE WAS THE PROXIMATE CAUSE OF THE
COLLISION; FIRST FACTOR WAS FAILURE ON THE PART OF PRIVATE
RESPONDENT'S VESSEL TO COMPLY WITH RULES 18(a) AND 28 (c) OF
THE INTERNATIONAL RULES OF THE ROAD. The Court believes that
there are three (3) principal factors which are constitutive of negligence on the
part of the "Don Carlos," which negligence was the proximate cause of the
collision. The first of these factors was the failure of the "Don Carlos" to
comply with the requirements of Rule 18 (a) of the International Rules of the
Road ("Rules"), which provides as follows: (a) When two power-driven vessels
are meeting end on, or nearly end on, so as to involve risk of collision, each
shall alter her course to starboard, so that each may pass on the port side of
the other. The "Don Carlos" also violated Rule 28 (c) for it failed to give the
required signal of two (2) short horn blasts meaning "I am altering my course
to port." When the "Yotai Maru" saw that the "Don Carlos" was turning to port,
the master of the "Yotai Maru" ordered the vessel turned "hard starboard" at
3:45 a.m. and stopped her engines; at about 3:46 a.m., the "Yotai Maru" went
"full astern engine." The collision occurred at exactly 3:50 a.m.
6. ID.; ID.; ID.; ID.; SECOND FACTOR WAS FAILURE ON THE PART OF
PRIVATE RESPONDENT'S VESSEL TO HAVE ON BOARD A "PROPER
LOOK-OUT"; CASE AT BAR. The second circumstance constitutive of
negligence on the part of the "Don Carlos" was its failure to have on board
that night a "proper look-out" as required by Rule I (B) of the International
Rules of the Road. Under Rule 29 of the same set of Rules, all consequences
arising from the failure of the "Don Carlos" to keep a "proper look-out" must be
born by the "Don Carlos." In the case at bar, the failure of the "Don Carlos" to
recognize in a timely manner the risk of collision with the "Yotai Maru" coming
in from the opposite direction, was at least in part due to the failure of the "Don
Carlos" to maintain a proper look-out.
7. ID.; ID.; ID.; ID.; THIRD FACTOR RELATES TO THE FACT THAT THE
SECOND MATE WAS, IMMEDIATELY BEFORE AND DURING THE
COLLISION, IN COMMAND OF PRIVATE RESPONDENT'S VESSEL. The
third factor constitutive of negligence on the part of the "Don Carlos" relates to
the fact that Second Mate Benito German was, immediately before and during
the collision, in command of the "Don Carlos." Second Mate German simply
did not have the level of experience, judgment and skill essential for
recognizing and coping with the risk of collision as it presented itself that early
morning when the "Don Carlos," running at maximum speed and having just
overtaken the "Don Francisco" then approximately one mile behind to the
starboard side of the "Don Carlos," found itself head-on or nearly head-on vis-
a-vis the "Yotai Maru." It is essential to point out that this situation was created
by the "Don Carlos" itself.

DECISION

FELICIANO, J : p

In the early morning of 3 May 1970 at exactly 0350 hours, on the

approaches to the port of Manila near Caballo Island, a collision took place
between the M/V "Don Carlos," an inter-island vessel owned and operated by
private respondent Carlos A. Go Thong and Company ("Go Thong"), and the
M/S "Yotai Maru," a merchant vessel of Japanese registry. The "Don Carlos"
was then sailing south bound leaving the port of Manila for Cebu, while the
"Yotai Maru" was approaching the port of Manila, coming in from Kobe, Japan.
The bow of the "Don Carlos" rammed the portside (left side) of the "Yotai
Maru" inflicting a three (3) cm. gaping hole on her portside near Hatch No. 3,
through which seawater rushed in and flooded that hatch and her bottom
tanks, damaging all the cargo stowed therein. Cdpr

The consignees of the damaged cargo got paid by their insurance companies.
The insurance companies in turn, having been subrogated to the interests of
the consignees of the damaged cargo, commenced actions against private
respondent Go Thong for damages sustained by the various shipments in the
then Court of First Instance of Manila.
Two (2) cases were filed in the Court of First Instance of Manila. The first
case, Civil Case No. 82567, was commenced or 13 March 1971 by petitioner
Smith Bell and Company (Philippines), Inc. and Sumitomo Marine and Fire
Insurance Company Ltd., against private respondent Go Thong, in Branch 3,
which was presided over by Judge Bernardo P. Fernandez. The second case,
Civil Case No. 82556, was filed on 15 March 1971 by petitioners Smith Bell
and Company (Philippines), Inc. and Tokyo Marine and Fire Insurance
Company, Inc. against private respondent Go Thong in Branch 4, which was
presided over by then Judge, later Associate Justice of this Court, Serafin R.
Cuevas. LLpr

Civil Cases Nos. 82567 (Judge Fernandez) and 82556 (Judge Cuevas) were
tried under the same issues and evidence relating to the collision between the
"Don Carlos" and the "Yotai Maru" the parties in both cases having agreed
that the evidence on the collision presented in one case would be simply
adopted in the other. In both cases, the Manila Court of First Instance held
that the officers and crew of the "Don Carlos" had been negligent, that such
negligence was the proximate cause of the collision and accordingly held
respondent Go Thong liable for damages to the plaintiff insurance companies.
Judge Fernandez awarded the insurance companies P19,889.79 with legal
interest plus P3,000.00 as attorney's fees; while Judge Cuevas awarded the
plaintiff insurance companies on two (2) claims US$68,640.00 or its equivalent
in Philippine currency plus attorney's fees of P30,000.00, and P19,163.02 plus
P5,000.00 as attorney's fees, respectively.
The decision of Judge Fernandez in Civil Case No. 82567 was appealed by
respondent Go Thong to the Court of Appeals, and the appeal was there
docketed as C.A.-G.R. No. 61320-R. The decision of Judge Cuevas in Civil
Case No. 82556 was also appealed by Go Thong to the Court of Appeals, the
appeal being docketed as C.A.-G.R. No. 61206-R. Substantially identical
assignments of errors were made by Go Thong in the two (2) appealed cases
before the Court of Appeals.
In C.A.-G.R. No. 61320-R, the Court of Appeals through Reyes,
L.B., J., rendered a Decision on 8 August 1978 affirming the Decision of
Judge Fernandez. Private respondent Go Thong moved for reconsideration,
without success. Go Thong then went to the Supreme Court on Petition for
Review, the Petition being docketed as G.R. No. L-48839 ("Carlos A. Go
Thong and Company v. Smith Bell and Company [Philippines], Inc., et al."). In
its Resolution dated 6 December 1978, this Court, having considered "the
allegations, issues and arguments adduced in the Petition for Review on
Certiorari, of the Decision of the Court of Appeals as well as respondent's
comment", denied the Petition for lack of merit. Go Thong filed a Motion for
Reconsideration; the Motion was denied by this Court on 24 January 1979.
In the other (Cuevas) case, C.A.-G.R. No. 61206-R, the Court of Appeals, on
26 November 1980 (or almost two [2] years after the Decision of Reyes,
L.B., J., in C.A.-G.R. No. 61320-R, had been affirmed by the Supreme Court
on Petition for Review) through Sison, P.V., J., reversed the Cuevas Decision
and held the officers of the "Yotai Maru" at fault in the collision with the "Don
Carlos," and dismissed the insurance companies' complaint. Herein
petitioners asked for reconsideration, to no avail.
The insurance companies are now before us on Petition for Review on
Certiorari, assailing the Decision of Sison, P.V., J., in C.A.-G.R. No. 61206-R.
Petitioners' principal contentions are:
a. that the Sison Decision had disregarded the rule of res judicata;
b. that Sison P.V., J., was in serious and reversible error in accepting
Go Thong's defense that the question of fault on the part of the "Yotai
Maru" had been settled by the compromise agreement between the
owner of the "Yotai Maru" and Go Thong as owner of the "Don
Carlos;" and
c. that Sison, P.V., J., was in serious and reversible error in holding
that the "Yotai Maru" had been negligent and at fault in the collision
with the "Don Carlos."
I
The first contention of petitioners is that Sison, P.V., J. in rendering his
questioned Decision, failed to apply the rule of res judicata. Petitioners
maintain that the Resolution of the Supreme Court dated 6 December 1978 in
G.R. No. 48839 which dismissed Go Thong's Petition for Review of the
Decision of Reyes, L.B., J., in C.A.-G.R. No. 61320-R, had effectively settled
the question of liability on the part of the "Don Carlos." Under the doctrine
of res judicata, petitioners contend, Sison, P.V., J. should have followed the
Reyes, L.B., J. Decision since the latter had been affirmed by the Supreme
Court and had become final and executory long before the Sison Decision
was rendered.
Private respondent Go Thong, upon the other hand, argues that the Supreme
Court, in rendering its minute Resolution in G.R. No. L-48839, had merely
dismissed Go Thong's Petition for Review of the Reyes, L.B., J. Decision for
lack of merit but had not affirmed in toto that Decision. Private respondent, in
other words, purports to distinguish between denial of a Petition for Review for
lack of merit and affirmance of the Court of Appeals' Decision. Thus, Go
Thong concludes, this Court did not hold that the "Don Carlos" had been
negligent in the collision.
Private respondent's argument must be rejected. That this Court denied Go
Thong's Petition for Review in a minute Resolution did not in any way diminish
the legal significance of the denial so decreed by this Court. The Supreme
Court is not compelled to adopt a definite and stringent rule on how its
judgment shall be framed. 1 It has long been settled that this Court has
discretion to decide whether a "minute resolution" should be used in lieu of a
full-blown decision in any particular case and that a minute Resolution of
dismissal of a Petition for Review on Certiorari constitutes an adjudication on
the merits of the controversy or subject matter of the Petition. 2 It has been
stressed by the Court that the grant of due course to a Petition for Review is
"not a matter of right, but of sound judicial discretion; and so there is no need
to fully explain the Court's denial. For one thing, the facts and law are already
mentioned in the Court of Appeals' opinion." 3 A minute Resolution denying a
Petition for Review of a Decision of the Court of Appeals can only mean that
the Supreme Court agrees with or adopts the findings and conclusions of the
Court of Appeals, in other words, that the Decision sought to be reviewed and
set aside is correct. 4
Private respondent Go Thong argues also that the rule of res judicata cannot
be invoked in the instant case whether in respect of the Decision of Reyes,
L.B., J. or in respect of the Resolution of the Supreme Court in G.R. No. L-
48839, for the reason that there was no identity of parties and no identity of
cause of action between C.A.-G.R. No. 61206-R and C.A.-G.R. No. 61320-R.
The parties in C.A.-G.R. No. 61320-R where the decision of Judge Fernandez
was affirmed, involved Smith Bell and Company (Philippines), Inc., and
Sumitomo Marine and Fire Insurance Co., Ltd. while the petitioners in the
instant case (plaintiffs below) are Smith Bell and Co. (Philippines), Inc. and
Tokyo Marine and Fire Insurance Co., Ltd. In other words, there was a
common petitioner in the two (2) cases, although the co-petitioner in one was
an insurance company different from the insurance company co-petitioner in
the other case. It should be noted, moreover, that the co-petitioner in both
cases was an insurance company and that both petitioners in the two (2)
cases represented the same interest, i.e., the cargo owner's interest as
against the hull interest or the interest of the shipowner. More importantly,
both cases had been brought against the same defendant, private respondent
Go Thong, the owner of the vessel "Don Carlos." In sum, C.A.-G.R. No.
61320-R and C.A.-G.R. No. 61206-R exhibited substantial identity of parties. LLpr

It is conceded by petitioners that the subject matters of the two (2) suits were
not identical, in the sense that the cargo which had been damaged in the one
case and for which indemnity was sought, was not the very same cargo which
had been damaged in the other case indemnity for which was also sought.
The cause of action was, however, the same in the two (2) cases, i.e., the
same right of the cargo owners to the safety and integrity of their cargo had
been violated by the same casualty, the ramming of the "Yotai Maru" by the
"Don Carlos." The judgments in both cases were final judgments on the merits
rendered by the two (2) divisions of the Court of Appeals and by the Supreme
Court, the jurisdiction of which has not been questioned.
Under the circumstances, we believe that the absence of identity of subject
matter, there being substantial identity of parties and identity of cause of
action, will not preclude the application of res judicata. 5
In Tingson v. Court of Appeals, 6 the Court distinguished one from the other
the two (2) concepts embraced in the principle of res judicata, i.e., "bar by
former judgment" and "conclusiveness of judgment:"
"There is no question that where as between the first case where the
judgment is rendered and the second case where such judgment is
invoked, there is identity of parties, subject-matter and cause of
action, the judgment on the merits in the first case constitutes an
absolute bar to the subsequent action not only as to every matter
which was offered and received to sustain or defeat the claim or
demand, but also as to any other admissible matter which might have
been offered for that purpose and to all matters that could have been
adjudged in that case. This is designated as 'bar by former judgment.'
But where the second action between the same parties is upon a
different claim or demand, the judgment in the prior action operates
as an estoppel only as to those matters in issue or points
controverted, upon the determination of which the finding or judgment
was rendered. In fine, the previous judgment is conclusive in the
second case, only as those matters actually and directly controverted
and determined and not as to matters merely involved therein. This is
the rule on'conclusiveness of judgment' embodied in subdivision (c)
of Section 49 of Rule 39 of the Revised Rules of Court." 7 (Citations
omitted) (Emphases supplied)
In Lopez v. Reyes, 8 the Court elaborated further the distinction between bar
by former judgment which bars the prosecution of a second action upon the
same claim, demand or cause of action, and conclusiveness of judgment
which bars the relitigation of particular facts or issues in another litigation
between the same parties on a different claim or cause of action:

"The doctrine of res judicata has two aspects. The first is the effect of
a judgment as a bar to the prosecution of a second action upon the
same claim, demand or cause of action. The second aspect is that it
precludes the relitigation of a particular fact or issues in another
action between the same parties on a different claim or cause of
action.
The general rule precluding the relitigation of material facts or
questions which were in issue and adjudicated in former action are
commonly applied to all matters essentially connected with the
 subject matter of the litigation. Thus, it extends to questions
'necessarily involved in an issue, and necessarily adjudicated, or
necessarily implied in the final judgment, although no specific finding
may have been made in reference thereto, and although such
matters were directly referred to in the pleadings and were not
actually or formally presented. Under this rule, if the record of the
former trial shows that the judgment could not have been rendered
without deciding the particular matter, it will be considered as having
settled that matter as to all future actions between the parties, and if a
judgment necessarily presupposes certain premises, they are as
conclusive as the judgment itself. Reasons for the rule are that a
judgment is an adjudication on all the matters which are essential to
support it, and that every proposition assumed or decided by the
court leading up to the final conclusion and upon which such
conclusion is based is as effectually passed upon as the ultimate
question which is finally solved.'" 9 (citations omitted) (Emphases
supplied)
In the case at bar, the issue of which vessel ("Don Carlos" or "Yotai Maru")
had been negligent, or so negligent as to have proximately caused the
collision between them, was an issue that was actually, directly and expressly
raised, controverted and litigated in C.A.-G.R. No. 61320-R. Reyes,
L.B., J., resolved that issue in his Decision and held the "Don Carlos" to have
been negligent rather than the "Yotai Maru" and, as already noted, that
Decision was affirmed by this Court in G.R. No. L-48839 in a Resolution dated
6 December 1978. The Reyes Decision thus became final and executory
approximately two (2) years before the Sison Decision, which is assailed in
the case at bar, was promulgated. Applying the rule of conclusiveness of
judgment, the question of which vessel had been negligent in the collision
between the two (2) vessels, had long been settled by this Court and could no
longer be relitigated in C.A.-G.R. No. 61206-R. Private respondent Go Thong
was certainly bound by the ruling or judgment of Reyes, L.B., J. and that of
this Court. The Court of Appeals fell into clear and reversible error when it
disregarded the Decision of this Court affirming the Reyes Decision. 10
Private respondent Go Thong also argues that a compromise agreement
entered into between Sanyo Shipping Company as owner of the "Yotai Maru"
and Go Thong as owner of the "Don Carlos," under which the former paid
P268,000.00 to the latter effectively settled that the "Yotai Maru" had been at
fault. This argument is wanting in both factual basis and legal substance. True
it is that by virtue of the compromise agreement, the owner of the "Yotai Maru"
paid a sum of money to the owner of the "Don Carlos." Nowhere, however, in
the compromise agreement did the owner of the "Yotai Maru" admit or
concede that the "Yotai Maru" had been at fault in the collision. The familiar
rule is that "an offer of compromise is not an admission that anything is due,
and is not admissible in evidence against the person making the offer." 11 A
compromise is an agreement between two (2) or more persons who, in order
to forestall or put an end to a law suit, adjust their differences by mutual
consent, an adjustment which everyone of them prefers to the hope of gaining
more, balanced by the danger of losing more. 12 An offer to compromise does
not, in legal contemplation, involve an admission on the part of a defendant
that he is legally liable, nor on the part of a plaintiff that his claim or demand is
groundless or even doubtful, since the compromise is arrived at precisely with
a view to avoiding further controversy and saving the expenses of
litigation. 13 It is of the very nature of an offer of compromise that it is made
tentatively, hypothetically and in contemplation of mutual concessions. 14 The
above rule on compromises is anchored on public policy of the most insistent
and basic kind; that the incidence of litigation should be reduced and its
duration shortened to the maximum extent feasible.
The collision between the "Yotai Maru" and the "Don Carlos" spawned not
only sets of litigations but also administrative proceedings before the Board of
Marine Inquiry ("BMI"). The collision was the subject matter of an investigation
by the BMI in BMI Case No. 228. On 12 July 1971, the BMI, through
Commodore Leovegildo L. Gantioki, found both vessels to have been
negligent in the collision.
Both parties moved for reconsideration of the BMI's decision. The Motions for
Reconsideration were resolved by the Philippine Coast Guard ("PCG") nine
(9) years later, in an order dated 19 May 1980 issued by PCG Commandant,
Commodore Simeon M. Alejandro. The dispositive portion of the PCG
decision read as follows:
"Premises considered, the Decision dated July 12, 1971 is hereby
reconsidered and amended absolving the officers of YOTAI MARU'
from responsibility for the collision. This Headquarters finds no
reason to modify the penalties imposed upon the officers of 'Don
Carlos'. (Annex 'C', Reply, September 5, 1981)." 15
Go Thong filed a second Motion for Reconsideration; this was denied by
the PCG in an order dated September 1980.
Go Thong sought to appeal to the then Ministry of National Defense from the
orders of the PCG by filing with the PCG on 6 January 1981 a motion for a 30-
day extension from 7 January 1981 within which to submit its record on
appeal. On 4 February 1981, Go Thong filed a second urgent motion for
another extension of thirty (30) days from 7 February 1981. On 12 March
1981, Go Thong filed a motion for a final extension of time and filed its record
on appeal on 17 March 1981. The PCG noted that Go Thong's record on
appeal was filed late, that is, seven (7) days after the last extension granted
by the PCG had expired. Nevertheless, on 1 July 1981 (after the Petition for
Review on Certiorari in the case at bar had been filed with this Court), the
Ministry of Defense rendered a decision reversing and setting aside the 19
May 1980 decision of the PCG.
The owners of the "Yotai Maru" then filed with the Office of the President a
Motion for Reconsideration of the Defense Ministry's decision. The Office of
the President rendered a decision dated 17 April 1986 denying the Motion for
Reconsideration. The decision of the Office of the President correctly
recognized that Go Thong had failed to appeal in a seasonable manner:
"MV 'DON CARLOS' filed her Notice of Appeal on January 5, 1981.
However, the records also show beyond peradventure of doubt that
the PCG Commandant's decision of May 19, 1980, had already
become final and executory when MV 'DON CARLOS' filed her
Record on Appeal on March 17, 1981, and when the motion for third
extension was filed after the expiry date.
Under Paragraphs (c), (d), (e) and (f), Chapter XVI, of the Philippine
Merchant Marine Rules and Regulations, decisions of the PCG
Commandant shall be final unless, within thirty (30) days after receipt
of a copy thereof, an appeal to the Minister of National Defense is
filed and perfected by the filing of a notice of appeal and a record on
appeal. Such administrative regulation has the force and effect of law,
and the failure of MV 'DON CARLOS' to comply therewith rendered
the PCG Commandant's decision on May 19, 1980, as final and
executory, (Antique Sawmills, Inc. vs. Zayco, 17 SCRA 316; Deslata
vs. Executive Secretary, 19 SCRA 487; Macailing vs. Andrada, 31
SCRA 126.) (Annex 'A', Go Thongs Manifestation and Motion for
Early Resolution, November 24, 1986)." 16 (Emphases supplied)
Nonetheless, acting under the misapprehension that certain "supervening"
events had taken place, the Office of the President held that the Minister of
National Defense could validly modify or alter the PCG Commandant's
decision:
"However, the records likewise show that, on November 26, 1980,
the Court of Appeals rendered a decision in CA-G.R. No. 61206-R
(Smith Bell & Co., Inc., et al. vs. Carlos A. Go Thong & Co.) holding
that the proximate cause of the collision between MV 'DON CARLOS'
AND MS 'YOTAI MARU' was the negligence, failure and error of
judgment of the officers of MS 'YOTAI MARU'. Earlier, or on February
27, 1976, the Court of First Instance of Cebu rendered a decision in
Civil Case No. R-11973 (Carlos A. Go Thong vs. San-yo Marine Co.)
holding that MS 'YOTAI MARU' was solely responsible for the
collision, which decision was upheld by the Court of Appeals.
The foregoing judicial pronouncements rendered after the finality of
the PCG Commandant's decision of May 19, 1980, were supervening
causes or reasons that rendered the PCG Commandant's decision as
no longer enforceable and entitled MV 'DON CARLOS' to request the
Minister of National Defense to modify or alter the questioned
decision to harmonize the same with justice and the facts. (De la
Costa vs. Cleofas, 67 Phil. 686; City of Bututan vs. Ortiz, 3 SCRA
659; Candelario vs. Canizarez, 4 SCRA 738; Abellana vs. Dosdos, 13
SCRA 244). Under such precise circumstances, the Minister of
National Defense may validly modify or alter the PCG commandant's
decision. (Sec. 37, Act 4007; Secs. 79(c) and 550, Revised
Administrative Code; Province of Pangasinan vs. Secretary of Public
 Works and Communications, 30 SCRA 134; Estrella vs. Orendain, 37
SCRA 640)." 17 (Emphases supplied)
The multiple misapprehensions under which the Office of the President
labored, were the following:

It took account of the Decision of Sison, P.V., J. in C.A.-G.R. No. 61206-R, the
very decision that is the subject of review in the Petition at bar and therefore
not final. At the same time, the Office of the President either ignored or was
unaware of the Reyes, L.B., J., Decision in C.A.-G.R. No 61320-R finding the
"Don Carlos" solely liable for the collision, and of the fact that that Decision
had been affirmed by the Supreme Court and had long ago become final and
executory. A third misapprehension of the Office of the President related to a
decision in a Cebu Court of First Instance litigation which had been settled by
the compromise agreement between the Sanyo Marine Company and Go
Thong. The Office of the President mistakenly believed that the Cebu Court of
First Instance had rendered a decision holding the "Yotai Maru" solely
responsible for the collision, when in truth the Cebu court had rendered a
judgment of dismissal on the basis of the compromise agreement. The Cebu
decision was not, of course, appealed to the Court of Appeals. Cdpr

It thus appears that the decision of the Office of the President upholding the
belated reversal by the Ministry of National Defense of the PCG'S decision
holding the "Don Carlos" solely liable for the collision, is so deeply flawed as
not to warrant any further examination. Upon the other hand, the basic
decision of the PCG holding the "Don Carlos" solely negligent in the collision
remains in effect.
II
In their Petition for Review, petitioners assail the finding and conclusion of the
Sison Decision, that the "Yotai Maru" was negligent and at fault in the
collision, rather than the "Don Carlos." In view of the conclusions reached in
Part I above, it may not be strictly necessary to deal with the issue of the
correctness of the Sison Decision in this respect. The Court considers,
nonetheless, that in view of the conflicting conclusions reached by Reyes,
L.B., J., on the one hand, and Sison, P.V., J., on the other, and since in
affirming the Reyes Decision, the Court did not engage in a detailed written
examination of the question of which vessel had been negligent, and in view
of the importance of the issues of admiralty law involved, the Court should
undertake a careful review of the record of the case at bar and discuss those
issues in extenso.
The decision of Judge Cuevas in Civil Case No. 82556 is marked by careful
analysis of the evidence concerning the collision. It is worth underscoring that
the findings of fact of Judge Fernandez in Civil Case No. 82567 (which was
affirmed by the Court of Appeals in the Reyes Decision and by this Court in
G.R. No. L-48839) are just about identical with the findings of Judge Cuevas.
Examining the facts as found by Judge Cuevas, the Court believes that there
are three (3) principal factors which are constitutive of negligence on the part
of the "Don Carlos," which negligence was the proximate cause of the
collision.
The first of these factors was the failure of the "Don Carlos" to comply with the
requirements of Rule 18 (a) of the International Rules of the Road
("Rules"), 18 which provides as follows
"(a) When two power-driven vessels are meeting end on, or nearly
end on, so as to involve risk of collision, each shall alter her course to
starboard, so that each may pass on the port side of the other. This
Rule only applies to cases where vessels are meeting end on or
nearly end on, in such a manner as to involve risk of collision, and
does not apply to two vessels which must, if both keep on their
respective course, pass clear of each other. The only cases to which
it does apply are when each of two vessels is end on, or nearly end
on, to the other; in other words, to cases in which, by day, each
vessel sees the masts of the other in a line or nearly in a line with her
own; and by night to cases in which each vessel is in such a position
as to see both the sidelights of the other. It does not apply, by day, to
cases in which a vessel sees another ahead crossing her own
course; or, by night, to cases where the red light of one vessel is
opposed to the red light of the other or where the green light of one
vessel is opposed to the green light of the other or where a red light
without a green light or a green light without a red light is seen ahead,
or where both green and red lights are seen anywhere but ahead."
(Emphasis supplied)
The evidence on this factor was summarized by Judge Cuevas in the
following manner:
"Plaintiffs and defendant's evidence seem to agree that each vessel
made a visual sighting of each other ten minutes before the collision
which occurred at 0350. German's version of the incident that
followed, was that 'Don Carlos' was proceeding directly to [a] meeting
[on an] 'end-on or nearly end-on situation' (Exh. S, page 8). He also
testified that 'Yotai Maru's' headlights were 'nearly in line at 0340
A.M.' (t.s.n, June 6, 1974) clearly indicating that both vessels were
sailing on exactly opposite paths (t.s.n. June 6, 1974, page 56). Rule
18 (a) of the International Rules of the Road provides as follows:
xxx xxx xxx
And yet German altered 'Don Carlos' course by five degrees to the
left at 0343 hours instead of to the right (t.s.n. June 6, 1974, pages
44-45) which maneuver was the error that caused the collision in
question. Why German did so is likewise explained by the evidence
on record. 'Don Carlos' was overtaking another vessel, the 'Don
Francisco' and was then at the starboard (right side) of the aforesaid
vessel at 3.40 a.m. It was in the process of overtaking 'Don
Francisco' that 'Don Carlos' was finally brought into a situation where
 he was meeting end-on or nearly end -on 'Yotai Maru' thus involving
risk of collision. Hence, German in his testimony before the Board of
Marine Inquiry stated:
'Atty. Chung:
You said in answer to the cross-examination that you took a change
of course to the left. Why did you not take a course to the right
instead?
German:
I did not take any course to the right because the other vessel was in
my mind at the starboard side following me. Besides, I don't
want to get risk of the Caballo Island (Exh. 2, pages 209 and
210).'" 19 (Emphasis supplied).
For her part, the "Yotai Maru" did comply with its obligations under Rule 18
(a). As the "Yotai Maru" found herself on an "end-on" or a "nearly end-on"
situation vis-a-vis the "Don Carlos," and as the distance between them was
rapidly shrinking, the "Yotai Maru" turned starboard (to its right) and at the
same time gave the required signal consisting of one short horn blast. The
"Don Carlos" turned to portside (to its left), instead of turning to starboard as
demanded by Rule 18 (a). The "Don Carlos" also violated Rule 28 (c) for it
failed to give the required signal of two (2) short horn blasts meaning "I am
altering my course to port." When the "Yotai Maru" saw that the "Don Carlos"
was turning to port, the master of the "Yotai Maru" ordered the vessel turned
"hard starboard" at 3:45 a.m. and stopped her engines; at about 3:46 a.m. the
"Yotai Maru" went "full astern engine." 20 The collision occurred at exactly 3:50
a.m.
The second circumstance constitutive of negligence on the part of the "Don
Carlos" was its failure to have on board that night a "proper look-out" as
required by Rule I (B). Under Rule 29 of the same set of Rules, all
consequences arising from the failure of the "Don Carlos" to keep a "proper
look-out" must be borne by the "Don Carlos." Judge Cuevas' summary of the
evidence said:
"The evidence on record likewise discloses very convincingly that
'Don Carlos' did not have a 'look-out' whose sole and only duty is only
to act as such . . ." 21
A "proper look-out" is one who has been trained as such and who is given
no other duty save to act as a look-out and who is stationed where he can
see and hear best and maintain good communication with the officer in
charge of the vessel, and who must, of course, be vigilant. Judge Cuevas
wrote:
"The 'look-out' should have no other duty to perform. (Chamberlain v.
Ward, 21, N.O.W. 62, U.S. 548, 571). He has only one duty, that
which its name implies to keep a 'look-out'. So a deckhand who
has other duties, is not a proper 'look-out'(Brooklyn Perry Co. v. U.S.,
 122, Fed. 696). The navigating officer is not a sufficient 'look-
out' (Larcen B. Myrtle, 44 Fed. 779) Griffin on Collision, pages
277-278). Neither the captain nor the [helmsman] in the pilothouse
can be considered to be a 'look-out' within the meaning of the
maritime law. Nor should he be stationed in the bridge. He should be
as near as practicable to the surface of the water so as to be able to
see low-lying lights (Griffin on Collision, page 273).
On the strength of the foregoing authorities, which do not appear to
be disputed even by the defendant, it is hardly probable that neither
German or Leo Enriquez may qualify as 'look-out' in the real sense of
the word." 22 (Emphases supplied).
In the case at bar, the failure of the "Don Carlos" to recognize in a timely
manner the risk of collision with the "Yotai Maru" coming in from the
opposite direction, was at least in part due to the failure of the "Don Carlos"
to maintain a proper look-out.
The third factor constitutive of negligence on the part of the "Don Carlos"
relates to the fact that Second Mate Benito German was, immediately before
and during the collision, in command of the "Don Carlos." Judge Cuevas
summed up the evidence on this point in the following manner:
"The evidence on record clearly discloses that 'Don Carlos' was, at
the time of the collision and immediately prior thereto, under the
command of Benito German, a second mate although its captain,
Captain Rivera, was very much in the said vessel at the time. The
defendant's evidence appears bereft of any explanation as to why
second mate German was at the helm of the aforesaid vessel when
Captain Rivera did not appear to be under any disability at the time.
In this connection, Article [633] of the Code of Commerce provides:

'Art. [633] The second mate shall take command of the vessel in
case of the inability or disqualification of the captain and sailing mate,
assuming, in such case, their powers and liability.'
The fact that second mate German was allowed to be in
command of 'Don Carlos' and not the chief or the sailing mate
in the absence of Captain Rivera, gives rise to no other
conclusion except that said vessel [had] no chief mate.
Otherwise, the defense evidence should have at least
explained why it was German, only a second mate, who was at
the helm of the vessel 'Don Carlos' at the time of the fatal
collision.
But that is not all. Worst still aside from German's being only a
second mate, is his apparent lack of sufficient knowledge of the basic
and generally established rules of navigation. For instance he
appeared unaware of the necessity of employing a 'look-out' (t.s.n.
June 6, 1974, page 27) which is manifest even in his testimony
before the Board of Marine Inquiry on the same subject (Exh. 2, page
 209). There is, therefore, every reasonable ground to believe that his
inability to grasp actual situation and the implication brought about by
inadequacy of experience and technical know-how was mainly
responsible and decidedly accounted for the collision of the vessels
involved in this case . . ." 23 (Emphasis supplied)
Second Mate German simply did not have the level of experience,
judgment and skill essential for recognizing and coping with the risk of
collision as it presented itself that early morning when the "Don Carlos,"
running at maximum speed and having just overtaken the "Don Francisco"
then approximately one mile behind to the starboard side of the "Don
Carlos," found itself head-on or nearly head on vis-a-vis the "Yotai Maru." It
is essential to point out that this situation was created by the "Don Carlos"
itself.
The Court of Appeals in C.A.-G.R. No. 61206-R did not make any findings of
fact which contradicted the findings of fact made by Judge Cuevas. What
Sison, P.V., J. actually did was to disregard all the facts found by Judge
Cuevas, and discussed above and, astonishingly, found a duty on the "Yotai
Maru" alone to avoid collision with and to give way to the "Don Carlos." Sison,
P.V., J., wrote:
"At a distance of eight (8) miles and with ten (10) minutes before the
impact, [Katoh] and Chonabayashi had ample time to adopt effective
precautionary measures to steer away from the Philippine vessel,
particularly because both [Katoh] and Chonabayashi also deposed
that at the time they had first eyesight of the 'Don Carlos' there was
still 'no danger at all' of a collision. Having sighted the 'Don Carlos' at
a comparatively safe distance 'no danger at all' of a collision the
Japanese ship should have observed with the highest diligence the
course and movements of the Philippine interisland vessel as to
enable the former to adopt such precautions as will necessarily
prevent a collision, or give way, and in case of a collision, the former
is prima facie at fault. In G. Urrutia & Co. vs. Baco River Plantation
Co., 26 Phil. 632, the Supreme Court held:
'Nautical rules require that where a steamship and
sailing vessel are approaching each other from opposite
directions, or on intersecting lines, the steamship, from the
moment the sailing vessel is seen, shall watch with the highest
diligence her course and movements so as to enable it to
adopt such timely means of precaution as will necessarily
prevent the two boats from coming in contact.' (Emphasis
supplied)
At 3:44 p.m., or 4 minutes after first sighting the 'Don Carlos', or 6
minutes before contact time, Chonabayashi revealed that the 'Yotai
Maru' gave a one-blast whistle to inform the Philippine vessel that the
Japanese ship was turning to starboard or to the right and that there
was no blast or a proper signal from the 'Don Carlos' (pp. 67-68.
Deposition of Chonabayashi, List of Exhibits). The absence of a reply
 signal from the 'Don Carlos' placed the 'Yotai Maru' in a situation of
doubt as to the course the Don Carlos' would take. Such being the
case, it was the duty of the Japanese officers 'to stop, reverse or
come to a standstill' until the course of the 'Don Carlos' has been
determined and the risk of a collision removed (The Sabine, 21 F (2d)
121, 124, cited in Standard Vacuum, etc. vs. Cebu Stevedoring, etc.,
5 C.A.R. 2d 853, 861-862) . . ." 24 (Emphasis supplied).
The Court is unable to agree with the view thus taken by Sison, P.V., J. By
imposing an exclusive obligation upon one of the vessels, the "Yotai Maru," to
avoid the collision, the Court of Appeals not only chose to overlook all the
above facts constitutive of negligence on the part of the "Don Carlos;" it also in
effect used the very negligence on the part of the "Don Carlos;" to absolve it
from responsibility and to shift that responsibility exclusively onto the "Yotai
Maru" the vessel which had observed carefully the mandate of Rule 18 (a).
Moreover, G. Urrutia and Company v. Baco River Plantation
Company 25 invoked by the Court of Appeals seems simply inappropriate and
inapplicable. For the collision in theUrrutia case was between a sailing vessel,
on the one hand, and a power-driven vessel, on the other; the Rules, of
course, imposed a special duty on the power-driven vessel to watch the
movements of a sailing vessel, the latter being necessarily much slower and
much less maneuverable than the power-driven one. In the case at bar, both
the "Don Carlos" and the "Yotai Maru" were power-driven and both were
equipped with radar; the maximum speed of the "Yotai Maru" was thirteen (13)
knots while that of the "Don Carlos" was eleven (11) knots. Moreover, as
already noted, the "Yotai Maru" precisely took last minute measures to avert
collision as it saw the "Don Carlos" turning to portside: the "Yotai Maru" turned
"hard starboard" and stopped its engines and then put its engines "full astern."
Thus, the Court agrees with Judge Cuevas (just as it had agreed with Reyes,
L.B., J.), with Judge Fernandez and Nocon, J., 26 that the "Don Carlos" had
been negligent and that its negligence was the sole proximate cause of the
collision and of the resulting damages.
FOR ALL THE FOREGOING, the Decision of the Court of Appeals dated 26
November 1980 in C.A.-G.R. No. 61206-R is hereby REVERSED and SET
ASIDE. The decision of the trial court dated 22 September 1975 is hereby
REINSTATED and AFFIRMED in its entirety. Costs against private
respondent.
(Smith Bell and Co. (Philippines), Inc. v. Court of Appeals, G.R. No. 56294,
|||

[May 20, 1991], 274 PHIL 472-494)

[G.R. No. 4510. December 19, 1908.]

THE CITY OF MANILA, plaintiff-appellee, vs. THE ATLANTIC,

GULF AND PACIFIC COMPANY, defendant-appellant.
Hartigan, & Rohde, for appellant.
Modesto Reyes, for appellee.

SYLLABUS

1. SHIPS AND SHIPPING; COLLISION; DAMAGES; NEGLIGENCE.

Plaintiffs launch, with scows in tow, came into collision with a heavily
laden lighter which was being towed by defendant's launch, and was
damaged. Plaintiff's launch carried lights and both launch and scows were
properly manned. The lighter carried no light, no crew, and had no
rudder: Held, That the accident was due to negligence in failing to provide
the lighter with the proper steering gear and helmsman, without which it
was unmanageable.

DECISION

TRACEY, J : p

This is an appeal from a judgment of the Court of First Instance of

the city of Manila awarding the plaintiff P1,020.50 damages for injuries to a
launch in a collision.
On November 20, 1906, the plaintiff's launch Jan, towing six small
scows up the River Pasig at Santa Ana came into collision with a large
lighter, heavily laden, towed by the launch Oriente of the defendant. She
was run aground with her frame near the port bow smashed in.
It is proved that the Jan carried lights; that both she and the scows
she was towing were properly manned, and according to the testimony of
the plaintiff's witnesses as soon as they saw the light ahead of
the Oriente their whistle was blown and on receiving an answering whistle,
in order to avoid a shock, they veered to starboard, leaving the channel
and running into shoal water. Defendant's witnesses admit that they saw
the Jan and its tow with the lights thereon and blew their own whistle, but
say that they did not hear any whistle from the other launch, which kept the
middle of the stream; that their boat was also put to starboard and the
launches successfully passed one another, but. their scow in tow, being
slow in changing direction, struck against the Jan, and they claim that they
did all in their power to avoid a collision in-view of the difficulty of
controlling the boat on their course downstream. It appears that this tow
was secured to their launch by a single cable, forking in the shape of the
letter "Y" so that each end was fastened to one side of the lighter.
The judge of the court below in rendering judgment for the plaintiff
appears to have relied upon several incidents; that the captain of
 the Oriente had no license but only a permit to navigate from the surveyor
of customs; that it was easier to control the boat going with the current than
the one going against it; that there was but one tow rope when there might
have been more, and that there was no helmsman on the lighter.
The testimony, however, of expert witnesses shows, and it is indeed
of common knowledge, that a boat going against the current is quicker to
mind her helm than one borne along by it, and the plaintiff's expert also
testified that whereas in ocean tows several cables were used, on the
River Pasig it was customary to employ but one in order to leave the vessel
under tow greater freedom of movement and therefore better self-control.
Aboard this lighter there was no light, there was no crew, and it
seems there was no rudder. The absence of the light may not have
contributed to the accident, but the lack of a rudder and of any person to
direct the boat so clearly deprived it of control of its own movements that
we are satisfied that when under tow of the forked rope it was not handily
manageable. Therefore, instead of following approximately in the wake of
the launch, it struck out on a tangent thereto, thus causing the collision. We
attach no importance to the character of the permit of the Oriente's captain
as a cause of the accident.
The defendant has sought to show by witnesses that the channel
was so obstructed by a boat alongside each bank a short distance from the
scene of the accident that it was impossible for the Oriente and its tow to
so maneuver as to escape the shock, but the testimony of these witnesses
is not definite as to the location of these boats at the time of the accident,
nor does the consequence sought to be deduced from their location, if
proved, appear to us a necessary one. In our opinion the accident occurred
for the reason that the scow of the defendant was unmanageable because
she was not properly provided with helm and steersman. The judgment of
the Court of First Instance is affirmed, with the costs of this instance. So
ordered.
(The City of Manila v. Atlantic, Gulp and Pacific Co., G.R. No. 4510,
|||

[December 19, 1908], 12 PHIL 277-279)

[G.R. No. 20145. November 15, 1923.]

VICENTE VERZOSA and RUIZ, REMENTERIA CIA., S. in

C., plaintiffs-appellants, vs. SILVINO LIM and SIY CONG
BIENG & COMPANY, INC., defendants-appellants.

Ramon Sotelo for plaintiffs-appellants.

Gabriel La O for defendants-appellants.

SYLLABUS
 1. ADMIRALTY LAW; COLLISION; PROTEST. A justice of the
peace and, in his absence, an auxiliary justice of the peace are competent
persons before whom to make protest of a marine collision.
2. ID.; ID.; ID.; PRESUMPTION AS TO AUTHORITY OF AUXILIARY
JUSTICE OF PEACE TO TAKE PROTEST. Where a protest of collision
is made before an auxiliary justice of the peace, it will be presumed, in the
absence of any proof to the contrary, that the justice of the peace was
absent and that the auxiliary justice of the peace had authority to act.
3. NOTARY PUBLIC EX-OFFICIO; AUXILIARY JUSTICE OF
PEACE. An auxiliary justice of the peace is not ex-officio notary public.
4. ADMIRALTY LAW; COLLISION; DAMAGES; LIABILITY OF
OWNER AND OPERATING COMPANY. Where a collision occurs
between two seagoing vessels, caused exclusively by the carelessness of
the navigating officers in charge of one of the vessels, both the owner and
the operating company (casa naviera) directly in charge of the offending
vessel are liable for the damage done.
5. OBLIGATIONS; APPORTIONABILITY OF OBLIGATION; JOINT
AND SEVERAL LIABILITY OF TORTFEASORS. The rule that joint
obligations are apportionable unless otherwise specially provided has no
application to obligations arising from tort (ex delicto). Persons who
cooperate in the tortious infliction of damage are jointly and severally liable.

DECISION

STREET, J : p

This action was instituted in the Court of First Instance of the City of
Manila by Vicente Verzosa and Ruiz, Rementeria y Compania, as owners
of the coastwise vessel Perla, against Silvino Lim and Siy Cong Bieng &
Company, Inc., as owner and agent, respectively, of the vessel Ban Yek,
for the purpose of recovering a sum of money alleged to be the damages
resulting to the plaintiffs from a collision which occurred on March 9, 1921,
between the two vessels mentioned, it being alleged that said collision was
due to the inexperience, carelessness and lack of skill on the part of the
captain of the Ban Yek and to his failure to observe the rules of navigation
appropriate to the case. The defendants answered with a general denial,
and by way of special defense asserted, among other things. that the
collision was due exclusively to the inexperience and carelessness of the
captain and officers of the steamship Perla; for which reason the
defendants in turn, by way of counterclaim, prayed judgment for the
damages suffered by the Ban Yek from the same collision. At the hearing
the trial judge absolved the defendants from the complaint and likewise
absolved the plaintiffs from the defendants' counterclaim. From this
judgment both parties appealed.
It appears in evidence that at about five o'clock in the afternoon of
March 9, 1921, the coastwise steamer Ban Yek left the port of Naga on the
Bicol River, in the Province of Camarines Sur, with destination to the City
of Manila. At the time of her departure from said port the sea was
approaching to high tide but the current was still running in through the
Bicol River, with the result that the Ban Yek had the current against her. As
the ship approached the Malbong bend of the Bicol River, in the
Municipality of Gainza, another vessel, the Perla, was sighted coming up
the river on the way to Naga. While the boats were yet more than a
kilometer apart, the Ban Yek gave two blasts with her whistle, thus
indicating an intention to pass on the left, or to her own port side. In reply to
this signal the Perla gave a single blast, thereby indicating that she
disagreed with the signal given by the Ban Yek and would maintain her
position on the right, that is, would keep to the starboard. The Ban
Yek made no reply to this signal. As the Perla was navigating with the
current, then running in from the sea, this vessel, under paragraph 163 of
Customs Marine Circular No. 53, had the right of way over the Ban Yek,
and the officers of the Perla interpreted the action of the Ban Yek in not
replying to the Perla's signal as an indication of acquiescence of the
officers of the Ban Yek in the determination of the Perla to keep to the
starboard.
The river at this point is about two hundred and fifty feet wide, and
the courses thus being respectively pursued by the two vessels necessarily
tended to bring them into a head-on collision. When the danger of such an
occurrence became imminent, Captain Garrido of the Perla, seeing that he
was shut off by the Ban Yek from passing to the right, put his vessel to
port, intending to avoid collision or minimize its impact by getting farther out
into the stream. An additional reason for this maneuver, as stated by
Captain Garrido, is that the captain of the Ban Yek waived his hand to
Garrido, indicating that the latter should turn his vessel towards the middle
of the stream. At about the same time that the Perla was thus deflected
from her course the engine on the Ban Yek was reversed and three blasts
were given by this vessel to indicate that she was backing.
Now, it appears that when the engine is reversed, a vessel swings to
the right or left in accordance with the direction in which the blades of the
propeller are set; and as the Ban Yek began to back, her bow was thrown
out into the stream, a movement which was assisted by the current of the
river. By this means the Ban Yek was brought to occupy an oblique
position across the stream at the moment the Perla was passing; and the
bow of the Ban Yekcrashed into the starboard bumpers of the Perla,
carrying away external parts of the ship and inflicting material damage on
the hull. To effect the repairs thus made necessary to the Perla cost her
owners the sum of P17,827, including expenses of survey.
 The first legal point presented in the case has reference to the
sufficiency of the protest. In this connection it appears that within twenty-
four hours after the arrival of the Perla at the port of Naga, Captain Garrido
appeared before Vicente Rodi, the auxiliary justice of the peace of the
municipality of Naga, and made before that officer the sworn protest which
is in evidence as Exhibit B. This protest is sufficient in our opinion to
answer all the requirements of article 835 of the Code of Commerce. A
regular justice of the peace would without doubt be competent to take a
marine protest, and the same authority must be conceded to the auxiliary
justice in the absence of any showing in the record to the effect that the
justice of the peace himself was acting at the time in the municipality (Adm.
Code, sec. 211; sec. 334, Code of Civ. Proc., subsecs. 14, 15). We note
that in his certificate to this protest Vicente Rode added to the appellation
of auxiliary justice of the peace, following his mane, the additional
designation "notary public ex-officio." However, under subsection (c) of
section 242 of the Administrative Code, it is plain that an auxiliary justice of
the peace is not an ex-officio notary public. It results that the taking of this
protest must be ascribed to the officer in his character as auxiliary justice of
the peace and not in the character of notary public ex-officio It is hardly
necessary to add that this court takes judicial notice of the fact that Naga is
not a port of entry and that no customs official of rank is there stationed
who could have taken cognizance of this protest.
Upon the point of responsibility for the collision we have no hesitancy
in finding that the fault is to be attributed exclusively to the negligence and
inattention of the captain and pilot in charge of the Ban Yek.
The Perlaundoubtedly had the right of way, since this vessel was
navigating with the current, and the officers in charge of the Perla were
correct in assuming, from the failure of the Ban Yek to respond to the
single blast of the Perla, that the officers in charge of the Ban
Yek recognized that the Perla had a right of way and acquiesced in her
resolution to keep to the right. The excuse urged for the Ban Yek is that
this vessel is somewhat larger than the Perla and that it was desirable for
the Ban Yek to keep on the side of the long are of the curve of the river;
and in this connection it is suggested that the river is deeper on the outer
edge of the bend that on the inner edge. It is also stated that on a certain
previous occasion the Ban Yek on coming out from this port had gotten
stuck in the mud in this bend by dipping too far to the right. Moreover, it is
said to be the practice of ships in navigating this stream to keep nearer the
outside than to the inside of the bend. These suggestions are by no means
convincing. It appears in evidence that the river bottom here is composed
of mud and silt, and as the tide at the time of this incident was nearly at its
flood, there was ample depth of water to have accommodated the Ban
Yek of she had kept to that part of the stream which it was proper for her to
occupy. We may further observe that the disparity in the size of the vessels
was not such as to dominate the situation and deprive the Perla of the right
of way under the conditions stated. Blame for the collision must therefore,
as already stated, be attributed to the Ban Yek.
On the other hand no fault can be attributed to the officers navigating
the Perla either in maintaining the course which had been determined upon
for that vessel in conformity with the marine regulations applicable to the
case or in deflecting the vessel towards the middle of the stream after the
danger of collision became imminent. The trial judge suggests in his
opinion that when Captain Garrido saw that the Ban Yek was holding her
course to the left he (Garrido) should have changed the course of
the Perla to port more promptly. The validity of this criticism cannot be
admitted. Among rules applicable to navigation none is better founded on
reason and experience than that which requires the navigating officers of
any vessel to assume that an approaching vessel will observe the
regulations prescribed for navigation (G. Urrutia & Co. vs. Baco River
Plantation Co., 26 Phil., 632, 637). Any other rule would introduce guess
work into the control of ships and produce uncertainty in the operation of
the regulations.

Our conclusion is that his Honor, the trial judge, was in error in not
awarding damages to the Perla; but no error we committed in absolving the
plaintiffs from the defendants' cross-complaint.
The sum of P17,827 in our opinion represents the limit of the
plaintiffs' right of recovery. On the original complaint recovery is sought for
an additional amount of P18,000, most of which consists of damages
supposed to have been incurred from the inability of the Perla to maintain
her regular schedule while laid up in the dock undergoing repairs. The
damages thus claimed, in addition to being somewhat of a speculative
nature, are in our opinion not sufficiently proved to warrant the court in
allowing the same.
Having determined the amount which the plaintiffs are entitled to
recover, it becomes necessary to consider the person, or persons, who
must respond for these damages. Upon this point we note that Silvino Lim
is impleaded as owner; and Siy Cong Bieng & Co. is impleaded as the
shipping agent (casa naviera), or person in responsible control of the Ban
Yek at the time of the accident. We note further that in article 826 of the
Code of Commerce it is declared that the owner of any vessel shall be
liable for the indemnity due to any other vessel injured by the fault,
negligence, or lack of skill of the captain of the first. We say "owner," which
is the word used in the current translation of this article in the Spanish
Code of Commerce. It is to be observed, however, that the Spanish text
itself uses the word naviero; and there is some ambiguity in the use of said
word in this article, owing to the fact that naviero in Spanish has several
meanings. The author of the article which appears under the
word naviero in the Enciclopedia Juridica Espaola tells us that in Spanish
it may mean either owner, outfitter, charterer, or agent, though he says that
 the fundamental and correct meaning of the word is that of "owner."
That naviero, as used in the Spanish text of article 826, means owner is
further to be inferred from article 837, which limits the civil liability
expressed in article 826 to the value of the vessel with all her
appurtenances and all the freight earned during the voyage. There would
have been no propriety in limiting liability to the value of the vessel unless
the owner were understood to be the person liable. It is therefore clear that
by special provision of the Code of Commerce the owner is made
responsible for the damage caused by an accident of the kind under
consideration in this case; and in more than one case this court has held
the owner liable, when sued alone (Philippine Shipping Co. vs. Garcia
Vegara, 6 Phil., 281; G. Urrutia & Co. vs. Baco river Plantation Co., 26
Phil., 632).
But while it is thus demonstrated that Silvino Lim is liable for these
damages in the character of owner, it does not necessarily follow that Siy
Cong Bieng & Co., as charterer or agent (casa naviera), is exempt from
liability; and we are of the opinion that both the owner and agent can be
held responsible where both are impleaded together. In Philippine Shipping
Co. vs. Garcia Vergara (6 Phil., 281), it seems to have been accepted as a
matter of course that both owner and agent of the offending vessel are
liable for the damage done; and this must, we think, be true. The liability of
the naviero, in the sense of charterer or agent, if not expressed in article
826 of the Code of Commerce, is clearly deducible from the general
doctrine of jurisprudence stated in article 1902 of the Civil Code, and it is
also recognized, but more especially as regards contractual obligations, in
article 586 of the Code of Commerce. Moreover, we are of the opinion that
both the owner and agent (naviero) should be declared to be jointly and
severally liable, since the obligation which is the subject of this action had
its origin in a tortious act and did not arise from contract. Article 1137 of the
Civil Code, declaring that joint obligations shall be apportionable unless
otherwise provided, has no application to obligations arising from tort.
For the reasons stated the judgment appealed from will be affirmed
in so far as it absolves the plaintiffs' complaint; and judgment will be
entered for the plaintiffs to recover jointly and severally from the
defendants Silvino Lim and Siy Cong Bieng & Co. the sum of seventeen
thousand eight hundred and twenty-seven pesos (17,827), with interest
from the date of the institution of the action, without special pronouncement
as to costs of either instance. So ordered.
||| (Verzosa v. Lim, G.R. No. 20145, [November 15, 1923], 45 PHIL 416-424)
[G.R. No. 1876. September 30, 1905.]

THE UNITED STATES, plaintiff-appellant, vs. SMITH BELL &

COMPANY, defendant-appellee.
Solicitor-General Araneta, for appellant.
Pillsbury & Sutro, for appellee.

SYLLABUS

1. ADMIRALTY; ACTION FOR DAMAGES AS RESULT OF

COLLISION. An action for the recovery of loss and damages arising
from the collision of boats engaged in traffic upon the waters of the
Philippine Archipelago, can not be admitted if a sworn statement or
declaration is not presented within twenty-four hours to competent authority
of the point where the collision took place or of the first port of arrival of the
vessel. (Art. 835, Commercial Code.) This statutory rules applies even
though the injury was done to a boat operated by the Government.

DECISION

JOHNSON, J : p

This was an action by the plaintiff against the defendant, brought in

the Court of First Instance of the city of Manila, to recover the sum of
$1,600, United States currency, for damages occasioned to the Navy
boat Barcelo on the 6th day of November, 1902, at about 11 o'clock, p.m.,
on the said day, near the mouth of the Pasig River, by a collision with a
casco that was then and there being towed by the launch Alexandra. The
launch Alexandra is the property of the defendant.
The inferior court found that the defendant had not complied with the
rules of navigation in Manila Bay, in that it failed to display lights in
accordance with such regulations, and that, by reason of such failure, the
collision and consequent damages occurred. This findings of fact by the
court below, there being no motion for a new trial, is conclusive.
The defendant, in the court below, claimed that the plaintiff could and
recover in the action, for the reason that it had not complied with the
provisions of the Code of Commerce, relying particularly upon article 835
of the same. Article 835 provides: "The action for the recovery of loss and
damages arising from collisions can not be admitted if a sworn statement
or declaration is not presented within twenty-four hours to competent
authority of the point where the collision took place, or that of the first port
of arrival of the vessel."
The plaintiff claimed that this provision of the Commercial Code did
not apply to it. We are all of the opinion that the quoted provision of the
Commercial Code applies to all persons engaged in traffic upon the waters
of the Philippine Archipelago; that the defendant has as much right to insist
 upon compliance with this provision of the code where the damages were
done to a boat operated by the Government as if such boat had been
operated by a private individual or company. This provision of the
Commercial Code, requiring protest to be made and presented to the
proper authority within twenty-four hours after the collision, or after the
arrival of the injured boat in port, is a prerequisite to the bringing of an
action for damages. By having failed to comply with this provisions of the
Commercial Code it can not maintain this action for damages.
It is therefore adjudged and ordered that the decision of the inferior
court be affirmed, and that the defendant recover of the plaintiff his costs in
this action, and at the expiration of twenty days judgment should be
entered in accordance herewith, and the cause remanded to the court
below for execution of said judgment. So ordered.
(U.S. v. Smith Bell & Co., G.R. No. 1876, [September 30, 1905], 5 PHIL 85-
|||

86)

[G.R. No. 18957. January 16, 1923.]

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-

appellee, vs. PHILIPPINE STEAMSHIP CO., INC., and
FERNANDEZ HERMANOS, defendants. PHILIPPINE
STEAMSHIP CO., INC., appellant.

Jose Varela Calderon and Fisher & DeWitt for appellant.

Attorney-General Villa-Real for appellee.

SYLLABUS

1. ADMIRALTY AND MARITIME LAW; COLLISION; SOLIDARY

LIABILITY OF COLLIDING VESSELS. Under articles 827 and 828 of
the Code of Commerce, in case of a collision between two vessels at sea,
both are solidarily liable for the loss of cargo carried by either, not only in
the case where both vessels may be shown to be actually blameworthy but
also in the case where it is obvious that only one was at fault but the proof
does not show which.
2. ID.; ID.; ID.; RESPONSIBILITY OF VESSEL SURVIVING
COLLISION. Where two ships approaching each other at sea are both
negligently managed, with the result that a collision occurs and one is sunk
with total loss of both ship and cargo, the owner of the other vessel is liable
to any shipper of cargo aboard the sunken vessel to the full extent of the
value thereof; and it makes no difference that the negligence imputable to
the two vessels may have differed somewhat in character and degree and
 that the negligence of the sunken ship was somewhat more marked than
that of the other.

DECISION

STREET, J :p

In this action the Government of the Philippine Islands seeks to

recover the sum of P14,648.25, the alleged value of 911 sacks of rice
which were lost at sea on February 11, 1920, as a result of a collision
between the steamerAntipolo, owned by the defendant company, and the
vessel Isabel, upon which said rice was embarked. In the Court of First
Instance judgment was entered for the recovery by the plaintiff from the
Philippine Steamship Company, Inc., of the full amount claimed, with
interest from the date of filing of the complaint. From this judgment said
company appealed.
It appears in evidence that at about 10 o'clock at night on February
10, 1920, the coastwise vessel Isabel, equipped with motor and sails, left
the port of Manila with primary destination to Balayan, Batangas, carrying,
among its cargo, 911 sacks of rice belonging to the plaintiff and consigned
to points in the south. After the boat had been under weigh for about four
hours, and had passed the San Nicolas Light near the entrance into Manila
Bay, the watch and the mate on the bridge of the Isabel discerned the light
of another vessel, which proved to be the Antipolo, also a coastwise
vessel, on its way to Manila and coming towards the Isabel. At about the
same time both the watch and mate on the bridge of the Antipolo also saw
the Isabel, the two vessels being then about one mile and a half or two
miles apart. Each vessel was going approximately at the speed of 6 miles
an hour, and in about ten minutes they had together traversed the
intervening space and were in close proximity to each other.
When the mate of the Antipolo, who was then at the wheel, awoke to
the danger of the situation and saw the Isabel "almost on top of him," to
use the words of the committee on marine accidents reporting the incident,
he put his helm hard to the starboard.
This maneuver was correct, and if the helmsman of the Isabel had
done likewise, all would apparently have been well, as in that event the two
vessels should have passed near to each other on the port side without
colliding. As chance would have it, however, the mate on the Isabel at this
critical juncture lost his wits and, in disregard of the regulations and of
common prudence, at once placed his own helm hard to port, with the
result that his boat veered around directly in the path of the other vessel
and a collision became inevitable. Upon this the mate on
the Antipolo fortunately stopped his engines, but the Isabel continued with
full speed ahead, and the two vessels came together near the bows.
The Isabel immediately sank, with total loss of vessel and cargo, though
the members of her crew were picked up from the water and saved.
The trial judge was in our opinion entirely right in finding that
negligence was imputable to both vessels, though differing somewhat in
character and degree with respect to each. The mate of the Antipolo was
clearly negligent in having permitted that vessel to approach directly
towards the Isabel until the two were in dangerous proximity. For this there
was no excuse whatever, since the navigable sea at this point is wide and
the incoming steamer could easily have given the outgoing vessel a wide
berth. On the other hand it is not clear that the Isabel was chargeable with
negligence in keeping on its course; for this boat had its jib sail hoisted,
and may for that reason be considered to have had the right of way. (G.
Urrutia & Co. vs. Baco River Plantation Co., 26 Phil., 632.)
Negligence shortly preceding the moment of collision is, however,
undoubtedly chargeable to the Isabel, for the incorrect and incompetent
way in which this vessel was then handled. The explanation of this may
perhaps be found in the fact that the mate on the Isabel had been on
continuous duty during the whole preceding day and night; and being
almost absolutely exhausted, he probably was either dozing or inattentive
to duty at the time the other vessel approached.
It results, as already stated, that both vessels were at fault; and
although the negligence on the part of the mate of the incoming vessel
preceded the negligence on the part of the mate of the outgoing vessel by
an appreciable interval of time, the first vessel cannot on that account be
absolved from responsibility. Indeed, in G. Urrutia & Co. vs. Baco River
Plantation Co., supra, this court found reason for holding that the
responsibility rested exclusively on a steamer which had allowed
dangerous proximity to a sailing vessel to be brought about under
somewhat similar conditions.
We are of the opinion therefore that his Honor, the trial judge,
committed no error in holding that both vessels were to blame and in
applying article 827 of the Code of Commerce to the situation before him. It
is there declared that where both vessels are to blame, both shall be
solidarily responsible for the damage occasioned to their cargoes. As
the Isabel was a total loss and cannot sustain any part of this liability, the
burden of responding to the Government of the Philippine Islands, as
owner of the rice embarked on the Isabel, must fall wholly upon the owner
of the other ship, that is, upon the defendant, the Philippine Steamship
Company, Inc.
Only one observation will be added, in response to one of the
contentions of the appellant's attorneys, which is, that the application of
article 827 of the Code of Commerce is not limited by article 828 to the
case where it cannot be determined which of the two vessels was the
cause of the collision. On the contrary article 828 must be considered as
 an extension of article 827 to an additional case. In other words, under the
two articles combined the rule of liability announced in article 827 is
applicable not only to the case where both vessels may be shown to be
actually blameworthy but also to the case where it is obvious that only one
was at fault but the proof does not show which.
(Government of the Philippine Islands v. Philippine Steamship Co., Inc., G.R.
|||

No. 18957, [January 16, 1923], 44 PHIL 359-362)

[G.R. No. 29166. October 22, 1928.]

AUGUSTO LOPEZ, plaintiff-appellant, vs. JUAN DURUELO,

ET AL., defendants. ALBINO JISON, appellee.

Angel S. Gamboa for appellant.

Feria & La O for appellee.

SYLLABUS

1. SHIPPING; COLLISION; PROTEST. The protest required by

article 835 of the Code of Commerce in case of collision between vessels
is not necessary to preserve the rights of a person aboard a motor boat
engaged in conveying passengers between ship and shore who is injured
in a collision between the motor boat and the larger vessel.
2. ID.; ID.; ID.; CASE AT BAR. A person desirous of embarking
on a ship which was some distance away from the shore in a Philippine
port took passage upon a small motor boat, which was used in conveying
passengers and luggage to and fro between the shore and the shipside.
Owing to the negligence of thepatron or incompetence of the person in
charge so the complaint averred the boat approached too near to the
stern of the ship, with the result that the propeller of the ship, which was
still turning, struck the motor boat and sunk it, injuring the plaintiff. Held:
Upon demurrer, that the failure of the complaint to allege that the plaintiff
had made protest according to article 835 of the Code of Commerce was
no impediment to the maintenance of a civil action, under articles 1902 and
1903 of the Civil Code, to recover damages for the tort.
3. ID.; ID.; ID.; MEANING OF WORD VESSEL. The word "vessel
" (Spanish, "buque," "nave") used in the Third Section of Title IV, Book
Third, of the Code of Commerce, dealing with collisions, does not include
all ships, craft or floating structures of any kind without limitation. The
provisions of said section do not apply to minor craft engaged in river and
bay traffic.
4. PLEADING AND PRACTICE; DEMURRER; INTERPRETATION
OF PLEADING DEMURRED TO. A case should not be dismissed on
 demurrer when, under any reasonable interpretation of the complaint, a
cause of action can be made out; and the fact that a complaint is
inartificially drawn or in a certain degree lacking in precision constitutes no
sufficient reason for dismissing it on demurrer. In passing upon a demurrer,
every reasonable intendment is to be taken in favor of the pleading against
which the demurrer is directed.

DECISION

STREET, J :p

This action was instituted in the Court of First Instance of Occidental

Negros by Augusto Lopez, for the purpose of recovering damages for
personal injuries inflicted upon him by reason of the negligence of the
defendants, JuanDuruelo and Albino Jison. The defendants demurred to
the complaint, and the demurrer having been sustained, the plaintiff
elected to stand upon his complaint, which was accordingly dismissed; and
the plaintiff appealed.
The facts necessary to an understanding of the case as set out in
the complaint are briefly these: On February 10, 1927, the plaintiff, who is a
resident of the municipality of Silay, Occidental Negros, was desirous of
embarking upon the interisland steamer San Jacinto in order to go to Iloilo.
This boat was at the time in the anchoring ground of the port of Silay, some
half a mile distant from the port. The plaintiff therefore embarked at the
landing in the motor boat Jison, which was then engaged in conveying
passengers and luggage back and forth from the landing to boats at
anchor, and which was owned and operated by the defendant Albino Jison,
with Juan Duruelo as patron. The engineer (maquinista) aboard on this trip
was one Rodolin Duruelo, a boy of only 16 years of age. He is alleged to
have been a mere novice without experience in the running of motor boats;
and the day of the occurrence now in contemplation is said to have been
the third day of his apprenticeship in this capacity. It is alleged that
the Jison, upon this trip, was grossly overladen, having aboard fourteen
passengers, while its capacity was only for eight or nine.
As the motor boat approached the San Jacinto in a perfectly quiet
sea, it came too near to the stern of the ship, and as the propeller of the
ship had not yet ceased to turn, the blades of the propeller struck the motor
boat and sank it at once. It is alleged in the complaint that the approach of
the Jison to this dangerous proximity with the propeller of the San
Jacinto was due to the fault, negligence and lack of skill of the defendant
Juan Duruelo, as patron of the Jison. As the Jison sank, the plaintiff was
thrown into the water against the propeller, and the revolving blades
inflicted various injuries upon him, consisting of a bruise in the breast, two
serious fractures of the bones of the left leg, and a compound fracture of
the left femur. As a consequence of these injuries the plaintiff was kept in
bed in a hospital in the City of Manila from the 28th of February until
October 19 of the year 1927, or approximately eight months. In the
conclusion of his complaint the plaintiff sets out the various items of
damage which he suffered, amounting in all to something more than
P120,000. These damages he seeks to recover of the defendants in this
action.
As a general ground of demurrer it is assigned by the defendants
that the complaint does not show a right of action, and in the course of the
argument submitted with the demurrer attention is directed to the fact that
the complaint does not allege that a protest had been presented by the
plaintiff, within twenty-four hours after the occurrence, to the competent
authority at the port where the accident occurred. It is accordingly insisted
that, under article 835 of the Code of Commerce, the plaintiff has shown no
cause of action.
Assuming that the article of the Code of Commerce relied upon
states a condition precedent to the maintenance of an action in a case
where protest is required and that the making of protest must be alleged in
the complaint in order to show a good cause of action an assumption
that is possibly without basis, for the reason that lack of protest in a case
where protest is necessary would seem to supply matter of defense proper
to be set up in the answer, we nevertheless are of the opinion that
protest was not necessary in the case now before us. The article in
question (835, Code of Com.) in found in the section dealing with collisions,
and the context shows the collisions intended are collisions of sea-going
vessels. Said article cannot be applied to small boats engaged in river and
bay traffic. The Third Book of the Code of Commerce, dealing with
Maritime Commerce, of which the section on Collisions forms a part, was
evidently intended to define the law relative to merchant vessels and
marine shipping; and, as appears from said Code, the vessels intended in
that Book are such as are run by masters having special training, with the
elaborate apparatus of crew and equipment indicated in the Code. The
word "vessel" (Spanish, "buque," "nave"), used in the section referred to
was not intended to include all ships, craft or floating structures of every
kind without limitation, and the provisions of that section should not be held
to include minor craft engaged only in river and bay traffic. Vessels which
are licensed to engage in maritime commerce, or commerce by sea,
whether in foreign or coastwise trade, are no doubt regulated by Book III of
the Code of Commerce. Other vessels of a minor nature not engaged in
maritime commerce, such as river boats and those carrying passengers
from ship to shore, must be governed, as to their liability to passengers, by
the provisions of the Civil Code or other appropriate special provisions of
law.
 This conclusion is substantiated by the writer Estasen who makes
comment upon the word "vessel" to the following effect:
"When the mercantile codes speak of vessels, they refer solely
and exclusively to merchant ships, as they do not include war ships,
and furthermore, they almost always refer to craft which are not
accessory to another as is the case of launches, lifeboats, etc.
Moreover, the mercantile laws, in making use of the words ship,
vessel, boat, embarkation, etc., refer exclusively to those which are
engaged in the transportation of passengers and freight from one port
to another or from one place to another; in a word, they refer to
merchant vessels and in no way can they or should they be
understood as referring to pleasure craft, yachts, pontoons, health
service and harbor police vessels, floating storehouses, warships or
patrol vessels, coast guard vessels, fishing vessels, towboats, and
other craft destined to other uses, such as for instance coast and
geodetic survey, those engaged in scientific research and
exploration, craft engaged in the loading and discharge of vessels
from same to shore or docks, or in transhipment and those small craft
which in harbors, along shore, bays, inlets, coves and anchorages
are engaged in transporting passengers and baggage."
(Estasen, Der. Mer., vol. IV, p. 195.)
In Yu Con vs. Ipil (41 Phil., 770), this court held that a small vessel
used for the transportation of merchandise by sea and for the making of
voyages from one port to another of these Islands, equipped and victualed
for this purpose by its owner, is a vessel, within the purview of the Code of
Commerce, for the determination of the character and effect of the
relations created between the owners of the merchandise laden on it and
its owner. In the case before us the Jison, as we are informed in the
complaint, was propelled by a second-hand motor, originally used for a
tractor plow; and it had a capacity for only eight persons. The use to which
it was being put was the carrying of passengers and luggage between the
landing at Silay and ships in the harbor. This was not such a boat as is
contemplated in article 835 of the Code of Commerce, requiring protest in
case of collision.
In Yu Con vs. Ipil, supra, the author of the opinion quotes a passage
from the treatise on Mercantile Law by Blanco. We now have before us the
latest edition of Blanco, and we reproduce here, in both Spanish and
English, not only the passage thus quoted but also the sentence
immediately following said passage; and this latter part of the quotation is
quite pertinent to the point now under consideration.

Says Blanco:
"Las palabras 'nave' y 'buque, en su sentido gramatical, se
aplican para designar cualquier clase de embarcaciones, grandes o
pequeiias, mercantes o de guerra, significacion que no difiere
esencialmente de la juridica, con arreglo a la cual se consideran
 buques para los efectos del Codigo y del Reglamento para la
organizacion del Registro mercantil, no solo las embarcaciones
destinadas a la navegacion de cabotaje o altura, sino tambien los
diques flotantes, pontones, dragas, ganguiles y cualquier otro
aparato flotante destinado a servicios de la industria o del comercio
maritimo.
"Aun cuando, conforme a este concepto legal, parece que
todo aparato flotante que sirve directamente para el trasporte de
cosas o personas, o que indirectamente se relacionen con esta
industria, han de sujetarse a los preceptos del Codigo sobre
propiedad, transmision, derechos, inscripciones, etc., entendemos
con el Sr. Benito (obra cit.) y asi ocurre en la practica, que no son
aplicables a las pequeas embarcaciones, que solo estan sujetas a
los de la administracion de marina para el servicio de los puQrtos o
ejercicio de la industria de la pesca." (Blanco, Der. Mer., vol. II, pag.
22.)
"The words 'ship' (nave) and 'vessel' (buque), in their
grammatical sense, are applied to designate every kind of craft, large
or small, merchant vessels or war vessels, a signification which does
not differ essentially from its juridical meaning, according to which
vessels for the purposes of the Code and Regulations for the
organization of the Mercantile Registry, are considered not only those
engaged in navigation, whether coastwise or on the high seas, but
also floating docks, pontoons, dredges, scows and any other floating
apparatus destined for the service of the industry or maritime
commerce.
"Yet notwithstanding these principles from which it would seem
that any floating apparatus which serves directly for the transportation
of things or persons or which indirectly is related to this industry,
ought to be subjected to the principles of the Code with reference to
ownership, transfer, rights, registration, etc., we agree with Benito
(cobra cit.) and it so happens in practice that they are not applicable
to small craft which are only subject to administrative (customs)
regulations in the matter of port service and in the fishing industry."
We may add that the word "nave" in Spanish, which is used
interchangeably with "buque" in the Code of Commerce, means, according
to the Spanish-English Dictionary compiled by Edward R. Bensley and
published at Paris in the year 1896, "Ship, a vessel with decks and sails."
Particularly significant in this definition is the use of the word "decks," since
a deck is not a feature of the smallest types of water craft.
In this connection a most instructive case from a Federal Court in the
United States is that of The Mamie (5 Fed., 813), wherein it was held that
only vessels engaged in what is ordinarily known as maritime commerce
are within the provisions of law conferring limited liability on the owner in
case of maritime disaster. In the course of the opinion in that case the
author cites the analogous provisions in the laws of foreign maritime
nations, especially the provisions of the Commercial Code of France; and it
is observed that the word "vessel" in these codes is limited to ships and
other sea-going vessels. "Its provisions are not applicable," said the court,
"to vessels in inland navigation, which are especially designated by the
name of boats." Quoting from the French author Dufour (1 Droit Mer. 121),
the writer of the opinion in the case cited further says: "Thus, as a general
rule, it appears to me clearly, both by the letter and spirit of the law, that
the provisions of the Second Book of the Commercial Code [French] relate
exclusively to maritime and not to fluvial navigation; and that consequently
the word 'ship,' when it is found in these provisions, ought to be understood
in the sense of a vessel serving the purpose of maritime navigation or
seagoing vessel, and not in the sense of a vessel devoted to the navigation
of rivers."
It is therefore clear that a passenger on a boat like the Jison, in the
case before us, is not required to make protest as a condition precedent to
his right of action for the injury suffered by him in the collision described in
the complaint. In other words, article 835 of the Code of Commerce does
not apply. But even if said provision had been considered applicable to the
case in hand, a fair interpretation of the allegations of the complaint
indicates, we think, that the injuries suffered by the plaintiff in this case
were of such a nature as to excuse protest; for, under article 836, it is
provided that want of protest cannot prejudice a person not in a condition
to make known his wishes. An individual who has suffered a compound
fracture of the femur and received other physical injuries sufficient to keep
him in a hospital for many months, cannot be supposed to have been in a
condition to make protest within twenty-four hours of such occurrence. It
follows that the demurrer in this case was not well taken and should have
been overruled.
In their brief in this court the attorneys for the defendant have
criticized the complaint for a general lack of certainty and precision in more
than one respect. However, we have read the document attentively and, in
our opinion, it states a good cause of action upon a civil liability arising
from tort under articles 1902 and 1903 of the Civil Code, and our attention
has not been drawn to any provision of law which would constitute an
obstacle to the maintenance of the action.
We have repeatedly called the attention of trial courts to the general
rule that a case should not be dismissed on demurrer when, under any
reasonable interpretation of the complaint, a cause of action can be made
out; and the fact that a complaint is inartificially drawn or in a certain
degree lacking in precision constitutes no sufficient reason for dismissing it.
In passing upon a demurrer, every reasonable intendment is to be taken in
favor of the pleader. In this connection it should be borne in mind that if a
complaint does not show a good cause of action, the action can be
dismissed at a later stage of the proceedings; and even where no objection
has been previously made, the point can be raised in the Supreme Court
under section 93 of the Code of Civil Procedure (Abiera vs. Orin, 8 Phil.,
 193). Little or no appreciable prejudice to the defendant will therefore
ordinarily result from overruling a demurrer, and no harm is done to anyone
by requiring the defendant to answer. On the contrary, grave prejudice may
result to a plaintiff from the erroneous sustaining of a demurrer, because of
the delay and even expense necessary to set the matter right upon appeal.
The judgment appealed from is reversed, the demurrer overruled,
and the defendant is required to answer the complaint within five days after
notification of the return of this decision to the court of origin. So ordered,
with costs against the appellee.
||| (Lopez v. Jison, G.R. No. 29166, [October 22, 1928], 52 PHIL 229-237)
MARITIME PROTEST
Condition precedent or prerequisite to recovery of damages arising from collisions and
other maritime accidents.
It is a written statement made under oath by the captain of a vessel after the occurrence of
an accident or disaster in which the vessel or cargo is lost or damaged, with respect to the
circumstances attending such occurrence, for the purpose of recovering losses and
damages.
Excuses for not filing protest: 1) where the interested person is not on board the vessel;
and 2) on collision time, need not be protested. (Art. 836)
Cases applicable:
1. Collision (Art. 835);
2. Arrival under stress (Art. 612(8));
3. Shipwrecks (Arts. 612(15), 843);
4. Where the vessel has gone through a hurricane or when the captain believes that the
cargo has suffered damages or averages (Art. 624).

Who makes: Captain

When made: within 24 hours from the time the collision took place.
Before whom made: competent authority at the point of collision or at the first port of
arrival, if in the Philippines and to the Philippine consul, if the collision took place abroad.
(Art. 835)