NATIONAL FOOD AUTHORITY vs. CA G.R. No.

96453, August 4, 1999

Facts:

National Food Authority (NFA), thru its officers, entered into a

“Letter of Agreement for Vessel/Barge Hire with Hongfil for the shipment of 200,000 bags of
corn grains from Cagayan de Oro City to Manila. The loading of bags of corn grains in the
vessel commenced but it took a longer period of 21 days, 15 hours, and 18 minutes to finish
than as was certified by the arrastre firm as there was a strike staged by the arrastre workers
in view of the refusal of the striking stevedores to attend to their work. The vessel was
allowed to depart for the port of Manila and arrived there, but unfortunately, it took a longer
period of 20 days, 14 hours and 33 minutes to finish the unloading than the discharging rate
certified by the Port of Manila, due to the unavailability of a berthing space for the vessel
M/V CHARLIE/DIANE. Only 166,798 bags were unloaded at the Port of Manila. After the
discharging was completed, NFA paid Hongfil the amount of P1,006,972.11 covering the
shipment of corn grains. Thereafter, Hongfil sent its billing to NFA claiming payment for
freight covering the shut-out load or deadfreight as well as demurrage, allegedly sustained
during the loading and unloading of subject shipment of corn grains. When NFA refused to
pay the amount reflected in the billing, Hongfil brought the present action against NFA.

Issues:

(1) Can petitioners be held liable for deadfreight? (2) Can petitioners be held liable for
demurrage?

Held:

(1) Yes. It bears stressing that subject Letter of Agreement is considered a Charter Party. A
charter party is classified into (1)

“bareboat” or “demise” charter and (2) contract of affreightment.

Subject contract is one of affreightment, whereby the owner of the vessel leases part or all
of its space to haul goods for others. It is a contract for special service to be rendered by the
owner of the vessel. Under such contract, the ship retains possession, command, and
navigation of the ship, the charterer orfreighter merely having use of the space in the vessel
in return for his payment of the charter hire. Under the law, the cargo not loaded is
considered a deadfreight. It is the amount paid by or recoverable from a charterer

of a ship for the portion of the ship’s capacity the latter contracted for

but failed to occupy. Explicit and succinct is the law that the liability for deadfreight is on the
charterer. (Article 680 of the Code of Commerce). (2) No. Demurrage is the sum fixed in a
charter party as a remuneration to the owner of the ships for the detention of his vessel
beyond the number of days allowed by the charter party for loading or unloading or for
sailing. Liability for demurrage, using the word in its technical sense, exists only when
expressly stipulated in the contract. Shipper or charterer is liable for the payment of
demurrage claims when he exceeds the period for loading and unloading as

agreed upon or the agreed “laydays”. The period for such

may or may not be stipulated in the contract. A charter party may either provide for a fixed
laydays or containgeneral or indefinite words such
as “customary quick dispatch” or “as fast as the streamer can load”.

In the case at bar, the charter party provides merely for a general or

indefinite words of “customary quick dispatch”. Such stipulation

implies that loading and unloading of the cargo should be within a reasonable time. The
charterer NFA could not be held liable for demurrage for it appears that cause of delay was
not imputable to either of the parties. The cause of delay during the loading was the strike
staged by the crew of the arrastre operator, and the unavailability of a berthing space for the
vessel during the unloading. Here, the Court holds that the delay sued upon was still within
the

“reasonable time” embraced in the stipulation of “Customary Quick Dispatch”. Furthermore,

considering the subject contract of affreightment contains an express provision
“Demurrage/Dispatch: NONE”, the same left the parties with no recourse but to apply the
literal meaning of such stipulation.

G.R. No. 4395 September 9, 1908

BEHN, MEYER & CO., LTD., plaintiffs-appellees, vs. EL BANCO ESPAÑOL-

FILIPINO, defendant-appellant.

Facts: On the 3d of November, 1906, at Hongkong, Sander, Wieler and Co., as agents for the
German steamship Hilary, chartered her to the interveners, Sin Liong, and Co., of Manila. By
the terms of the charter party, she was to proceed to the port of Saigon Bay, to load there or
at Phu Yen Harbor as many head of cattle as the steamer could safely, carry, and being
loaded, then to proceed to the port of Manila and so end the voyage.

Upon its arrival at Saigon, the ship was loaded with the rice then it proceeded to Phu Yen
Harbor. It was in the said harbor where the ship was contracted to load 202 head of cattle.
However, the captain refused to load the carabaos. When the time the captian consented to
receive the said carabaos, the weather was so bad that cattle was never loaded when it
sailed back to Manila.

The vessel arrived in Manila on the 3rd of December. The interveners, the charters, desiring
to unload part of the rice at Iloilo, as soon as the boat arrived made a contract by cable with
Sander, Wieler and Co., in Hongkong, for a voyage to Iloilo, agreeing to pay therefor 800
Hongkong dollars. As soon as the boat arrived the captain applied to the plaintiffs to act his
agents and to attend to the business while here. Before that time that plaintiffs had never
acted as the agents for the steamer.

By the terms of the charter party, the freight for the voyage from Saigon to Manila, which
was 9,250 Hongkong dollars, was to be paid on or before the delivery of the cargo and cattle
at Manila. The charterers did not desire to make that payment until the balance of the cargo
had been unloaded at Iloilo. The plaintiffs would not allow the vessels to leave for Iloilo until
the freight and all claims for demurrage had been paid or secured. Thereupon the charterers
deposited P13,000.00 with the defendant bank. The defendant bank wrote on a letter to the
plaintiffs stating that if upon the completion of the unloading, the price stipulated in the
agreement and the demurrage is not paid by said parties, defendant bank bound itself to
make such payment.
After the vessel finished unloading, plaintiffs presented to the charterers, the interveners, an
account amounting to 12, 350 Hongkong dollars. However, the charteres refused to pay it;
application was then made by plaintiffs to the defendant bank but the latter refused. Thus,
the former commenced an action against defendant bank.

It was alleged that the plaintiffs are not the real parties in interest in this case, the claim of
the appellants being that the action should have been brought in the name of the owners of
the vessel, and that Behn, Meyer and Co. was not the real party in interest.

Issue: WON Behn, Meyer and Co. can maintain the action in their own names.

Ruling: Yes.

If Behn, Meyer and Co. had brought this action upon the charter party itself to recover the
freight therein mentioned, it is very clear that it could not be maintained. They were not
parties to that contract and had no interest to the only parties are the defendant bank and
Behn, Meyer and Co. The defendant bank contracted directly with Behn, Meyer and Co. and
no mention is made in the contract of owners of the streamer.

The evidence shows that Behn, Meyer and Co. were agents of the capital and that the
transaction to which their agency relates was a mercantile one. Being such agents, they
made a contract in their own names with the defendant bank. It appears from the testimony
of the manager of the bank that he was not notified and never knew for whom Behn, Meyer
and Co. where acting. The document itself shows that he contracted with them in their own
names and there is no evidence to show Behn, Meyer and Co. disclosed to the bank the
names of the persons for whom they were acting. The manager of the bank never saw the
charter party and knew nothing about its contents.

NARIC vs. CA et al
G.R. No. L-32320
July 16, 1979
FACTS: The National Rice and Corn Corporation (Naric) had on
stock 8000 metric tons of corn which it could not dispose of due to its
poor quality. Naric called for bids for the purchase of the corn and
rice. But precisely because of the poor quality of the corn, a direct
purchase of said corn even with the privilege of importing
commodities did not attract good offers. Davao Merchandising
Corporation (Damerco) came in with its offer to act as agent in the
exportation of the corn, with the agent answering for the price thereof
and shouldering all expenses incidental thereto, provided it can
import commodities, paying the NARIC therefor from the price it
offered for the corn. Damerco was to open a domestic letter of credit,
which shall be available to the NARIC drawing therefrom through
sight draft without recourse. The availability of said letter or letters of
credit to the NARIC was dependent upon the issuance of the export
permit. The payment therefor depended on the importation of the
collateral goods, that is after its arrival.
The first half of the collateral goods were successfully imported. Due
to the inferior quality of the corn, it had to be replaced with more
acceptable stock. This caused such delay that the letters of credit
expired without the NARIC being able to draw the full amount
therefrom. Checks and PN were issued by DAMERCO for the purpose
of securing the unpaid part of the price of the corn and as guaranty
that DAMERCO will purchase the corresponding collateral goods.

But because of the change of administration in the government,

barter transactions were suspended. Hence, DAMERCO was not able
to import the remaining collateral goods.

NARIC instituted in the CFI of Manila against DAMERCO and

Fieldmen’s Insurance Co. Inc. an action for recovery of a sum of
money representing the balance of the value of corn and rice exported
by DAMERCO.

The trial court rendered in favor of NARIC ordering DAMERCO and

Fieldmen’s Insurance Co. Inc., to pay, jointly and severally. CA
reversed the trial court’s decision and rendered a new judgement
dismissing the complaint as premature and for lack of cause of action.
Hence this petition for certiorari.

ISSUE: Whether DAMERCO only acted as an agent of NARIC or is a

buyer

HELD: the petition for review is denied and the resolution of the CA
appealed from is hereby affirmed

AGENT

Clearly from the contract between NARIC and DAMERCO: bids were
previously called for by the NARIC for the purchase of corn and
rice to be exported as well as of the imported commodities that will
be brought in, but said biddings did not succeed in attracting good
offers. Subsequently, Damerco made an offer. Now, to be sure, the
contract designates the Naric as the seller and the Damerco as the
buyer. These designations, however, are merely nominal, since the
contract thereafter sets forth the role of the “buyer” (Damerco)’ “as
agent of the seller” in exporting the quantity and kind of corn and rice
as well as in importing the collateral goods thru barter and “to pay
the aforementioned collateral goods.”
The contract between the NARIC and the DAMERCO is bilateral and
gives rise to a reciprocal obligation. The said contract consists of two
parts: (1) the exportation by the DAMERCO as agent for the NARIC
of the rice and corn; and (2) the importation of collateral goods by
barter on a back to back letter of credit or no-dollar remittance basis.
It is evident that the DAMERCO would not have entered into the
agreement were it not for the stipulation as to the importation of the
collateral goods which it could purchase.

It appears that we were also misled to believe that the Damerco was
buying the corn. A closer look at the pertinent provisions of the
contract, however, reveals that the price as stated in the contract was
given tentatively for the purpose of fixing the price in barter. It
should likewise be stressed that the aforesaid exportation and
importation was on a “no-dollar remittance basis”. In other words,
the agent, herein defendant Damerco, was not to be paid by its
foreign buyer in dollars but in commodities. Damerco could not get
paid unless the commodities were imported, and Damerco was not
exporting and importing on its own but as agent of the
plaintiff, because it is the latter alone which could
export and import on barter basis according to its
charter.Thus, unless Damerco was made an agent of the plaintiff,
the former could not export the corn and rice nor import at the same
time the collateral goods. This was precisely the intention of the
parties.
He is not to be considered a buyer, who should be liable for the sum
sought by NARIC because the contract itself clearly provides the
Damerco was to export the rice and corn, AND TO BUY THE
collateral goods. There is nothing in the contract providing
unconditionally that Damerco was buying the rice and corn. To be
more specific, if the agreement was just a sale of corn to Damerco, the
contract need not specify that Damerco was to buy the collateral
goods.

Dela Torre vs. Court of Appeals and Concepcion

(G.R. No. 160088. July 13, 2011)

FACTS:

Concepcion owned LCT-Josephine , a vessel registered with the Philippine Coast Guard.
February 1, 1984 - Concepcion entered into a "Preliminary Agreement" with Dela Torre for
the dry- docking and repairs of the LCT Josephine as well as for its charter afterwards. Under
this agreement, Concepcion agreed that after the dry-docking and repair of LCT-Josephine, it
"should" be chartered for P10,000.00 per month with the following conditions: 1. The
CHARTERER will be the one to pay the insurance premium of the vessel. 2. The vessel will be
used once every three (3) months for a maximum period of two (2) weeks. 3. Concepcion
agreed that LCT-Josephine should be used by Dela Torre for maximum period of two (2)
years. 4. Dela Torre will take charge of maintenance cost of the said vessel. June 20, 1984 -
Concepcion and the Philippine Trigon Shipyard Corporation (PTSC), represented by Dela
Torre, entered into a "Contract of Agreement," wherein the latter would charter LCT-
Josephine retroactive to May 1, 1984. August 1, 1984 - PTSC/Roland sub-chartered LCT-
Josephine to Trigon Shipping Lines (TSL), a single proprietorship owned by Roland's father,
Agustin de la Torre (Agustin). November 22, 1984 - TSL, this time represented by Roland per
Agustin's Special Power of Attorney, sub-chartered LCT-Josephine to Larrazabal for the
transport of cargo consisting of sand and gravel to Leyte. November 23, 1984 - the LCT-
Josephine with its cargo of sand and gravel arrived at Philpos, Isabel, Leyte. The vessel was
beached near the NDC Wharf. With the vessel's ramp already lowered, the unloading of the
vessel's cargo began with the use of Larrazabal's payloader. While the payloader was on the
deck of the LCT-Josephine scooping a load of the cargo, the vessel's

ramp started to move downward, the vessel tilted and sea water rushed in. Shortly
thereafter, LCT-Josephine sank. Concepcion demanded that PTSC/Roland refloat LCT-
Josephine. The latter assured Concepcion that negotiations were underway for the refloating
of his vessel. Unfortunately, this did not materialize. Hence, case was initiated by
Concepcion. RTC: declared that the "efficient cause of the sinking of the LCT-JOSEPHINE was
the improper lowering or positioning of the ramp," which was well within the charge or
responsibility of the captain and crew of the vessel.Defedants (Dela

Torres’

and PTSC) were liable, jointly and severally. CA: Affirmed in toto. Additional findings:

There was improper lowering or positioning of the ramp, which was not at "peak," according
to de la Torre and "moving down" according to Sungayan when the payloader entered and
scooped up a load of sand and gravel. Because of this, the payloader was in danger of being
submerged and caused Larrazabal to order the operator to go back into the vessel, according
to de la Torre's version, or back off to the shore, per Sungayan. Whichever it was, the fact
remains that the ramp was unsteady (moving) and compelled action to save the payloader
from submerging, especially because of the conformation of the sea and the shore. . .

The contract executed on June 20, 1984, between Concepcion and Rolando showed that the
services of the crew of the owner of the vessel were terminated. This allowed the charterer,
Rolando, to employ their own. The sub-charter contract between PTSC TSL showed similar
provision where the crew of PTSC had to be terminated or rehired by TSL. As to the
agreement with fourth-party Larrazabal, it is silent on who would hire the crew of the vessel.
Clearly, the crew manning the vessel when it sunk belonged to TSL. Hubart Sungayan, the
acting Chief Mate, testified that he was hired by Agustin de la Torre, who in turn admitted to
hiring the crew. The actions of Larrazabal and his payloader operator did not include the
operation of docking where the problem arose.

ISSUE:

(1)

W/N the Limited Liability Rule in Code of Commerce should be applied to the defendants.
The said rule has been explained to be that of the real and hypothecary doctrine in maritime
law where the shipowner or ship agent's liability is held as merely co-extensive with his
interest in the vessel such that a total loss thereof results in its extinction. In this jurisdiction,
this rule is provided in three articles of the Code of Commerce. These are: Art. 587. The ship
agent shall also be civilly liable for the indemnities in favor of third persons which may arise
from the conduct of the captain in the care of the goods which he loaded on the vessel; but
he may exempt himself therefrom by abandoning the vessel with all her equipment and the
freight it may have earned during the voyage. Art. 590. The co-owners of the vessel shall be
civilly liable in the proportion of their interests in the common fund for the results of the acts
of the captain referred to in Art. 587. Each co-owner may exempt himself from this liability
by the abandonment, before a notary, of the part of the vessel belonging to him. Art. 837.
The civil liability incurred by shipowners in the case prescribed in this section, shall be
understood as limited to the value of the vessel with all its appurtenances and freightage
served during the voyage.

Article 837 specifically applies to cases involving collision which is a necessary consequence
of the right to abandon the vessel given to the shipowner or ship agent under the Article
587. Similarly, Article 590 is a reiteration of Article 587, only this time the situation is that the
vessel is co-owned by several persons. Obviously, the forerunner of the Limited Liability Rule
under the Code of Commerce is Article 587.

Now, the latter is quite clear on which indemnities may be confined or restricted to the value
of the vessel pursuant to the said Rule, and these are the

"indemnities in favor of third persons which may arise from the conduct of the captain in the
care of the goods which he loaded on the vessel." Thus, what is contemplated is the liability
to third persons who may have dealt with the shipowner, the agent or even the charterer in
case of demise or bareboat charter. The only person who could avail of this is the shipowner,
Concepcion. He is the very person whom the Limited Liability Rule has been conceived to
protect. The petitioners cannot invoke this as a defense. In

Monarch Insurance Co., Inc. v. CA,

Supreme Court held that: 'No vessel, no liability,' expresses in a nutshell the limited liability
rule. The shipowner's or agent's liability is merely coextensive with his interest in the vessel
such that a total loss thereof results in its extinction. The total destruction of the vessel
extinguishes maritime liens because there is no longer any res to which it can attach. This
doctrine is based on the real and hypothecary nature of maritime law which has its srcin in
the prevailing conditions of the maritime trade and sea voyages during the medieval ages,
attended by innumerable hazards and perils.To offset against these adverse conditions and to
encourage shipbuilding and maritime commerce, it was deemed necessary to confine the
liability of the owner or agent arising from the operation of a ship to the vessel, equipment,
and freight, or insurance, if any.

In view of the foregoing, Concepcion as the real shipowner is the one who is supposed to be
supported and encouraged to pursue maritime commerce. Thus, it would be absurd to apply
the Limited Liability Rule against him who, in the first place, should be the one benfitting
from the said rule.

Distinguish the rights of the Shipowner and the Charterer (Yueng Sheng Exchange and
Trading Co. v. Urrutia & Co.)

As charterers of the vessel, did not put the latter in the place of the former, nor make them
agents of the owner or owners of the vessel. With relation to those agents, they retained
opposing rights derived from the charter party of the vessel, and at no time could they be
regarded by the third parties, or by the authorities, or by the courts, as being in the place of
the owners or the agents in matters relating to the

responsibilities pertaining to the ownership and possession of the vessel.

Charterer does not completely and absolutely step into the shoes of the shipowner or even
the ship agent because there remains conflicting rights between the former and the real
shipowner as derived from their charter agreement.

Their (the charterer's) possession was, therefore, the uncertain title of lease, not a
possession of the owner, such as is that of the agent, who is fully subrogated to the place of
the owner in regard to the dominion, possession, free administration, and navigation of the
vessel. Therefore, even if the contract is for a bareboat or demise charter where possession,
free administration and even navigation are temporarily surrendered to the charterer,
dominion over the vessel remains with the shipowner. Ergo, the charterer or the sub-
charterer, whose rights cannot rise above that of the former, can never set up the Limited
Liability Rule against the very owner of the vessel. Borrowing the words of Chief Justice
Artemio V. Panganiban, "

Indeed, where the reason for the rule ceases, the rule itself does not apply

."

(2)

What is the liability of the Charterer and Sub-Charter? In the present case, the charterer and
the sub-charterer through their respective contracts of agreement/charter parties, obtained
the use and service of the entire LCT- Josephine. The vessel was likewise manned by the
charterer and later by the sub- charterer's people. With the complete and exclusive
relinquishment of possession, command and navigation of the vessel, the charterer and later
the sub-charterer became the vessel's owner pro hac vice. Now, and in the absence of any
showing that the vessel or any part thereof was commercially offered for use to the public,
the above agreements/charter parties are that of a private carriage where the rights of the
contracting parties are primarily defined and governed by the stipulations in their contract.
Although certain statutory rights and obligations of charter parties are found in the Code of
Commerce, these provisions as correctly pointed out by the RTC, are not applicable in the
present case. Necessarily, the Court looks to the New Civil Code to supply the deNciency.
Thus, the RTC and the CA were both correct in applying the statutory provisions of the New
Civil Code in order to define the respective rights and obligations of the opposing parties.
Thus, Roland, who, in his personal capacity, entered into the Preliminary Agreement with
Concepcion for the dry-docking and repair of LCT-Josephine, is liable under Article 1189 of
the New Civil Code. There is no denying that the vessel was not returned to Concepcion after
the repairs because of the provision in the Preliminary Agreement that the same "should" be
used by Roland for the first two years. Before the vessel could be returned, it was lost due to
the negligence of Agustin to whom Roland chose to sub-charter or sublet the vessel. PTSC is
liable to Concepcion under Articles 1665 and 1667 of the New Civil Code. As the charterer or
lessee under the Contract of Agreement dated June 20, 1984, PTSC was contract-bound to
return the thing leased and it was liable for the deterioration or loss of the same. Agustin, on
the other hand, who was the sub-charterer or sub-lessee of LCT- Josephine, is liable under
Article 1651 of the New Civil Code. 39 Although he was never privy to the contract between
PTSC and Concepcion, he remained bound to preserve the chartered vessel for the latter. In
any case, all three petitioners are liable under Article 1170 of the New Civil Code - DAMAGES.