UNIVERSITY OF SOUTHERN PHILIPPINES

FOUNDATION
SALINAS DRIVE LAHUG, CEBU CITY
COLLEGE OF LAW

ELECTIVE: ADMIRALTY

CASE DIGESTS

A partial requirement for Elective – Admiralty Law subject,

presented and submitted to Atty. Camille B. Amoroso

Section B – Batch 2019

Saturday 3:00pm-5:00pm Schedule
 Submitted by the following:

Abella, Ma Fe P.
Alvarico, Danah L.
Angot, Ladylou G.
Ator, Leonides A.
Baronda, Phialene Rosari C.
Bayona, Richelle Jane C.
Comedido, Aia Marie M.
Cruiz, Mike Joseph M.
Del Fiero, Melody K.
Dumagan, Joan D.
Faelnar, Sheena Rhea T.
Francisco, Princess Angelica C.
Friolo, Rex G.
Garcia, Stephen John C.
Gorosin, Marissa C.
Juarez, Jerby Emmanuel T.
Lumongsod, Jose Neil D.
Maldo, Mikhaela Frances A.
Maluya, Jerryl C.
Manit, Joelan Rouque G.
Niebres, Ellen C.
Perida, Kathlyn Jane V.
Prosia, Nena T.
Regis, Renelyn F.
Rizada, Lumen Christine B.
Rodriguez, Joanna Stephanie P.
Salares, Glepcel L.
Salva, Jherwin Kaye M.
Sanchez, Brazil
Ylanan, Mayell N.

x--------------------- x
 DE LA TORRE VS COURT OF APPEALS

FACTS:

Standard Insurance Co., Inc. (STANDARD) filed a complaint against the

petitioners Flor Bola Mangoba and RCJ Bus Lines, Inc. The complaint was predicated upon an accident
which involves the Mitsubishi Lancer and the RCJ Bus Lines. Upon seeing a pile of gravel and sand on the
road, the Toyota Corolla, which is ahead of the Mitsubishi Lancer, stopped on its tracks. The Mitsubishi
Lancer followed suit and also halted. At this point, the bus hit and bumped the rear portion of the
Mitsubishi Lancer causing it to move forward and hit the Toyota Corolla in front of it. As a result of the
incident, the Mitsubishi Lancer sustained damages amounting to P162,151.22, representing the costs of
its repairs. Under the comprehensive insurance policy secured by Rodelene Valentino, owner of the
Mitsubishi Lancer, STANDARD reimbursed to the former the amount she expended for the repairs of her
vehicle. Rodelene then executed a Release of Claim and Subrogation Receipt, subrogating STANDARD to
all rights, claims and actions she may have against RCJ Bus Lines, Inc. and its driver, Flor Bola Mangoba.
In its answer, RCJ Bus Lines, Inc. maintained, among others, that the direct, immediate and proximate
cause of the accident was the negligence of the driver of the Mitsubishi Lancer when, for no reason at
all, it made a sudden stop along the National Highway, as if to initiate and/or create an accident.
The MeTC rendered its decision in favor of Standard. The RTC affirmed with modification
the MeTC’s Decision deleting the award for exemplary damages.The appellate court found that the RTC
committed no reversible error in affirming RCJ’s liability as registered owner of the bus and employer
of Mangoba.

ISSUES:

Whether the petitioner is entitled to the limited liability rule

RULING:

No. 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.
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 benefitting from the said rule.
 MONARCH INSURANCE VS COURT OF APPEALS

FACTS:

All cases arose from the loss of cargoes of various shippers when the M/V P. Aboitiz, a common carrier
owned and operated by Aboitiz, sank on her voyage from Hong Kong to Manila on October 31, 1980.
Seeking indemnification for the loss of their cargoes, the shippers, their successors-in-interest, and the
cargo insurers such as the instant petitioners filed separate suits against Aboitiz before the Regional Trial
Courts. The claims numbered one hundred and ten (110) for the total amount of P41,230,115.00 which is
almost thrice the amount of insurance proceeds of P14,500,000.00 plus earned freight of P500,000.00
according to Aboitiz. To this day, some of these claims, including those of herein petitioners, have not yet
been settled.

ISSUES:

Whether or not the doctrine of limited liability applies in the instant case.

RULING:

Yes. The doctrine of limited liability is applicable.

The failure of Aboitiz to present sufficient evidence to exculpate itself from fault and/or negligence in the
sinking of its vessel in the face of the foregoing expert testimony constrains us to hold that Aboitiz was
concurrently at fault and/or negligent with the ship captain and crew of the M/V P. Aboitiz.

[This is in accordance with the rule that in cases involving the limited liability of shipowners, the initial
burden of proof of negligence or unseaworthiness rests on the claimants.

However, once the vessel owner or any party asserts the right to limit its liability, the burden of proof as
to lack of privity or knowledge on its part with respect to the matter of negligence or unseaworthiness is
shifted to it. This burden, Aboitiz had unfortunately failed to discharge.]

That Aboitiz failed to discharge the burden of proving that the unseaworthiness of its vessel was not due
to its fault and/or negligence should not however mean that the limited liability rule will not be applied to
the present cases.

The peculiar circumstances here demand that there should be no strict adherence to procedural rules on
evidence lest the just claims of shippers/insurers be frustrated. The rule on limited liability should be
applied in accordance with the latest ruling in Aboitiz Shipping Corporation v. General Accident Fire and
Life Assurance Corporation, Ltd.,] promulgated on January 21, 1993, that claimants be treated as
"creditors in an insolvent corporation whose assets are not enough to satisfy the totality of claims against
it."
 ABOITIZ SHIPPING CORP VS COURT OF APPEALS

FACTS:

The evidence disclosed that on May 11, 1975, Anacleto Viana boarded the vessel M/V Antonia, owned
by defendant, at the port at San Jose, Occidental Mindoro, bound for Manila, having purchased a ticket
(No. 117392) in the sum of P23.10 (Exh. 'B'). On May 12, 1975, said vessel arrived at Pier 4, North
Harbor, Manila, and the passengers therein disembarked, a gangplank having been provided connecting
the side of the vessel to the pier. Instead of using said gangplank Anacleto Viana disembarked on the third
deck which was on the level with the pier. After said vessel had landed, the Pioneer Stevedoring
Corporation took over the exclusive control of the cargoes loaded on said vessel pursuant to the
Memorandum of Agreement dated July 26, 1975 (Exh. '2') between the third party defendant Pioneer
Stevedoring Corporation and defendant Aboitiz Shipping Corporation.
The crane owned by the third party defendant and operated by its crane operator Alejo Figueroa was
placed alongside the vessel and one (1) hour after the passengers of said vessel had disembarked, it started
operation by unloading the cargoes from said vessel. While the crane was being operated, Anacleto Viana
who had already disembarked from said vessel obviously remembering that some of his cargoes were still
loaded in the vessel, went back to the vessel, and it was while he was pointing to the crew of the said
vessel to the place where his cargoes were loaded that the crane hit him, pinning him between the side of
the vessel and the crane. He was thereafter brought to the hospital where he later expired three (3) days
thereafter, on May 15, 1975, the cause of his death according to the Death Certificate (Exh. "C") being
"hypostatic pneumonia secondary to traumatic fracture of the pubic bone lacerating the urinary bladder"
(See also Exh. "B"). For his hospitalization, medical, burial and other miscellaneous expenses, Anacleto's
wife, herein plaintiff, spent a total of P9,800.00 (Exhibits "E", "E-1", to "E-5"). Anacleto Viana who was
only forty (40) years old when he met said fateful accident (Exh. 'E') was in good health. His average
annual income as a farmer or a farm supervisor was 400 cavans of palay annually. His parents, herein
plaintiffs Antonio and Gorgonia Viana, prior to his death had been recipient of twenty (20) cavans of
palay as support or P120.00 monthly. Because of Anacleto's death, plaintiffs suffered mental anguish and
extreme worry or moral damages. For the filing of the instant case, they had to hire a lawyer for an agreed
fee of ten thousand (P10,000.00) pesos

ISSUES:

Whether or not petitioner is still responsible as a carrier to Viana after the latter had already disembarked
the vessel.

RULING:

Yes. The rule is that the relation of carrier and passenger continues until the passenger has been landed at
the port of destination and has left the vessel owner’s dock or premises. Once created, the relationship
will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted from
the carrier’s conveyance or had a reasonable opportunity to leave the carrier’s premises.
All persons who remain on the premises a reasonable time after leaving the conveyance are to be deemed
passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined from
all the circumstances, and includes a reasonable time to see after his baggage and prepare for his
departure. The carrier-passenger relationship is not terminated merely by the fact that the person
transported has been carried to his destination if, for example, such person remains in the carrier’s
premises to claim his baggage. Consequently, under the foregoing circumstances, the victim Anacleto
Viana is still deemed a passenger of said carrier at the time of his tragic death.
 ABOITIZ SHIPPING CORP. VS GENERAL ACCIDENT FIRE AND ASSURANCE GR 100446
217 SCRA 359 (1993)

FACTS: Petitioner is a corporation engaged in the business of maritime trade as a carrier who owned and
operated the M/V P/ ABOITIZ, a common carrier that sank on a voyage. Private respondent General
Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC) is a foreign insurance company pursuing
its remedy as a subrogee of several cargo consignees whose respective cargo sank with the said vessel and
for which it has priory paid. The sinking of vessel gave rise to filling of suit to recover the lost cargo
either by shippers, their successors-in-interest, or the cargo insurers like GAFLAC as subrogees.

The sinking was initially investigated by the Board of Marine Inquiry, which found that such sinking was
due to fortuitous event. Notwithstanding such finding, the trial court found against the carrier on the basis
that the loss was not due to force majeure. The attempted execution of the judgment award in said case
gave rise to this case. Aboitiz contends that the Limited Liability Rule warrants immediate stay of
execution of judgment to prevent impairment of other creditor’s shares.

ISSUE/S: WON the doctrine of limited liability is applicable to the case?

HELD: YES. The provisions under the Code of Commerce provides that limited liability rule covers only
civil liabilities for injuries to third parties (Art. 587), acts of the captain (Art. 590) and collisions If these
circumstances are attendant then the only time the Limited Liability Rule does not apply is when there is
an actual finding of negligence on the part of the vessel owner or agent. In this case, there has been no
actual finding of negligence on the part of Aboitiz. The cause of the sinking of the vessel was because of
unseaworthiness due to the failure of the crew and the master to exercise extraordinary diligence. There
appears to have been no evidence presented sufficient to form a conclusion that petitioner shipowner itself
was negligent.
 ICRSI VS. PRUDENTIAL GUARANTEE G.R. No. 134514; December 8, 1999; 320 SCRA 244
(1999)

FACTS: Mother vessel Tao He loaded and received on board in San Francisco, California, a shipment of
five lots of canned foodstuff complete and in good order and condition for transport to Manila in favor of
Duel Food Enterprises (consignee) under “shipper’s load and count”.

The shipment arrived at the port of Manila and discharged by the vessel MS Wei He in favor of ICTSI for
safekeeping. The brokerage withdrew the shipment and delivered the same to the consignee. An
inspection there revealed that 161 cartoons were missing valued at P85,984.40. Consignee learned of such
shortage on June 4, 1990. It filed claim for loss on October 2, 1990. Claim for indemnification of the loss
having been denied by ICTSI and the brokerage, consignee sought payment from Prudential (insurer)
under the marine cargo policy.
The appellate court found ICTSI negligent in its duty to exercise due diligence over the shipment. It also
ruled that the filing of a claim depended on the issuance of a certificate of loss by ICTSI based on the
liability clause printed on the back of the arrastre and wharfage receipt. Since ICTSI did not issue such a
certificate despite being informed of the shortage, the 15-day period given to the consignee for filing a
formal claim never began. Prudential, therefore can hold the ICTSI liable for the shortage.

ISSUE/S:
1) WON ICTSI negligent in its duty to exercise due diligence over the shipment?
2) WON the consignee failed to file a formal claim within the period stated on the dorsal side of the
arrastre and wharfage receipt?

HELD:
1) NO. The consigned goods were shipped under “shipper’s load and count”. This means that the shipper
was solely responsible for the loading of the container, while the carrier was oblivious to the contents of
the shipment. Protection against pilferage of the shipment was the consignee’s lookout. The arrastre
operator was not required to verify the contents of the container received and to compare them with those
declared by the shipper because as earlier stated, the cargo was at the shipper’s load and count. The
arrastre operator was expected to deliver to the consignee only the container received from the carrier.

The legal relationship between the arrastre and consignee is akin to that between a warehouseman and a
depositor. As to both the nature of the functions and the place of their performance, arrastre operator’s
services are clearly not maritime in character.

2) YES. In order to hold the arrastre operator liable for lost or damaged goods, the claimant should file
with the operator a claim for the value of said goods “within the 15-day period from the date of discharge
of the last package from the carrying vessel.” The filing within the period is in the nature of a prescriptive
period for bringing an action and is a condition precedent to holding the arrastre operator liable. In an
endeavor to promote fairness, equity and justness, however, a long line of cases has held that the 15-day
period for filing claims should be counted from the date the consignee learns of the loss, damage or
misdelivery of goods.
In the case at bar, the consignee had all the time to make a formal claim from the day it discovered the
shortage in the shipment, which was June 4, 1990, as shown by the records. By the time the claim for the
loss was filed on October 2, 1990, four months had already elapsed from the date of delivery. In any
event, within 15 days from the time the loss was discovered, the consignee could have filed a provisional
claim, which would have constituted substantial compliance with the rule. Its failure to do so relieved the
arrastre operator of any liability for the non-delivery of the goods. The rationale between the time limit is
that, without it, a consignee could too easily concoct or fabricate claims and deprive the arrastre operator
of the best opportunity to prove immediately their veracity.

CRESECENT PETROLEUM VS M/V LOK MAHESHWARI G.R. No. 155014; November 11,
2005; 474 SCRA 623 (2005)

FACTS: Respondent M/V "Lok Maheshwari" (Vessel) is an oceangoing vessel of Indian registry that is
owned by respondent Shipping Corporation of India (SCI), a corporation organized and existing under the
laws of India and principally owned by the Government of India. It was time-chartered by respondent SCI
to Halla Merchant Marine Co. Ltd. (Halla), a South Korean company. Halla, in turn, sub-chartered the
Vessel through a time charter to Transmar Shipping, Inc. (Transmar). Transmar further sub-chartered the
Vessel to Portserv Limited (Portserv). Both Transmar and Portserv are corporations organized and
existing under the laws of Canada.

On or about November 1, 1995, Portserv requested petitioner Crescent Petroleum, Ltd. (Crescent), a
corporation organized and existing under the laws of Canada that is engaged in the business of selling
petroleum and oil products for the use and operation of oceangoing vessels, to deliver marine fuel oils
(bunker fuels) to the Vessel. Petitioner Crescent granted and confirmed the request through an advice via
facsimile dated November 2, 1995. As security for the payment of the bunker fuels and related services,
petitioner Crescent received two (2) checks in the amounts of US$100,000.00 and US$200,000.00. Thus,
petitioner Crescent contracted with its supplier, Marine Petrobulk Limited (Marine Petrobulk), another
Canadian corporation, for the physical delivery of the bunker fuels to the Vessel.

On or about November 4, 1995, Marine Petrobulk delivered the bunker fuels amounting to US$103,544
inclusive of barging and demurrage charges to the Vessel at the port of Pioneer Grain, Vancouver,
Canada. The Chief Engineer Officer of the Vessel duly acknowledged and received the delivery receipt.
Marine Petrobulk issued an invoice to petitioner Crescent for the US$101,400.00 worth of the bunker
fuels. Petitioner Crescent issued a check for the same amount in favor of Marine Petrobulk, which check
was duly encashed.

Having paid Marine Petrobulk, petitioner Crescent issued a revised invoice dated November 21, 1995 to
"Portserv Limited, and/or the Master, and/or Owners, and/or Operators, and/or Charterers of M/V ‘Lok
Maheshwari’" in the amount of US$103,544.00 with instruction to remit the amount on or before
December 1, 1995. The period lapsed and several demands were made but no payment was received.
Also, the checks issued to petitioner Crescent as security for the payment of the bunker fuels were
dishonored for insufficiency of funds. As a consequence, petitioner Crescent incurred additional expenses
of US$8,572.61 for interest, tracking fees, and legal fees.

On May 2, 1996, while the Vessel was docked at the port of Cebu City, petitioner Crescent instituted
before the RTC of Cebu City an action "for a sum of money with prayer for temporary restraining order
and writ of preliminary attachment" against respondents Vessel and SCI, Portserv and/or Transmar.

On May 3, 1996, the trial court issued a writ of attachment against the Vessel with bond at P2,710,000.00.
Petitioner Crescent withdrew its prayer for a temporary restraining order and posted the required bond.

On May 18, 1996, summonses were served to respondents Vessel and SCI, and Portserv and/or Transmar
through the Master of the Vessel. On May 28, 1996, respondents Vessel and SCI, through Pioneer
Insurance and Surety Corporation (Pioneer), filed an urgent ex-parte motion to approve Pioneer’s letter of
undertaking, to consider it as counter-bond and to discharge the attachment. On May 29, 1996, the trial
court granted the motion; thus, the letter of undertaking was approved as counter-bond to discharge the
attachment.

ISSUE/S: WON the Philippine court has or will exercise jurisdiction and entitled to maritime lien under
our laws on foreign vessel docked on Philippine port and supplies furnished to a vessel in a foreign port?

HELD: In a suit to establish and enforce a maritime lien for supplies furnished to a vessel in a foreign
port, whether such lien exists, or whether the court has or will exercise jurisdiction, depends on the law of
the country where the supplies were furnished, which must be pleaded and proved.

The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced such single-factor methodologies as the
law of the place of supply. The multiple-contact test to determine, in the absence of a specific
Congressional directive as to the statute’s reach, which jurisdiction’s law should be applied. The
following factors were considered: (1) place of the wrongful act; (2) law of the flag; (3) allegiance or
domicile of the injured; (4) allegiance of the defendant shipowner; (5) place of contract; (6)
inaccessibility of foreign forum; and (7) law of the forum. This is applicable not only to personal injury
claims arising under the Jones Act but to all matters arising under maritime law in general.

The Court cannot sustain petitioner Crescent’s insistence on the application of P.D. No. 1521 or the Ship
Mortgage Decree of 1978 and hold that a maritime lien exists. Out of the seven basic factors listed in the
case of Lauritzen, Philippine law only falls under one – the law of the forum. All other elements are
foreign – Canada is the place of the wrongful act, of the allegiance or domicile of the injured and the
place of contract; India is the law of the flag and the allegiance of the defendant shipowner. Applying
P.D. No. 1521,a maritime lien exists would not promote the public policy behind the enactment of the law
to develop the domestic shipping industry. Opening up our courts to foreign suppliers by granting them a
maritime lien under our laws even if they are not entitled to a maritime lien under their laws will
encourage forum shopping. In light of the interests of the various foreign elements involved, it is clear
that Canada has the most significant interest in this dispute. The injured party is a Canadian corporation,
the sub-charterer which placed the orders for the supplies is also Canadian, the entity which physically
delivered the bunker fuels is in Canada, the place of contracting and negotiation is in Canada, and the
supplies were delivered in Canada.
 ABOITIZ SHIPPING vs. NEW INDIA ASSURANCE COMPANY

531 SCRA 134 (2007)

FACTS:On October 31, 1980, M/V P. Aboitiz, a vessel owned by petitioner, sank on her voyage from
Hong Kong to Malaysia. Respondent is the insurer of the lost cargoes loaded on board M/V P. Aboitiz and
consigned to General Textile, Inc. After respondent indemnified General Textile, Inc., it was subrogated
to its rights, interests and actions against petitioner.

Respondent New India filed an action for recovery against petitioner, claiming ₱142,401.60 as
actual damages, attorney’s fees, exemplary damages and costs of suit. On November 20, 1989, the trial
court held petitioner liable for the total value of the lost cargoes instead of applying the doctrine of limited
liability. The Court of Appeals affirmed in totothe trial court’s decision and denied petitioner’s motion for
reconsideration.

Petitioner elevated the case to the Supreme Court raising the issue of whether the doctrine of
limited liability applies. In the court’s May 2, 2006 Decision, they denied the petition for lack of merit
and affirmed the decision of the Court of Appeals holding petitioner liable for the total value of the lost
cargo.Hence, petitioner filed this Motion for Reconsideration

ISSUE: Did the May 2, 2006 Decision modify or reverse the rulings in Monarch and GAFLAC contrary
to Section 4(3) of Article VIII of the Constitution?

RULING: Petitioner’s arguments are mere rehash of those already submitted to and pronounced without
merit by this Court in our May 2, 2006 Decision. The basic issues have already been passed upon and the
motion discloses no cogent reason to warrant modification of our May 2, 2006 Decision.

A perusal of GAFLAC and Monarchvis-á-visthe instant case will show that our May 2, 2006
Decision did not modify or reverse the doctrines in GAFLAC and Monarch. Here, petitioner was found
concurrently negligent with the ship captain and crew, while in GAFLAC, there is no such finding. Then
the peculiar circumstances in Monarch called for the application of the doctrine of limited liability.

The weather was moderate when M/V P. Aboitiz sank. Both the trial and appellate courts also
ruled that the M/V P. Aboitiz sank due to its unseaworthiness and not due to typhoon. To limit petitioner’s
liability to the amount of the insurance proceeds, it has the burden of showing that the unseaworthiness of
the vessel was not due to its fault or negligence. But it failed to do so. Where the shipowner fails to
overcome the presumption of negligence, the doctrine of limited liability cannot be applied.
 ABOITIZ SHIPPING vs. NEW INDIA ASSURANCE COMPANY

488 SCRA 563 (2006)

FACTS:SocieteFrancaise Des Colloides loaded a cargo of textiles and auxiliary chemicals from France
on board a vessel owned by Franco-Belgian Services, Inc. The cargo was consigned to General Textile,
Inc., in Manila and insured by respondent New India Assurance Company, Ltd. While in Hongkong, the
cargo was transferred to M/V P. Aboitiz for transshipment to Manila.

Before departing, the vessel was advised by the Japanese Meteorological Center that it was safe
to travel to its destination. But while at sea, the vessel received a report of a typhoon moving within its
general path. To avoid the typhoon, the vessel changed its course. However, it was still at the fringe of the
typhoon when its hull leaked. On October 31, 1980, the vessel sank, but the captain and his crew were
saved.

General Textile, lodged a claim with respondent New India Assurance Company for the amount
of its loss. Respondent paid General Textile and was subrogated to the rights of the latter.

ISSUE: Whether or not limited liability doctrine, which limits respondent’s award of damages to its pro-
rata share in the insurance proceeds, is applicable in this case.

RULING:From the nature of their business and for reasons of public policy, common carriers are bound
to observe extraordinary diligence over the goods they transport according to all the circumstances of
each case.In the event of loss, destruction or deterioration of the insured goods, common carriers are
responsible, unless they can prove that the loss, destruction or deterioration was brought about by the
causes specified in Article 1734 of the Civil Code. In all other cases, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence. Moreover, where the vessel is found unseaworthy, the shipowner is also presumed to be
negligent since it is tasked with the maintenance of its vessel.

To limit its liability to the amount of the insurance proceeds, petitioner has the burden of proving
that the unseaworthiness of its vessel was not due to its fault or negligence. Considering the evidence
presented and the circumstances obtaining in this case, we find that petitioner failed to discharge this
burden. Both the trial and the appellate courts, found that the sinking was not due to the typhoon but to its
unseaworthiness. Evidence on record showed that the weather was moderate when the vessel sank. These
factual findings of the Court of Appeals, affirming those of the trial court are not to be disturbed on
appeal, but must be accorded great weight. These findings are conclusive not only on the parties but on
this Court as well.

Where the shipowner fails to overcome the presumption of negligence, the doctrine of limited
liability cannot be applied. Therefore, the court ruled that petitioner is liable for the total value of the lost
cargo.
 CENTRAL SHIPPING COMPANY vs. INSURANCE COMPANY OF NORTH AMERICA

437 SCRA 511 (2004)

FACTS: On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its vessel,
the M/V Central Bohol, 376 pieces of Philippine Apitong Round Logs and undertook to transport
said shipment to Manila for delivery to Alaska Lumber Co., Inc.
The cargo was insured for P3,000,000.00 against total loss under respondents Marine Cargo
Policy No. MCPB-00170.
At about 0128 hours, after the listing of the vessel had increased to 15 degrees, the ship captain
ordered his men to abandon ship and at about 0130 hours of the same day the vessel completely
sank. Due to the sinking of the vessel, the cargo was totally lost.
The consignee, Alaska Lumber Co. Inc., presented a claim for the value of the shipment to the
[petitioner] but the latter failed and refused to settle the claim, hence [respondent], being the insurer,
paid said claim and now seeks to be subrogated to all the rights and actions of the consignee as
against the petitioner.

ISSUES: 1.) Whether the carrier is liable for the loss of the cargo
2.) Whether the doctrine of limited liability is applicable

RULING:
1.) Yes. Carrier is liable for the loss of the cargo.
In the present case, petitioner has not given the Court sufficient cogent reasons to disturb the
conclusion of the CA that the weather encountered by the vessel was not a storm as contemplated by
Article 1734(1). Established is the fact that between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July
26, 1990, M/V Central Bohol encountered a southwestern monsoon in the course of its voyage. Normally
expected on sea voyages, however, were such monsoons, during which strong winds were not unusual.
The court is inclined to believe that the logs did shifted, and that they had been improperly loaded.
The manner of stowage in the lower hold was not sufficient to secure the logs in the event the ship should
roll in heavy weather. Notably, they were of different lengths ranging from 3.7 to 12.7 meters. Being
clearly prone to shifting, the round logs should not have been stowed with nothing to hold them securely
in place. Each pile of logs should have been lashed together by cable wire, and the wire fastened to the
side of the hold. Considering the strong force of the wind and the roll of the waves, the loose arrangement
of the logs did not rule out the possibility of their shifting.
The evidence indicated that strong southwest monsoons were common occurrences during the month
of July. They should then have taken extra precaution in stowing the logs in the hold, in consonance with
their duty of observing extraordinary diligence in safeguarding the goods. But the carrier took a calculated
risk in improperly securing the cargo. Having lost that risk, it cannot now escape responsibility for the
loss.
 2.)The doctrine of limited liability under Article 587 of the Code of Commerceis not applicable to
the present case. This rule does not apply to situations in which the loss or the injury is due to the
concurrent negligence of the shipowner and the captain. It has already been established that the sinking of
M/V Central Bohol had been caused by the fault or negligence of the ship captain and the crew, as shown
by the improper stowage of the cargo of logs. Closer supervision on the part of the shipowner could have
prevented this fatal miscalculation. As such, the shipowner was equally negligent. It cannot escape
liability by virtue of the limited liability rule.
 G.R. No. 110398. November 7, 1997

NEGROS NAVIGATION CO., INC. vs THE COURT OF APPEALS, RAMON

MIRANDA, SPS. RICARDOand VIRGINIA DE LA VICTORIA

Doctrine:

The carrier is liable for the damages to the full extent and not up to the value of the vesselif it
was established that the carrier was guilty of negligence, in failing to maintain the ship as
seaworthyand in allowing the ship to carry more passengers than it was allowed to carry.

FACTS:

Private respondent Ramon Miranda purchased from the Negros Navigation Co., Inc. four
special cabin tickets for his wife, daughter, son and niece. The tickets were for Voyage No. 457-
A of the M/V Don Juan.

The Don Juan collided with the M/T Tacloban City, an oil tanker owned by the
PhilippineNational Oil Company (PNOC) and the PNOC Shipping and Transport Corporation
(PNOC/STC). As aresult, the M/V Don Juan sank. Several of her passengers perished in the sea
tragedy. The bodies of thefour members of private respondents families were never found.

Private respondents filed a complaint in the RTC against the Negros Navigation, the
Philippine National Oil Company (PNOC), and the PNOC Shipping and Transport Corporation
(PNOC/STC), seeking damages for the death of their family members. The RTC ruled in favor
of the complainants and ordered petitioner to pay for the damages. The CA affirmed the said
decision.

ISSUE:

Whether or not the petitioner is liable for damages to the full extent.

RULING:

YES. The rule is well-entrenched in our jurisprudence that a shipowner may be held
liable for injuries to passengers notwithstanding the exclusively real and hypothecary nature of
maritime law if fault can be attributed to the ship owner. Petitioner is guilty of negligence in (1)
allowing or tolerating the ship captain and crew members in playing mahjong during the voyage,
(2) in failing to maintain the vessel seaworthy and (3) in allowing the ship to carry more
passengers than it was allowed to carry.

Petitioner is, therefore, clearly liable for damagesto the full extent.

Prior to this case, a previous case was brought for the death of other passengers. Said case is
entitled Mecenas v. Intermediate Appellate Court. In that case it was found that although the
proximate cause of the mishap was the negligence of the crew of the M/T Tacloban City

, the crew of the Don Juan was equally negligent as it found that the latter’s master, Capt.
Rogelio Santisteban, was playing mahjong at the time of collision, and the officer on watch,
Senior Third Mate Rogelio De Vera, admitted that he failed to call the attention of Santisteban to
the imminent danger facing them. This Court found that Capt. Santisteban and the crew of the
M/V Don Juan failed to take steps to prevent the collision or at least delay the sinking of theship
and supervise the abandoning of the ship.Petitioner Negros Navigation was found equally
negligent in tolerating the playing of mahjong by the shipcaptain and other crew members while
on board the ship and failing to keep the M/V Don Juan seaworthyso much so that the ship sank
within 10 to 15 minutes of its impact with the M/T Tacloban City .In addition, the Court found
that the Don Juan was overloaded.

On the Doctrine of stare decisis:

Adherence to the Mecenas case is dictated by this Courts policy of maintaining stability in
jurisprudence in accordance with the legal maxim stare decisis et non quiet amovere (Follow
past precedents and do not disturb what has been settled.) Where, as in this case, the same
questions relating to the same event have been put forward by parties similarly situated as in a
previous case litigated and decided by a competent court, the rule of stare decisis is a bar to any
attempt to re-litigate the same issue.
 G.R. No. 116940 June 11, 1997

The Phil. American Gen. Insurance Co., Inc. vs Court of Appeals and Felman Shipping Lines

Facts:

July 6, 1983 Coca-cola loaded on board MV Asilda, owned and operated by Felman, 7,500 cases
of 1-liter Coca-Cola soft drink bottles to be transported to Zamboanga City to Cebu. The shipment was
insured with Philamgen.

July 7, the vessel sank in Zamboanga del Norte. July 15, cocacola filed a claim with respondent
Felman for recovery of damages. Felman denied thus prompted cocacola to file an insurance claim with
Philamgen. Philamgen later on claimed its right of subrogation against Felman which disclaimed any
liability for the loss.

Philamgen alleged that the sinking and loss were due to the vessel's unseaworthiness, that the
vessel was improperly manned and its officers were grossly negligent. Felman filed a motion to dismiss
saying that there is no right of subrogation in favor of Philamgen was transmitted by the shipper.

RTC dismissed the complaint of Philamgen. CA set aside the dismissal and remanded the case to
the lower court for trial on the merits. Felman filed a petition for certiorari but was denied.

RTC rendered judgment in favor of Felman. it ruled that the vessel was seaworthy when it left the
port of Zamboanga as evidenced by the certificate issued by the Phil. Coast Guard and the ship owner’s
surveyor. Thus, the loss is due to a fortuitous event, in which, no liability should attach unless there is
stipulation or negligence.

On appeal, CA rendered judgment finding the vessel unseaworthy for the cargo for being top-
heavy and the cocacola bottles were also improperly stored on deck. Nonetheless, the CA denied the
claim of Philamgen, saying that Philamgen was not properly subrogated to the rights and interests of the
shipper plus the filing of notice of abandonment had absolved the ship owner from liability under the
limited liability rule.

Issues:

(a) Whether the vessel was seaworthy, (b) whether limited liability rule should apply and (c) whether
Philamgen was properly subrogated to the rights against Felman.

Ruling:

(a) The vessel was unseaworthy. The proximate cause thru the findings of the Elite Adjusters, Inc., is the
vessel's being top-heavy. Evidence shows that days after the sinking coca-cola bottles were found near the
vicinity of the sinking which would mean that the bottles were in fact stowed on deck which the vessel
was not designed to carry substantial amount of cargo on deck. The inordinate loading of cargo deck
resulted in the decrease of the vessel's metacentric height thus making it unstable.

(b) Art. 587 of the Code of Commerce is not applicable, the agent is liable for the negligent acts of the
captain in the care of the goods. This liability however can be limited through abandonment of the vessel,
its equipment and freightage. Nonetheless, there are exceptions wherein the ship agent could still be held
answerable despite the abandonment, as where the loss or injury was due to the fault of the ship owner
and the captain. The international rule is that the right of abandonment of vessels, as legal limitation of
liability, does not apply to cases where the injury was occasioned by the fault of the ship owner. Felman
was negligent, it cannot therefore escape liability.

(c) Generally, in marine insurance policy, the assured impliedly warrants to the assurer that the vessel is
seaworthy and such warranty is as much a term of the contract as if expressly written on the face of the
policy. However, the implied warranty of seaworthiness can be excluded by terms in writing in the policy
of the clearest language. The marine policy issued by Philamgen to cocacola has dispensed that the
"seaworthiness of the vessel as between the assured and the underwriters in hereby admitted."

The result of the admission of seaworthiness by Philamgen may mean two things: (1) the warranty of
seaworthiness is fulfilled and (2) the risk of unseaworthiness is assumed by the insurance company. This
waiver clause would mean that Philamgen has accepted the risk of unseaworthiness, therefore Philamgen
is liable.

On the matter of subrogation, it is provided that;

Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person
who has violated the contract. If the amount paid by the insurance company does not fully cover the
injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the
loss or injury.

Pan Malayan Insurance Corp. vs CA: The right of subrogation is not dependent upon, nor does it grow
out of any privity of contract or upon payment by the insurance company of the insurance claim. It
accrues simply upon payment by the insurance company of the insurance claim.

Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc., gave the former
the right to bring an action as subrogee against FELMAN. Having failed to rebut the presumption of fault,
the liability of FELMAN for the loss of the 7,500 cases of 1-liter Coca-Cola soft drink bottles is
inevitable.

WHEREFORE, the petition is GRANTED. Respondent FELMAN SHIPPING LINES is ordered to pay
petitioner PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC.
 G.R. No. 151040 - Allied Banking Corporation v. Cheng Yong, et al.

Facts:
Sometime before 1981, Philippine Pacific Fishing Company, Inc. (Philippine Pacific), through its then
Vice-Chairman of the Board and concurrent President Marilyn Javier, obtained from Allied Banking
Corporation (Allied Bank), a packing credit accommodation amounting to One Million Seven Hundred
Fifty Two Thousand Pesos (P1,752,000.00). Such credit accommodation was secured by a Continuing
Guaranty/Comprehensive Surety.

An intra-corporate dispute among its stockholders. Thereafter, the corporation was reorganized,
following which the spouses Cheng Yong and Lilia Gaw were elected as its president and treasurer,
respectively. The spouses Cheng also hold similar positions in another company, the Glee Chemicals
Phils., Inc. (GCPI), which, incidentally, also had a credit line with Allied Bank.

Philippine Pacific failed to pay according to the schedule of payments set out in the promissory note of 12
August 1981, prompting the spouses Cheng to secure the note with substantial collateral by executing a
deed of chattel mortgage in favor of Allied Bank over a fishing vessel, "Jean III", a Japanese -
manufactured vessel with refrigerated hatches and glass freezers, owned by the spouses and registered in
their names.
Philippine Pacific again defaulted payment. Hence, on 18 September 1984, Allied Bank filed with the
sheriff of Navotas an application for extra-judicial foreclosure of the chattel mortgage constituted
on "Jean III".

Pursuant thereto, notices of extra-judicial sale dated 21 September 1981 were served on the concerned
parties by the Ex-Officio sheriff of Malabon while the vessel was moored at the Navotas Fishing Port
Complex and under a charter contract with Lig Marine Products, Inc.

On 27 September 1984, the spouses Cheng, to prevent the auction sale of the vessel, filed with the
Regional Trial Court at Quezon City an action for declaratory relief with prayer for injunctive remedies.
Initially, that court issued a writ of preliminary injunction restraining the sale but later lifted it upon
dismissal of the main case for declaratory relief on 29 March 1985.

In the meantime, the vessel sank at the port of Navotas on 22 June 1985, resulting to its total loss. As per
certification of the Harbor Master of the Philippine Fisheries Development Authority, the vessel sank due
to unnoticed defects caused by its prolonged stay in the fish port and the abandonment thereof. Shortly
before the loss, charterer Lig Marine Products, Inc. offered to purchase the vessel for Four Million Pesos
(P4,000,000.00).

On 26 June 1985, the spouses Cheng filed with the Regional Trial Court at Makati a complaint
for Injunction, Annulment of Contracts and Damages with the provisional remedy of Preliminary
Injunction, against Allied Bank and the Ex-Officio Sheriff of Malabon.
On 22 August 1985, the spouses Cheng filed in Civil Case No. 10947 an amended complaint praying,
among others, that: (a) the promissory note of 12 August 1981 be declared void and unenforceable; (b)
the vessel be declared a total loss; and (c) Allied Bank be ordered to pay them the value of the loss. And,
in order to prevent Allied Bank and the Ex-Officio Sheriff of Pasig from foreclosing the real estate
mortgage over their San Juan property, the spouses Cheng filed a supplemental complaint with an
application for a writ of preliminary injunction. A writ of preliminary injunction was, thereafter, issued by
the trial court.

Issue:
One of the issues of this case this:

Whether or not the chattel mortgage over the fishing vessel "Jean III" can be foreclosed for Philippine
Pacific's failure to comply with its obligation under the promissory note dated 12 August 1981brary

Ruling:
We thus declare and so hold that Allied Bank's foreclosure of the chattel mortgage constituted over the
vessel "Jean III" was justified. On this score, we also rule that the loss of the mortgaged chattel brought
about by its sinking must be borne not by Allied Bank but by the spouses Cheng. As owners of the
fishing vessel, it was incumbent upon the spouses to insure it against loss. Thus, when the vessel sank
before the chattel mortgage could be foreclosed, uninsured as it is, its loss must be borne by the spouses
Cheng.
 INTERNATIONAL HARVESTER CO. V. HAMBURG AMERICAN LINE 42 PHIL. 846

Facts:

International Harvester delivered to the Ham burg- American Line a large consignment
agricultural machinery, to be delivered to the order of the consignor at Vladivostock, Russia. Shipment to
be transported from Baltimore, Maryland to Hamburg Germany. The bill of lading provided, among other
things that the goods thus destind for points beyond Hamburg should be subject to the terms expressed in
the customary form of bill of lading in use at the time of shipment by the carrier he completing the transit.

When the shipment arrived at the Hamburg the carrier company transferred the cargo to the Suevia a ship
of its own line, and issued to itself therefor, as forwarding agent, another bill of lading in the customary
form in use in the port of Hamburg, covering the transportation from Hamburg to toVladivodostcok.
While the ship enrout to Russia , war broke in Europe; and as the Suevia was a German vessel, the
master considered it necessary to take refuge in the nearest neutral port which was happened to be in
Manila. Accordingly, the ship was put into this harbor on August 1914. Intenational Harvester would
agree to subject said cargo to liability upon general average to satisfy the cost and expenses of the Suevia
incident to its stay in the port of Manila. International Harvester refused. Hamburg International offered
to deliver the cargo provided the owner would deposit with Hamburg-American Line a sum of money
equivalent to 20% of the value of said cargo, as security for the cost and expenses to be adjusted as
general average. The cost and expenses amounted to P 63, 024. 50, which included port charges, repairs,
and wages and maintenance of officers and crew. International Harvester instituted an action in the CFI of
Manila. Meanwhile, international Harvester obtained the delivery of the property from the Suevia by
means of writ of Replevin and forwarded to Vladivostock by another steamer. Hamburg American Line
denies liability for damages and asserts that has a lien on the property for general average.

Issues:

1. Whether the cargo is liable to be made to contribute by way of general average to the costs
and expenses incurred by reason of the interment of the Suevia in the port of Manila.
2. Whether the defendant is liable for the expenses of transferring the cargo to another ship and
transporting it to the port of destination.

Ruling:

1. No Cargo not liable to general average: No common danger to ship and cargo herein, it is not
claimed that agricultural machinery was contrabond of war and begins and being neutral
goods was not liable to forfeiture in the event of capture by the enemies of the ships. It
follows that when the master of the Sueviadecided to take a refuge in th port of Manila he
acted exclusively with a view to the protection of his vessel. There was no common danger to
the ship and to the cargo and therefore it was not charged for a general average. When a ship
have entered a port of refuge in consequence of accident, sacrifice or other extraordinary
 circumstance which renders that the necessary for the common carrier be safety at the
expense of entering such port be admitted as general average.
2. Hamburg- American Line is liable for the expenses incident to the transshipment and
conveyance of the cargo to Vladivostock. The original bill of lading issued to a shipper in
Baltimore contained the provisions that the goods should be forwarded from Hamburg to
Vladivostock at the steamer’s expense .

Outbreak of war between Germany and Russia would have absolved carrier from contract of
affreightment, if not for the latter’s terms. The outbreak of the war between Germany and
Russia undoubtedly absolved Hamburg- American Lines
 SPOUSES CRUZ VS. SUN HOLIDAYS, INC.GR NO. 18631229

FACTS:

Spouses Cruz files a complaint for damages against Sun Holidays arising from the death of their son who
perished with his wife on board the boat M/B Coco Beach III that capsized en route Batangas from
PuertoGalera where the couple had stayed at Coco Beach Island resort owned and operated by
respondent, heir stay was by virtue of a tour package-contract with respondent that included
transportation to andfrom the resort and the point of departure in Batangas! Eight of the passengers'
including petitioners sonand his wife' died during the accident! Sun denied any responsibility for the
incident which it consideredto be a fortuitous event. Petitioners allege that as a common carrier' Sun was
negligent in allowing the boat to sail despite the storm warning bulletins issued by PAGASA.Respondent
denied being a commoncarrier' alleging that its boats are not available to the public but are only used as
ferry resort carrier. It alsoclaimed to have exercised the utmost diligence in ensuring the safety of its
passengers' and that contraryto petitioners( allegation' there was no storm as the Coast Guard in fact
cleared the voyage! M/B CocoBeach III was not filled to capacity and had sufficient life jackets for its
passengers.

RTC dismissed the complaint! CA denied the appeal holding that Sun is a private carrier which is only
required to observe ordinary diligence and that the proximate cause of the incident was a fortuitous event.

ISSUE:

Whether M/B Coco Beach III breached a contract of carriage

HELD:

Respondent is a common carrier. Its ferry services are so intertwined with its business as to be properly
considered ancillary thereto.The constancy of respondent(s ferry services in its resort operations is
underscored by its having its own Coco Beach boats! )nd the tour pac$ages it offers' which include the
ferry services' may be availed of by anyone who can afford to pay the same. These services are thus
available to the public.
In the De Guzman case Article 1732 of the Civil Code defining “common carriers” has deliberately
refrained from making distinctions on whether the carrying of persons or goods is the carrier(s principal
business' whether it is offered on a regular basis' or whether it is offered to the general public.

Under the Civil Code' common carriers' from the nature of their business and for reasons of public
policy'are bound to observe extraordinary diligence for the safety of the passengers transported by them,
according to all the circumstances of each case. They are bound to carry the passengers safely as far as
human care and foresight can pro#ide' using the utmost diligence of very cautious persons, with due
regard for all the circumstances.

When a passenger dies or is insured in the discharge of a contract of carriage' it is presumed that the
common carrier is at fault or negligent. In fact' there is even no need for the court to make an express
finding of fault or negligence on the part of the common carrier! "his statutory presumption may only be
overcome by evidence that the carrier exercised extraordinary diligence.
 LOADSTAR SHIPPING CO. V. CA

Facts:

On November 19, 1984, Loadstar received on board its vessel M/V Cherokee the following goods for
shipment:

1. 705 bales of lawanit hardwood

2. 27 boxes and crates of tilewood assemblies and others

3. 49 bundles of mouldings R & W (3) Apitong Bolidenized

The goods, amounting to P6,067,178, were insured by Manila Insurance Co. The vessel is insured by
Prudential Guarantee and Assurance, Inc. On November 20, 1984, on its way to Manila from Agusan, the
vessel sank off Limasawa Island. MIC paid the consignee P6,075,000 for the value of the goods lost, and
filed a complaint against Loadstar and PGAI, claiming subrogation into the r

ights of the consignee. When PGAI paid Loadstar, it was dropped from the complaint. The trial court
ruled against Loadstar, and this was affirmed by the Court of Appeals.

Loadstar submits that the vessel was a private carrier because it was not issued a certificate of public
convenience, it did not have a regular trip or schedule nor a fixed route, and there was only "one shipper,
one consignee for a special cargo." In refutation, MIC argues that the issue as to the classification of the
M/V "Cherokee" was not timely raised below; hence, it is barred by estoppel. While it is true that the
vessel had on board only the cargo of wood products for delivery to one consignee, it was also carrying
passengers as part of its regular business. Moreover, the bills of lading in this case made no mention of
any charter party but only a statement that the vessel was a "general cargo carrier." Neither was there any
"special arrangement" between LOADSTAR and the shipper regarding the shipment of the cargo. The
singular fact that the vessel was carrying a particular type of cargo for one shipper is not sufficient to
convert the vessel into a private carrier.

LOADSTAR argues that as a private carrier, it cannot be presumed to have been negligent, and the
burden of proving otherwise devolved upon MIC. It also maintains that the vessel was seaworthy, and
that the loss was due to force majeure. LOADSTAR goes on to argue that, being a private carrier, any
agreement limiting its liability, such as what transpired in this case, is valid. Since the cargo was being
shipped at "owner’s risk," LOADSTAR was not liable for any loss or damage to the same. Finally,
LOADSTAR avers that MIC’s claim had already prescribed, the case having been instituted beyond the
period stated in the bills of lading for instituting the same — suits based upon claims arising from
shortage, damage, or non-delivery of shipment shall be instituted within sixty days from the accrual of the
right of action. MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss
of the cargo was due to force majeure, because the same concurred with LOADSTAR’s fault or
negligence. Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the
same must be deemed waived. Thirdly, the "limited liability" theory is not applicable in the case at bar
because LOADSTAR was at fault or negligent, and because it failed to maintain a seaworthy vessel.
Authorizing the voyage notwithstanding its knowledge of a typhoon is tantamount to negligence.

Issues:

(1) Whether Loadstar was a common carrier or a private carrier

(2) Whether Loadstar exercised the degree of diligence required under the circumstances

(3) Whether the stipulation that the goods are at “the owner’s risk” is valid

(4) Whether the action has prescribed

Held:

(1) We hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a
certificate of public convenience, and this public character is not altered by the fact that the carriage of the
goods in question was periodic, occasional, episodic or unscheduled. There was no charter party. The bills
of lading failed to show any special arrangement, but only a general provision to the effect that the M/V
"Cherokee" was a "general cargo carrier." Further, the bare fact that the vessel was carrying a particular
type of cargo for one shipper, which appears to be purely coincidental, is not reason enough to convert the
vessel from a common to a private carrier, especially where, as in this case, it was shown that the vessel
was also carrying passengers.

(2) The doctrine of limited liability does not apply where there was negligence on the part of the vessel
owner or agent. LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in
having allowed its vessel to sail despite knowledge of an approaching typhoon. In any event, it did not
sink because of any storm that may be deemed as force majeure, inasmuch as the wind condition in the
area where it sank was determined to be moderate. Since it was remiss in the performance of its duties,
LOADSTAR cannot hide behind the "limited liability" doctrine to escape responsibility for the loss of the
vessel and its cargo.

(3) Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the
carrier from any and all liability for loss or damage occasioned by its own negligence. The second is one
providing for an unqualified limitation of such liability to an agreed valuation. And the third is one
limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and
pays a higher rate of freight. According to an almost uniform weight of authority, the first and second
kinds of stipulations are invalid as being contrary to public policy, but the third is valid and enforceable.
Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was
subrogated to all the rights which the latter has against the common carrier, LOADSTAR.

(4) MIC’s cause of action had not yet prescribed at the time it was concerned. Inasmuch as neither the
Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of
Goods by Sea Act (COGSA) — which provides for a one-year period of limitation on claims for loss of,
or damage to, cargoes sustained during transit — may be applied suppletorily to the case at bar. This one-
year prescriptive period also applies to the insurer of the goods. In this case, the period for filing the
action for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year period is null and
void; it must, accordingly, be struck down.
 CALTEX [PHILIPPINES], INC. VS. SULPICIO LINES, INC.

Facts:

On December 20, 1987, motor tanker MV Vector, carrying petroleum products of Caltex, collided in the
open sea with passenger ship MV Doña Paz, causing the death of all but 25 of the latter’s passengers.
Among those who died were Sebastian Canezal and his daughter Corazon Canezal. On March 22, 1988,
the board of marine inquiry found that Vector Shipping Corporation was at fault. On February 13, 1989,
Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal’s wife and mother respectively, filed with the
Regional Trial Court of Manila a complaint for damages arising from breach of contract of carriage
against Sulpicio Lines. Sulpicio filed a third-party complaint against Vector and Caltex. The trial court
dismissed the complaint against Caltex, but the Court of Appeals included the same in the liability.
Hence, Caltex filed this petition.

Issue:

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

Held:

First: The charterer has no liability for damages under Philippine Maritime laws.

Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter.

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. 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. 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.

Second: MT Vector is a common carrier

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. It is 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. 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.

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.

Third: Is Caltex liable for damages under the Civil Code?

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 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. 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.
 SAN MIGUEL v HEIRS of SABINIANO INGUITO

Facts:

1. San Miguel Corporation entered into a Time Charter Party Agreement with Julius Ouano, doing
business under the name and style J. Ouano Marine Services.
2. Under the terms of the agreement, SMC chartered the M/V Doa Roberta owned by Julius Ouano for a
period of two years, for the purpose of transporting SMCs beverage products
OWNER warrants that the vessel is seaworthy and in proper, useful and operational condition and
in the event that CHARTERER finds any defect in the vessel with regards to its working order, condition
and function, CHARTERER shall immediately notify OWNER of this fact;

3. During the term of the charter, SMC issued sailing orders to the Master, Captain INguito instructing
him
1. Sail for Opol, Cagayan 0500H Nov. 12, 1990, or as soon as loading of FGS is completed, with
load: SEE BILL OF LADING
2. You are expected to arrive Opol 0900H Nov. 13, 1990.
3. You are expected to depart Opol 0900H Nov. 14, 1990, or as soon as loading of empties is
completed, back to Mandaue.
4. You are expected to arrive Mandaue 1300H Nov. 15, 1990.
5. In case you need cash advance, send your request thru radio addressed to us for needed
authority.
6. Maintain communications and keep us posted of your developments.
7. Observe weather condition, exercise utmost precautionary measures.

4. Because of said orders. Captain obtained necrssary sailing clearance from the PH Coast Guard.
Loading of the cargo on the vessel was complete HOWEVER THE VESSEL DID NOT LEAVE
MANDAUE CITY until 6 am the next day.
5. At 4AM, typhoon Ruping was spotted. At 7AM one hour after the vessel departed, Captain was
advised to take shelter but Captain Inguito proceeded despite the typhoon saying that that typhoon was
already far from them already
6. At 2pm Captain was again advised to take shelter, Capt responded that they can manage
7. At midnight Captain is already asking to rescue them. The ship sank
8. The shipowner Julius Ouano, in lieu of the captain who perished in the sea tragedy, FILED A
MARINE PROTEST
9. He alleged that the proximate cause of the loss of the vessel was the fault and negligence of SMC
whoch had complete control and disposal of the vessel as charterer and which issued the sailing order for
its departure despite being forewarned of the typhoon.
10. SMC countered that it was Ouano who had control over the vessel. That notwithstanding his
knowledge, braved the typhoon.

Both SMC and Ouano appealed to the Court of Appeals, docketed as CA-G.R. CV No. 48296. SMC
argued that as mere charterer, it did not have control of the vessel and that the proximate cause of the loss
of the vessel and its cargo was the negligence of the ship captain. For his part, Ouano complained of the
reduced damages awarded to him by the trial court

RULING: In deciding the cases at bar, the Court of Appeals correctly resolved the issues with an initial
discussion of the definition and kinds of charter parties. Preliminarily, a charter party is a contract by
virtue of which the owner or the agent of a vessel binds himself to transport merchandise or persons for a
fixed price. It has also been defined as a contract by virtue of which the owner or the agent of the vessel
leases for a certain price the whole or a portion of the vessel for the transportation of goods or persons
from one port to another

A charter party may either be a (1) bareboat or demise charter or (2) contract of affreightment. Under a
demise or bareboat charter, the charterer mans the vessel with his own people and becomes, in effect, the
owner of the ship for the voyage or service stipulated, subject to liability for damages caused by
negligence In a contract of affreightment, on the other hand, 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 owner retains the possession, command and navigation of the ship, the
charterer or freighter merely having use of the space in the vessel in return for his payment of the charter
hire. 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 We concur with the findings of the Court of
Appeals that the charter party in these cases was a contract of affreightment, contrary to petitioner Ouanos
protestation that it was a demise charter, as shown by the following stipulations in the Time Charter Party
Agreement: There shall be no employer-employee relations between the OWNER and/or its vessels crew
on one hand and the CHARTERER on the other. The crew of the vessel shall continue to be under the
employ, control and supervision of the OWNER. Consequently, damage or loss that may be attributable
to the crew, including loss of the vessel used shall continue to be the responsibility of, and shall be borne,
by the OWNER; the OWNER further covenants to hold the CHARTERER free from all claims and
liabilities arising out of the acts of the crew and the condition of the vessel;

It appearing that Ouano was the employer of the captain and crew of the M/V Doa Roberta during the
term of the charter, he therefore had command and control over the vessel DISPOSITIVE: Under the
foregoing definitions, as well as the clear terms of the Charter Party Agreement between the parties, the
charterer, SMC, should be free from liability for any loss or damage sustained during the voyage, unless it
be shown that the same was due to its fault or negligence.

ON SEAWORTHINESS: Considering that the charter was a contract of affreightment, the shipowner
had the clear duty to ensure the safe carriage and arrival of goods transported on board its vessels. More
specifically, Ouano expressly warranted in the Time Charter Party that his vessel was seaworthy. 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. Seaworthiness is defined as the sufficiency of the vessel in
materials, construction, equipment, officers, men, and outfit, for the trade or service in which it is
employed. It includes the fitness of a ship for a particular voyage with reference to its physical and
mechanical condition, the extent of its fuel and provisions supply, the quality of its officers and crew, and
its adaptability for the time of voyage propose.

APPLICATION: In the assailed decision, the Court of Appeals found that the proximate cause of the
sinking of the vessel was the negligence of Captain Sabiniano Inguito, as the gross failure of the captain
of the vessel to observe due care and to heed SMCs advices to take shelter.
 [G.R. No. 128661. August 8, 2000]
PHILIPPINE NATIONAL BANK/NATIONAL INVESTMENT DEVELOPMENT
CORPORATION, petitioners, vs. THE COURT OF APPEALS, CHINA BANKING
CORPORATION, respondents.

Facts:
To finance the acquisition of 7 shipping vessels, the Philippine International Shipping Corporation
(PISC) applied for and was granted by National Investment Development Corporation (NIDC) guaranty
accomodations. As security for these guaranty accomodations, PISC executed chattel mortgages on the
vessels to be acquired by it. Meanwhile, PISC entered into a contract with Hong Kong United
Dockyards, Ltd. for the repair and conversion of one of the vessels, M/V Asean Liberty.

The Central Bank of the Phils. Authorized PISC to open with China Banking Corporation (CBC) a
standby letter of credit for US$545,000 in favor of Citibank, N.A. to cover the repair and partial
conversion of the vessel M/V Asean Liberty. PISC executed an Application and Agreement for
Commercial Letter of Credit for US$545,000 with CBC in favor of Citibank. CBC then issued its
Irrevocable Standby Letter of Credit for US$545,000 in favor of Citibank for the account of PISC. PISC
executed a promissory note for US$545,000 in favor of Citibank pursuant to the Loan Agreement
between PISC and Citibank.

Upon failure of PISC to fulfill its obligations, Citibank sent CBC a letter drawing on the Letter of
Credit. CBC then instructed its correspondent Irving Trust Co. to pay to Citibank the amount of
US$242,225. Subsequently, for failure of PISC to settle its obligations under the guaranty
accommodations, the Philippine National Bank (PNB) conducted an auction sale of the
mortgaged vessels. NIDC emerged as the highest bidder in these auctions. PISC, claiming that the
foreclosure sale of its mortgaged vessels was illegal and irregular, instituted a civil case for the annulment
of the foreclosure and auction sale. CBC filed a complaint in intervention for recovery upon a maritime
lien against the proceeds of the sale of the foreclosed vessels.

Issue:
Whether or not CBC’s claim as evidenced by its Irrevocable Letter of Credit is in the nature of a maritime
lien under the provisions of P.D. No. 1521; and if so, whether or not said maritime lien is preferred over
the mortgage lien of PNB/NIDC on the foreclosed vessel M/V Asean Liberty.

Held:
Under the provisions of P.D. No. 1521, any person furnishing repairs, supplies, or other necessities to a
vessel on credit will have a maritime lien. Such maritime lien, if it arose prior to the recording of a
preferred mortgage lien, shall have priority over the said mortgage lien.

In this case, it was Hongkong United Dockyards, Ltd. which originally possessed a maritime lien over the
vessel M/V Asean Liberty by virtue of its repair of the said vessel on credit. CBC, however, stands as
guarantor of the loan extended by Citibank to PISC. It was Citibank which advanced the money to PISC.
It was only upon the failure of PISC to fulfill its obligations under its promissory note to Citibank that
CBC was called upon by Citibank to exercise its duties under the Standby Letter of Credit. The applicable
law, which is the Shipping Mortgage Decree of 1978, was patterned closely after the U.S. Ship Mortgage
Act of 1920. Being of foreign origin, the provisions of the Ship Mortgage Decree of 1978 may thus be
construed with the aid of foreign jurisprudence. Under American jurisprudence, “furnishing money to a
master in good faith to obtain repairs or supplies or to remove liens, in order to forward the voyage of the
vessel, raises a lien just as though the things for which money was obtained to pay for had been furnished
by the lender”. This is in accord with Art5. 1302 of the Civil Code which provides that there is legal
subrogation “when a third person, not interested in the fulfillment of
the obligation, pays with the express or tacit approval of the debtor”.

In this case, the amount for the repair of vessel M/V Asean Liberty was advanced by Citibank and was
used for the purpose of paying off the original maritime lienor, Hongkong United Dockyards, Ltd.

As a person not interested in the fulfillment of the obligation between PISC and Hongkong United
Dockyards, Ltd., Citibank was subrogated to the rights of Hongkong United Dockyards, Ltd. as maritime
lienor over the vessel. CBC, as guarantor, was itself subrogated to all the rights of Citibank as against
PISC, the latter’s debtor. Art. 2067 of the civil Code provides that “the guarantor who pays is subrogated
by virtue thereof to all the rights which the creditor had against the debtor”. When CBC honored its
contract of guaranty with Citibank on March 30, 1983, it also acquired by subrogation the maritime lien
over the vessel which attached to it on March 12, 1979 in favor of Hongkong United Drydocks, Ltd.

The maritime lien of CBC thus arose prior to the recording of PNB/NIDC’s mortgage on
September 25, 1979. As such, the said maritime lien has priority over the said mortgage lien.
 POLIAND INDUSTRIAL LTD VS. NATIONAL DEVELOPMENT CO. (NDC)
POLIAND INDUSTRIAL LIMITED vs. NATIONAL DEVELOPMENT COMPANY,
DEVELOPMENT BANK OF THE PHILIPPINES [G.R. No. 143866. August 22, 2005]

FACTS:

Poliand is an assignee of the of the rights of Asian Hardwood over the outstanding obligation of National
Development Corporation (NDC), the latter being the owner of Galleon which previously secured credit
accommodations from Asian Hardwood for its expenses on provisions, oil, repair, among others.

Galleon also obtained loans from Japanese lenders to finance acquisition of vessels which was guaranteed
by DBP in consideration of a promise by Galleon to secure a first mortgage on the vessels. DBP later
transferred ownership of the vessel to NDC.

A collection suit was filed after repeated demands of Poliand for the satisfaction of the obligation from
Galleon, NDC and DBP went unheeded.

ISSUE: Whether POLIAND has a maritime lien enforceable against NDC or DBP or both.

HELD:
Yes, Poliand has a maritime lien which is more superior than DBP’s mortgage lien.

“Before POLIAND’s claim may be classified as superior to the mortgage constituted on the vessel, it
must be shown to be one of the enumerated claims which Section 17, P.D. No. 1521 declares as having
preferential status in the event of the sale of the vessel. One of such claims enumerated under Section 17,
P.D. No. 1521 which is considered to be superior to the preferred mortgage lien is a maritime lien arising
prior in time to the recording of the preferred mortgage. Such maritime lien is described under Section 21,
P.D. No. 1521, which reads:

SECTION 21. Maritime Lien for Necessaries; persons entitled to such lien. — Any person furnishing
repairs, supplies, towage, use of dry dock or marine railway, or other necessaries to any vessel, whether
foreign or domestic, upon the order of the owner of such vessel, or of a person authorized by the owner,
shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall be necessary
to allege or prove that credit was given to the vessel.

Under the aforequoted provision, the expense must be incurred upon the order of the owner of the vessel
or its authorized person and prior to the recording of the ship mortgage. Under the law, it must be
established that the credit was extended to the vessel itself.

The trial court found that GALLEON’s advances obtained from Asian Hardwood were used to cover for
the payment of bunker oil/fuel, unused stores and oil, bonded stores, provisions, and repair and docking
of the GALLEON vessels. These expenses clearly fall under Section 21, P.D. No. 1521.

The trial court also found that the advances from Asian Hardwood were spent for ship modification cost
and the crew’s salary and wages. DBP contends that a ship modification cost is omitted under Section 17,
P.D. No. 1521, hence, it does not have a status superior to DBP’s preferred mortgage lien.

As stated in Section 21, P.D. No. 1521, a maritime lien may consist in “other necessaries spent for the
vessel.” The ship modification cost may properly be classified under this broad category because it was a
necessary expenses for the vessel’s navigation. As long as an expense on the vessel is indispensable to the
maintenance and navigation of the vessel, it may properly be treated as a maritime lien for necessaries
under Section 21, P.D. No. 1521."

However, Only NDC is liable on the maritime lien

x x x [O]nly NDC is liable for the payment of the maritime lien. A maritime lien is akin to a mortgage
lien in that in spite of the transfer of ownership, the lien is not extinguished. The maritime lien is
inseparable from the vessel and until discharged, it follows the vessel. Hence, the enforcement of a
maritime lien is in the nature and character of a proceeding quasi in rem.[65] The expression “action in
rem” is, in its narrow application, used only with reference to certain proceedings in courts of admiralty
wherein the property alone is treated as responsible for the claim or obligation upon which the
proceedings are based.[66] Considering that DBP subsequently transferred ownership of the vessels to
NDC, the Court holds the latter liable on the maritime lien. Notwithstanding the subsequent transfer of
the vessels to NDC, the maritime lien subsists.
 NEGROS NAVIGATION CO.vs.THE COURT OF APPEALS

573 SCRA 434

Facts:

Private respondent Ramon Miranda purchased from the Negros Navigation Co., Inc. four special cabin
tickets. The tickets were for Voyage No. 457-A of the M/V Don Juan, leaving Manila and going to
Bacolod.

Subsequently, the Don Juan collided off the Tablas Strait in Mindoro, with the M/T Tacloban City, an oil
tanker owned by the Philippine National Oil Company (PNOC) and the PNOC Shipping and Transport
Corporation (PNOC/STC). As a result, the M/V Don Juan sank. Several of her passengers perished in the
sea tragedy. The bodies of some of the victims were found and brought to shore, but the four members of
private respondents’ families were never found.

Private respondents filed a complaint against the Negros Navigation, the Philippine National Oil
Company (PNOC), and the PNOC Shipping and Transport Corporation (PNOC/STC), seeking damages
for the death. Petitioner, however, denied that the four relatives of private respondents actually boarded
the vessel as shown by the fact that their bodies were never recovered. Petitioner further averred that the
Don Juan was seaworthy and manned by a full and competent crew, and that the collision was entirely
due to the fault of the crew of the M/T Tacloban City.

In finding petitioner guilty of negligence and in failing to exercise the extraordinary diligence required of
it in the carriage of passengers, both the trial court and the appellate court relied on the findings of this
Court in Mecenas v. Intermediate Appellate Court, which case was brought for the death of other
passengers. In Mecenas, SC found petitioner guilty of negligence in (1) allowing or tolerating the ship
captain and crew members in playing mahjong during the voyage, (2) in failing to maintain the vessel
seaworthy and (3) in allowing the ship to carry more passengers than it was allowed to carry. Petitioner is,
therefore, clearly liable for damages to the full extent.

Petitioner criticizes the lower court’s reliance on the Mecenas case, arguing that, although this case arose
out of the same incident as that involved in Mecenas, the parties are different and trial was conducted
separately. Petitioner contends that the decision in this case should be based on the allegations and
defenses pleaded and evidence adduced in it or, in short, on the record of this case.

Issues:

1. Whether the ruling in Mecenas v. Court of Appeals, finding the crew members of petitioner to be
grossly negligent in the performance of their duties, is binding in this case;
2. Whether the award for damages in Mecenas v. Court of Appeals is applicable in this case.\

Held:

1. No. The contention is without merit.

Adherence to the Mecenas case is dictated by this Court’s policy of maintaining stability in jurisprudence.
Where, as in this case, the same questions relating to the same event have been put forward by parties
similarly situated as in a previous case litigated and decided by a competent court, the rule of stare decisis
is a bar to any attempt to relitigate the same issue.

2. No, it is not applicable.

Petitioner contends that, assuming that the Mecenas case applies, private respondents should be allowed
to claim only P43,857.14 each as moral damages because in the Mecenascase, the amount of P307,500.00
was awarded to the seven children of the Mecenas couple. Here is where the principle of stare decisis
does not apply in view of differences in the personal circumstances of the victims. For that matter,
differentiation would be justified even if private respondents had joined the private respondents in the
Mecenas case.

The doctrine of stare decisis works as a bar only against issues litigated in a previous case. Where the
issue involved was not raised nor presented to the court and not passed upon by the court in the previous
case, the decision in the previous case is not stare decisis of the question presently presented.

The Mecenas case cannot be made the basis for determining the award for attorney’s fees. The award
would naturally vary or differ in each case.
 OUANO VS COURT OF APPEALS

211 SCRA 740

FACTS:

Petitioner Ouano is the owner and operator of M/V Don Julio Ouano. Petitioner leased said vessel to
respondent Rafols under a charter party for P60,000 a month with a down payment of P30,000 and the
remaining balance to be paid within 20 days after the departure from the port. It was also stated in the
charter contract that said vessel should not be sublet or sub-chartered by the charterer without the
knowledge or consent of the owner. Several days after the vessel was leased to Rafols, Rafols contracted
with Market Developers Inc (MADE) under a fixture note to transport 13,000 bags of cement to General
Santos, consigned to Supreme Merchant Construction Supply Inc (SMCSI) for a freightage of P46,150.
Said amount was to be made to Rafols in two installments of P23,075 upon loading the cargo and upon
receipt of the cargo by the consignee. The fixture note did not contain any consent of Ouano.

Ouano filed a complaint with Cebu RTC against MADE as shipper, SMCSI as consignee and Rafols as
charterer seeking payment of P23,000 for freight charges. RTC Cebu held in favor of Ouano however CA
reversed the decision on the ground that MADE and SMCSI were not liable to Ouano for the payment of
freight charges.

ISSUE:

Whether or not MADE should be liable for mayment of freight charges to Ouano.

HELD:

It should be made clear that Rafols did not violate the terms of the contract by entering into a contract of
transportation of cement cargo with MADE since it did not sublet nor sub-charter the same to the latter.
The possession, operation and management of the vessel remained with Rafols as the charterer. It is a
basic principle in civil law that with certain exceptions, a contract can only bind the parties who had
entered into it or by their successors who had assumed their personalities or juridical position and as a
consequence, such a contract can neither favor nor prejudice a third person. It is undisputed that the
charter contract was entered into only by Ouano and Rafols and MADE and SMCSI were not parties
thereto nor were they aware of the provisions thereof. Even if the petitioner’s allegation that Rafols
subleased the vessel to MADE, it does not give Ouano any cause of action against the supposed sublesee
as his right of recourse is against the original charterer. The obligation of contracts is limited to the parties
making them and ordinarily, only those who are parties to contracts are liable for their breach. Parties to a
contract cannot thereby impose any liability on one who, under its terms, is a stranger to the contract, and,
in any event, in order to bind a third person contractually, an expression of assent by such person is
necessary.
 MACONDRAY AND CO., INC. VS.PROVIDENT INSURANCE CORP.
G.R. No. 154305, December 9, 2004

FACTS:

Canpotex Shipping Services Ltd., Inc., (CANPOTEX), shipped and loaded on board the vessel of M/V
trade carrier, 500 metric tons of standard grade muriate of potash in bulk for transportation to and deliver
at the port of Sangi, Toledo City in favour of Atlas Fertilizer Corp. (ATLAS). Subject shipments were
insured with Provident against all risks.

When the shipment arrived ATLAS discovered that the shipment sustained losses. Provident paid for
losses. Formal claims was then filed with Trade and Transport and Macondray but the same refused and
failed to settle the same.

Macondray denied liability over the losses for having no absolute relation with defendant Trade and
Transport, the alleged operator of the vessel who transported the subject shipment; that accordingly,
Macondrary is local representative of the CANPOTEX; the charterer of M/V TRADE CARRIER and not
party to this case; that it has no control over the acts of the captain and crew of the Carrier and cannot be
held responsible for any damage arising from the fault or negligence of said captain and crew; that upon
arrival at the port of Sangi, Toledo City, Cebu, the M/V Trade Carrier discharged the full amount of
shipment.

ISSUE:

Whether or not MACONDRAY is an agent and thus liable for any loss sustained by any party from the
vessel owned by defendant TRADE & TRANSPORT.

RULING:

AFFIRMATIVE
Although MACONDRAY is not an agent of TRADE & TRANSPORT, it can still be the ship agent of the
vessel M/V Trade Carrier. Article 586 of the Code of Commerce states that a ship agent is the person
entrusted with provisioning or representing the vessel in the port in which it may be found. Hence,
whether acting as agent of the owner of the vessel or as agent of the charterer, petitioner will be
considered as the ship agent and may be held liable as such, as long as the latter is the one that provisions
or represents the vessel.

The trial court and the CA found evidence that petitioner was appointed as local agent of the
vessel,represented such vessel in the Port of Manila and was the ship agent.

As ship agent, it may be held civilly liable in certain instances. The Code of Commerce provides:

Article 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the
obligations contracted by the latter to repair, equip, and provision thevessel, provided the creditor proves
that the amount claimed was invested for the benefit of the same.

Article 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which
may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he
may exempt himself therefrom by abandoning the vessel with all her equipments and the freight it may
have earned during the voyage.
Petitioner does not dispute the liabilities of the ship agent for the loss/shortage of standard-grade Muriate
of Potash valued. Hence, the court find no reason to delve further into the matter or to disturb the finding
of the CA holding petitioner, as ship agent, liable to respondent for the losses sustained by the subject
shipment.

COASTWISE LIGHTERAGE CORP. VS. CA

G.R No. 114167, July 12, 1995

FACTS:

Pag-asa Sales Inc. entered into a contract to transport molasses from the province of Negros to Manila
with Coastwise Lighterage Corporation (Coastwise for brevity), using the latter's dumb barges. The
barges were towed in tandem by the tugboat MT Marica, which is likewise owned by Coastwise. Upon
reaching Manila Bay, one of the barges, "Coastwise 9", struck an unknown sunken object. The forward
buoyancy compartment was damaged, and water gushed in through a hole "two inches wide and twenty-
two inches long". As a consequence, the molasses at the cargo tanks were contaminated. Pag-asa filed a
claim against Philippine General Insurance Company, the insurer of its cargo. Philgen paid P700,000 for
the value of the molasses lost.

Philgen then filed an action against Coastwise to recover the money it paid, claiming to be subrogated to
the claims which the consignee may have against the carrier. Both the trial court and the Court of Appeals
ruled against Coastwise.

ISSUES:

(1) Whether Coastwise was transformed into a private carrier by virtue of the contract it entered into with
Pag-asa, and whether it exercised the required degree of diligence

(2) Whether Philgen was subrogated into the rights of the consignee against the carrier

RULING:

(1) Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one point
to another, but the possession, command mid navigation of the vessels remained with petitioner
Coastwise Lighterage. Coastwise Lighterage, by the contract of affreightment, was not converted
into a private carrier, but remained a common carrier and was still liable as such. The law and
jurisprudence on common carriers both hold that the mere proof of delivery of goods in good
order to a carrier and the subsequent arrival of the same goods at the place of destination in bad
order makes for a prima facie case against the carrier. It follows then that the presumption of
negligence that attaches to common carriers, once the goods it is sports are lost, destroyed or
deteriorated, applies to the petitioner. This presumption, which is overcome only by proof of the
exercise of extraordinary diligence, remained unrebutted in this case. Jesus R. Constantino, the
patron of the vessel "Coastwise 9" admitted that he was not licensed. Coastwise Lighterage
cannot safely claim to have exercised extraordinary diligence, by placing a person whose
navigational skills are questionable, at the helm of the vessel which eventually met the fateful
accident. It may also logically, follow that a person without license to navigate, lacks not just the
skill to do so, but also the utmost familiarity with the usual and safe routes taken by seasoned and
legally authorized ones. Had the patron been licensed he could be presumed to have both the skill
and the knowledge that would have prevented the vessel's hitting the sunken derelict ship that lay
on their way to Pier 18. As a common carrier, petitioner is liable for breach of the contract of
 carriage, having failed to overcome the presumption of negligence with the loss and destruction
of goods it transported, by proof of its exercise of extraordinary diligence.

(2) Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the
insured property is destroyed or damaged through the fault or negligence of a party other than the
assured, then the insurer, upon payment to the assured will be subrogated to the rights of the
assured to recover from the wrongdoer to the extent that the insurer has been obligated to pay.
Payment by the insurer to the assured operated as an equitable assignment to the former of all
remedies which the latter may have against the third party whose negligence or wrongful act
caused the loss. The right of subrogation is not dependent upon, nor does it grow out of, any
private of contract or upon written assignment of, claim. It accrues simply upon payment of the
insurance claim by the insurer.
 PHILIPPINES FIRST INSURANCE CO. VS.WALLEM PHILS. SHIPPING
G.R. NO. 165647, March 26, 2009

FACTS:

October 1995, Anhui Chemicals Import and Export Corp. loaded on board M/S Offshore Master a
shipment consisting of sodium sulphate anhydrous, complete and in good order for transportation to and
delivery at the port of Manila for consignee, covered by a clean bill of lading.

On October 16, 1995, the shipment arrived in port of manila and was discharged which caused various
degrees of spillage and losses as evidence by the turn over survey of the arrastre operator. Asia Star
Freight delivered the shipments from pier to the consignees in Quezon City, during the unloading, it was
found by the consignee that the shipment was damaged and in bad condition.

April 29, 1996, the consignee filed a claim with Wallem for the value of the damaged shipment, to no
avail. Since the shipment was insured with Phil. First Insurance against all risks in the amount of
P2,470,213.50. The consignee filed a claim against the First Insurance. First insurance after examining
the turn-over survey, the bad order certificate and other documents paid the consignee but later on sent a
demand letter to Wallem for the recovery of the amount paid to the consignee (in exercise of its right of
subrogation). Wallem did not respond to the claim.

First Insurance then instituted an action before RTC for damages against Wallem. RTC held the shipping
company and the arrastre operator solidarily liable since both are charged with the obligation to deliver
the goods in good order condition.

The CA reversed and set aside the RTC's decision. CA says that there is no solidary liability between the
carrier and thearrastre because it was clearly established that the damage and losses of the shipment were
attributed to the mishandling by the arrastre operator in the discharge of the shipment.

ISSUE:
1. Whether or not the Court of Appeals erred in not holding that as a common carrier, the carriers duties
extend to the obligation to safely discharge the cargo from the vessel;
2. Whether or not the carrier should be held liable for the cost of the damaged shipment;
3. Whether or not Wallems failure to answer the extra judicial demand by petitioner for the cost of the
lost/damaged shipment is an implied admission of the formers liability for said goods;
4. Whether or not the courts below erred in giving credence to the testimony of Mr.Talens.

RULING:
(1) Yes, the vessel is a common carrier, and thus the determination of the existence or absence of liability
will be gauged on the degree of diligence required of a common carrier.

(2) The first and second issue will be resolved concurrently.

(3) The damage of the shipment was documented by the turn0over survey and request for bad order
survey, with these documents, petitioner insist that the shipment incurred damages while still in the care
and responsibility of Wallem before it was turned over to the arrastre operator. However, RTC found the
testimony of Mr.Talens (cargo surveyor) that the loss was caused by the mishandling of the arrastre
operator. This mishandling was affirmed by the CA which was the basis for declaring the arrastre
operator solely liable for the damage.
It is established that damage or losses were incurred by the shipment during the unloading. As common
carrier, they are bound to observe extraordinary diligence in the vigilance over the goods transported by
them. Subject to certain exceptions enumerated under Article 1734 of the Civil Code, common carriers
are responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of
the common carrier lasts from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered, actually or constructively, by the
carrier to the consignee, or to the person who has a right to receive them.

For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable for the
cargo from the time it is turned over to him at the dock or afloat alongside the vessel at the port of
loading, until he delivers it on the shore or on the discharging wharf at the port of unloading, unless
agreed otherwise.

COGSA provides that under every contract of carriage of goods by sea, the carrier in relation to the
loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the
responsibilities and liabilities and entitled to the rights and immunities set forth in the Act. Section 3 (2)
thereof then states that among the carriers responsibilities are to properly and carefully load, handle, stow,
carry, keep, care for, and discharge the goods carried.

On the other hand, the functions of an arrastre operator involve the handling of cargo deposited on the
wharf or between the establishment of the consignee or shipper and the ship's tackle. Being the custodian
of the goods discharged from a vessel, an arrastre operator's duty is to take good care of the goods and to
turn them over to the party entitled to their possession.

Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or employees
should observe the standards and measures necessary to prevent losses and damage to shipments under its
custody. Thus, in this case the appellate court is correct insofar as it ruled that an arrastre operator and a
carrier may not be held solidarily liable at all times. But the precise question is which entity had custody
of the shipment during its unloading from the vessel?

The records are replete with evidence which show that the damage to the bags happened before and after
their discharge and it was caused by the stevedores of the arrastre operator who were then under the
supervision of Wallem.

It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the
custody of the carrier. In the instant case, the damage or losses were incurred during the discharge of the
shipment while under the supervision of the carrier. Consequently, the carrier is liable for the damage or
losses caused to the shipment. As the cost of the actual damage to the subject shipment has long been
settled, the trial courts finding of actual damages in the amount of P397,879.69 has to be sustained.

(4) Mr Talens credibility must be respected.

CA's decision is set aside. Wallem is liable.

 Magsaysay-Labrador vs CA Case Digest
Magsaysay-Labrador, et. al. vs. Court of Appeals
[GR 58168, 19 December 1989]

Facts:

On 9 February 1979, Adelaida Rodriguez-Magsaysay, widow and special administratix of the

estate of the late Senator Genaro Magsaysay, brought before the then Court of First Instance of Olongapo
an action against ArtemioPanganiban, Subic Land Corporation (SUBIC), Filipinas Manufacturer's Bank
(FILMANBANK) and the Register of Deeds of Zambales, for the annulment of the Deed of Assignment
executed by the late Senator in favor of SUBIC (as a result of which TCT 3258 was cancelled and TCT
22431 issued in the name of SUBIC), for the annulment of the Deed of Mortgage executed by SUBIC in
favor of FILMANBANK (dated 28 April 1977 in the amount of P 2,700,000.00), and cancellation of TCT
22431 by the Register of Deeds, and for the latter to issue a new title in her favor. On 7 March 1979,
Concepcion Magsaysay-Labrador, Soledad Magsaysay-Cabrera, Luisa Magsaysay-Corpuz, Felicidad
Magsaysay, and Mercedes Magsaysay-Diaz, sisters of the late senator, filed a motion for intervention on
the ground that on 20 June 1978, their brother conveyed to them 1/2 of his shareholdings in SUBIC or a
total of 416,566.6 shares and as assignees of around 41 % of the total outstanding shares of such stocks of
SUBIC, they have a substantial and legal interest in the subject matter of litigation and that they have a
legal interest in the success of the suit with respect to SUBIC. On 26 July 1979, the trial court denied the
motion for intervention, and ruled that petitioners have no legal interest whatsoever in the matter in
litigation and their being alleged assignees or transferees of certain shares in SUBIC cannot legally entitle
them to intervene because SUBIC has a personality separate and distinct from its stockholders.

On appeal, the Court of Appeals found no factual or legal justification to disturb the findings of
the lower court. The appellate court further stated that whatever claims the Magsaysay sisters have against
the late Senator or against SUBIC for that matter can be ventilated in a separate proceeding. The motion
for reconsideration of the Magsaysay sisters was denied. Hence, the petition for review on certiorari.

Issue: Whether the Magsaysay sister, allegedly stockholders of SUBIC, are interested parties in a case
where corporate properties are in dispute.

Held: Viewed in the light of Section 2, Rule 12 of the Revised Rules of Court, the Magsaysay sisters
have no legal interest in the subject matter in litigation so as to entitle them to intervene in the
proceedings. To be permitted to intervene in a pending action, the party must have a legal interest in the
matter in litigation, or in the success of either of the parties or an interest against both, or he must be so
situated as to be adversely affected by a distribution or other disposition of the property in the custody of
the court or an officer thereof . Here, the interest, if it exists at all, of the Magsaysay sisters is indirect,
contingent, remote, conjectural, consequential and collateral. At the very least, their interest is purely
inchoate, or in sheer expectancy of a right in the management of the corporation and to share in the profits
thereof and in the properties and assets thereof on dissolution, after payment of the corporate debts and
obligations. While a share of stock represents a proportionate or aliquot interest in the property of the
corporation, it does not vest the owner thereof with any legal right or title to any of the property, his
interest in the corporate property being equitable or beneficial in nature. Shareholders are in no legal
sense the owners of corporate property, which is owned by the corporation as a distinct legal person.
 C. B. WILLIAMS vs. TEODORO R. YANGCO
G.R. No.L-8325. March 10, 1914

FACTS:

The steamer Subic, owned by the defendant, collided with the lunch Euclid owned by the plaintiff, in the
Bay of Manila at an early hour on the morning of January 9, 1911, and the Euclid sank five minutes
thereafter. This action was brought to recover the value of the Euclid.

The court below held from the evidence submitted that the Euclid was worth at a fair valuation P10,000;
that both vessels were responsible for the collision; and that the loss should be divided equally between
the respective owners, P5,000 to be paid the plaintiff by the defendant, and P5,000 to be borne by the
plaintiff himself. From this judgment both defendant and plaintiff appealed.

ISSUE:

Whether or not plaintiff should not be held liable on account of doctrine of last clear chance—the
defendant having the last opportunity to avoid the collision.

HELD:

No. In cases of a disaster arising from the mutual negligence of two parties, the party who has a
last clear opportunity of avoiding the accident, notwithstanding the negligence of his opponent, is
considered wholly responsible for it under the common-law rule of liability as applied in the courts of
common law of the United States. But this rule (which is not recognized in the courts of admiralty in the
United States, wherein the loss is divided in cases of mutual and concurring negligence, as also where the
error of one vessel has exposed her to danger of collision which was consummated by he further rule, that
where the previous application by the further rule, that where the previous act of negligence of one vessel
has created a position of danger, the other vessel is not necessarily liable for the mere failure to recognize
the perilous situation; and it is only when in fact it does discover it in time to avoid the casualty by the use
of ordinary care, that it becomes liable for the failure to make use of this last clear opportunity to avoid
the accident. (See cases cited in Notes, 7 Cyc., pp. 311, 312, 313.)

So, under the English rule which conforms very nearly to the common-law rule as applied in the
American courts, it has been held that the fault of the first vessel in failing to exhibit proper lights or to
take the proper side of the channel will relieve from liability one who negligently runs into such vessels
before he sees it; although it will not be a defense to one who, having timely warning of the danger of
collision, fails to use proper care to avoid it. (Pollock on Torts, 374.). In the case at bar, the most that can
be said in support of plaintiff's contention is that there was negligence on the part of the officers on
defendant's vessel in failing to recognize the perilous situation created by the negligence of those in
charge of plaintiff's launch, and that had they recognized it in time, they might have avoided the accident.
But since it does not appear from the evidence that they did, in fact, discover the perilous situation of the
launch in time to avoid the accident by the exercise of ordinary care, it is very clear that under the above
set out limitation to the rule, the plaintiff cannot escape the legal consequences of the contributory
negligence of his launch, even were we to hold that the doctrine is applicable in the jurisdiction, upon
which point we expressly reserve our decision at this time.
 THE AMERICAN INSURANCE COMPANY, plaintiff-appellant,
vs.
COMPAÑIA MARITIMA, ET AL., defendants.

G.R. No. L-24515 November 18, 1967

Facts:
Appeal from the order of the Court of First Instance of Manila (Civil Case No. 55056) dismissing, on
the ground of prescription, theamended complaint of plaintiff-appellant, The American Insurance
Company, as against alternative defendant Macondray & Co., Inc.
On August 11, 1962, a certain cargo insured with plaintiff corporation was shipped in New York, U.S. A.
aboard "M/S TOREADOR", of which the general agent in the Philippines is appellee Macondray & Co.,
Inc. (hereinafter referred to as Macondray). The cargo, with an invoice value of $3,539.61 CIF Cebu, was
consigned to the order of the importer Atlas Consolidated Mining and Development Corporation.
Inasmuch as the final port of call of the "M/S TOREADOR" was Manila, the carrier, in accepting the
cargo at the point of shipment, agreed to transship the same, after its discharge in Manila, aboard an inter-
island vessel to its destination in Cebu.
On September 18, 1962 the "M/S TOREADOR" arrived at the port of Manila and on the same date
discharged the cargo in question. Pursuant to the arrangement the cargo was subsequently loaded aboard
the "SS SIQUIJOR, an inter-island vessel. The shipment was finally discharged in Cebu on September
24, 1962.
When the consignee took delivery of the shipment it was found to be short of two (2) pieces of tractor
parts worth $2,834.88, or P11,063.12 at the exchange rate of P3.9025. Plaintiff paid the insured value of
the lost merchandise to the consignee. To recover the said sum of P11,063.12 plaintiff, as subrogee of the
consignee's rights, filed on September 24, 1963 a complaint against the Compañia Maritimaand
the Visayan Cebu Terminal Co., Inc. as alternative defendants. The former was sued as operator and
owner of "SS SIQUIJOR" and the latter as operator of the arrastre service at the port of Cebu charged
with the care and custody of all cargo discharge there.

In view of Maritima's allegation in its answer that the lost merchandise had not actually been delivered to
it, plaintiff filed on November 6, 1964 a motion to admit its amended
complaint impleading Macondray and Luzon Brokerage Corporation as additional defendants and
eliminating the Visayan Cebu Terminal Co., Inc. According to plaintiff, "the amended
complaint is necessary in view of defendantMaritima's assertion and records tending to show that the lost
merchandise was not delivered to it, contrary to Macondray'srepresentation, even after the filing of the
original complaint, that the cargo was delivered to Maritima." The amended complaint was admitted
on November 14, 1964.
On December 23, 1964 Macondray moved to dismiss the amended complaint against it on the ground that
plaintiff's action had already prescribe under the provisions of the carriage of Goods by Sea Act*

Macondray contended that since the amended complaint in which it was impleaded for the first time
was filed only on November 6, 1964 and admitted on November 14, 1964, the period of one year had
expired whether reckoned from one or the other of the two dates, namely: September 18, 1962, when the
"M/S TOREADOR" arrived at the port of Manila and discharged the cargo for transshipment to Cebu on
board the "SS SIQUIJOR", and September 24, 1962 when the shipment finally arrived in Cebu and was
discharged the same day.
The motion to dismiss was granted.

Plaintiff interposed the present appeal from the order of dismissal.

Plaintiff avers that the one year prescriptive period provided for in the Carriage of Goods by Sea Act does
not apply in this case, which should be governed by the statute of limitations in the Civil Code. In
support of this contention it is pointed out that the cargo in question was transshipment cargo; that the
discharge thereof in Manila terminated the obligation of Macondray as carrier; and that its obligation to
transship the cargo to Cebu was merely that of a "forwarding agent" of the shipper. Reliance is placed on
Clause 11 of the bill of lading which states:
"This carrier, in making arrangements for any transshipping or forwarding vessel or
means of transportation not operated by this carrier shall be considered solely
the forwarding agent of the shipper and without any other responsibility."

Issue:

Whether or not plaintiff's action had already prescribed under the provisions of the carriage of
Goods by Sea Act.

Held:

Carriage of Goods by Sea Act* Section 3 (6) provides that:

"In any event, the carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the goods or the
date when the goods is all have been delivered".

We do not see that the use of the term "forwarding agent of the shipper" is decisive of the
issue. According to paragraph 4 of the amended complaint the cargo was loaded on board the
"M/S TOREADOR" in New York, "freight prepaid to Cebu City . . . pursuant to the bill of lading
No. 13." In other words, the action is based on the contract of carriage up to the final port
of destination, which was Cebu City, for which the corresponding freight had been prepaid.

In any event the Carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the goods or the date when
the goods should have been delivered.
 The transshipment of the cargo from Manila to Cebu was not a separate transaction from that
originally entered into by Macondray, as general agent for the "M/S TOREADOR." It was part
of Macondray's obligation under the contract of carriage and the fact that the transshipment
was made via an inter-island vessel did not operate to remove the transaction from the operation
of the Carriage of Goods by Sea Act.

GO CHAN & CO., INC., plaintiff-appellee,

vs.
ABOITIZ & CO., INC., defendant-appellant.

G. R. No. L-8319 December 29, 1955

Facts:

As owner of 200 boxes of canned milk placed on board the S. S. Daniel R. Hill for transportation
from New Orleans, U. S. A. to Cebu City, plaintiff Go Chan & Co., Inc. sued defendant as the agent of
said vessel. The complaint alleged that in February, 1947 such cargo was delivered to it minus 24 cases;
and that the value of the shortage was P416.68, for which judgment was accordingly requested.

The defendant answered that the loss was due to a peril of the sea, and that anyway the action was
barred because more than one year had elapsed from February 1947 to May 1950 when the complaint was
filed.

The court of first instance of Cebu rendered judgment for the plaintiff, upon the following facts,
which it found to have been established:

. . . that the plaintiff shipped 240 cases of milk and the correspondong freight was paid; that the cargo was
transhipped on the S. S. Snug Hitch and arrived at the port of Cebu in 1947 with 24 cases short-landed;
that a timely claim for the short-landed cargo of 24 cases was presented by the plaintiff to the defendant
but the latter asked to defer the claim; that when the 24 cases arrived, Go Tiong, the General Manager of
the plaintiff corporation did not receive them because they were no longer in cases but in sakes, and that
the cans were no longer fit for human consumption — they wer damaged and rusty; that the delay in
payment was due to the request of the defendant for amicable settlement which later, the defendant
refused to pay.

Concerning the defendant;s plea of prescription, founded on Commonwealth Act No. 65 adopting in
toto the Act of the U. S. Congress known as Carriage of Goods by Sea Act, the Cebu court declared that
both laws did not modify our statute of limitations, Act 190, under which, actions of this nature
prescribed in four years.

Having failed in a motion to reconsider, defendant perfected its appeal.

Issue:

Whether or not the action was barred by prescription.

Held:

Appeal is meritorious.

In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage
unless suit is brought within one year after delivery of the goods or the date when the goods should have
been delivered; provided, that if a notice of loss or damage, either apparent or concealed, is not given as
provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit
within one year after the delivery of the goods or the date when the goods should have been delivered.

Thru Mr. Justice Bautista Angelo this Court explained:

The claim that the prescriptive period to be considered in this case is that embodied in the Code of Civil
Procedure is untenable for the simple reason that this is a general law which only applies to cases not
covered by any special act. As we have already stated, the transaction under consideration is covered by
the Carriage of Goods by Sea Act, and since this is a special act, its provisions must of necessity limit or
restrict a law of general application. To hold otherwise would be to render nugatory the prescriptive
provision contained in that special act.

Because this action was not filed within one year from February, 1947 when the cargo was delivered or
should have been delivered, the law discharged this defendant from all liability in connection with the
carriage of said goods. The judgment will therefore be reversed and the defendant absolved.
 Barrios vs. Go Thong
GR L-17192, 30 March 1963)

FACTS:

Petitioner Honorio Barrios, captain and/or master of the MV Henry I, received or otherwise
intercepted an S.O.S. distress signal by blinkers from the MV Alfredo, owned and/or operated by
respondent Carlos Go Thong & Company. Thereafter, he altered the course of said vessel, and steered and
headed towards the beckoning MV Don Alfredo, which Barrios found to be in trouble, due to engine
failure and the loss of her propeller. Upon getting close to the MV Don Alfreco, with the consent and
knowledge of the captain and/or master of the MV Don Alfredo, Barrios caused the latter vessel to be tied
to, or well-secured and connected with tow lines from the MV Henry, and proceeded moving until such
time that a sister ship of MV Don Alfredo was sighted so that thetow lines were also released.Brought to
the CFI of Manila, the court therein dismissed the case; with cost against Barrios. Barrios interposed an
appeal.

ISSUE:

Whether under the facts of the case, the service rendered by plaintiff to defendant constituted
"salvage" or "towage", and if so, whether plaintiff may recover from defendant compensation for such
service.

HELD:

It is not a salvage service.

Salvage defined“Salvage” has been defined as “the compensation allowed to persons by whose
assistance a ship or her cargo has been saved, in whole or in part, from impending peril on the sea, or in
recovering such property from actual loss, as in case of shipwreck, derelict, or recapture.”

Elements for a valid salvage claim; Erlanger &Galinger case

In the Erlanger &Galinger case, it was held that three elements are necessary to a valid salvage claim,
namely, (1) a marine peril, (2) service voluntarily rendered when not required as an existing duty or from
a special contract, and (3) success in whole or in part, or that the service rendered contributed to such
success.

No marine peril to justify valid salvage claim

There was no marine peril to justify a valid salvage claim by Barrios against Go Thong. It appears that
although Go Thong’s vessel in question was, on the night of 1 May 1958, in a helpless condition due to
engine failure, it did not drift too far from the place where it was. The weather was fair, clear, and good.
The waves were small and too slight, so much so, that there were only ripples on the sea, which was quite
smooth. During the towing of the vessel on the same night, there was moonlight. Although said vessel
was drifting towards the open sea, there was no danger of its foundering or being stranded, as it was far
from any island or rocks. In case of danger of stranding, its anchor could be released, to prevent such
occurrence. There was no danger that Go Thong’s vessel would sink in view of the smoothness of the sea
and the fairness of the weather. That there was absence of danger is shown by the fact that said vessel or
its crew did not even find it necessary to lower its launch and two motor boats, in order to evacuate its
passengers aboard. Neither did they find occasion to jettison the vessel’s cargo as a safety measure.
Neither the passengers nor the cargo were in danger of perishing. All that the vessel’s crew members
could not do was to move the vessel on its own power. That did not make the vessel a quasi-derelict.

Contract of towage perfected even without written agreement

Herein, in consenting to Barrios’ offer to tow the vessel, Go Thong (through the captain of its vessel MV
Don Alfredo) thereby impliedly entered into a juridical relation of “towage” with the owner of the vessel
MV Henry I, captained by Barrios, the William Lines.

Only owner entitled to remuneration in towage

If the contract thus created is one for towage, then only the owner of the towing vessel, to the exclusion of
the crew of the said vessel, may be entitled to remuneration. The courts have to draw a distinct line
between salvage and towage; for the reason that a reward ought sometimes to be given to the crew of the
salvage vessel and to other participants in salvage services, and such reward should not be given if the
services were held to be merely towage. The master and members of the crew of a tug were not entitled to
participate in payment by liberty ship for services rendered by tug which were towage services and not
salvage services. The distinction between salvage and towage is of importance to the crew of the
salvaging ship, for the following reasons: If the contract for towage is in fact towage, then the crew does
not have any interest or rights in the remuneration pursuant to the contract. But if the owners of the
respective vessels are of a salvage nature, the crew of the salvaging ship is entitled to salvage, and can
look to the salved vessel for its share.

Equity cannot be resorted if there is an express provision of law

Barrios cannot invoke equity in support of his claim for compensation against Go Thong. There being an
express provision of law (Art. 2142, Civil Code) applicable to the relationship created in the case, i.e. that
of a quasi-contract of towage where the crew is not entitled to compensation separate from that of the
vessel, there is no occasion to resort to equitable considerations.
 G.R. No. L-22491

DOMINGO ANG vs. AMERICAN STEAMSHIP AGENCIES INC

Facts:

Yau Yue Commercial Bank Ltd. of Hongkong, sell 140 packages ofgalvanized steel durzinc
sheetsto one Herminio G. Teves, shippedby Tokyo Boeki Ltd. of Tokyo, Japan. with
AmericanSteamshipAgencies, Inc. as the agent in the Philippines, under ashipping agreement. The bill of
lading was indorsed to the orderof and delivered to Yau Yue by the shipper. Upon receiptthereof, Yau
Yue drew a demand draft together with the bill oflading against Herminio G. Teves, through the
Hongkong &Shanghai Bank. Upon arrival, Hongkong & Shanghai Bank notifiedTeves, the "notify party"
under the bill of lading, of thearrival of the goods and requested payment of the demand draftrepresenting
the purchase price of the articles. Teves, however,did not pay the demand draft, prompting the bank to
make thecorresponding protest. The bank likewise returned the bill oflading and demand draft to Yau Yue
which indorsed the said billof lading to Domingo Ang. Despite non-payment Teves was able tosecure a
"Permit To Deliver Imported Articles" which hepresented to the Bureau of Customs which in turn
released to himthe articles covered by the bill of lading. Subsequently,Domingo Ang claimed for the
articles from American SteamshipAgencies, Inc., by presenting the indorsed bill of lading, buthe was
informed by the latter that it had delivered the articlesto Teves. A complaint was filed by Ang against
AmericanSteamship for having allegedly wrongfully delivered and/orconverted the goods covered by the
bill of lading. Defendantfiled a motion to dismiss upon the ground that plaintiff's causeof action has
prescribed under the Carriage of Goods by Sea Act.Lower court dismissed the case on the ground of
prescription.Hence, an appeal was filed to SC.

Issue:

Whether or not there was "loss" of the goods subject matter ofthe complaint.

Ruling:

The provision of the law speaks of “loss or damage”. But there was no damage caused to the
goods which were delivered intact toHerminio Teves. As defined by the Civil Code and as applied to
section 3, paragraph 4, of the Carriage of Goods by sea Act, “loss” contemplates a situationwhere no
delivery at all was made by the shipper of the goods because the same had perished, gone out of
commerce, or disappeared thattheir existence is unknown or they cannot be recovered. It does not include
a situation where there was indeed delivery, but delivery to thewrong person.The applicable rule on
prescription is that found in the Civil Code, either: ten years for breach of contract or four years for quasi-
delict. Ineither case, the plaintiff’s cause of action has not yet prescribed. Thus, the case is remanded to
the court a quo for further proceeding
 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 or freighter 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 contain
general 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.
 KENG HUA PAPER PRODUCTS VS. CA
G.R. NO. 116868, FEBRUARY 12, 1998

Facts:

Sea-Land Service, a shipping company, is a foreign corporation licensed to do business in the Philippines.
Shipping Company received at its Hong Kong terminal a sealed container of “unsorted waste paper” for
shipment to Keng Hua Paper Products, Co. in Manila. A bill of lading to cover the shipment was issued
by Shipping Company. Notices of arrival were transmitted to Keng Hua but the latter failed to discharge
the shipment from the container during the “free time” period or grace period. The said shipment
remained inside the Shipping Company’s container from the moment the free time period expired until
the time when the shipment was unloaded from the container. During the said period, demurrage charges
accrued.

Keng Hua alleged that it purchased waste paper from the shipper in Hong Kong, Ho Kee Waste Paper, as
manifested in a Letter of Credit issued by Equitable Banking Corporation. His contentions were:
1) Under the letter of credit, the remaining balance of the shipment was only ten (10) metric tons but the
shipment Shipping Company was asking defendant to accept was twenty (20) metric tons.
2) That the shipping company had no cause of action against Keng Hua because the latter did not hire the
former to carry the merchandise; that the cause of action should be against the shipper which contracted
the Shipping Company’s services and not against defendant.

Issues:

1.)Whether Keng Hua was bound by the Bill of lading.

2.) Whether Keng Hua was correct in not accepting the over shipment.

Held:

Liability under the bill of lading

1. Yes.

A “bill of lading delivered and accepted constitutes the contract of carriage even though not signed,”
because the “acceptance of a paper containing the terms of a proposed contract generally constitutes an
acceptance of the contract and of all of its terms and conditions of which the acceptor has actual or
constructive notice.” In a nutshell, the acceptance of a bill of lading by the shipper and the consignee,
with full knowledge of its contents, gives rise to the presumption that the same was a perfected and
binding contract.

Shipper and consignee were liable for payment of demurrer charges;

Section 17 of the bill of lading Section 17 of the bill of lading provided that the shipper and the consignee
were liable for the payment of demurrage charges for the failure to discharge the containerized shipment
beyond the grace period allowed by tariff rules. Section 17 of the bill of lading provided “Cooperage
Fines. The shipper and consignee shall be liable for, indemnify the carrier and ship and hold them
harmless against…..”
 2. No

Keng Hua’s prolonged failure to receive and discharge the cargo from the Shipping Company’s vessel
constitutes a violation of the terms of the bill of lading. It should thus be liable for demurrage to the
former.

Keng Hua’s letter proved refusal to pick up cargo and not rejection of bill of lading;
Implied acceptance Keng Hua “received the bill of lading immediately after the arrival of the shipment”.
Having been afforded an opportunity to examine the said document, it did not immediately object to or
dissent from any term or stipulation therein. It was only six months later that it sent a letter to private
respondent saying that it could not accept the shipment. Its inaction for such a long period conveys the
clear inference that it accepted the terms and conditions of the bill of lading. Moreover, said letter spoke
only of petitioner’s inability to use the delivery permit, i.e. to pick up the cargo, due to the shipper’s
failure to comply with the terms and conditions of the letter of credit, for which reason the bill of lading
and other shipping documents were returned by the “banks” to the shipper. The letter merely proved its
refusal to pick up the cargo, not its rejection of the bill of lading.

Contract of carriage in bill of lading to be treated independently of contract of sale and the contract
for the issuance of credit
The contract of carriage, as stipulated in the bill of lading in the present case, must be treated
independently of the contract of sale between the seller and the buyer, and the contract for the issuance of
a letter of credit between the buyer and the issuing bank. Any discrepancy between the amount of the
goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of
credit will not affect the validity and enforceability of the contract of carriage as embodied in the bill of
lading. As the bank cannot be expected to look beyond the documents presented to it by the seller
pursuant to the letter of credit, neither can the carrier be expected to go beyond the representations of the
shipper in the bill of lading and to verify their accuracy vis-a-vis the commercial invoice and the letter of
credit. Thus, the discrepancy between the amount of goods indicated in the invoice and the amount in the
bill of lading cannot negate Keng Hua’s obligation to private respondent arising from the contract of
transportation.

Remedy of alleged over shipment lies against the shipper and not against the carrier
The contract of carriage was under the arrangement known as “Shipper’s Load and Count,” and the
shipper was solely responsible for the loading of the container while the carrier was oblivious to the
contents of the shipment. Keng Hua’s remedy in case of over shipment lies against the seller/shipper, not
against the carrier.
 NATIONAL STEEL CORP VS. CA AND VLASONS SHIPPING, INC.
G.R. NO. 112350, DECEMBER 12, 1997

Facts:
The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or
shipment for the general public. Its services are available only to specific persons who enter into a special
contract of charter party with its owner. It is undisputed that the ship is a private carrier. And it is in this
capacity that its owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract of
voyage charter hire with National Steel Corporation.

On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons
Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire whereby NSC hired VSI’s
vessel, the MV ‘VLASONS I’ to make one (1) voyage to load steel products at Iligan City and discharge
them at North Harbor, Manila.

On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV
‘VLASONS I’ loaded at plaintiff’s pier at Iligan City, the NSC’s shipment of 1,677 skids of tinplates and
92 packages of hot rolled sheets or a total of 1,769 packages with a total weight of about 2,481.19 metric
tons for carriage to Manila. The shipment was placed in the three (3) hatches of the ship.

The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12, 1974. The following
day, August 13, 1974, when the vessel’s three (3) hatches containing the shipment were opened by
plaintiff’s agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and
rusty. The cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was
completed only on August 24, 1974 after incurring a delay of eleven (11) days due to the heavy rain
which interrupted the unloading operations.

To determine the nature and extent of the wetting and rusting, NSC called for a survey of the shipment by
the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated March 17, 1975
(Exhibit ‘G’), MASCO made a report of its ocular inspection conducted on the cargo, both while it was
still on board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo
was taken and stored. MASCO reported that it found wetting and rusting of the packages of hot rolled
sheets and metal covers of the tinplates; that tarpaulin hatch covers were noted torn at various extents;
that container/metal casings of the skids were rusting all over. MASCO ventured the opinion that ‘rusting
of the tinplates was caused by contact with SEA WATER sustained while still on board the vessel as a
consequence of the heavy weather and rough seas encountered while en route to destination. It was also
reported that MASCO’s surveyors drew at random samples of bad order packing materials of the tinplates
and delivered the same to the M.I.T. Testing Laboratories for analysis. On August 31, 1974, the M.I.T.
Testing Laboratories issued Report No. 1770 which in part, states, ‘The analysis of bad order samples of
packing materials xxx shows that wetting was caused by contact with SEA WATER’.

On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the defendant its
claim for damages suffered due to the downgrading of the damaged tinplates in the amount
of P941,145.18.

NSC demanded damages of P941,145.18 as a result of the act, neglect and default of the master and crew
in the management of the vessel as well as the want of due diligence on the part of the defendant to make
the vessel seaworthy and to make the holds and all other parts of the vessel in which the cargo was
carried, fit and safe for its reception, carriage and preservation -- all in violation of defendant’s
undertaking under their Contract of Voyage Charter Hire.

Vlasons Shipping denied liability for the alleged damages; claiming that the MV ‘VLASONS I’ was
seaworthy in all respects for the carriage of plaintiff’s cargo; that said vessel was not a ‘common
carrier’ inasmuch as she was under voyage charter contract with the plaintiff as charterer under the
charter party; that in the course of the voyage from Iligan City to Manila, the MV ‘VLASONS I’
encountered very rough seas, strong winds and adverse weather condition, causing strong winds and big
waves to continuously pound against the vessel and seawater to overflow on its deck and hatch covers;
that under the Contract of Voyage Charter Hire, Vlasons shall not be responsible for losses/damages
except on proven willful negligence of the officers of the vessel, that the officers of said MV ‘VLASONS
I’ exercised due diligence and proper seamanship and were not willfully negligent; that furthermore the
Voyage Charter Party provides that loading and discharging of the cargo was on FIOST terms which
means that the vessel was free of risk and expense in connection with the loading and discharging of the
cargo

RTC rendered decision in favor of Vlasons Shipping; that the vessel is seaworthy, properly manned,
equipped and supplied, and that there is no proof of willful negligence of the vessel’s officers
CA modified the decision of RTC regarding the awards of damages.
ISSUE: Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant
to which there exist[s] a presumption of negligence against the common carrier in case of loss or damage
to the cargo are applicable to a private carrier.
HELD: VSI did not offer its services to the general public. As found by the Regional Trial Court, it
carried passengers or goods only for those it chose under a “special contract of charter party.” [13] As
correctly concluded by the Court of Appeals, the MV Vlasons I “was not a common but a private
carrier.” Consequently, the rights and obligations of VSI and NSC, including their respective liability for
damage to the cargo, are determined primarily by stipulations in their contract of private carriage or
charter party. Recently, in Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and
Seven Brothers Shipping Corporation, the Court ruled:

“ xxx in a contract of private carriage, the parties may freely stipulate their duties and obligations which
perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage
does not involve the general public. Hence, the stringent provisions of the Civil Code on common
carriers protecting the general public cannot justifiably be applied to a ship transporting commercial
goods as a private carrier. Consequently, the public policy embodied therein is not contravened by
stipulations in a charter party that lessen or remove the protection given by law in contracts involving
common carriers.
 PEDRO VASQUEZvs. THE COURT OF APPEALS and FILIPINAS PIONEER LINES, INC.
G.R. No. L-42926, September 13, 1985

FACTS:

This litigation involves a claim for damages for the loss at sea of petitioners' respective children
after the shipwreck of MV Pioneer Cebu due to typhoon "Klaring" in May of 1966.

Inter-island vessel MV "Pioneer Cebu" left the Port of Manila in the early morning of May 15,
1966 bound for Cebu. Its officers were aware of the upcoming typhoon Klaring that is already building up
somewhere in Mindanao. There being no typhoon signals on their route, they proceeded with their
voyage. When they reached the island of Romblon, the captain decided not to seek shelter since the
weather was still good. While passing the island of Tanguingui, the weather suddenly change and heavy
rains fell. Fearing that they might hit Chocolate Island due to zero visibility, the captain ordered to reverse
the vessel so that they could weather out the typhoon b facing the strong winds and waves. Unfortunately,
the vessel struck a reef near Malapascua Island, it sustained a leak and eventually sunk.

The parents of the passengers filed an action against Filipinas Pioneer Lines for the recovery of
damages due to the loss of their children, Alfonso Velasquez, Filipinas Bagaipo, and Mario Marlon
Vasquez during said voyage.

The respondentpleaded force majeure and the extinction of its liability by the actual loss of the
vessel, but the Trial Court ruled in favor of the petitioners. On appeal to the Court of Appeals, it reversed
the decision of the lower court stating that the calamity was caused solely and proximately by fortuitous
event, and that there was no negligence on the part of the common carrier in the discharge of its duties.

ISSUE:
Whether or not the appellate court is correct in freeing the defendant from liability applying the
defense of caso fortuito.

HELD:

No, the appellate is not correct. The Supreme Court upheld the decision of the Trial Court. To
constitute a caso fortuito that would exempt a person from responsibility, it is necessary that (1) the event
must be independent of the human will; (2) the occurrence must render it impossible for the debtor to
fulfill the obligation in a normal manner; and that (3) the obligor must be free of participation in, or
aggravation of, the injury to the creditor. In the language of the law, the event must have been impossible
to foresee, or if it could be foreseen, must have been impossible to avoid.There must be an entire
exclusion of human agency from the cause of injury or loss.

While indeed, the typhoon was inevitable occurrence, the crew failed to observe that
extraordinary diligence required of them explicitly by law for the safety of the passengers transported by
them with due regard for all necessary circumstance and unnecessarily exposed the vessel to tragic
mishap. Despite knowledge of the fact that there was a typhoon, they still proceeded with their voyage
relying only on the forecast. That it would weaken upon crossing the island of Samar. With respect to
private respondent’s submission that the total loss of the vessel extinguished its liability pursuant to
Article 587 of the Code of Commerce, it does not apply in this case since under the limited liability rule,
the ship owner or agent may be held liable for reason of the death of its passengers.
 DIONISIA ABUEG, ET AL., vs.BARTOLOME SAN DIEGO
77 Phil 32, December 17, 1946

Facts:

The M/S San Diego II and the M/S Bartolome, while engaged in fishing operations around
Mindoro Island on Oct. 1, 1941 were caught by a typhoon as a consequence of which they were sunk and
totally lost. Amado Nuñez, Victoriano Salvacion and Francisco Oching while acting in their capacities
perished in the shipwreck.

Counsel for the appellant cite article 587 of the Code of Commerce which provides that if the
vessel together with all her tackle and freight money earned during the voyage are abandoned, the agent's
liability to third persons for tortious acts of the captain in the care of the goods which the ship carried is
extinguished; article 837 of the same code which provides that in cases of collision, the ship owners'
liability is limited to the value of the vessel with all her equipment and freight earned during the voyage
(Philippine Shipping company vs. Garcia, 6 Phil., 281), and article 643 of the same Code which provides
that if the vessel and freight are totally lost, the agent's liability for wages of the crew is extinguished.
From these premises counsel draw the conclusion that appellant's liability, as owner of the two motor
ships lost or sunk as a result of the typhoon that lashed the island of Mindoro on October 1, 1941, was
extinguished.

Issue:

Whether the liability of the shipowner is extinguished by the total loss of the ship?

Held:

No, the shipowner is still liable for compensation. The provisions of the Code of Commerce
invoked by appellant have no room in the application of the Workmen's Compensation Act which seeks
to improve, and aims at the amelioration of, the condition of laborers and employees.

It is not the liability for the damage or loss of the cargo or injury to, or death of, a passenger by or
through the misconduct of the captain or master of the ship; nor the liability for the loss of the ship as
result of collision; nor the responsibility for wages of the crew, but a liability created by a statute to
compensate employees and laborers in cases of injury received by or inflicted upon them, while engaged
in the performance of their work or employment, or the heirs and dependents and laborers and employees
in the event of death caused by their employment. Such compensation has nothing to do with the
provisions of the Code of Commerce regarding maritime commerce. It is an item in the cost of production
which must be included in the budget of any well-managed industry.

It has been repeatedly stated that the Workmen's Compensation Act was enacted to abrogate the
common law and our Civil Code upon culpable acts and omissions, and that the employer need not be
guilty of neglect or fault, in order that responsibility may attach to him and that ship owner was liable to
pay compensation provided for in the Workmen's Compensation Act, notwithstanding the fact that the
motorboat was totally lost.
 FAR EASTERN SHIPPING COMPANY vs.COURT OF APPEALS and PHILIPPINE PORTS
AUTHORITY G.R. No. 130150; October, 1998

FACTS:

M/V PAVLODAR, owned and operated by the Far Eastern Shipping Company (FESC), arrived at the
Port of Manila and was assigned Berth 4 of the Manila International Port, as its berthing space. Gavino,
who was assigned by the Appellant Manila Pilots’ Association to conduct the docking maneuvers for the
safe berthing, boarded the vessel at the quarantine anchorage and stationed himself in the bridge, with the
master of the vessel, Victor Kavankov, beside him. After a briefing of Gavino by Kavankov of the
particulars of the vessel and its cargo, the vessel lifted anchor from the quarantine anchorage and
proceeded to the Manila International Port. The sea was calm and the wind was ideal for docking
maneuvers. When the vessel reached the landmark, one-half mile from the pier, Gavino ordered the
engine stopped. When the vessel was already about 2,000 feet from the pier, Gavino ordered the anchor
dropped. Kavankov relayed the orders to the crew of the vessel on the bow. The left anchor, with two (2)
shackles, were dropped. However, the anchor did not take hold as expected. The speed of the vessel did
not slacken. A commotion ensued between the crew members. After Gavino noticed that the anchor did
not take hold, he ordered the engines half-astern. Abellana, who was then on the pier apron, noticed that
the vessel was approaching the pier fast. Kavankov likewise noticed that the anchor did not take hold.
Gavino thereafter gave the “full-astern” code. Before the right anchor and additional shackles could be
dropped, the bow of the vessel rammed into the apron of the pier causing considerable damage to the pier
as well as the vessel.

ISSUES:

(1) Is the pilot of a commercial vessel, under compulsory pilotage, solely liable for the damage caused by
the vessel to the pier, at the port of destination, for his negligence?;
(2) Would the owner of the vessel be liable likewise if the damage is caused by the concurrent negligence
of the master of the vessel and the pilot under a compulsory pilotage?

HELD:

(1) Generally speaking, the pilot supersedes the master for the time being in the command and navigation
of the ship, and his orders must be obeyed in all matters connected with her navigation. He becomes the
master pro hac vice and should give all directions as to speed, course, stopping and reversing anchoring,
towing and the like. And when a licensed pilot is employed in a place where pilotage is compulsory, it is
his duty to insist on having effective control of the vessel or to decline to act as pilot. Under certain
systems of foreign law, the pilot does not take entire charge of the vessel but is deemed merely the adviser
of the master, who retains command and control of the navigation even in localities where pilotage is
compulsory. It is quite common for states and localities to provide for compulsory pilotage, and safety
laws have been enacted requiring vessels approaching their ports, with certain exceptions, to take on
board pilots duly licensed under local law. The purpose of these laws is to create a body of seamen
thoroughly acquainted with the harbor, to pilot vessels seeking to enter or depart, and thus protect life and
property from the dangers of navigation. Upon assuming such office as a compulsory pilot, Capt. Gavino
is held to the universally accepted high standards of care and diligence required of a pilot, whereby he
assumes to have skill and knowledge in respect to navigation in the particular waters over which his
license extends superior to and more to be trusted than that of the master. He is not held to the highest
possible degree of skill and care but must have and exercise the ordinary skill and care demanded by the
circumstances, and usually shown by an expert in his profession. Under extraordinary circumstances, a
pilot must exercise extraordinary care. In this case, Capt. Gavino failed to measure up to such strict
standard of care and diligence required of pilots in the performance of their duties. As the pilot, he should
have made sure that his directions were promptly and strictly followed.

(2) The negligence on the part of Capt. Gavino is evident; but Capt. Kabancov is no less responsible for
the allision. The master is still in command of the vessel notwithstanding the presence of a pilot. A
perusal of Capt. Kabankov’s testimony makes it apparent that he was remiss in the discharge of his duties
as master of the ship, leaving the entire docking procedure up to the pilot, instead of maintaining watchful
vigilance over this risky maneuver. The owners of a vessel are not personally liable for the negligent acts
of a compulsory pilot, but by admiralty law, the fault or negligence of a compulsory pilot is imputable to
the vessel and it may be held liable therefor in rem. Where, however, by the provisions of the statute the
pilot is compulsory only in the sense that his fee must be paid, and is not in compulsory charge of the
vessel, there is no exemption from liability. Even though the pilot is compulsory, if his negligence was
not the sole cause of the injury, but the negligence of the master or crew contributed thereto, the owners
are liable. But the liability of the ship in rem does not release the pilot from the consequences of his own
negligence. The master is not entirely absolved of responsibility with respect to navigation when a
compulsory pilot is in charge. Except insofar as their liability is limited or exempted by statute, the vessel
or her owners are liable for all damages caused by the negligence or other wrongs of the owners or those
in charge of the vessel. As a general rule, the owners or those in possession and control of a vessel and the
vessel are liable for all natural and proximate damages caused to persons or property by reason of her
negligent management or navigation.
 ELSER AND CO VS COURT OF APPEALS

FACTS: In 1945, goods except a case of vanishing cream were shipped on the ‘S.S Sea Hydra, of
Isthmian Steamship Company, from New York to Manila, and were received by the consignee ‘‘Udharam
Bazar and Co.’ now claimed for indemnity of the loss from the said insurer,’ and was subsequently paid
by the latter’s agent ‘E. E. Elser Inc.’ the amount involved, that is P159.78.

RTC as affirmed by the Court of Appeals held that petitioners have already lost their right to press their
claim against respondent because of their failure to serve notice thereof upon the carrier within 30 days
after receipt of the notice of loss or damage as required by clause 18 of the bill of lading which was issued
concerning the shipment of the merchandise which had allegedly disappeared.

In this respect, the court said that, ‘’ appellant unwittingly admitted that they were late in claiming the
indemnity for the loss of the case of the vanishing cream as their written claim was made on April 24,
1946, or more than 30 days after they had been aware of said loss, and because of this failure, the Court
said the action of petitioners should and must, fall. Petitioners now contend that this finding is erroneous
in the light of provisions of the Carriage of goods by Sea Act of 1936, which apply to this case, the same
having been made an integral part of the covenants agreed upon on the bill of lading.

ISSUE: Which of these two provisions should prevail? Is it that contained in clause of 18 of the
bill of lading, or that appearing in the Carriage of Goods by Sea Act?

HELD: The clause 18 of the bill of lading must of necessity yields to the provisions of the
Carriage of Goods by Sea Act in view of the proviso contained in the same Act which says: any clause,
covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or
damage or to in connection with the goods or lessening such liability otherwise than as provided in this
Act, shall be null and void and of no effect. This means that a carrier cannot limit its liability in a manner
contrary to what is provided for in said act, and so clause 18 of the bill of lading must of necessity be null
and void.

Supreme court held that the Philippines was a territory or possession of the United States for the purposes
of said Act and that the trade between the Philippines and the United States before the advent of
independence was not foreign trade or can only be considered in a domestic sense, still we are the opinion
that then Carriage of Goods by the Sea Act of 1936 may have application to the present case it appearing
that the parties have expressly agreed to make and incorporate the provisions of said Act as integral part
of their contract of carriage.
 OVERSEAS FACTORS INC. VS. SOUTH SEA SHIPPING (GR L-12138, 27 FEBRUARY 1962)

FACTS:

On 3 and 9 September 1954 the National Rice and Corn Corporation (NARIC) and the Overseas Factors, Inc.
entered into two contracts whereby the latter undertook to supply the former with 5,000 metric Transportation Law,
2004 ( 426 ) Haystacks (Berne Guerrero) tons of Kangni rice at P.51 per ganta and 5,000 metric tons of Joshi rice at
P.49 per ganta.

On 10 September 1954 the NARIC established for its account with the Philippine National Bank (PNB_ in
Manila two irrevocable letters of credit (62655 & 62656) in the amounts of $529,125 and $508,375, in favor of the
Pakistan Development Corporation, Ltd. (PDC), Karachi, Pakistan. On 30 October 1954, S. M. Yeung, authorized
representative of the South Sea Shipping Co., Ltd., wrote to José W. Diokno, authorized representative of the
Overseas Factors, in Karachi, Pakistan, enumerating the terms and conditions of the charter party they have agreed
upon for shipment of the rice to be imported by the Overseas Factors from Pakistan aboard the SS Ocean Trader
owned by the South Sea Shipping.

At the foot of the letter, José W. Diokno affixed his signature signifying his intention to confirm the terms
and conditions therein enumerated. On the same date, 30 October 1954, S. M. Yeung, in behalf of the South Sea
Shipping, and Chung Kien Tieng, in behalf of the Overseas Factors, entered into a formal contract of charter party in
Karachi, Pakistan, incorporating the terms and conditions enumerated in the letter. On 12 November 1954 the terms
and conditions of the charter party regarding the rate and payment of freight were amended by the parties in
Hongkong.

On 4 November 1954 Juan A. Magsino, in behalf of Overseas Factors entered into an agreement with
Abdulaye A. Badat, sole proprietor of Ivlom Corporation, in Karachi, Pakistan, whereby the said corporation
undertook to supply the Overseas Factors, with 5,000 metric tons of Kangni rice of the quality and specifications
enumerated in PNB Letter of Credit 62655. Badruddin H. Mavani undertook to supply the Overseas Factors with the
needed Joshi rice.

On 5 November 1954 the Overseas Factors and Gertrudes Carlos, co-financier of the former in its contract
with the NARIC to supply it with the needed rice, jointly and severally applied to the South Sea Surety & Insurance
Co., Inc. to act as surety upon a bond demanded by the South Sea Shipping in the amount of P315,000 to guarantee
the payment by the charterers in Hongkong of the freight, demurrage, dead freight and other losses that might arise.
On the same date, 5 November 1954, the Overseas Factors, as principal, and Carlos, as co-principal, and the South
Sea Surety, as surety, executed a performance bond in the amount of P315,000 in favor of the South Sea Shipping to
guarantee the full payment by the charterers at Hongkong of all freight, demurrage, dead freight and other losses that
might arise, within 14 days from the date of departure of the vessel from Karachi, Pakistan. From 16 to 23
November 1954, 2,567.6053 metric tons gross of Joshi rice and from 20 to 25 November 1954, 5,054.0662 metric
tons gross of Kangni rice or a total of 7,621.6715 metric tons of rice were loaded on board the SS Ocean Trader in
Karachi, Pakistan. On 25 and 29 November the bills of lading covering the said shipments of rice duly signed by the
shipper’s agent were issued in the name of the PNB, Manila, as consignee. It appears in the two bills of lading that
the party to be notified upon arrival in Manila was the NARIC.

On 25 November 1954 the SS Ocean Trader sailed from Karachi, Pakistan and arrived in Manila on 18
December 1954. The captain and crew members of the SS Ocean Trader refused to unload the cargo of rice unless
the balance of the freight and other charges due were paid by the charterers.
 An action was brought on 29 December 1954 in the Court of First Instance of Manila praying the Court to
direct the captain and the crew of SS Ocean Trader to convert the amount in rupees paid by Overseas Factors and
Carlos in Karachi, Pakistan, into British sterling pounds, computed at the legal rate of exchange as allowed by the
Government of Pakistan; to deliver to Overseas Factors and Carlos the bills of lading of the cargo of rice; to permit
the unloading by Overseas Factors and Carlos of the cargo of rice from the SS Ocean Trader pending trial of the
case; to desist or refrain from interfering with such unloading upon the filing of an additional surety bond, if
necessary, in an amount that the Court may fix to answer for damages that South Sea Shipping, A. Magsaysay, and
the captain and crew of SS Ocean Trader may suffer as a result of such injunction, and to pay the costs; and the
Collector of Customs to see to it that the cargo of rice from the SS Ocean Trader be unloaded.

Overseas Factors and Carlos also prayed that the demurrages sought to be collected by South Sea Shipping,
et. al. be computed at the rate L300 and not at L700 a day; and for other just and equitable relief (civil 24972). South
Sea Shipping, et. al. answered the complaint and set up a counterclaim of P316,364.38 for freightage, demurrage,
charges for detention and other expenses of the vessel while on detention. Overseas Factors and Carlos controverted
South Sea Shipping, et. al.’s counterclaim.

The NARIC filed a complaint in intervention to protect its interest and the South Sea Surety filed a cross-
claim against Overseas Factors. After trial, the Court rendered judgment in favor of Overseas Factors and Carlos
Transportation Law, 2004 ( 427 ) Haystacks (Berne Guerrero) and against South Sea Shipping; holding therein that
(1) the total amount of 369,000 Pakistan rupees received by S. M. Yeung was in full payment of the transportation
of the rice in question from Karachi to Manila, and that the delay in the unloading of such rice in Manila was not
due to Overseas Shipping and Carlos’ fault; and (2) the claim for lien on the shipment of rice has no legal basis for
the reason that the freight had already been paid in Karachi, Pakistan, before such shipment arrived in Manila.

ISSUES: Whether or not South Sea Shipping be liable to pay the costs

Whether or not the respondent desistance to the unloading of cargo is legal

HELD: The Court ordered the cancellation of the injunction bond filed by Carlos and Overseas Factors and as well
as the performance bond executed to guaranty the payment of freight. The Court dismissed the complaint with
respect to A. Magsaysay, Inc., the Captain and the Crew of the S.S. Ocean Trader, and the Collector of Customs of
Manila, it appearing that they have nothing to do with the controversy between Overseas Factors and South Sea
Shipping. The Court dismissed the counterclaim, and ordered South Sea Shipping to pay the costs.

South Sea Shipping and A. Magsaysay appealed.

The Supreme Court modified the judgment appealed by ordering Overseas Factors and Carlos to pay South Sea
Shipping the sums of P203,449.57, the balance of the freightage still unpaid, P6,720 as demurrage in loading the
cargo and P6,720 as demurrage for detention of the vessel, without prejudice to any amount sought to be collected
for demurrage which is to be submitted to arbitration in London, against which the equivalent amount in Philippine
currency of the sum of L12,838-0-6d or Rs119,221-5-0 as above stated is set off; and holding that South Sea
Shipping did not lose its lien on the cargo of rice, without pronouncement as to costs. The Court dismissed the
complaintand the complaint in intervention as to the other defendant appellants, and the counterclaim against South
Sea Surety, and the latter’s cross-claim.

Further, the Court held the respondents desistance to unload the cargo is not legal because the freight had already
been paid in Pakistan before such shipment arrived in Manila.
 ERLANGER AND GALINGER vs. SWEDISH EAST ASIATIC CO.

G.R. No. L-10051; March 9, 1916 (34 PHIL 178)

FACTS:

S.S. Nippon was bound for Manila to Singapore, loaded mainly with copra and with some other general
merchandise. The ship struck the Scarborough Reef, and it was filled with water. Immediately the chief
officer wired the Director of Navigation at Manila for assistance for rescue. Shortly thereafter, the captain
and crew left the Nippon and went on board of SS. Marchuria and headed for Hong Kong.

Plaintiff Erlanger and Galinger applied to the Director of Navigation for a charter of a coast guard cutter.
Through the said cutter, the Nippon was floated and towed to Olangapo, where temporary repairs were
made, and then brought to Manila.

The trial court found that the plaintiffs were “entitled to recover one-half of the net proceeds from the
property salved and sold, and one-half the value of the property delivered to the claimants.

ISSUES:

1) Was the ship abandoned?

2) Was the salvage conducted with skill, diligence, and efficiency?

3) Was the award justified?

RULING:

The relief of property from an impending peril of the sea, by the voluntary exertions of those who are
under no legal obligation to render assistance, and the consequent ultimate safety of the property,
constitute a case of salvage.

Three elements necessary for a valid salvage claim: (1) A marine peril. (2) Service voluntarily rendered
when not required as an existing duty or from a special contract. (3) Success, in whole or in part, or that
the service rendered contributed to such success.
(1) The evidence proves that the Nippon was in peril; that the captain left in order to protect his life and
the lives of the crew; that the animo revertendi was slight.

When a man finds property thus temporarily left to the mercy of the elements, whether from necessity or
any other cause, though not finally abandoned and legally derelict, and he takes possession of it with the
bona fide intention of saving it for the owner, he will not be treated as a trespasser. On the contrary, if by
his exertions he contributed materially to the preservation of the property, he will entitle himself to a
remuneration according to the merits of his service as a salvor.

(2) The plaintiffs were diligent in commencing the work and were careful and efficient in its pursuit and
conclusion. While the plaintiiff entered upon the salvage proceedings without proper means and not being
adapted by their business to conduct their work, and while it may appear that possibly the salvage might
have been conducted in a better manner and have accomplished somewhat better results in the saving of
the copra cargo, yet it appears that they quickly remedied their lack of means and corrected the conduct of
the work so that it accomplished fairly good results.

(3) The award granted to the plaintiff must be reduced. Compensation as salvage is a reward given for
perilous services, voluntarily rendered, and as an inducement to mariners to embark in such dangerous
enterprises to save life and property. One of the grounds for liberality in salvage awards is the risk
assumed by the salvor, that he can have no recompense for service or expense unless he is successful in
the rescue of property, and that his reward must be withing the measure of his success. In other words, he
can only have a portion, in any event; and the fact that his exertions were meritorious and that their actual
value, or the expense actually incurred, exceeded the amount produced by the service, cannot operate to
absorb the entire proceeds against the established rules of salvage.
 G.URRUTIA & COMPANY VS. THE PASIG STEAMER AND LIGHTER CO.

Citation: G.R. No. L-7294; March 22, 1912

FACTS:

Under date of May 19, 1909, counsel for G. Urrutia and Company filed a written complaint against The
Pasig Steamer and Lighter Co., wherein it was alleged that the plaintiff company was the owner of the
steamer Nuestra Señora del Pilar, inscribed in the marine registry of the port of Manila; that the said
vessel was provided with the proper license to navigate and trade in the waters of the Philippines, was
worth P80,000 in cash, and, on the dates mentioned in the complaint, was carrying a cargo valued at
P45,000; that the defendant company was the owner of the steamer San Juan, inscribed in the marine
registry of the port of Manila; that on or about December 6, 1908, while a storm was raging, the steamer
Nuestra Señora del Pilar, belonging to the plaintiff, was navigating in the direction of the port of Legaspi
and, after twenty hours and thirty minutes, descried, toward Mal-Abrigo, a steamship which had signal
flags hoisted, wherefore the Nuestra Señora del Pilar directed its course towards the said vessel, which
proved to be the San Juan displaying the signals M Y and L D, which mean: "Am unable to navigate. Will
you tow me to a safe anchorage?" that on that occasion, the steamer Nuestra Señora del Pilar, with great
risk to itself, rendered salvage service to the San Juan by taking it to a safe port, and that, had it not been
for the opportune, prompt and efficacious aid lent by the. Nuestra Señora del Pilar, the San Juan and its
cargo would certainly have been totally lost; that the salved steamer, together with its cargo, was worth on
the dates of the salvage and the complaint 100,000, at a true cash valuation; that the just and adequate
remuneration for the salvage service rendered by the Nuestra Señora del Pilar to the San Juan amounted
to the sum of P40,000; and that, notwithstanding that the plaintiff company had demanded of the
defendant concern the payment of the said sum for the salvage service referred to, and since the 15th of
January, the defendant, without objecting to the amount of the plaintiff’s claim, had not paid the same and
had been delaying the payment thereof under futile pretexts: wherefore, the plaintiff prayed that judgment
be rendered in its behalf, to enable it to collect from the defendant the sum of P40,000, with legal interest
thereon from January 15, and the costs.

ISSUE:

Whether or not the steamer was salvage.

RULING:

Yes. When so important a service is rendered as that of salving a vessel with its crew and the cargo it
carries, from a positive danger to which it is exposed, strict justice demands that whoever effects so
meritorious a service should receive adequate remuneration therefor, not only on account of the act
performed in behalf of the ship-owner and the crew, but also because of the danger run by the vessel
which made the salvage, due to the circumstances that existed at the time such service was rendered.
In a lease of work or services, says article 1544 of the Civil Code, one of the parties binds himself to
execute a work or to render a service to the other for a specified price. In accordance with the provisions
of this article, the service rendered in the natural course of events and at an ordinary time must be
remunerated, unless the service he rendered gratuitously at the express will of the server.

The principle has been established by the courts of the United States that when a vessel has been disabled
by the breaking of its shaft at sea and hoists signals asking for aid, and another vessel goes to its relief and
takes it in tow, such service rendered is one of salvage, and not merely of towage. The towage of a vessel
in peril to some place of security, when it is unable by itself to reach the same, is a service of salvage. The
towage of a vessel which has lost the use of its engine by accident, though it is complete in its hull and
masts, is a service of salvage, and it is not necessary that the said loss be inevitable since, in view of the
peril, the vessel could not be salved in any other way: for it is sufficient that at the moment the service
was rendered there was a probable, threatening danger and a reasonable fear that it might strike.
 Singa-Ship Managementt Phil Inc vs NLRC 276 SCRA 201 (2007)

FACTS

Singa Ship Management Phils. is the local manning agent of Singa Ship Management Pte., Ltd., a
company based in Singapore. Winefredo Sua was employed by petitioner as radio officer on board the
vessel M/V Singa Wilstream from November 28, 1988 to September 1989 with a monthly salary of
U.S.$850.00. Petitioner alleged that when the M/V Singa Wilstream was anchored in Los Angeles, CA,
private respondent and some members of the crew, went on shore leave. By the end of the day, the group
missed the last boat and hired a service boat to take them to the ship. Hence, they arrived on the ship at
8:30 in the evening. The ship captain and master, together with some officers were at the bridge. The
captain reprimanded them for returning late and admonished private respondent in particular, being the
highest-ranking member in the group. Sua who was drunk shouted: "Fuck your ass, captain! I don't want
to sail with you!" Bosun Rodolfo Sarmiento, who was nearby, was ordered to take private respondent to
his cabin. Sua, however, cried out: "Fuck you two, two of you!" and hurled invectives at the captain and
the bosun. Eventually, the other crew members pacified private respondent and brought him down to his
cabin. Later, at about 1:00 in the morning, Chief Officer Rakesh Nanda went down to inspect the bunker.
He saw private respondent lowering his bag to the bunker barge. The chief officer tried to dissuade
private respondent from leaving the ship. The latter refused saying: "Sorry, but I don't want to sail with
the captain!" Private respondent boarded the barge and left the ship.

ISSUE

Whether or not Winefredo Z. Sua deserted the vessel.

RULING

Desertion in maritime law, is defined as "the act by which a seaman deserts and abandons a ship or vessel,
in which he had engaged to perform a voyage, before the expiration of his time, and without leave. By
desertion, in maritime law, is meant, not a mere unauthorized absence from the ship, without leave, but an
unauthorized absence from the ship with an intention not to return to her service; or as it is often
expressed, animo non revertendi , that is, with an intention to desert."

Desertion has been defined as (1) a seaman's abandonment of duty by quitting ship, not only without
leave or permission, but without justifiable cause, before termination of engagement; and (2) with the
intent of not returning to the ship's duty. It is essential that there be an animo non revertendi , an intention
not to return. Once the facts constituting the abandonment and intent not to return are proven, the seaman
may be dismissed by the master, or he may be suspended by the POEA for three years as minimum
penalty or delisted from the POEA registry as maximum penalty.

In the case at bar, at the height of their argument, the captain ordered to disembark the vessel. To the
mind of private respondent, the order to disembark was an order of dismissal from his job especially after
he had assaulted the bosun. This explains why after the incident he did not report to petitioner's office in
Manila nor did he file a complaint with the POEA. Contrary to petitioner's allegations, the words private
respondent uttered do not indicate the firm intention to leave and not to return to his job. At best, the
words can be interpreted as expressing what private respondent felt towards his master. They do not
unequivocably establish the intent to abandon his job, never to return. Neither do his acts reinforce this
intent to abandon. After hurling invectives at the master, private respondent calmed down and returned to
his cabin. The totality of the circumstances of the case does not show animo non revertendi and private
respondent cannot be deemed to have deserted the vessel. Notably, Sua would not intentionally get
himself stranded in a foreign land without means of support if he was not dismissed. The fact that he did
not voluntarily resign but was dismissed from his employment is more in keeping with the ordinary
experience of mankind.
 American Home Assurance v Court of Appeals 208 SCRA 343 (1992)

FACTS:

American Home Assurance Co. and the National Marine Corporation (NMC) are foreign corporations
licensed to do business in the Philippines. On or about 19 June 1988, Cheng Hwa Pulp Corporation
shipped 5,000 bales (1,000 ADMT) of bleached kraft pulp from Haulien, Taiwan on board “SS
Kaunlaran”, which is owned and operated by NMC. The said shipment was consigned to Mayleen Paper,
Inc. of Manila, which insured the shipment with American Home Assurance Co..

On 22 June 1988, the shipment arrived in Manila and was discharged into the custody of the Marina Port
Services, Inc., for eventual delivery to the consignee-assured.

However, upon delivery of the shipment to Mayleen Paper, Inc., it was found that 122 bales had either
been damaged or lost. The loss was calculated to be 4,360 kilograms with an estimated value of
P61,263.41. Mayleen Paper, Inc. then duly demanded indemnification from NMC for the damages and
losses in the shipment but to no avail. Mayleen Paper, Inc. sought recovery from American Home
Assurance Co.. Upon demand and submission of proper documentation, American Home Assurance paid
Mayleen Paper, Inc. the adjusted amount of P31, 506.75 for the damages/losses suffered by the shipment,
hence, AHA was subrogated to the rights and interests of Mayleen Paper, Inc.

AHA brought a suit against respondent NMC for the amount it paid Mayleen Paper, Inc.

The RTC rendered a decision dismissing the complaint, such decision was affirmed by the CA.

ISSUE:

Whether or not American Home Assurance Company is entitled to reimbursement from National Marine
Corporation of what it paid to Mayleen Paper?

RULING:

YES.

The Supreme Court reversed the decisions of both the Court of Appeals and the Regional Trial Court of
Manila, Branch 41, appealed from; and ordered NMC to reimburse the subrogee, American Home
Assurance, the amount of P31,506.75.

Under Article 1733 of the Civil Code, common carriers from the nature of their business and for reasons
of public policy are bound to observe extraordinary diligence in the vigilance over the goods and for the
safety of passengers transported by them according to all circumstances of each case. Thus, under Article
1735 of the same Code, in all cases other than those mentioned in Article 1734 thereof, the common
carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has
observed the extraordinary diligence required by law.

Common carriers cannot limit their liability for injury or loss of goods where such injury or loss was
caused by its own negligence. Otherwise stated, the law on averages under the Code of Commerce cannot
be applied in determining liability where there is negligence.

Under the foregoing principle and in line with the Civil Code’s mandatory requirement of extraordinary
diligence on common carriers in the care of goods placed in their stead, it is but reasonable to conclude
that the issue of negligence must first be addressed before the proper provisions of the Code of Commerce
on the extent of liability may be applied.

As resolved in National Development Co. v. C.A. (164 SCRA 593 [1988]; citing Eastern Shipping Lines,
Inc. v. I.A.C., 150 SCRA 469, 470 [1987], “the law of the country to which the goods are to be
transported governs the liability of the common carrier in case of their loss, destruction or deterioration.”
(Article 1753, Civil Code). Herein, thus, for cargoes transported to the Philippines, the liability of the
carrier is governed primarily by the Civil Code and in all matters not regulated by said Code, the rights
and obligations of common carrier shall be governed by the Code of Commerce and by special laws
(Article 1766, Civil Code).

The filing of a motion to dismiss on the ground of lack of cause of action carries with it the admission of
the material facts pleaded in the complaint (Sunbeam Convenience Foods, Inc. v. C.A., 181 SCRA 443
[1990]). Herein, upon delivery of the shipment in question at Mayleen’s warehouse in Manila, 122 bales
were found to be damaged/lost with straps cut or loose, calculated by the so-called “percentage method”
at 4,360 kilograms and amounting to P61,263.41. Instead of presenting proof of the exercise of
extraordinary diligence as required by law, NMC filed its Motion to Dismiss dated 7 August 1989,
hypothetically admitting the truth of the facts alleged in the complaint to the effect that the loss or damage
to the 122 bales was due to the negligence or fault of NMC. Such being the case, it is evident that the
Code of Commerce provisions on averages cannot apply.

Article 1734 of the Civil Code provides that common carriers are responsible for loss, destruction or
deterioration of the goods, unless due to any of the causes enumerated therein. Herein, it is obvious that
the present case does not fall under any of the exceptions. Thus, American Home Assurance Company is
entitled to reimbursement of what it paid to Mayleen Paper, Inc. as insurer.
 INTER-ORIENT MARITIME ENTERPRISES, INC., SEA HORSE SHIP, INC. andTRENDA
WORLD SHIPPING (MANILA), INC.vs.NATIONAL LABOR RELATIONS COMMISSION and
RIZALINO D. TAYONG

Facts:

On 16 July 1989, while at the Port of Hongkong and in the process of unloading cargo, Captain
Tayongreceived a weather report that a storm code-named"Gordon" would shortly hit
Hongkong.Precautionary measures were taken to securethe safety of the vessel, as well as its crew.On 21
July 1989, Captain Tayong followed-up the requisition by the former captainof the Oceanic Mindoro for
supplies of oxygen and acetylene, necessary for thewelding-repair of the vessel’s leaking turbo-charger
and the economizer.While the vessel was en route from Hongkong to Singapore, Captain Tayongreported
that the vessel had stopped in mid-ocean for six (6) hours and forty-five(45) minutes due to a leaking
economizer. He was instructed to shut down theeconomizer and use the auxiliary boiler instead.When the
vessel arrived at the port of Singapore, the Chief Engineer remindedCaptain Tayong that the oxygen and
acetylene supplies had not been delivered.Captain Tayong called the shipowner, Sea Horse Ship
Management, Ltd., in Londonand informed them that the departure of the vessel for South Africa may
beaffected because of the delay in the delivery of the supplies. He was advised to contact Mr. Clark, the
Technical Director, for a solution for thesupply of said oxygen and acetylene. Mr. Clark responded that
by shutting off the water to the turbo chargers and usingthe auxiliary boiler, there should be no further
problems. Captain Tayong, however, communicated to Sea Horse his reservations regardingproceeding to
South Africa without the requested supplies, and was advised to waitfor the supplies. On August 1, 1989,
the supplies were delivered and theyimmediately sailed for Richard Bay.

When the vessel arrived at the port of Richard Bay, South Africa on August 16,1989, Captain
Tayong was instructed to turn-over his post to the new captain. Hewas thereafter repatriated to the
Philippines, without being informed of the chargesagainst him.

The POEA dismissed the complaint for illegal dismissal filed by Captain Tayong,holding that
there was valid cause for his untimely repatriation.The NLRC reversed and set aside the decision of the
POEA and directed petitionersto pay the Captain (a) his salary for the unexpired portion of the contract
atUS$1,900.00 a month, plus one (1) month leave benefit; and (b) attorney's feesequivalent to ten percent
(10%) of the total award due.

Issue:

Whether or not Capt. Tayong’s refusal to sail from Singapore to South Africa withoutthe supply
of said oxygen and acetylene was an actual and sufficient basis for thealleged loss of trust or confidence
on the part of the petitioner?
Ruling:

A master or captain, for purposes of maritime commerce, is one who has commandof a vessel. A
captain commonly performs three (3) distinct roles: (1) he is ageneral agent of the shipowner; (2) he is
also commander and technical director ofthe vessel; and (3) he is a representative of the country under
whose flag henavigates. Of these roles, by far the most important is the role performed by thecaptain as
commander of the vessel; for such role (which, to our mind, is analogousto that of "Chief Executive
Officer" [CEO] of a present-day corporate enterprise) hasto do with the operation and preservation of the
vessel during its voyage and theprotection of the passengers (if any) and crew and cargo.

It is a basic principle of admiralty law that in navigating a merchantman, themaster must be left
free to exercise his own best judgment. The requirements ofsafe navigation compel us to reject any
suggestion that the judgment anddiscretion of the captain of a vessel may be confined within a
straitjacket, even inthis age of electronic communications. 22 Indeed, if the ship captain is convinced, asa
reasonably prudent and competent mariner acting in good faith that theshipowner's or ship agent's
instructions (insisted upon by radio or telefax from theiroffices thousands of miles away) will result, in
the very specific circumstancesfacing him, in imposing unacceptable risks of loss or serious danger to
ship or crew,he cannot casually seek absolution from his responsibility, if a marine casualtyoccurs, in
such instructions.

The critical question, therefore, is whether or not Captain Tayong had reasonablegrounds to
believe that the safety of the vessel and the crew under his command orthe possibility of substantial delay
at sea required him to wait for the delivery of thesupplies needed for the repair of the turbo-charger and
the economizer beforeembarking on the long voyage.

Under all the circumstances of this case, we, along with the NLRC, are unable tohold that Captain
Tayong's decision (arrived at after consultation with the vessel'sChief Engineer) to wait seven (7) hours in
Singapore for the delivery on board theOceanic Mindoro of the requisitioned supplies needed for the
welding-repair, onboard the ship, of the turbo-charger and the economizer equipment of the
vessel,constituted merely arbitrary, capricious or grossly insubordinate behavior on hispart.
CRISLYNDON T. SADAGNOTvs. REINIER PACIFIC INTERNATIONALSHIPPING, INC. and
NEPTUNESHIPMANAGEMENT SERVICES, PTE., Promulgated:LTD. of SINGAPORE

Facts:

Reinier Pacific International Shipping and its foreign principal, Neptune Ship Management
Services, hired
Crislyndon T. Sadagnot as Third Officer of MV Baotrans. The contract was for 10 months with a basic
salary of US$650.

While on board the vessel, Sadagnot was ordered to perform hatch stripping, a deck work. He
refused to follow the order on the ground that it was not related to his duties as Third Officer, and that
while such order was issued, he was on watch standing duty and doing nautical publications.

Sadagnot alleged that because of his refusal to obey the order, the Master made several negative
reports against him.Reiner Pacific repatriated Sadagnot to the Philippines.Upon arrival in the Philippines,
Sadagnot executed a release document in favor of Reinier Pacific and Neptune Ship Management, stating
that he had received all the amounts due to him, and that he has no cause of action against his employer.

Nonetheless, Sadagnot filed an action for dismissal, non-payment of allotment, termination pay,
damages, andattorney’s fees against Reinier Pacific and Neptune Ship. He alleged that he was
prematurely repatriated without being given the opportunity to avail of the company’s grievance
procedure. Labor Arbiter: Ruled in favor of Sadagnot. NLRC reversed LA, and just ordered the
employers to indemnify Sadagnot P10,000 for non-observance of due process.CA affirmed NLRC
decision. The act of not following the Master’s order was serious misconduct/willful disobedience under
Article 282 of the Labor Code.

Issues:

1. W/N CA erred in adopting the logbook entry as evidence of Sadagnot’s misconduct - NO.
2. W/N Sadagnot was validly dismissed from employment -YES.
3. W/N there is legal basis for the award of P10,000 toSadagnot – YES.

Ruling:

CA decision AFFIRMED, only modified amount for indemnification.

Ratio:

1. Reinier Pacific and Neptune Ship alleged that Sadagnot’s signature in the verification of the
petition was just a facsimile, and that because of this, the petition should be dismissed outright.
 They also presented an undated contract signed by Sadagnot for comparison.The petition was
filed on May 6, 2002. The Court assumed that the contract must have been signed in August
1995. There was a lapse of almost 7 years between the signing of the 2 documents, and as such,
there is no sufficient proof that Sadagnot’s signature on the verification was forged.

2. Sadagnot argued that CA erred in giving credence to the logbook entry instead of the joint
statement of his crewmates, attesting to the fact that there were 12 deck crews on deck at the time
who would be able to handle the hatch stripping if they were ordered to do so. A ship’s logbook is
the official record of a ship’s voyage which its captain is obligated by law to keep. It is where the
captain records the decision he has adopted, a summary of the performance of the vessel, and
other daily events. The entries made in the logbook by a person performing a duty required by
law are prima facieevidence of the facts stated in the log book.In this case, there is no evidence
that the Master fabricated the entry. Nonetheless, Sadagnot has already admitted that he did not
obey the master’s order.

3. Sadagnot’s duties clearly indicate that he shall carry out duties assigned by the Master, and his
disposition only proved his determination to disobey the Master. The urgency of the work to be
done is within the sound discretion of the Master, and is not for someone else, like Sadagnot, to
decide.Willful disobedience has 2 requisites: (1) the conduct must have been willful —
characterized by a wrongful and perverse attitude, and (2) the order violated must have been
reasonable, lawful, made known to the employee, and must pertain to the duties which he had
been engaged to discharge.It is evident that the Master’s order was not unreasonable orunlawful,
and that he already admitted not following suchorder. Therefore, Sadagnot was dismissed for a
valid cause, and is not entitled to any salary for the unexpired portion of his employment contract.

4. The award was increased from P10,000 to P30,000. The employer failed to satisfy the twin notice
requirement in thedismissal of employees.
 TRANS-ASIA SHIPPING LINES, INC.vs. COURT OF APPEALS and ATTY. RENATO T.
ARROYO

Facts:

Respondent Atty. Renato Arroyo, a public attorney, bought a ticket from herein petitioner for the
voyage of M/V Asia Thailand vessel to Cagayan de Oro City from Cebu City on November 12, 1991.

At around 5:30 in the evening of November 12, 1991, respondent boarded the M/V Asia Thailand
vessel during which he noticed that some repairs were being undertaken on the engine of the vessel. The
vessel departed at around 11:00 in the evening with only one (1) engine running.

After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its anchor
thereat. After half an hour of stillness, some passengers demanded that they should be allowed to return to
Cebu City for they were no longer willing to continue their voyage to Cagayan de Oro City. The captain
acceded to their request and thus the vessel headed back to Cebu City.

In Cebu City, plaintiff together with the other passengers who requested to be brought back to
Cebu City, were allowed to disembark. Thereafter, the vessel proceeded to Cagayan de Oro City.
Petitioner, the next day, boarded the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a
vessel of defendant.
On account of this failure of defendant to transport him to the place of destination on November
12, 1991, respondent Arroyo filed before the trial court “an action for damage arising from bad faith,
breach of contract and from tort,” against petitioner. The trial court ruled only for breach of contract. The
CA reversed and set aside said decision on appeal.

Issue:
Whether or not the petitioner Trans-Asia was negligent?

Ruling:

Yes.
Before commencing the contracted voyage, the petitioner undertook some repairs on the cylinder
head of one of the vessel’s engines. But even before it could finish these repairs, it allowed the vessel to
leave the port of origin on only one functioning engine, instead of two. Moreover, even the lone
functioning engine was not in perfect condition as sometime after it had run its course, it conked out. This
caused the vessel to stop and remain adrift at sea, thus in order to prevent the ship from capsizing, it had
to drop anchor. Plainly, the vessel was unseaworthy even before the voyage began. 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.[21] The failure of a common carrier to maintain in seaworthy condition its
vessel involved in a contract of carriage is a clear breach of is duty prescribed in Article 1755 of the Civil
Code.
 SMITH BELL AND COMPANY PHILS. V. CA (G.R. NO. L-56294)

Facts:

M/V “Don Carlos,” an inter-island vessel owned and operated by private respondent Go Thong was
sailing south bound for Cebu, when it collided with M/S “Yotai Maru,” a merchant vessel of Japanese
registry which was approaching the port of Manila coming in from Kobe, Japan. The bow of the “Don
Carlos” rammed the left side of the “Yotai Maru” inflicting a gaping hole through which seawater rushed
in and flooded the hatch, damaging all the cargo stowed therein. The consignees of the damaged cargo
having been paid by their insurance companies, the latter in turn commenced actions against private
respondent Go Thong for damages sustained by the various shipments. 2 cases were filed before the RTC.
The first case (Smith Bell and Sumitomo Insurance v. Go Thong) reached the SC which ruled in finality
that negligence was with the officers and crew of “Don Carlos.” On the contrary, the second case (Smith
Bell and Tokyo Insurance v. Go Thong) was decided by the CA holding the officers and crew of “Yotai
Maru” at fault in the collision. Hence the present petition.

Issue:

Whether or not inscrutable fault is present in said collision.

Ruling: NO.

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.

(1) 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 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 evidence on this factor state that
“Don Carlos” altered its course by five degrees to the left instead of to the right which maneuver was the
error that caused the collision in question. Why it did so is because “Don Carlos” was overtaking another
vessel, the “Don Francisco”, and was then at the right side of the aforesaid vessel. 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.

(2) 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.” 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.

(3) 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 right 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.

FOR ALL THE FOREGOING, the Decision of the Court of Appeals is hereby REVERSED and SET
ASIDE.

*Inscrutable Fault – where it cannot be determined which of the 2 vessels caused the collision, each
vessel shall suffer its own damages, and both shall be solidarily responsible for the losses and damages
occasioned to their cargoes.
 MANILA STEAMSHIP CO., INC. vs. INSA ABDULHAMAN (MORO) and LIM HONG TO

FACTS:

InsaAbdulhaman together with his wife and five children boarded M/L Consuelo V in Zamboanga City.
The said ship was bound for Siokon under the command of Faustino Macrohon. On the same night, M/S
Bowline Knot was navigating from Maribojoctowards Zamboanga.

Around 9:30- 10:00 in the evening of May 4, 1948, while some of the passengers of the M/L Consuelo V
were then sleeping and some lying down awake, a shocking collision suddenly occurred. The ship that
collided was later on identified as the M/S Bowline Knot. M/L Consuelo V capsized that resulted to the
death of 9 passengers and the loss of the cargoes on board.

The court held that the owners of both vessels solidarily liable to plaintiff for damages caused to the latter
under Article 827 of the Code of Commerce but exempted defendant Lim Hong To from liability due to
the sinking and total loss of his vessel. While Manila Steamship, owner of the Bowline Knot was ordered
to pay all the plaintiff’s damages.

Petitioner Manila Steamship Co. is exempt from liability under Article 1903 of the Civil Code because it
had exercised the diligence of a good father of a family in the selection of its employees, particularly the
officer in command of the M/S Bowline Knot.

ISSUE:

Whether or not the petitioner is exempt from any liability under Art. 1903 of the Civil Code.

HELD:

NO. Petitioner is not exempted from liabilities. While it is true that plaintiff’s action against petitioner is
based on a tort or quasi-delict, the tort in question is not a civil tort under the Civil Code but a maritime
tort resulting in a collision at sea, governed by Articles 826-939 of the Code of Commerce. Under Article
827 of the Code of Commerce, in case of collision between two vessels imputable to both of them, each
vessel shall suffer her own damage and both shall be solidarilly liable for damages on occasioned to their
cargoes. The shipowner is directly and primarily responsible in tort resulting in a collision at sea, and he
may not escape liability on the ground that he exercised due diligence in the selection and supervision of
the vessel’s officers and crew.
 THE GOVERNEMENT OF THE PHILIPPINE ISLANDS VS. THE INSULAR MARITIME
COMPANY

FACTS:

Petitioner of the Government seeks by this action to recover from defendant a sum of money for repairs
made by the Bureau of Commerce and Industry on the motor ship Insular.

The defendant here was organized with a capital and it became the owner of one vessel only which valued
at 150,000.00. However, the defendant asked the Bureau to perform certain repairs on the Insular. The
government consented and terminated said repairs on the same year. Subsequently, the Insular suffered a
total loss by fire.

The bill prepared by the chief of the Bureau of Commerce and Industry for work done on the motor ship
Insular. Collection of the claim was attempted pursuant to formal demand made by the acting insular
auditor. Thus, it was emphasized by the defense and by the court that no steps were taken by the
government to secure payment for the repairs until after the loss of the vessel.

ISSUE:

Whether or not that the insular maritime company shall be held liable.

HELD:

The decision was predicated under Article 591 of the Code of Commerce. As in the case of Philippine
shipping co. vs. Garcia Vergara that there is nothing in the language to denote that the liability of the
owners is wiped out by the loss of that vessel.

Here there is a contractual relation which remains unaffected by the loss of the thing concerned in the
contract. As a general rule, the owners of a vessel are liable for necessary repairs. Naturally the total
destruction of the vessel extinguishes the maritime lien, as there is no longer any res to which it can
attach. Thus the total destruction does not affect the liability of the owners for repairs on the vessel
completed before the loss.
 PHILIPPINE HOME ASSURANCE CORP V. CA AND EASTERN SHIPPING LINES (1996)
KAPUNAN, J.

A boat burned down and its cargo was subsequently salvaged. The shipping company asked for additional
payment from the people who were supposed to get the shipment of the cargo (the consignees) for the
salvage of the cargo. The charges were all paid b y Phil Home Assurance. Phil Home Assurance, as
subrogee of the rights of the people who were supposed to get the shipment, now wants to seek
reimbursement from the shipping company. Issue: Is Phil Assurance entitled to the reimbursement? SC
says yes they are. The fire occurred because of the negligence of the shipping company and its captain
and crew. It stored a cylinder with flammable substances close to the engine room, which is heat
producing. This caused an explosion. And so, the fire was not a natural calamity. Therefore, the liable one
is the shipping company.

Eastern Shipping Lines loaded the following to boat SS Eastern Explorer in Kobe, Japan for shipping to
Manila and Cebu, (all with their corresponding Bills of lading): 2 boxes internal combustion engine parts,
consigned to William Lines; 10 tons (or 334 bags) ammonium chloride, consigned to Orca's Company;
200 bags of Glue 300, consigned to Pan Oriental Match Company; Some garments, consigned to Ding
Velayo

While the boat was in Okinawa, a small flame started on the “acetylene cylinder” in the accommodation
area near the engine room. As the crew tried to extinguish the fire, the “acetylene cylinder” suddenly
exploded, causing fire in the accommodation area. Death and severe injuries happened. The whole boat
was on fire. This forced the master and the crew to abandon ship. Thereafter, the boat was found to be a
constructive total loss and its voyage was declared abandoned. After several hours, a tugboat arrived near
the boat and towed the boat for the port of Naha, Japan. Firefighting operations were again conducted at
the port. After the fire was put out, the cargos which were saved were loaded to another boat for delivery
to Manila and/or Cabu. Eastern Shipping charged the consignees some amounts corresponding to
additional freight and salvage charges. The charges were all paid by Philippine Home Assurance Corp
under protest. Phil Assurance, as subrogee of the consignees, filed a complaint in RTC-Manila against
Eastern Shipping to recover the sum paid under protest.

Phil Assurance says: The charges were actually damages directly brought about by the fault and/or breach
of contract of Eastern Shipping.

Eastern Shipping says: That it exercised the diligence required by law in the handling of the shipment;
That the fire was caused by an unforeseen event; That the additional freight charges are due and
demandable pursuant to the Bill of Lading; That salvage charges are properly collectible under the
Salvage Law.

The RTC dismissed Phil Assurance’s complaint and the CA affirmed such decision. In the SC, Phil
Assurance questions the finding of the RTC and CA that the fire was a natural disaster.

Issue:
Is Philppine Assurance entitled to recover what it had paid?

Held:
Yes.
The goods were not lost or damaged by the fire. The goods were all delivered to the consignees, even if
the transshipment took longer.What is at issue, therefore, is NOT whether or not the carrier is liable for
the loss, damage, or deterioration of the goods but WHO, among the carrier, consignee or insurer of the
goods, is liable for the additional charges incurred by the owner of the ship in the salvage operations and
in the transshipment of the goods via a different carrier.

Re: Natural disaster

CA affirmed RTC ruling that the fire was a natural disaster or calamity. Phil Assurance questions this,
and SC agrees with Phil Assurance.In Phil jurisprudence, fire may not be considered a natural disaster
since it almost always arises from some act of man. It cannot be an act of God unless caused by lightning
or a natural disaster or casualty not attributable to human agency.In this case, there was no showing, and
none was alleged by the parties, that the fire was caused by a natural. Actually, there is strong evidence
indicating that the “acetylene cylinder” caught fire because of the negligence of Eastern Shipping, its
captain, and its crew:First, the “acetylene cylinder” should not have been stored in the accommodation
area near the engine room where the heat generated could cause the cylinder to explode by spontaneous
combustion. Eastern Shipping should have foreseen that since the cylinder contained highly flammable
material it was in danger of exploding, being close to the engine room.Second, Eastern Shipping should
have known that by storing the cylinder in the accommodation area for passengers, it unnecessarily
exposed its passengers to grave danger. Curious passengers, ignorant might have handled the cylinder or
could have smoked cigarettes while in the accommodation area.Third, the fact that the cylinder was
examined and certified as having complied with the safety measures by qualified expertsbefore it was
loaded in the boat only shows that negligence was present in the handling of the cylinder AFTER it was
loaded and WHILE it was on board the ship.
Re: whether or not expenses incurred in saving the cargo are considered general average. The Supreme
Court says, yes. As a rule, general or gross averages include all damages and expenses which are
deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known
risk.While this case may technically fall within general averages, the formalities prescribed under Article
813 and 814 of the Code of Commerce in order to incur the expenses and cause the damage
corresponding to gross average were NOT complied with. Consequently, respondent ESLI's claim for
contribution from the consignees of the cargo at the time of the occurrence of the average turns to naught.
In conclusion:Cargo consignees cannot be made liable to Eastern Shipping for additional freight and
salvage charges.Eastern Shipping must refund to the insurer, Phil Assurance, the amount it paid under
protest Judgment reversed.
 SULPICIO V. CA (1995)
G.R. No. 113578 July 14, 1995
Lessons Applicable: Exceptions to Contracting Parties (Transportation)

FACTS:

October 23, 1988: Tito Duran Tabuquilde (Tito) and his 3-year old daughter Jennifer Anne (Anne)
boarded the M/V Dona Marilyn at North Harbor, Manila, bringing with them several pieces of
luggage.Storm Signal No. 2 had been raised by the PAG-ASA authorities over Leyte as early as 5:30
P.M. of October 23, 1988 and which signal was raised to Signal No. 3 by 10 P.M. Ship captain ordered
the vessel to proceed to Tacloban when prudence dictated that he should have taken it to the nearest port
for shelter, thus violating his duty to exercise extraordinary diligence in the carrying of passengers safely
to their destination.

October 24, 1988 morning: M/V Dona Marilyn, while in transit, encountered inclement weather which
caused huge waves due to Typhoon Unsang.Angelina Tabuquilde contacted the Sulpicio Office to verify
radio reports that the vessel M/V Dona Marilyn was missing. Sulpicio Lines assured her that the ship was
merely "hiding" thereby assuaging her anxiety.

October 24, 1988 2:00 P.M.: vessel capsized, throwing Tito and Anne, along with hundreds of
passengers, into the sea.Tito tried to keep himself and his daughter afloat but to no avail as the waves got
stronger and he was subsequently separated from his daughter despite his efforts.

October 25, 1988 11:00 A.M.: He found himself on Almagro Island in SamarHe immediately searched for
his daughter among the survivors in the island, but failed. Angelina tried to seek the assistance of the
Sulpicio Lines in Manila to no avail. Angelina spent sleepless nights worrying about her husband and
daughter in view of the refusal of Sulpicio Lines to release a verification of the sinking of the ship.

October 26, 1988: Tito and other survivors in the Almagro Island were fetched and were brought to
Tacloban Medical Center for treatment

October 31, 1988: Tito reported the loss of his daughter and was informed that the corpse of a child with
his daughter's description had been found. Tito wrote a letter to his wife, reporting the sad fact that
Jennifer Anne was dead. Angelina suffered from shock and severe grief upon receipt of the news.

November 3, 1988: coffin bearing the corpse of Anne was buried.

November 24, 1988: Tito filed a claim for damages against Sulpicio Lines for the death of Anne and the
loss of his belongings worth P27,580

Trial Court ruled in favor of Tito. Actual damages, P30,000.00 for the death of Anne; P100,000.00 as
moral damages; P50,000.00 as exemplary damages; P50,000.00 as attorney's fees, and costs

ISSUE:

Whether Tito has a right to recover damage for his lost belongings

HELD:
NO. Court of Appeals is AFFIRMED with the MODIFICATION that the award of P27,580.00 as actual
damages for the loss of the contents of the pieces of baggage is deleted and that the award of P30,000.00
under Article 2206 in relation Article 1764 is increased to P50,000.00.There is no showing that the value
of the contents of the lost pieces of baggage was based on the bill of lading or was previously declared by
Tito before he boarded the ship. Article 2206 of the Civil Code of the Philippines:only deaths caused by a
crime as quasi delict are entitled to actual and compensatory damages without the need of proof of the
said damages. The amount of damages for death caused by a crime or quasi delict shall be at least Three
Thousand Pesos, even though there may have been mitigating circumstances. . . .Deducing alone from
said provision, one can conclude that damages arising from culpa contractual are not compensable
without proof of special damages sustained by the heirs of the victim.With respect to the award of moral
damages, the general rule is that said damages are not recoverable in culpa contractual except when the
presence of bad faith was provenin breach of contract of carriage, moral damages may be recovered when
it results in the death of a passenger. With respect to the award of exemplary damages, Article 2232 of the
Civil Code of the Philippines gives the Court the discretion to grant said damages in breach of contract
when the defendant acted in a wanton, fraudulent and reckless manner. The crew assumed a greater risk
when, instead of dropping anchor in or at the periphery of the Port of Calapan, or returning to the port of
Manila which is nearer, proceeded on its voyage on the assumption that it will be able to beat and race
with the typhoon and reach its destination before it (Unsang) passes.
 G.R. No. 161745 September 30, 2005

LEA MER INDUSTRIES, INC., vs. MALAYAN INSURANCE CO., INC.,

Common carriers are bound to observe extraordinary diligence in their vigilance over the goods entrusted
to them, as required by the nature of their business and for reasons of public policy. Consequently, the
law presumes that common carriers are at fault or negligent for any loss or damage to the goods that they
transport. In the present case, the evidence submitted by petitioner to overcome this presumption was
sorely insufficient.

The Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the October 9, 2002
Decision and the December 29, 2003 Resolution of the Court of Appeals (CA) in CA-GR CV No. 66028.
The challenged Decision disposed as follows:

"WHEREFORE, the appeal is GRANTED. The December 7, 1999 decision of the Regional Trial Court
of Manila, Branch 42 in Civil Case No. 92-63159 is hereby REVERSED and SET ASIDE. [Petitioner] is
ordered to pay the [herein respondent] the value of the lost cargo in the amount of ₱565,000.00. Costs
against the [herein petitioner .

The assailed Resolution denied reconsideration.

The Facts

Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the shipment of
900 metric tons of silica sand valued at ₱565,000. Consigned to Vulcan Industrial and Mining
Corporation, the cargo was to be transported from Palawan to Manila. On October 25, 1991, the silica
sand was placed on board Judy VII, a barge leased by Lea Mer. During the voyage, the vessel sank,
resulting in the loss of the cargo.

Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo. To recover the amount
paid and in the exercise of its right of subrogation, Malayan demanded reimbursement from Lea Mer,
which refused to comply. Consequently, Malayan instituted a Complaint with the Regional Trial Court
(RTC) of Manila on September 4, 1992, for the collection of ₱565,000 representing the amount that
respondent had paid Vulcan.

On October 7, 1999, the trial court dismissed the Complaint, upon finding that the cause of the loss was a
fortuitous event. The RTC noted that the vessel had sunk because of the bad weather condition brought
about by Typhoon Trining. The court ruled that petitioner had no advance knowledge of the incoming
typhoon, and that the vessel had been cleared by the Philippine Coast Guard to travel from Palawan to
Manila.

Ruling of the Court of Appeals

Reversing the trial court, the CA held that the vessel was not seaworthy when it sailed for Manila. Thus,
the loss of the cargo was occasioned by petitioner’s fault, not by a fortuitous event.

Hence, this recourse.

The Issues

Petitioner states the issues in this wise:

"A. Whether or not the survey report of the cargo surveyor, Jesus Cortez, who had not been presented as a
witness of the said report during the trial of this case before the lower court can be admitted in evidence to
prove the alleged facts cited in the said report.

"B. Whether or not the respondent, Court of Appeals, had validly or legally reversed the finding of fact of
the Regional Trial Court which clearly and unequivocally held that the loss of the cargo subject of this
case was caused by fortuitous event for which herein petitioner could not be held liable.

"C. Whether or not the respondent, Court of Appeals, had committed serious error and grave abuse of
discretion in disregarding the testimony of the witness from the MARINA, Engr. Jacinto Lazo y Villegal,
to the effect that the vessel ‘Judy VII’ was seaworthy at the time of incident and further in disregarding
the testimony of the PAG-ASA weather specialist, Ms. Rosa Barba y Saliente, to the effect that typhoon
‘Trining’ did not hit Metro Manila or Palawan."

In the main, the issues are as follows: (1) whether petitioner is liable for the loss of the cargo, and (2)
whether the survey report of Jesus Cortez is admissible in evidence.

The Court’s Ruling

The Petition has no merit.

First Issue:

Liability for Loss of Cargo

Question of Fact

The resolution of the present case hinges on whether the loss of the cargo was due to a fortuitous event.
This issue involves primarily a question of fact, notwithstanding petitioner’s claim that it pertains only to
a question of law. As a general rule, questions of fact may not be raised in a petition for review. The
present case serves as an exception to this rule, because the factual findings of the appellate and the trial
courts vary. This Court meticulously reviewed the records, but found no reason to reverse the CA.

Rule on Common Carriers

Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods, or both -- by land, water, or air -- when this service is offered to the
public for compensation. Petitioner is clearly a common carrier, because it offers to the public its
business of transporting goods through its vessels.

Thus, the Court corrects the trial court’s finding that petitioner became a private carrier when Vulcan
chartered it. Charter parties are classified as contracts of demise (or bareboat) and affreightment, which
are distinguished as follows:
"Under the demise or bareboat charter of the vessel, the charterer will generally be considered as owner
for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes, in
effect, the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a
demise, the owner of a vessel must completely and exclusively relinquish possession, command and
navigation thereof to the charterer; anything short of such a complete transfer is a contract of
affreightment (time or voyage charter party) or not a charter party at all."

The distinction is significant, because a demise or bareboat charter indicates a business undertaking that
is private in character. Consequently, the rights and obligations of the parties to a contract of private
carriage are governed principally by their stipulations, not by the law on common carriers.

The Contract in the present case was one of affreightment, as shown by the fact that it was petitioner’s
crew that manned the tugboat M/V Ayalit and controlled the barge Judy VII. Necessarily, petitioner was a
common carrier, and the pertinent law governs the present factual circumstances.

Extraordinary Diligence Required

Common carriers are bound to observe extraordinary diligence in their vigilance over the goods and the
safety of the passengers they transport, as required by the nature of their business and for reasons of
public policy. Extraordinary diligence requires rendering service with the greatest skill and foresight to
avoid damage and destruction to the goods entrusted for carriage and delivery. Common carriers are
presumed to have been at fault or to have acted negligently for loss or damage to the goods that they have
transported. This presumption can be rebutted only by proof that they observed extraordinary diligence, or
that the loss or damage was occasioned by any of the following causes:

"(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

"(2) Act of the public enemy in war, whether international or civil;

"(3) Act or omission of the shipper or owner of the goods;

"(4) The character of the goods or defects in the packing or in the containers;

"(5) Order or act of competent public authority

Rule on Fortuitous Events

Article 1174 of the Civil Code provides that "no person shall be responsible for a fortuitous event which
could not be foreseen, or which, though foreseen, was inevitable." Thus, if the loss or damage was due to
such an event, a common carrier is exempted from liability.

Jurisprudence defines the elements of a "fortuitous event" as follows: (a) the cause of the unforeseen and
unexpected occurrence, or the failure of the debtors to comply with their obligations, must have been
independent of human will; (b) the event that constituted the caso fortuitous must have been impossible to
foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it
impossible for the debtors to fulfill their obligation in a normal manner; and (d) the obligor must have
been free from any participation in the aggravation of the resulting injury to the creditor. To excuse the
common carrier fully of any liability, the fortuitous event must have been the proximate and only cause of
the loss. Moreover, it should have exercised due diligence to prevent or minimize the loss before, during
and after the occurrence of the fortuitous event.

Loss in the Instant Case

There is no controversy regarding the loss of the cargo in the present case. As the common carrier,
petitioner bore the burden of proving that it had exercised extraordinary diligence to avoid the loss, or that
the loss had been occasioned by a fortuitous event -- an exempting circumstance.

It was precisely this circumstance that petitioner cited to escape liability. Lea Mer claimed that the loss of
the cargo was due to the bad weather condition brought about by Typhoon Trining. Evidence was
presented to show that petitioner had not been informed of the incoming typhoon, and that the Philippine
Coast Guard had given it clearance to begin the voyage. On October 25, 1991, the date on which the
voyage commenced and the barge sank, Typhoon Trining was allegedly far from Palawan, where the
storm warning was only "Signal No. 1." The evidence presented by petitioner in support of its defense of
fortuitous event was sorely insufficient. As required by the pertinent law, it was not enough for the
common carrier to show that there was an unforeseen or unexpected occurrence. It had to show that it was
free from any fault -- a fact it miserably failed to prove.

First, petitioner presented no evidence that it had attempted to minimize or prevent the loss before, during
or after the alleged fortuitous event. Its witness, Joey A. Draper, testified that he could no longer
remember whether anything had been done to minimize loss when water started entering the barge. This
fact was confirmed during his cross-examination, as shown by the

Petitioner offered no evidence to rebut the existence of the holes. Its witness, Domingo A. Luna, testified
that the barge was in "tip-top" or excellent condition, but that he had not personally inspected it when it
left Palawan.

The submission of the Philippine Coast Guard’s Certificate of Inspection of Judy VII, dated July 31, 1991,
did not conclusively prove that the barge was seaworthy. The regularity of the issuance of the Certificate
is disputably presumed. It could be contradicted by competent evidence, which respondent offered.
Moreover, this evidence did not necessarily take into account the actual condition of
the vessel at the time of the commencement of the voyage.

Second Issue:

Admissibility of the Survey Report

Petitioner claims that the Survey Report prepared by Jesus Cortez, the cargo surveyor, should not have
been admitted in evidence. The Court partly agrees. Because he did not testify during the trial, then the
Report that he had prepared was hearsay and therefore inadmissible for the purpose of proving the truth of
its contents.

The Survey Report Not the Sole Evidence

The facts reveal that Cortez’s Survey Report was used in the testimonies of respondent’s witnesses --
Charlie M. Soriano; and Federico S. Manlapig, a cargo marine surveyor and the vice-president of Toplis
and Harding Company. Soriano testified that the Survey Report had been used in preparing the final
Adjustment Report conducted by their company. The final Report showed that the barge was not
seaworthy because of the existence of the holes. Manlapig testified that he had prepared that Report after
taking into account the findings of the surveyor, as well as the pictures and the sketches of the place
where the sinking occurred. Evidently, the existence of the holes was proved by the testimonies of the
witnesses, not merely by Cortez’ Survey Report.

Rule on Independently- Relevant Statement

That witnesses must be examined and presented during the trial, and that their testimonies must be
confined to personal knowledge is required by the rules on evidence, from which we quote:

"Section 36. Testimony generally confined to personal knowledge; hearsay excluded. –A witness can
testify only to those facts which he knows of his personal knowledge; that is, which are derived from his
own perception, except as otherwise provided in these rules

On this basis, the trial court correctly refused to admit Jesus Cortez’s Affidavit, which respondent had
offered as evidence. Well-settled is the rule that, unless the affiant is presented as a witness, an affidavit is
considered hearsay.

An exception to the foregoing rule is that on "independently relevant statements." A report made by a
person is admissible if it is intended to prove the tenor, not the truth, of the statements. Independent of the
truth or the falsity of the statement given in the report, the fact that it has been made is relevant. Here, the
hearsay rule does not apply. In the instant case, the challenged Survey Report prepared by Cortez was
admitted only as part of the testimonies of respondent’s witnesses. The referral to Cortez’s Report was in
relation to Manlapig’s final Adjustment Report. Evidently, it was the existence of the Survey Report that
was testified to. The admissibility of that Report as part of the testimonies of the witnesses was correctly
ruled upon by the trial court.

At any rate, even without the Survey Report, petitioner has already failed to overcome the presumption of
fault that applies to common carriers.

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution are AFFIRMED.
Costs against petitioner.
 PLANTERS PRODUCTS VS CA - 226 SCRA 476 (1993)

FACTS:

June 16 1974: Mitsubishi International Corporation (Mitsubishi) of New York, U.S.A., 9,329.7069
M/T of Urea 46% fertilizer bought by Planters Products, Inc. (PPI) on aboard the cargo vessel M/V
"Sun Plum" owned by private Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A.,
to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading

May 17 1974: a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General
Charter was entered into between Mitsubishi as shipper/charterer and KKKK as ship owner, in
Tokyo, Japan
Before loading the fertilizer aboard the vessel, 4 of her holds were all presumably inspected by the
charterer's representative and found fit
The hatches remained closed and tightly sealed throughout the entire voyage

July 3, 1974: PPI unloaded the cargo from the holds into its steel bodied dump trucks which were
parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and
conditions of the charter-partly hatches remained open throughout the duration of the discharge
Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was
transported to the consignee's warehouse located some 50 meters from the wharf

Midway to the warehouse, the trucks were made to pass through a weighing scale where they were
individually weighed for the purpose of ascertaining the net weight of the cargo.
The port area was windy, certain portions of the route to the warehouse were sandy and the weather
was variable, raining occasionally while the discharge was in progress.

Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain spillages of the
fertilizer. It took 11 days for PPI to unload the cargo. Cargo Superintendents Company Inc.
(CSCI), private marine and cargo surveyor, was hired by PPI to determine the "outturn" of the cargo
shipped, by taking draft readings of the vessel prior to and after discharge. Shortage in the cargo of
106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with
dirt
Certificate of Shortage/Damaged Cargo prepared by PPI short of 94.839 M/T and about 23 M/T were
rendered unfit for commerce, having been polluted with sand, rust and dirt
PPI sent a claim letter 1974 to Soriamont Steamship Agencies (SSA), the resident agent of the carrier,
KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped and the
diminution in value of that portion said to have been contaminated with dirt
SSA: what they received was just a request for short landed certificate and not a formal claim, and
that they "had nothing to do with the discharge of the shipment

RTC: Failure to destroy the presumption of negligence against them, SSA is liable

CA: REVERSED - failed to prove the basis of its cause of action

ISSUE:

W/N a time charter between a ship owner and a charterer transforms 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
HELD:

NO petition is DISMISSED
When PPI chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were
under the employ of the ship owner and therefore continued to be under its direct supervision and
control. Hardly then can we charge the charterer, a stranger to the crew and to the ship, with the duty
of caring for his cargo when the charterer did not have any control of the means in doing so

Carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of
negligence. The hatches remained close and tightly sealed while the ship was in transit as the weight
of the steel covers made it impossible for a person to open without the use of the ship's boom.

Bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage. More
so, with a variable weather condition prevalent during its unloading

This is a risk the shipper or the owner of the goods has to face. Clearly, KKKK has sufficiently
proved the inherent character of the goods which makes it highly vulnerable to deterioration; as well
as the inadequacy of its packaging which further contributed to the loss.

On the other hand, no proof was adduced by the petitioner showing that the carrier was remise in the
exercise of due diligence in order to minimize the loss or damage to the goods it carried.