CHAPTER 14 – CHARTER PARTIES | CHAPTER 16 – AVERAGES | CHAPTER 17 - COLLISIONS

01. COASTWISE LIGHTERAGE CORPORATION vs. COURT OF APPEALS and PARTIES:

the PHILIPPINE GENERAL INSURANCE COMPANY Petitioner: COASTWISE LIGHTERAGE CORPORATION
G.R. No. 114167 | July 12, 1995 Respondent: CA and the PHILIPPINE GENERAL INSURANCE COMPANY
Nature of Action: recover the amount of P700,000.00 which it paid to Pag-asa
TOPIC: Bareboat Charter Sales, Inc. for the latter's lost cargo.
CC/Mode of Transportation: Barges
BUZZWORD: Molasses Owner: Coastwise
Goods: molasses
DOCTRINE: Contract: Contract of Affreightment
Puromines, Inc. vs. Court of Appeals, wherein we ruled: "Under the demise or Route: Negros to Manila
bareboat charter of the vessel, the charterer will generally be regarded as the owner Cause/Accident: one of the barges, "Coastwise 9," struck an unknown sunken
for the voyage or service stipulated. The charterer mans the vessel with his own object
people and becomes 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 PROCEDURE:
completely and exclusively relinquish possession, command and navigation thereof RTC of Manila: Ruled in favor of PhilGen and awarded it the amount prayed for.
to the charterer, anything short of such a complete transfer is a contract of CA: Affirmed
affreightment (time or voyage charter party) or not a charter party at all.
RECIT READY DIGEST:
VOCABULARY: Pag-asa Sales entered into a contract of affreightment with Coastwise to ship
Molasses from Negros to Manila. Unfortunately, the dumb barge where the cargo
was loaded hit a sunken boat, which led to ship being damaged and the cargo being
Bareboat or Demise Charter Contract of contaminated. Since the molasses were deemed unfit for use, Pag-asa rejected the
Affreightment cargo and filed a claim from the insurer PhilGen. PhilGen in turn claimed payment
from Coastwise on the grounds that it was subrogated the rights of Pag-asa. The S.C.
The owner of a vessel must One in which the owner
ruled that a contract of affreightment does not transform a CC into a private one and
completely and exclusively of the vessel leases part
therefore, for failure of Coastwise to exercise extraordinary diligence, it was liable to
relinquish possession, command or all of its space to haul
pay PhilGen.
and navigation thereof to the goods for others.
Definition charterer, anything short of such
FACTS:
a complete transfer is a contract
• Pag-asa Sales, Inc. entered into a contract to transport molasses from the province
of affreightment (time or voyage
of Negros to Manila with Coastwise Lighterage Corporation (Coastwise for brevity),
charter party) or not a charter
using the latter's dumb barges.
party at all.
• The barges were towed in tandem by the tugboat MT Marica, which is likewise
The charterer will generally be The general owner owned by Coastwise.
regarded as the owner for the retains the possession, • Upon reaching Manila Bay, while approaching Pier 18, one of the barges,
Ownership voyage or service stipulated. command and "Coastwise 9," struck an unknown sunken object.
navigation of the ship. • 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 and
A a charter party may transform Cannot be transformed rendered unfit for the use it was intended.
Type of Carrier a common carrier into a private into a private carrier. • This prompted the consignee, Pag-asa Sales, Inc. to reject the shipment of
one. molasses as a total loss.
• Thereafter, Pag-asa Sales, Inc. filed a formal claim with the insurer of its lost cargo,
If it becomes a private carrier, it Liable as a common
herein private respondent, Philippine General Insurance Company (PhilGen, for
is subject to liability to others for carrier and must answer
short) and against the carrier, herein petitioner, Coastwise Lighterage.
damages caused by negligence. for any breach of duty
Liability • Coastwise Lighterage denied the claim and it was PhilGen which paid the
as to the care, loading
consignee, Pag-asa Sales, Inc., the amount of P700,000.00, representing the value
and unloading of the
of the damaged cargo of molasses.
cargo.
• In turn, PhilGen then led an action against Coastwise Lighterage before the
Regional Trial Court of Manila, seeking to recover the amount of P700,000.00
which it paid to Pag-asa Sales, Inc. for the latter's lost cargo.

MMA’S SHIPPING COMPANY - TRANSPORATION LAW DIGESTS 1

Coastwise Argument: contends that the RTC and the Court of Appeals erred in
Finding that it was a common carrier
 It stresses the fact that it contracted with Pag-asa Sales, Inc. to transport
the shipment of molasses from Negros Oriental to Manila and refers to this
contract as a "charter agreement."
ISSUE/S:
1. WON Coastwise Lighterage was transformed into a private carrier, by virtue of
the contract of affreightment which it entered into with the consignee, Pag-asa
Sales, Inc.- NO (MAIN ISSUE)
2. WON it exercised ordinary diligence - NO
3. WON Coastwise is liable for breach of contract of carriage - YES
4. WON PhilGen’s contention of being subrogated the rights of Pag-asa Sales upon
payment by the insurer of the value of the consignee's goods lost while on
board one of the carrier's vessels was proper.
HELD:
Main Issue: NO, it remained a CC because the contract entered into was a
contract for affreightment which does not and cannot transform it into a
private carrier. (Discussion below)
RULE: A contract of affreightment cannot transform into a private carrier, unlike a
bareboat or demise charter. Therefore it is obligated to exercise extraordinary
diligence.
Second Issue: NO, since it is not a private carrier, it had to observe extraordinary
diligence and carries the presumption of negligence. However it failed to overcome
the presumption of negligence with the loss and destruction of goods it transported,
by proof of its exercise of extraordinary diligence. The fact of negligence is proven
by evidence.
Third Issue: YES it is liable for breach of contract because it hired an
unlicensed patron.
RULE: Art. 609. — Captains, masters, or patrons of vessels must be Filipinos, have
legal capacity to contract in accordance with this code, and prove the skill capacity
and qualifications necessary to command and direct the vessel, as established by
marine and navigation laws, ordinances or regulations, and must not be disqualified
according to the same for the discharge of the duties of the position. . . .
 The Patron of the ship, Jesus R. Constantino, admitted that he was not
licensed.
 It 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.
Fourth Issue: Yes, undoubtedly, upon payment by respondent insurer PhilGen of
the amount of P700,000.00 to Pag-asa Sales, Inc., the consignee of the cargo of
molasses totally damaged while being transported by petitioner Coastwise
Lighterage, the former was subrogated into all the rights which Pag-asa Sales, Inc.
may have had against the carrier, herein petitioner Coastwise Lighterage. For the
damage sustained by the loss of the cargo which petitioner-carrier was transporting,
it was not the carrier which paid the value thereof to Pag-asa Sales, Inc. but the
latter's insurer, herein private respondent PhilGen.
IN THIS CASE: Petitioner admits that the contract it entered into with the consignee
was one of affreightment. 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 and navigation of the vessels remained with petitioner Coastwise
Lighterage.
THEREFORE: 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.
DISPOSITIVE: WHEREFORE, premises considered, this petition is DENIED and the
appealed decision affirming the order of Branch 35 of the Regional Trial Court of
Manila for petitioner Coastwise Lighterage to pay respondent Philippine General
Insurance Company the "principal amount of P700,000.00 plus interest thereon at
the legal rate computed from March 29, 1989, the date the complaint was led until
fully paid and another sum of P100,000.00 as attorney's fees and costs” is likewise
hereby AFFIRMED.
02. LITONJUA SHIPPING COMPANY v. NATIONAL SEAMEN BOARD &
CADONGO
G.R. No. L-51910 | August 10, 1989
TOPIC: Different Kinds of Charter Parties
BUZZ WORD: Hala Bare si Litonjua!
DOCTRINE: see held for the distinction among 3 kinds of charter
RECIT READY SUMMARY: Fairwind chartered Mullion’s M/V Dufton Bay. Fairwind
further appointed Litonjua Shipping as the crew-managing agent who will hire crews
in case needed. Litonjua hired Cadongo who was dismissed before the expiration of
the contract. Cadongo sued Fairwind and Litonjua. Litonjua denies liability and said
that it is the shipowner who is liable and not the charterer Fairwind and Litonjua. In
short he denies that it is a bareboat charter BUT he failed to attach the charter
contract, which resulted for the court to assume that it is indeed a bareboat charter.
NSB: it’s a bareboat charter. Fairwind and Litonjua solidarily liable
PARTIES:
COMMON CARRIER: M/V Dufton Bay - an ocean-going vessel of foreign registry
owned
OWNER: R.D. Mullion Ship Broking Agency
CHATERER: Fairwind Shipping Corporation
KIND OF CHARTER: bareboat or demise
LOCAL CREWING MANAGING OFFICE: Litonjua Shipping Corp.
 CHAPTER 14 – CHARTER PARTIES | CHAPTER 16 – AVERAGES | CHAPTER 17 - COLLISIONS
3RD ENGINEER (Hired by Litonjua): Gregorio Candongo
FACTS:
 Petitioner Litonjua is the duly appointed local crewing Managing Office of
the Fairwind
 Faiwind executed a contract appointing Litonjua as its agent:
This is to certify that Messrs. Litonjua Shipping, Inc. is duly appointed local
crewing Managing Office to attend on our Crew requirements as well as
attend to our ship's requirements when in Philippine ports.
We further authorized Litonjua Shipping Co., Inc. to act as local
representative who can sue and be sued, and to bind and sign contracts for
our behalf
 While the Dufton Bay was in the port of Cebu and while under charter by
Fairwind, the vessel's master contracted the services of, private respondent
Gregorio Candongo to serve as Third Engineer for a period of 12 months
with a monthly wage of US$500.00
 This agreement was executed before the Cebu Area Manning Unit of the
NSB.
 Candongo boarded the vessel but before expiration of his contract,
Candongo was required to disembark at Port Kelang, Malaysia, and was
returned to the Philippines
 Candongo filed a complaint before public respondent NSB for violation of
contract, against Mullion as the shipping company and petitioner Litonjua
as agent of the shipowner and of the charterer of the vessel
NSB: in favor of Cadongo. Fairwind is the charterer of the vessel
 Mullion and Litonjua as solidarily liable to pay 4,657.63 USD on the ground
that there was no sufficient cause to terminate the services of Candongo
 Litonjua through its supercargos in the persons of Edmund Cruz and Renato
Litonjua, had knowledge that the former assisted in the interviews
conducted by the Master of the crew applicants as admitted by Renato
Litonjua including the acts of facilitating the crew's NISA clearances as
testified to by complainant
Litonjua’s Arguments:
 shipowner, not the charterer, was the employer of Candongo
 liability for damages cannot be imposed upon Litonjua which was a mere
agent of the charterer.
 Cadongo’s contract of employment and affidavit of undertaking clearly
showed that the party with whom he had contracted was Mullion, the
shipowner, represented by the ship's master
 Its supercargos merely assisted Captain Ho King Yiu of the Dufton Bay in
being Cadonong as Third Engineer
ISSUE:
1. WON Shipowner Mullion should be held liable and not the charterer
Fairwand and its agent Litonjua – NO, Litonjua as agent of charterer
should be held liable
2. What kind of charter did Fairwind and Mullion Ship contracted – bareboat /
demise
HELD:
Litonjua should be held liable to Cadongo’s Employment Contract
RULE:
This is a case of bareboat or demise charter even if Captain Ho King Yiu
was provided by Mullion
What is a "bareboat" or "demise" charter?
 A bareboat or demise charter is a demise of a vessel, much as a lease of an
unfurnished house is a demise of real property.
 It is well settled that in a demise or bare boat charter, the charterer is
treated as owner pro hac vice of the vessel, the charterer assuming in large
measure the customary rights and liabilities of the shipowner in relation to
third persons who have dealt with him or with the vessel
 Possesion : charterer who then undertakes to provide a crew and victuals
and supplies and fuel for her during the term of the charter.
 Crew: charterer (see exception below)
GR: crew to be provided by the charterer. The shipowner is not normally required by
the terms of a demise charter to provide a crew, and so the charterer gets the "bare
boat", i.e., without a crew.
XPT: Sometimes, of course, the demise charter might provide that the shipowner is
to furnish a master and crew to man the vessel under the charterer's direction, such
that the master and crew provided by the shipowner become the agents and
servants or employees of the charterer, and the charterer (and not the owner)
through the agency of the master, has possession and control of the vessel during
the charter period
 In such case, the Master of the vessel is the agent of the charterer and not
of the shipowner.
IN THIS CASE:
 Litonjua did not submit to the Court a copy of the charter party
covering the Dufton Bay (take note, so why won’t he attach right?)
 With such omission, the Court assumed that Litonjua was aware of the
nature of a bareboat or demise charter an if he did not see fit to include in
the record a copy of the charter party, which had been entered into by its
principal, it was because the charter party and the provisions thereof were
not supportive of the position adopted by petitioner Litonjua in the present
case, a position diametrically opposed to the legal consequence of a
bareboat charter
 Litonjua made an appearance that it was the real owner of the bare boat.
THEREFORE: Litonjua may be held liable on the contract of employment between
the ship captain and Candongo. Treating Fairwind as owner pro hac vice, Litonjua
having failed to show that it was not such, we believe and so hold that Litonjua, as
Philippine agent of the charterer, may be held liable on the contract of employment
between the ship captain and Cadongo
Other indications that he should be held liable:
 Fairwind, clearly benefitted from the employment of Cadonong as Third
Engineer of the Dufton Bay, along with the 10 other Filipino crewmembers
recruited by Captain Ho in Cebu at the same occasion.
 The scope of authority of Litonua as agent was not clearly delimited
MMA’S SHIPPING COMPANY - TRANSPORATION LAW DIGESTS 3
  Litonjua took the position that its commission was limited to taking care of
vessels owned by Fairwind but the documentary authorization read into the
record of this case does not make that clear at all.
 The words he used that “our ships” may well be read to refer both to
vessels registered in the name of Fairwind and vessels owned by others but
chartered by Fairwind
 Indeed the commercial, operating requirements of a vessel for crew
members and for supplies and provisions have no relationship to the
technical characterization of the vessel as owned by or as merely chartered
by Fairwind. I
o In any case, it is not clear from the authorization given by Fairwind
to Litonjua that vessels chartered by Fairwind (and owned by some
other companies) were not to be taken care of by Litonjua should
such vessels put into a Philippine port
 Litonjua represented that it was taking care of the crewing and other
requirements of a vessel chartered by its principal, Fairwind
Unpaid wages of the crew members constitute as maritime lien,
 Fairwind, being a foreign registered company, is in no position to enforce
that lien.
 It is Litonjua, a Philippine agent, which is on the best position upon whom
the lien may be enforced.
KINDS OF CHARTER
In modern maritime law and usage, there are three (3) distinguishable types of
charter parties:
1. the "bareboat" or "demise" charter (explained earlier)
2. the "time" charter
o like a demise charter, is a contract for the use of a vessel for a
specified period of time or for the duration of one or more specified
voyages.
o Possesion & crew: shipowner, it retains possession and control
through the master and crew who remain his employees
o What the time charterer acquires is the right to utilize the carrying
capacity and facilities of the vessel and to designate her destinations
during the term of the charter.
3. the "voyage" or "trip" charter
o a contract of affreightment, that is, a contract for the carriage of
goods, from one or more ports of loading to one or more ports of
unloading, on one or on a series of voyages.
o Possesion & crew: shipowner
DAMAGES: not mentioned
DISPOSITIVE: WHEREFORE, the Petition for certiorari is DISMISSED and the
Decision of the then National Seamen Board dated 31 May 1979 is hereby
AFFIRMED. No pronouncement as to costs. SO ORDERED.
03. AGUSTIN P. DELA TORRE v. COURT OF APPEALS, CRISOSTOMO
CONCEPCION, RAMON “BOY” LARRAZABEAL. PHILIPPINE TRIGON SHIPYARD
CORPORATION AND ROLAND DELA TORRE
G.R. No. 160088 | July 13, 2011
TOPIC: Rights and Obligations of Charterers;
BUZZ WORD: Lumubog si Josephine gawa ng tatay kos
DOCTRINE:
With the complete and exclusive relinquishment of possession, command and
navigation of the vessel, the charterer and later the sub-charterer became the
vessel’s owner  pro hac vice.
In the absence of any showing that the vessel or any part thereof was commercially
offered for use to the public, the above agreements/charter parties are that of a
private carriage where the rights of the contracting parties are primarily defined and
governed by the stipulations in their contract
PARTIES:
PETITIONER: Agustin Dela Torre (dad of Roland Dela Torre)
RESPONDENT: CA, Concepcion, Larrazabal. Philippine Trigon Shipyard. Roland Dela
Torre
CC/MODE OF TRANSPORT: LCT-Josephine (lighter/vessel)
OWNER OF VESSEL: Crisostomo G. Concepcion
CHARTERER: Roland Dela Torre
SUB-CHARTERERS:
1. PTSC (Roland),
2. Trigon Shipping Lines (Agustin Dela Torre)
3. Ramon Larrazabal
GOODS / PASSENGERS: sand and gravel
PORT OF DEPARTURE: n/a
ROUTE: Philpos, Isabel, Leyte (not indicated in the case where it came from)
CAUSE / ACCIDENT: the vessel sank due to the moving of the vessel’s ramp down
resulting to the consequent tilting of such plus the sea water rushed in
CHIEFMATE: Hubart Sungayan
NATURE OF ACTION: Complaint for sum of money and damages
RECIT READY DIGEST:
Respondent Crisostomo G. Concepcion owned LCT-Josephine, a vessel registered
with the Philippine Coast Guard. Concepcion entered into a “Preliminary Agreement”
with Roland de la Torre for the dry-docking and repairs of the said vessel as well as
for its charter afterwards. While the payloader was on the deck of the LCT-Josephine
scooping a load of the SAND AND GRAVEL, the vessel’s ramp started to move
downward, the vessel tilted and sea water rushed in. Shortly thereafter, LCT-
Josephine sank. Concepcion demanded that PTSC/ Roland refloat LCT-Josephine. The
latter assured Concepcion that negotiations were underway. Unfortunately, this did
not materialize. Thus, the RTC declared that the “efficient cause of the sinking of
the LCT-JOSEPHINE was the improper lowering or positioning of the ramp,”
which was well within the charge or responsibility of the captain and crew of the
vessel. Both CA and SC upheld such ruling.
RTC: in favor of Crisostomo
 CHAPTER 14 – CHARTER PARTIES | CHAPTER 16 – AVERAGES | CHAPTER 17 - COLLISIONS
 Cause of the sinking was the improper lowering or positioning of the ramp  CRISOSTOMO demanded that PTSC/ ROLAND refloat the VESSEL. The latter
which was well within the responsibility of captain and crew assured CRISOSTOMO that negotiations were underway for the refloating of
CA: affirmed in toto his VESSEL. Unfortunately, this did not materialize.

 CRISOSTOMO filed a complaint for “Sum of Money and Damages”

FACTS:
against PTSC/ROLAND before the RTC.
 Respondent Crisostomo G. Concepcion (CRISOSTOMO) owned LCT-
Josephine, a vessel registered with the Philippine Coast Guard.
 PTSC and ROLAND filed their answer together with a third-party
 First Contract: Between Crisostomo and Roland
complaint against AGUSTIN.
o On February 1, 1984, CRISOSTOMO entered into a “Preliminary
Agreement” with Roland de la Torre (ROLAND) for the dry-
 AGUSTIN, in turn, filed his answer plus a fourth-party complaint against
docking and repairs of the VESSEL and for its charter afterwards. 
RAMON.
o Under this agreement, CRISOSTOMO agreed that after the dry-
docking and repair of the VESSEL, it “should” be chartered for
 RAMON filed his answer and counterclaim but was subsequently declared in
₱10,000 per month along with certain conditions
default by the RTC. 
 Second Contract: Between Crisostomo and PTSC
 Eventually, the fourth-party complaint against RAMON was
o On June 20, 1984, CRISOSTOMO and the Philippine Trigon
dismissed.
Shipyard Corporation (PTSC), represented by ROLAND,
entered into a “Contract of Agreement,” wherein ROLAND
PROCEDURE:
would charter the VESSEL retroactive to May 1, 1984, under
certain conditions.
RTC: in favor of Crisostomo
 declared that the “efficient cause of the sinking of the VESSEL was the
 Third Contract: Between PTSC/Roland and TSL/Agustin
improper lowering or positioning of the ramp,” which was well within the
o On August 1, 1984, PTSC/ROLAND sub-chartered the VESSEL
charge or responsibility of the captain and crew of the vessel. 
to Trigon Shipping Lines (TSL), a single proprietorship owned
 In said RTC decision, the following observations were written:
by Roland’s father, Agustin de la Torre (AGUSTIN). 
o The testimonies of ROLAND and Hubart Sungayan (the chiefmate
o The sub-charter between ROLAND and AGUSTIN was subject to the
of LCT- Josephine and under the employ of TSL/AGUSTIN) show:
terms and conditions of another “Contract of Agreement”.
1) that the payloader was used to unload the cargo of sand
o and gravel;
 Fourth Contract: Between TSL/Agustin and Ramon 2) that the payloader had to go inside the vessel and scoop
o On November 22, 1984, TSL (represented by ROLAND per up a load;
AGUSTIN’s Special Power of Attorney) sub-chartered the 3) that the ramp according to ROLAND “was not properly put
VESSEL to Ramon Larrazabal (RAMON) for the transport of into peak such that the front line will touch the bottom,
cargo consisting of sand and gravel to Leyte. The sub-charter particularly will touch the sea
between TSL and RAMON was subject to the terms and conditions 4) that “the tires (of the payloader) will be submerged to the
of a contract1 executed between them. sea”;
5) that according to Sungayan “the ramp of the vessel was
 On November 23, 1984, the VESSEL with its cargo of sand and gravel moving down”;
arrived at Philpos, Isabel, Leyte. 6) that the payloader had to be maneuvered by its operator
 The VESSEL was beached near the NDC Wharf. With the VESSEL’s ramp who dumped the load at the side of the vessel;
already lowered, the unloading of the VESSEL’s cargo began with the use of 7) that the dumping of the load changed the stability of the
RAMON’s payloader vessel and tilted it to the starboard side; and
o While the payloader was on the deck of the the VESSEL scooping a 8) that the tilting caused the sliding of the cargo toward that
load of the cargo, the VESSEL’s ramp started to move side and opened the manhole through which seawater
downward, the VESSEL tilted and sea water rushed in. rushed in
Shortly thereafter, the VESSEL sank. o Hubart Sungayan also admitted at the trial that it was
TSL/AGUSTIN that was was in-charge of the VESSEL’s
operations although the responsibility of loading and
unloading the cargo was under RAMON.

MMA’S SHIPPING COMPANY - TRANSPORATION LAW DIGESTS 5

  The defendants (PTSC/ROLAND) and the third-party defendant (AGUSTIN)
were found to be liable to CRISOSTOMO jointly and severally in the sum
of 841,386.86 as the value of the LCT JOSEPHINE.
 The defendants were also made to pay CRISOSTOMO unpaid rentals
(P90,000) and lost rentals (P170,000).
 The defendants’ counterclaim (₱24,304.35) for the unpaid balance of
plaintiff CRISOSTOMO’s obligation for the dry-docking and repair of the
VESSEL were however found to be valid and ordered deducted from the
unpaid rentals.   
 The fourth-party complaint against the fourth-party defendant, RAMON was
dismissed for being without basis.
CA: affirmed in toto
ISSUE/S: Whether or not the Limited Liability Rule under the Code of Commerce
should be applied in the present case with respect to the liability of the petitioners
(PTSC/ROLAND/AGUSTIN) - NO
HELD:
With respect to PTSC/ROLAND’s position that the Limited Liability Rule under the
Code of Commerce should be applied to them, the argument is misplaced.
RULE:
The said rule has been explained to be that of the real and hypothecary
doctrine in maritime law where the shipowner or ship agent’s liability is
held as merely co-extensive with his interest in the vessel such that a total
loss thereof results in its extinction.  agreements/charter parties are that of a private carriage where the rights
In this jurisdiction, this rule is provided in three articles of the Code of
Commerce.  These are:
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of
third persons which may arise from the conduct of the captain in the care of the
goods which he loaded on the vessel; but he may exempt himself therefrom by
abandoning the vessel with all her equipment and the freight it may have earned
during the voyage.
Art. 590. The co-owners of the vessel shall be civilly liable in the proportion of their
interests in the common fund for the results of the acts of the captain referred to in
Art. 587. Each co-owner may exempt himself from this liability by the abandonment,
before a notary, of the part of the vessel belonging to him.
Art. 837. The civil liability incurred by shipowners in the case prescribed in this
section, shall be understood as limited to the value of the vessel with all its
appurtenances and freightage served during the voyage
Article 837 specifically applies to cases involving collision which is a necessary
consequence of the right to abandon the vessel given to the shipowner or ship agent
under the first provision – Article 587. Similarly, Article 590 is a reiteration of Article
587, only this time the situation is that the vessel is co-owned by several persons.
Obviously, the forerunner of the Limited Liability Rule under the Code of
Commerce is Article 587.
IN THIS CASE:
 The only person who could avail of this is the
shipowner, CRISOSTOMO. He is the very person whom the Limited
Liability Rule has been conceived to protect.  The petitioners cannot invoke
this as a defense. 
 Reason: The policy which the rule is designed to promote is the
encouragement of shipbuilding and investment in maritime commerce.
 CRISOSTOMO 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.
 In Yueng Sheng case, it was further stressed that the charterer does not
completely and absolutely step into the shoes of the shipowner or even the
ship agent because there remains conflicting rights between the former
and the real shipowner as derived from their charter agreement.
Liability of the charterer and sub-charterer  
 In the present case, the charterer (PTSC/ROLAND) and the sub-charterer
(TSL) through their respective contracts of agreement/charter parties,
obtained the use and service of the entire  VESSEL.
 The VESSEL was likewise manned by the charterer (PTSC/ROLAND) and
later by the sub-charterer’s (TSL) people.
 With the complete and exclusive relinquishment of possession, command
and navigation of the vessel, the charterer and later the sub-charterer
became the vessel’s owner pro hac vice.
 Now, and in the absence of any showing that the vessel or any part thereof
was commercially offered for use to the public, the above
of the contracting parties are primarily defined and governed by the
stipulations in their contract
 Although certain statutory rights and obligations of charter parties are
found in the Code of Commerce, these provisions are not applicable in the
present case.
 Indeed, none of the provisions found in the Code of Commerce deals with
the specific rights and obligations between the real shipowner and the
charterer obtaining in this case. Necessarily, the Court looks to the New
Civil Code to supply the deficiency.
Liabilities
 ROLAND who, in his personal capacity, entered into the Preliminary
Agreement with CRISOSTOMO for the dry-docking and repair of the VESSEL,
is liable under Article 1189 of the New Civil Code.
Art. 1189. When the conditions have been imposed with the intention of
suspending the efficacy of an obligation to give, the following rules shall be
observed in case of the improvement, loss or deterioration of the thing during the
pendency of the condition:
1. If the thing is lost without the fault of the debtor, the obligation shall be
extinguished;
2. If the thing is lost through the fault of the debtor, he shall be obliged to pay
damages; it is understood that the thing is lost when it perishes, or goes
out of commerce, or disappears in such a way that its existence is unknown
or it cannot be recovered;
3. When the thing deteriorates without the fault of the debtor, the impairment
is to be borne by the creditor;
 CHAPTER 14 – CHARTER PARTIES | CHAPTER 16 – AVERAGES | CHAPTER 17 - COLLISIONS
4. If it deteriorates through the fault of the debtor, the creditor may choose
between the rescission of the obligation and its fulfillment, with indemnity o The necessity of insuring the VESSEL, regardless of who
for damages in either case; will share in the payment of the premium, is very clear
5. If the thing is improved by its nature, or by time, the improvement shall under the Preliminary Agreement and the subsequent Contracts
inure to the benefit of the creditor; of Agreement dated June 20, 1984 and August 1, 1984,
6. If it is improved at the expense of the debtor, he shall have no other right respectively.
than that granted to the usufructuary.  o The August 17, 1984 letter of CRISOSTOMO’s
representative, Rogelio L. Martinez, addressed to ROLAND
o There is no denying that the vessel was not returned to in his capacity as the president of PTSC inquiring about the
CRISOSTOMO after the repairs because of the provision in the insurance of the VESSEL as well as reiterating the
Preliminary Agreement that the same “should” be used by importance of insuring the said VESSEL is quite telling.  
ROLAND for the first two years. Before the vessel could be DAMAGES
returned, it was lost due to the negligence of AGUSTIN to whom  Value of the vessel
ROLAND chose to sub-charter or sublet the VESSEL.  Unpaid rentals
 Lost rentals
 PTSC is liable to CRISOSTOMO under Articles 1665 and 1667 of the New
Civil Code. COUNTERCLAIM DAMAGES
Art. 1665. The lessee shall return the thing leased, upon the termination of the  Dry docking and repair
lease, as he received it, save what has been lost or impaired by the lapse of
time, or by ordinary wear and tear, or from an inevitable cause THEREFORE:
 Clearly, the petitioners, to whom the possession of the VESSEL had been
Art. 1667. The lessee is responsible for the deterioration or loss of the thing leased, entrusted as early as the time when it was dry-docked for repairs, were
unless he proves that it took place without his fault. This burden of proof on the obliged to insure the same.
lessee does not apply when the destruction is due to earthquake, flood, storm or  Unfortunately, they failed to do so in clear contravention of their respective
other natural calamity. agreements. Certainly, they should now all answer for the loss of the
o As the charterer or lessee under the Contract of Agreement dated vessel.
June 20, 1984, PTSC was contract-bound to return the thing leased  Hence, all of them should be held lliable:
and it was liable for the deterioration or loss of the same.
DISPOSITIVE:
 AGUSTIN, on the other hand, who was the sub-charterer or sub-lessee WHEREFORE, the petitions are denied.
of the VESSEL, is liable under Article 1651 of the New Civil Code.
Art. 1651. Without prejudice to his obligation toward the sublessor, the sublessee is
bound to the lessor for all acts which refer to the use and preservation of the thing
leased in the manner stipulated between the lessor and the lessee. (1551) 04. MAGSAYSAY, INC vs. AGAN
G.R. No. L-6393 | January 31, 1955
o Although he was never privy to the contract between PTSC and
CRISOSTOMO, he remained bound to preserve the chartered Topic: Requisites of a General Average
vessel for the latter.
o Despite his non-inclusion in the complaint of CRISOSTOMO, it was BUZZWORD: Run Aground
deemed amended so as to include him because, despite or in the
absence of that formality of amending the complaint to include DOCTRINE:
him, he still had his day in court as he was in fact impleaded as a The following are the requisites for general average:
third-party defendant by his own son, ROLAND – the very same (1) there must be a common danger;
person who represented him in the Contract of Agreement with (2) for the common safety part of the vessel or of the cargo or both is sacrificed
RAMON. deliberately;
(3) from the expenses or damages caused follows the successful saving of the
 In any case, all three petitioners (ROLAND/PTSC/AGUSTIN) are liable vessel and cargo; and
under Article 1170 of the New Civil Code.  (4) the expenses or damages should have been incurred or inflicted after taking
Art. 1170. Those who in the performance of their obligations are guilty of fraud, proper legal steps and authority.
negligence, or delay, and those who in any manner contravene the tenor thereof,
are liable for damages. (1101) It is the deliverance from an immediate, impending peril, by a common sacrifice,
that constitutes the essence of general average

MMA’S SHIPPING COMPANY - TRANSPORATION LAW DIGESTS 7

 Magsaysay’s Contention: that the expenses incurred in floating the vessel
VOCABULARY: constitute general average to which both ship and cargo should contribute.
1. Simple or Particular Averages: include all expenses and damages caused to
the vessel or cargo which have not inured to the common benefit (Art. 809) and Agan’s Contention: denied liability, alleging that the stranding of the vessel was
are, therefore, to be borne only by the owner of the property which gave rise to due to the fault, negligence and lack of skill of its master, that the expenses incurred
the same (Art. 810) in putting it a float did not constitute general average, and that the liquidation of the
2. General or gross averages: include "all the damages and expenses which are average was not made in accordance with law.
deliberately caused in order to save the vessel, its cargo, or both at the same
time, from a real and known risk" (Art. 811). Being for the common benefit, ISSUE: WON it was a General Average (no)
gross averages are to be borne by the owners of the articles saved (Art. 812).
3. Aground: describes a boat that's accidentally gone ashore, or is stuck on the HELD: No, there was failure to prove all the requisites for a General average
bottom of a lake or other body of water. therefore the claim for payment from Agan was dismissed.
4. Refloat: Set afloat a grounded boat.
RULE: (Refer to Doctrine supra)
PARTIES:
Plaintiff-appellee: A. MAGSAYSAY, INC IN THIS CASE: None of the requisites of a General Average were complied with.
Defendant-appellant: ANASTACIO AGAN
Nature of Action: Claim of Payment of P841.40 against Agan What does appear from the testimony of plaintiff's manager is that the vessel had to
CC/ Mode of Transport: S S "San Antonio be salvaged in order to enable it "to proceed to its port of destination." But as
Owner: Magsaysay was said in the case just cited it is the safety of the property, and not of
Route: Manila bound for Basco, Batanes, via Aparri, Cagayan the voyage, which constitutes the true foundation of the general average.
Cause: The boat incurred damages after it ran aground
Requisites Complied? Why/How
Recit Ready Digest:
y/n
Magsaysay’s vessel carrying several cargoes, including Agan’s ran aground on the
way to Basco Batanes. Since it could not float on its own, it asked help from the 1. there must be a Running aground on very shallow
Luzon Stevedoring Company. It incurred expenses which it claimed as a general N
common danger; water is not an imminent danger
average, to which the owners of the cargo paid the amount. However, Agan refused
claiming that it was not a general average. The S.C. overturned the CFI’s decision 2. for the common The cargo could, without need of
and ruled in favor of Agan on the ground that Magsaysay failed to prove that the safety part of the vessel expensive salvage operation, have
requisites for a General Average. But as the sacrifice was for the benefit of or of the cargo or both N been unloaded by the owners if they
the vessel — to enable it to proceed to destination — and not for the is sacrificed had been required to do so
purpose of saving the cargo, the cargo owners are not in law bound to deliberately;
contribute to the expenses.
3. that from the The successful salvage operation
Procedure: expenses or damages was not for the benefit of saving
CFI of Manila: Ruled in favor of Magsaysay caused follows the N the cargo, it was for the benefit
(No CA. This is a direct appeal to the S.C) successful saving of the of saving the vessel.
vessel and cargo.
FACTS:
• October 6, 1949: The S S "San Antonio", a vessel owned and operated by 4. that the expenses or The final requisite has not been
Magsaysay left Manila bound for Basco, Batanes, via Aparri, Cagayan, with general damages should have proved, for it does not appear that
cargo belonging to different shippers, among them Agan’s cargo. been incurred or the expenses here in question were
• The vessel reached Aparri on the 10th of that month, and after a day's stopover in N
inflicted after taking incurred after following the
that port, weighed anchor to proceed to Basco. proper legal steps and procedure laid down in articles 813 et
• But while still in port, it ran aground at the mouth of the Cagayan river, and, authority seq.
attempts to refloat it under its own power having failed, Magsaysay had it
refloated by the Luzon Stevedoring Co. at an agreed compensation.
• Once afloat, the vessel returned to Manila to refuel and then proceeded to Basco,
THEREFORE: Agan does not need to pay the average.
the port of destination.
• There the cargoes were delivered to their respective owners or consignees, who,
DISPOSITIVE: Wherefore, the decision appealed from is reversed and plaintiff's
with the exception of Agan, made a deposit or signed a bond to answer for their
complaint ordered dismissed with costs.
contribution to the average. (In other words, Agan was the only who did not want
to pay for the Average).
 CHAPTER 14 – CHARTER PARTIES | CHAPTER 16 – AVERAGES | CHAPTER 17 - COLLISIONS
05. AMERICAN HOME ASSURANCE v. CA
G.R. No. 94149 | May 5, 1992
TOPIC: Effect of Negligence
BUZZ WORD:
DOCTRINE:
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.
RECIT READY SUMMARY:
Cheng Hwa shipped 5,000 bales of kraft pulp via Natiomal Marine Corp’s SS
Kaunlaran. Said goods were insured by American Home. Goods arrived damaged/lost
with straps cut or loose so AHA indemnified the consignee Mayleen. Now AHA is
seeking for reimbursement from NMC. NMC said the damage were less than 5% of
general average or 1% of particular average since it is only .18%. Court held that
Civil Code was applied since it is the law of the destination and the code provides
that observance of extraordinary diligence is fist required and 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. So in short NMC is negligence
so law on average will not apply.
RTC & CA: in favor of NMC; SC: reversed
PARTIES:
PETITIONER: American Home Assurance Co
RESPONDENT: National Marine Corporation
SHIPPER: Cheng Hwa Pulp Corporation
COMMON CARRIER: SS Kaunlaran
OWNER: National Marine Corporation (PH branch)
INSURER: American Home Assurance Co. (PH branch)
GOODS: 5,000 bales of bleached kraft pulp
CONSIGNEE: Mayleen Paper, Inc.
ROUTE: Hualien, Taiwan -> Philippines
FACTS:
 NMC and AHA are foreign corporation licensed to do business in the
Philippines and are operating here through their branch
 Cheng Hwa shipped the 5,000 bales of bleached kraft pulp to Mayleen
Paper Inc. which was insured by AHA as evidenced by bill of lading
 When the bales were discharged in the custody of Marina Port Services for
the delivery to Mayleen and upon receipt of the later, ., it was found that
122 bales had either been damaged or lost.
o The loss was calculated to be 4,360 kilograms with an estimated
value of P61,263.41.
 The records show that upon delivery of the shipment in question of
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
 Mayleen Paper demanded indemnification with NMC for the loss or damage
but no justifiable reason was given
 AHA indemnified Mayleen, the adjusted amount of P31,506.75 for the
damages/losses suffered by the shipment, hence, AHA was subrogated to
the rights and interests on Mayleen Paper
 AHA bought a suit against NMC for payment
RTC: in favor of NMC
 loss suffered by the shipment is only .18% or less that 1% of the interest of
the consignee on the cargo Invoking the provision of the Article 848 of the
Code of Commerce
CA: Affirmed RTC and dismissed AHA’s certiorari
NMC’S Arguments:
 AHA no cause of action based on Art. 848 of Code of Comemrce
which provides "that claims for averages shall not be admitted if they do not exceed
5% of the interest which the claimant may have in the vessel or in the cargo if it be
gross average and 1% of the goods damaged if particular average, deducting in
both cases the expenses of appraisal, unless there is an agreement to the contrary”
 loss sustained in the case was P35,506.75 which is only .18% of
P17,420,000.00, the total value of the cargo
 Civil Code is the primary law and Code of Commerce is just suppletory
 In all matters not covered by the Civil Code, the rights and obligations of
the parties shall be governed by the Code of Commerce and by special laws
as provided for in Article 1766 of the Civil Code;
 That Article 806, 809 and 848 of the Code of Commerce should be applied
suppletorily as they provide for the extent of the common carriers' liability.
AHA’S Arguments:
 Article 848 does not apply as it refers to averages and that a particular
average presupposes that the loss or damages is due to an inherent defect
of the goods, an accident of the sea, or a force majeure or the negligence
of the crew of the carrier
 On the other hand, claims for damages due to the negligence of the
common carrier are governed by the Civil Code provisions on
Common Carriers.
 Court failed to consider that NMC being a common carrier, in conducting its
business is regulated by the Civil Code primarily and suppletorily by the
Code of Commerce; and that respondent court refused to consider the Bill
of Lading as the law governing the parties
ISSUE/S:
1. WON loss suffered by the cargo in question is a "particular average” – YES
2. WON average is applicable – NO
3. WON Mayleen Paper Inc. is entitled to reimbursement - YES
HELD:
MMA’S SHIPPING COMPANY - TRANSPORATION LAW DIGESTS 9
The loss suffered is a PARTICULAR AVERAGE since loss is less than 1% to
the value of the cargo and there appears to be no allegations as to any
agreement defendants and the consignee of the goods to the contrary, by
express provision of the law, plaintiff is barred from suing for recovery.
Particular Average - is a loss happening to the ship, freight, or cargo which is not
beshared by contributing among all those interested, but must be borne by the
owner of the subject to which it occurs
General Average - is a contribution by the several interests engaged in the
maritime venture to make good the loss of one of them for the voluntary sacrifice of
a part of the ship or cargo to save the residue of the property and the lives of those
on board, or for extraordinary expenses necessarily incurred for the common benefit
and safety of al
2ND ISSUE: Law on average is not applicable
Rule: 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
Eastern Shipping Lines, Inc.  v.  I.A.C.,
"the law of the country to which the goods are to be transported persons the liability
of the common carrier in case of their loss, destruction or deterioration." (Article
1753, Civil Code).
 In this case, 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)
IN THIS CASE:
 The records show that upon delivery of the shipment in question of
Mayleen's warehouse in Manila, 122 bales were found to be damaged/lost
with straps cut or loose
 Civil Code's mandatory requirement of extraordinary diligence on common
carriers in the car 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.
 Instead of presenting proof of the exercise of extraordinary diligence as
required by law, NMC filed its Motion to Dismiss dated August 7, 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
o 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
 Therefore, Such being the case, it is evident that the Code of
Commerce provisions on averages cannot apply.
3RD ISSUE: AHA entitled to reimbursement
Rule: 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 (only exception is Art. 1734 – fortuitous..)
 It is obvious that this 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.
DAMAGES: not mentioned
DISPOSITIVE: Accordingly, it is evident that the findings of respondent Court of
Appeals, affirming the findings and conclusions of the court a quo are not supported
by law and jurisprudence.
PREMISES CONSIDERED, (1) the decisions of both the Court of Appeals and the
Regional Trial Court of Manila, Branch 41, appealed from are REVERSED; and (2)
private respondent National Marine Corporation is hereby ordered to reimburse the
subrogee, petitioner American Home Assurance Company, the amount of
P31,506.75.SO ORDERED.
06. A URRUTIA AND CO. v. BACO RIVER AND COMPANY PLANTATION
G.R. No. 7675 | March 25, 1913
TOPIC: Zones in collision;
BUZZ WORD: collision ni Señora with a mangyan
DOCTRINE:
In case of collision between a steamship and a sailing ship the steamship is prima
facie in fault under Article 20 and Article 21 of the International Rules for the
Prevention of Collision at Sea.
PARTIES:
PETITIONER: A Urrutia & Co
RESPONDENT: Baco River and Co plantation
INTERVENER: M Garza
CC/MODE OF TRANSPORT (1): Steamship Nuestra Señora del Pilar (sank)
OWNER: A Urrutia and Co.
CC/MODE OF TRANSPORT (2): Mangyan, the schooner (sail vessel)
OWNER: Baco River and Company Plantation
GOODS / PASSENGERS: 1 thousand peso worth of merchandise of M. Garza
POINT OF COLLISION: Verde Island North Passage
CAUSE / ACCIDENT: Collision between steamship Nuesta Señora del Pilar and the
schooner Mangyan
RECIT READY DIGEST:
Steamship Del Pilar collided with Schooner Mangyan. Although aware of the
approaching steamship, Mangyan kept its course steady up until the last minute
 CHAPTER 14 – CHARTER PARTIES | CHAPTER 16 – AVERAGES | CHAPTER 17 - COLLISIONS
before actual contact. The steamer sank and 8 died. SC ruled that Mangyan was not
liable in continuing its course even though it was in extremis. In an instance of a
collision between a steamship and a sailing ship, the steamship is liable.
RTC: Those managing the steamship nuestra senora were guilty of gross negligence
and for that reason Urrutia cannot recover anything
FACTS:
 Steamship Nuestra Señora del Pilar, owned by Urrutia, and the schooner
Mangyan owned by Baco River collided early morning of April 8, 1910 in
Verde Island, North Passage
 The sail vessel (schooner) was sailing with a fresh breeze dead astern, her
sails wing and wing.
 The steamer was seen by those on board the sailing vessel some time
before the actual collision, sailing erratically.
 Despite this fact, the sailing ship kept its course steady until just before the
actual contact. (It was during the time when the sail vessel was passing
through the third zone that it changed its course to port in order to avoid, if
possible, the collision.)
 As such, the sailing ship rammed the steamer, wherein the steamer sank
and 8 died.
 An action was filed by the owner of the steamship against the owner of the
sail vessel, to recover the value of the destroyed steamer and the damages
caused by reason of its destruction, alleging that the sailing ship was
negligent.
 Note that the steamer was insured in this case.
 Also, before the action was tried, M. Garza made an application to
intervene under the provisions of Section 121, alleging that because of the
collision, he has sustained damages through the loss of his merchandise
worth 1,000 pesos but not pointing to whomever the steamship or the
schooner
ISSUE/S:
Whether or not the sailing ship Mangyan should be held liable in
continuing its course without variation up to the moment that it found
itself in extremis? – NO.
HELD:
No, the sailing ship Mangyan should not be held liable.
RULE:
In case of collision between a steamship and a sailing ship the steamship
is prima facie in fault.
Article 20 of the International Rules for the Prevention of Collision at Sea
states: "If two ships, one of which is a sailing ship and the other a steam ship, are
proceeding in such directions as to involve risk of collision, the steam ship shall keep
out of the way, of the sailing ship."
Article 21 states: "where by any of these rules one of two vessels is to keep out of
the way, the other shall keep her course and speed."
Generally speaking, in collisions between vessels there exist three divisions of time,
or zones:
1. The first division covers all the time up to the moment when the risk
of collision may be said to have begun. Within this zone no rule is
applicable because none is necessary. Each vessel is free to direct its
course as it deems best without reference to the movements of the
other vessel.
2. The second division covers the time between the moment when the
risk of collision begins and the moment when it has become a practical
certainty.
3. The third division covers the time between the moment when
collision has become a practical certainty and the moment of actual
contact.
The rule is that vessels may each assume that the other will obey the law
is one of the most important in the law of collision.
Were it otherwise and were vessels required to take all sorts of measures to keep
out the way, when they are not in each other's way, navigation would be impossible.
PROVIDED that a steamer must not approach so near a sailing vessel, and on such a
course as to alarm a man of ordinary skill and prudence. If the man on the sailing
vessel makes an improper maneuver, he is not responsible. It is what is called an
"error in extremis."
As a general rule, therefore, when meeting a sailing vessel, whether close hauled
or with the wind free, the latter has a right to keep her course, and it is the duty of
the steamer to adopt precautions as will avoid her.
This way, the steamer can adopt the necessary measures to avoid the danger, and it
will have a right to assume that the sailing vessel will keep its course. If the latter
fails to do this, the fault will be attributable to it, and the master of the steamer will
be responsible only for a fair exertion of the power of his vessel to avoid the collision
under the unexpected change of the course of the other vessel, and the
circumstances of the case.
Rules of navigation are obligatory from the time the necessity for
precaution begins, and continue to be applicable as the vessels advance,
so long as the means and opportunity to avoid the danger remain; but they
do not apply to a vessel required to keep her course after the approach is
so near that the collision is inevitable, and are equally inapplicable to
vessels of every description while they are yet so distant from each other
that measures of precaution have not become necessary.
Why? Steamer has greater maneuvering skills
iN THIS CASE:
 Accordingly, in the first zone no rules apply. In the second the burden is on
the vessel required to keep away and avoid the danger.
MMA’S SHIPPING COMPANY - TRANSPORATION LAW DIGESTS 11
  The third zone covers the period in which errors in extremis occur; and the
rule is that the vessel which has forced the privileged vessel into danger is
responsible even if the privileged vessel has committed an error within that
zone.
 "Nautical rules require that where a steamship and sailing vessel are
approaching each other from opposite directions, or on intersecting lines,
the steamship from the moment the sailing vessel is seen, shall watch with
the highest diligence her course and movements so as to be able to
adopt such timely means of precaution as will necessarily prevent the two
boats from coming in contact.
 Fault on the part of the sailing vessel at the moment preceding a collision
does not absolve a steamer which has suffered herself and a sailing vessel
to get in such dangerous proximity as to cause inevitable alarm and
confusion and collusion as a consequence.
 The steamer, as having committed a far greater fault in allowing such
proximity to be brought about, is chargeable with all the damages resulting
from a collision."
NOTES: Summary of nautical rules between steamer and schooner:
1. Upon the steamship and schooner discovering each other proceeding in
such directions as to involve risk of collision, as stated in the foregoing
findings of fact, it was the right and duty of the schooner to keep her
course, and the duty of the steamship to keep out of the way of the
schooner, and the steamship was in fault in failing to perform that duty.
2. It was also the duty of the steamship under the circumstances stated, to
pursue a course which should not needlessly put the schooner in
imminent peril; and the steamship was in fault in failing to perform that
duty.
3. It was the duty of the steamship before the time when she did so, to
slacken her speed or stop, and the steamship was in fault in failing to
perform that duty.
4. If, when a collision had become imminent by reason of the fault of the
steamship, any error was committed in extremis by those in charge of the
schooner, the schooner is not responsible therefor.
5. The steamship had no right, under the circumstances stated, needlessly to
place herself in such close proximity to the schooner that the error or a
moment would bring destruction.
6. The collision was occasioned by the fault of the steamship, and the
steamship should be condemned therefor.
The steamship should have avoided the sail vessel since it is what is incumbent
upon him according to the law.
IN THIS CASE:
 The Court is satisfied from the authorities that, under the facts stated in the
opinion of the trial court, the defendant is entitled to recover such damages
as reasonably and naturally followed from the collision.
 There is sufficient evidence in the record to fox such damages with
reasonable accuracy.
 It was proved upon the trial that it would require an expenditure of P3,525
to put the sail vessel in the condition in which it was before the injury; that
it cost P245 to get the vessel to Manila after the injury; that the value of the
supplies lost was P240.99. The evidence relative to the loss of earnings is
not sufficient to permit the court to formulate any conclusion in relation
thereto, even if it be considered a proper item of damage.
 The Court also think that the judgment of the trial court correct in
dismissing the complaint of intervention.
 The judgment of the court below, in so far as it finds against the plaintiff
and the intervener, is hereby affirrmed.
 As to that portion which dismisses the counterclaim of the defendant, the
Baco River Plantation Company, the judgment is reversed and the cause
remanded, with instructions to the trial court to enter judgment in favor of
the defendant, the Baco River Plantation Company, and against the
plaintiff, G. Urrutia & Company, for the sum of P4,010.99, and costs. No
costs on this appeal.
ADDITIONAL ISSUE ABOUT INSURANCE (SHE MIGHT ASK COS U KNOW TERI
MOVES)
 While it was held in the case of Philippine Shipping Co. vs. Vergara
(that, in accordance with articles 837 and 826 of the Code of Commerce,
the defendant in an action such as the one at bar cannot be held
responsible in damages when the ship causing the injury was wholly lost
by reason of the accident, we do not apply it in this case for the
reason that the vessel lost was insured and that defendant
collected the insurance.
 That being the case, the insurance money substitutes the vessel and must
be used, so far as necessary, to pay the judgment rendered in this case.
THEREFORE:
Where a sailing level and one propelled by steam are approaching each other bow,
on the steamer must give away, In case of a collision between such vessels,
the steamer is prima facie in fault as in the case at hand.
DISPOSITIVE:
Petition is GRANTED.
The judgment in this case is, therefore, collectible, but the amount collected cannot
exceed the amount of insurance money actually received.
The writer of this opinion had doubts of the applicability of article 1186, referred to;
but has yielded to the learning of the majority relative to the Roman and Spanish
jurisprudence on this point.
07. NDC v. CA
G.R. No. L-49407 | August 19, 1988
TOPIC: Applicable Law
BUZZWORD: COGSA daw di Code of Commerce
 CHAPTER 14 – CHARTER PARTIES | CHAPTER 16 – AVERAGES | CHAPTER 17 - COLLISIONS
DOCTRINE: Article 826 of the Code of Commerce provides that where collision is
imputable to the personnel of a vessel, the owner of the vessel at fault, shall
indemnify the losses and damages incurred after an expert appraisal. But more in
point to the instant case is Article 827 of the same Code, which provides that if the
collision is imputable to both vessels, each one shall suffer its own damages and
both shall be solidarily responsible for the losses and damages suffered by their
cargoes.
PARTIES:
Petitioner-appellant: NATIONAL DEVELOPMENT COMPANY
Respondents-appellees: THE COURT OF APPEALS and DEVELOPMENT INSURANCE
& SURETY CORPORATION
Nature of Action Filed: action for the recovery of the sum of P364,915.86 plus
attorney's fees of P10,000.00 against NDC and MCP
CC: Doña Nati
Owner: Maritime Company of the Philippines
Agent: National Development Company
Route: from San Francisco, California and Tokyo, Japan to the Philippines
Cause/Accident: goods in question are transported were lost or damaged due to a
collision which was found to have been caused by the negligence or fault of both
captains of the colliding vessels.
Shipper 1: E. Philipp Corporation of New York
Goods: 1,200 bales of American raw cotton
Consignee: Manila Banking Corporation, Manila and the People's Bank and Trust
Company
Shipper 2: Kyokuto Boekui, Kaisa, Ltd
Goods: 200 cartons of sodium lauryl sulfate and 10 cases of aluminum foil.
Consignee: Manila Banking Corporation
Insurer: Development Insurance & Surety Corporation
RECIT READY DIGEST: The Dona Nati operated by MCP as agent to NDC (owner),
met a collision with a Japanese Vessel. As a result, the cargoes were lost and
destroyed. The Development Insurance and Surety Corporation as insurer paid those
who were holders of the bill of lading the amount insured. DISC then went after NDC
and MCP. The S.C. ruled that the lower courts properly used the Code of Commerce
to rule on the case, holding NDC and MCP solidarily liable to DISC.
PROCEDURE:
• RTC: held that National Development Company and Maritime Company of the
Philippines, to pay jointly and severally, to the plaintiff Development Insurance and
Surety Corp., the sum of 364, 915.86) with the legal interest
• CA: Affirmed RTC
FACTS:
• NDC and MCP entered into a MOA wherein NDC appointed MCP as its agent to
manage and operate said vessel for and in its behalf and account as the first
preferred mortgagee of three ocean going vessels including one with the name
'Doña Nati'
• February 28, 1964: the E. Philipp Corporation of New York loaded on board
the vessel 'Doña Nati' at San Francisco, California, a total of 1,200 bales of
American raw cotton consigned to the order of Manila Banking Corporation, Manila
and the People's Bank and Trust Company
• Also loaded on the same vessel at Tokyo, Japan, were the cargo of Kyokuto
Boekui, Kaisa, Ltd., consigned to the order of Manila Banking Corporation
consisting of 200 cartons of sodium lauryl sulfate and 10 cases of aluminum foil.
• En route to Manila the vessel Doña Nati figured in a collision at 6:04 a.m. on April
15, 1964 at Ise Bay, Japan with a Japanese vessel 'SS Yasushima Maru' as a result
of which 550 bales of aforesaid cargo of American raw cotton were lost and/or
destroyed, of which 535 bales as damaged were landed and sold on the authority
of the General Average Surveyor for Yen 6,045,-500 and 15 bales were not landed
and deemed lost.
• The damaged and lost cargoes was worth P344,977.86 which amount, the plaintiff
as insurer, paid to the Riverside Mills Corporation as holder of the negotiable bills
of lading duly endorsed). A
• lso considered totally lost were the aforesaid shipment of Kyokuto, Boekui, Kaisa
Ltd., consigned to the order of Manila Banking Corporation, Manila, acting for
Guilcon, Manila.
• The total loss was P19,938.00 which the plaintiff as insurer paid to Guilcon as
holder of the duly endorsed bill of lading.
• Thus, theDISC had paid as insurer the total amount of P364,915.86 to the
consignees or their successors-in- interest, for the said lost or damaged cargoes.
Hence, plaintiff led this complaint to recover said amount from the defendants-
NDC and MCP as owner and ship agent respectively, of the said 'Doña Nati'
vessel."
• The Development Insurance and Surety Corporation led before the then Court of
First Instance of Manila an action for the recovery of the sum of P364,915.86 plus
attorney's fees of P10,000.00 against NDC and MCP
NDC’s Contention: the Carriage of Goods by Sea Act should apply to the case at
bar and not the Civil Code or the Code of Commence. Insists that based on the
findings of the trial court which were adopted by the Court of Appeals, both pilots of
the colliding vessels were at fault and negligent, NDC would have been relieved of
liability under the Carriage of Goods by Sea Act.
PROCEDURE:
• RTC: held that National Development Company and Maritime Company of the
Philippines, to pay jointly and severally, to the plaintiff Development Insurance and
Surety Corp., the sum of 364, 915.86) with the legal interest
• CA: Affirmed RTC
•
Maritime Company of the Philippines (MCP’S) Contention:
1. DISC has no cause of action against it because the latter did not prove that its
alleged subrogers have either the ownership or special property right or
beneficial interest in the cargo in question; neither was it proved that the bills of
lading were transferred or assigned to the alleged subrogers; thus, they could
not possibly have transferred any right of action to said plaintiff-appellee in this
case.
MMA’S SHIPPING COMPANY - TRANSPORATION LAW DIGESTS 13
2. It can not be liable solidarily with NDC because it is merely the manager and
operator of the vessel Doña Nati, not a ship agent. As the general managing
agent, according to MCP, it can only be liable if it acted in excess of its authority.
3. MCP insists that their liability should be limited to P200.00 per package or per
bale of raw cotton as stated in paragraph 17 of the bills of lading. Also the MCP
argues that the law on averages should be applied in determining their liability.
ISSUE/S:
1. WON the lower courts correctly used the Code of Commerce to rule on the case -
YES (MAIN ISSUE)
4. WON MCP is solidarily liable with NDC - YES
5. WON the law on averages should be applied in determining MCP’s liability = NO
HELD:
MAIN ISSUE: Yes, no reversible error can be found in respondent court's application
to the case at bar of Articles 826 to 839, Book Three of the Code of Commerce,
which deal exclusively with collision of vessels.
RULE:
• Article 826 of the Code of Commerce provides that where collision is
imputable to the personnel of a vessel, the owner of the vessel at fault, shall
indemnify the losses and damages incurred after an expert appraisal.
• **Article 827 of the same Code, which provides that if the collision is imputable
to both vessels, each one shall suffer its own damages and both shall be solidarily
responsible for the losses and damages suffered by their cargoes.
• Significantly, under the provisions of the Code of Commerce, particularly Articles
826 to 839, the shipowner or carrier, is not exempt from liability for damages
arising from collision due to the fault or negligence of the captain.
• Primary liability is imposed on the shipowner or carrier in recognition of the
universally accepted doctrine that the shipmaster or captain is merely the
representative of the owner who has the actual or constructive control over the
conduct of the voyage
Second Issue:
• The Court held that both the owner and agent should be declared jointly and
severally liable, since the obligation which is the subject of the action had its origin
in a tortious act and did not arise from contract.
• Consequently, the agent, even though he may not be the owner of the vessel, is
liable to the shippers and owners of the cargo transported by it, for losses and
damages occasioned to such cargo, without prejudice, however, to his rights
against the owner of the ship, to the extent of the value of the vessel, its
equipment, and the freight.
• It is well settled that both the owner and agent of the offending vessel are
liable for the damage done where both are impleaded; that in case of
collision, both the owner and the agent are civilly responsible for the acts of the
captain.
• That while it is true that the liability of the naviero in the sense of charterer or
agent, is not expressly provided in Article 826 of the Code of Commerce, it is
clearly deducible from the general doctrine of jurisprudence under the Civil Code
but more specially as regards contractual obligations in Article 586 of the Code of
Commerce.
Third Issue: The declared value of the goods was stated in the bills of lading and
corroborated no less by invoices offered as evidence during the trial. Jurisprudence
provides that CCs "cannot limit its liability for injury to a less of goods where such
injury or loss was caused by its own negligence."
IN THIS CASE: Aside from the fact that the Carriage of Goods by Sea Act (Com. Act
No. 65) does not specifically provide for the subject of collision, said Act in no
uncertain terms, restricts its application "to all contracts for the carriage of goods by
sea to and from Philippine ports in foreign trade."
 Under Section 1 thereof, it is explicitly provided that "nothing in this Act
shall be construed as repealing any existing provision of the Code
of Commerce which is now in force, or as limiting its application."
 By such incorporation, it is obvious that said law not only recognizes the
existence of the Code of Commerce, but more importantly does not repeal
nor limit its application.
THEREFORE: There is, therefore, no room for NDC's interpretation that the Code of
Commerce should apply only to domestic trade and not to foreign trade.
DISPOSITIVE: PREMISES CONSIDERED, the subject petitions are DENIED for lack of
merit and the assailed decision of the respondent Appellate Court is AFFIRMED.
08. WILLIAMS v. YANGCO
G.R. No. L-8325 | March 10, 1914
TOPIC: Contributory Negligence and Last Clear Chance NOT APPLICABLE
BUZZ WORD: oh W(h)Y same kayo may kasalanan!
DOCTRINE:
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.
DOCTRINE OF LAST CLEAR CHANCE NOT APPLICABLE IN MARITIME COLLISION.
RECIT READY SUMMARY:
The steamer Subic collided with the launch Euclid in the Bay of Manila, as a result of
which the Euclid went to the bottom. The findings of record disclosed that the
officers on both boats were negligent in the performance of their duties at the time
of the accident, and that both vessels were to blame for the disaster. Held,That the
owner of the launch Euclid has no cause of action against the owner of the
steamer Subic.
PARTIES:
PLAINTIFF: C.B. WiIlliams
DEFENDANT: Teodoro Yangco
COMMON CARRIER (1): steamer Euclid
CAPTAIN: not mentioned
COMMON CARRIER (2): steamer Subic
CAPTAIN: Hilarion Millonario
 CHAPTER 14 – CHARTER PARTIES | CHAPTER 16 – AVERAGES | CHAPTER 17 - COLLISIONS
FACTS:
 Steamer Euclid and Subic collided at the bay of Manila at an early hour on
the morning of January 9, 1911
 After the collision, Euclid, a vessel with fair valuation at P10,000, sank 5
minutes later
Euclid’s Argument: insisted the doctrine of "the last clear chance"
 Subic should be held liable because, even if the officers on board the
Euclid’s's launch were negligent in failing to exhibit proper lights and in
failing to take the proper steps to keep out of the path of the Subic’s vessel,
nevertheless the officers on Subic’s vessel, by the exercise of due
precautions might have avoided the collision by a very simple manuever.
RTC: both vessel responsible and loss should be equally divided P5,000 each
 Both appealed
CA: affirmed RTC. Both officers were negligent in the performance of duty
ISSUE:
1. WON doctrine of last clear chance is applicable – NO
2. WON both vessels should be held liable – YES
Doctrine of Last Clear Chance and Contributory Negligence is NOT
applicable in vessel collisions.
Morever, there was not enough evidence that Subic could have discovered
avoided it. And if they did, Euclid has contributory negligence.
RULE: ART. 827. If both vessels may be blamed for the collision, each one shall be
liable for its own damages, and both shall be jointly responsible for the loss and
damages suffered by their cargoes.
IN THIS CASE:
 The most that can be said in support of Euclid’s contention is that there was
negligence on the part of the officers on Subic's vessel in failing to
recognize the perilous situation created by the negligence of those in
charge of Euclid’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, Euclid cannot escape the legal
consequences of the contributory negligence of his launch, even were the
Court to hold that the doctrine is applicable in the jurisdiction, upon which
point the court expressly reserve its decision at this time.
 Since the evidence of record clearly discloses, as found by the trail judge,
that "both vessels may be blamed for the collision," each one must be held
may be blamed for it own damages, and the owner of neither one can
recover from the other in an action for damages to his vessel.
Why is Doctrine of Last Clear Chance not applicable?
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
Doctrine of Last Clear Chance - 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.
THEREFORE: Without deciding whether in any case the doctrine of "the last clear
chance" should be recognized in this jurisdiction, Subic could not be held liable for
the loss of the Euclid, under the well-recognized rules limiting the application of that
doctrine in cases of collisions at sea.
DAMAGES: not mentioned
DISPOSITIVE: Euclid's complaint should be dismissed without day, without costs to
either party in this instance. So ordered.
09. GOV’T OF THE PHILIPPINE ISLANDS v. PHILIPPINE STEAMSHIP
COMPANY
G.R. No. 18957 | January 16. 1923
TOPIC: Contributory negligence and last clear chance not applicable;
BUZZ WORD: ISABEL vs ANTIPOLO
DOCTRINE:
Where both vessels are to blame for the collision, both shall be solidarily liable for
the damage occasioned to the loss of their cargo.
PARTIES:
PETITIONER: Government of the Philippine Islands
RESPONDENT: Philippine Steamship Company
CC/MODE OF TRANSPORT (1): Boat Isabel
CC/MODE OF TRANSPORT (2): Antipolo vessel
SHIPPER: Government of the Philippine Islands
GOODS / PASSENGERS: 911 sacks of rice
PORT OF DEPARTURE: Manila
ROUTE: Manila -> Balayan, Batangas
CAUSE / ACCIDENT: collision and Isabel sank
RECIT READY DIGEST:
There was a collision involving 2 vessels. One carried sacks of rice belonging to the
Philippine Islands, and the said vessel immediately sank losing its cargo. The
Philippine Islands now sue Phil. Steamship Co., the owner of the other vessel, for the
MMA’S SHIPPING COMPANY - TRANSPORATION LAW DIGESTS 15
value of the sacks of rice. The Court ruled that both parties were at fault and must
therefore be solidarily liable. But since the other vessel (the one which sank) was at
a total loss and cannot sustain any part of its liability, the burden of responding to
the Phil. Islands must fall wholly on Phil. Steamship Co.
RTC: The trial court ruled that negligence was imputable to both vessels, though
differing in character and decree with respect to each. Both vessels were at fault.
a. The mate of the Antipolo was negligent in having permitted their
vessel to approach directly towards Isabel until they were in dangerous
proximity;
b. The mate of Isabel was negligent because shortly preceding the
collision, the vessel was handled in an incorrect and incompetent way.
This may be explained by the fact that the mate on the Isabel had
been on continuous duty during the whole preceding day and night and
was probably exhausted and was either inattentive or dozing off at
the time the other vessel approached.
FACTS:
 The boat Isabel left the port of Manila destined for Balayan, Batangas
carrying 911 sacks of rice belonging to the Government of the Philippine
Islands (Government) worth P14,648.25.
 After 4 hours of the Isabel being under weigh, and after it had passed the
San Nicolas Light near the Manila Bay entrance, the watch and the mate on
the bridge of the Isabel discerned the light of another vessel (Antipolo)
coming towards it.
 The watch and mate on the bridge of the Antipolo also saw the Isabel, the
two vessels being about 1.5 or 2 miles apart.
 Each vessel was going at the speed of 6 mi/hr, and in about 10 mins., they
were in close proximity to each other.
Antipolo’s argument:
 When the mate of the Antipolo, who was at the wheel, saw the danger of
the situation and saw Isabel “almost on top of him”, he put his helm hard
to the starboard.
 This move was correct and if the helmsman of the Isabel had done the
same, the two vehicles would have passed each other without colliding.
 However, the mate on the Isabel placed his own held hard to port, in
disregard of the regulations and of common prudence, veering the vessel in
the directly in the path of Antipolo thus resulting in a collision.
 Upon collision, the mate of the Antipolo stopped his engines, but the Isabel
continued at full speed. The latter immediately sank. The vessel and cargo
were lost, but the crew members were saved.
Government’s action:
 The Government filed an action against Phil. Steamship Co., the company
which owns Antipolo, for the recovery of the sum of the alleged value of the
911 sacks of rice lost due to the collision.
ISSUE/S:
Whether or not both vessels were to blame - YES
HELD:
Yes, in this case the blame should be imputed to both vessels.
RULE:
Although the negligence on the part of the mate of the Antipolo preceded
the negligence on the part of the mate of Isabel by an appreciable interval
of time, the first vessel cannot on that account be absolved from
responsibility.
 Indeed, in G. Urrutia & Co. vs. Baco River Plantation Co, this court found
reason for holding that the responsibility rested exclusively on a steamer
which had allowed dangerous proximity to a sailing vessel to be brought
about under somewhat similar conditions.
 The trial judge committed no error in holding that both vessels were to
blame and in applying Article 827 of the Code of Commerce to the situation
before him.
i. It is there declared that where both vessels are to blame, both
shall be solidarily responsible for the damage occasioned
to their cargoes.
ii. As the Isabel was a total loss and cannot sustain any part of
this liability, the burden of responding to the Government of
the Philippine Islands, as owner of the rice embarked on the
Isabel, must fall wholly upon the owner of the other ship, that
is, upon the defendant, the Philippine Steamship Company,
Inc.
 Only one observation will be added, in response to one of the contentions
of the appellant's attorneys, which is, that the application of Article 827 of
the Code of Commerce is not limited by Article 828 to the case where it
cannot be determined which of the two vessels was the cause of the
collision.
 On the contrary Article 828 must be considered as an extension of Article
combined the rule of liability announced in Article 827 is applicable not only
to the case where both vessels may be shown to be actually blameworthy
but also to the case where it is obvious that only one was at fault but the
proof does not show which.
THEREFORE:
Owners of the subject vessels in this case shall be solidarily liable since the
doctrines of Contributory negligence and last clear chance cannot be applied.
DISPOSITIVE:
The judgment appealed from must be affirmed.
10. DE SARASOLA vs. YU BIAO SONTUA
G.R. No. 22630. January 31, 1925
TOPIC: Contributory Negligence and Last Clear Chance Not Applicable
DOCTRINE: Article 827 of the Code of Commerce: "If both vessels may be blamed
for the collision, each one shall be liable for his own damages, and both shall be
jointly responsible for the losses and damages suffered by their cargoes."
PARTIES:
 CHAPTER 14 – CHARTER PARTIES | CHAPTER 16 – AVERAGES | CHAPTER 17 - COLLISIONS
Plaintiff-Appellee: GORGONIO DE SARASOLA
Defendant-appellant: YU BIAO SONTUA
Nature of Action Filed:
CC1: Mercedes
Owner: GORGONIO DE SARASOLA
CC2: Y. Sontua
Owner: YU BIAO SONTUA
Accident: Collision
Location: Manila Bay
RECIT READY DOCTRINE: The Mercedes was entering Manila Bay and was struck by
the Y. Sontua thats was leaving Manila Bay. As a result the Mercedes sank. The S.C.
held that while the Y. Sontua’s failure to remain on its course is the primary cause of
the collision, the Mercedes is also contributorily liable because it should have also
remained on its course since the physical facts show that both vessels can easily see
each other and could have avoided the incident.
PROCEDURE:
Lower Court: favor of (Mercedes) Sarasola against Sontua for P27,106.89, with
legal interest.
S.C.: Affirmed
The case at bar is an MR filed with the S.C. to reverse its earlier decision.
FACTS:
• March 3, 1922: the motorboat Mercedes entered the Manila Bay through the Boca
Grande, and at 6 p.m. it navigated with motor and sail in the direction of the
lighthouse which indicates the entrance to the Pasig River."
• "Then several minutes thereafter it was struck by the steamship Y. Sontua, and as
a result of the collision it suffered damages by reason of which it sank within half
an hour."
ISSUE: WON there was Contributory Negligence on the part of the Mercedes - Yes
HELD: YES, it is contributorily liable, especially since it could see the Y.
Sontua since they could spot each other from their proximity to each other
and because there was sufficient aid from artificial light.
“One vessel going out of the bay and the other coming in; each on its own course,
which if both had followed there would have been a full clearance and no collision.
That the officers on the one vessel at a distance of two or three miles could clearly
see the course and maneuvers of the other vessel. The Y. Sontua changed its course
which was the primary cause of the collision. Even so, if the Mercedes had remained
true to its course, there would have been a full clearance. It appears from the
physical facts that by the aid of natural light, at the time of and prior to the collision,
either vessel could be clearly and distinctly seen for a considerable distance. hence,
we have a right to assume that without the aid of artificial light, the officers of the Y.
Sontua saw the Mercedes and the course of the vessel. That the officers of the
Mercedes saw the Y. Sontua and its course and the maneuver which it made. under
such a state of facts, the Mercedes either knew or should have known that, if it had
remained true to its course, there would not have been any collision.”
RULE: (refer to doctrine)
IN THIS CASE: The testimony is conclusive that the negligence of the Y. Sontua was
the primary cause of the collision. That if it had remained true to its course, it never
would have happened. It is equally true that even after the Y. Sontua changed its
course, if the Mercedes had remained true to its course, there would not have been
any collision.
THEREFORE: the negligence of the Y. Sontua was the primary cause of the accident,
and that the Mercedes was guilty of contributory negligence in failing to maintain its
course, and that the case comes under the provisions of article 827.
DISPOSITIVE: The judgment in favor of the plaintiff is reversed, and the complaint
dismissed, neither party to recover costs this or the lower court. So ordered.
11. SMITH BELL AND COMPANY v. CA
G.R. No. L-56294 | May 20, 1991
TOPIC: Specific Rules under Code of Commerce
BUZZ WORD: Nako Yotai (patay) ka Don Carlos magbayad ka!
DOCTRINE:
Nautical rules require that where a steamship and sailing vessel are approaching
each other from opposite directions, or on intersecting lines, the steamship, from
the moment the sailing vessel is seen, shall watch with the highest diligence her
course and movements so as to enable it to adopt such timely means of
precaution as will necessarily prevent the two boats from coming in contact.
RECIT READY SUMMARY:
There was a collision between the M/V Don Carlos owned by Go Thong and a
Japanese ship Yotai Maru. Cargo on the Yotai Maru were destroyed. Insurance
companies paid for the damage of the goods and filed 2 separate cases vs. Go
Thong in the CFI of Manila. CFI held in both cases the Go Thong was liable. On
appeal of the first case (J Fernandez decision), CA and SC affirmed that M/V Don
Carlos officers were liable. 2 years later, appeal of the second case (J Cuevas
decision) reversed the ruling of the CFI Manila and said that Yotai Maru officers were
negligent. But the Court held that Don Carlos was negligent for not comply with the
requirements of Rule 18 (a) of the International Rules of the Road and for not having
a “proper look-out” as required by the rules.
RTC: Don Carlos Crew negligent in both cases
CA: Yotai Maru crew negligent
PARTIES:
PETITIONERS: Smith Bell and Company and Tokyo Marine and Fire Insurance
RESPONDENTS: CA and Carols Go Thong and Co.
COMMON CARRIER (1): M/V Don Carlos
OWNER: Carlos Go Thong and Co.
MMA’S SHIPPING COMPANY - TRANSPORATION LAW DIGESTS 17
KIND OF VESSEL: inter-island vessel
ROUTE: Manila -> Cebu
COMMON CARRIER (2): M/S Yotai Maru (Japanese Registry)
OWNER: not mentioned
KIND OF VESSEL: merchant vessel
INSURANCE: Smith Bell & Co and Sumitomo Marine & Fire Insurance
ROUTE: Kobe, Japan -> Manila
CAUSE: Collision
FACTS:
 Don Carlos was sailing south bound leaving the port of Manila for Cebu
while Yotai Maru was approaching the port of Manila from Kobe, Japan
 The bow of the "Don Carlos" rammed the portside (left side) of the "Yotai
Maru" inflicting a three (3) cm. gaping hole on her portside near Hatch No.
3, through which seawater rushed in and flooded that hatch and her bottom
tanks, damaging all the cargo stowed therein.
 The consignees of the damaged cargo got paid by their insurance
companies.
 The insurance companies in turn, having been subrogated to the interests
of the consignees of the damaged cargo, commenced actions against
private respondent Go Thong for damages sustained by the various
shipments in the CFI of Manila.
 Two (2) cases were filed in the CFI of Manila.
1. Civil Case No. 82567, was commenced on 13 March 1971 by Smith
Bell and Company (Philippines), Inc. and Sumitomo Marine and
Fire Insurance Company Ltd., against Go Thong, in Branch 3, which
was presided over by Judge Bernardo P. Fernandez.
2. Civil Case No. 82556, was filed on 15 March 1971 by Smith Bell
and Company (Philippines), Inc. and Tokyo Marine and Fire
Insurance Company, Inc. against Go Thong in Branch 4, which was
presided over by then Judge, later Associate Justice of this Court,
Serafin R. Cuevas.
 Both cases were tried under the same issues and evidence
CFI Manila: in both cases, the officers and crew of the "Don Carlos" had been
negligent that such negligence was the proximate cause of the collision and
accordingly held respondent Go Thong liable for damages to the plaintiff insurance
companies.
 1st case - Judge Fernandez awarded the insurance companies P19,889.79
with legal interest plus P3,000.00 as attorney's fees
 2nd case - Judge Cuevas awarded the insurance companies on 2 claims US $
68,640.00 or its equivalent in Philippine currency plus attorney's fees of
P30,000.00, and P19,163.02 plus P5,000.00 as attorney's fees, respectively.
Go Thong: appealed both cases in the CA with substantially identical assignments
of errors.
 Appeal of Judge Fernandez decision – affirmed by JBL Reyes. MR denied.
Went to the SC on Petition for Review. Denied!
CA: almost 2 years after the decision of JBL Reyes was affirmed by the SC, the CA
thru Justice Sison reversed the Cuevas Decision and held the officers of the "Yotai
Maru" at fault in the collision with the "Don Carlos," and dismissed the insurance
companies' complaint.
ISSUE/S:
1. WON the Sison decision disregarded the rule of res judicata - YES
2. WON Sison P.V., J., was in serious and reversible error in accepting Go
Thong's defense that the question of fault on the part of the "Yotai Maru"
had been settled by the compromise agreement between the owner of the
"Yotai Maru" and Go Thong as owner of the "Don Carlos - YES
3. WON Sison, P. V. J., was in serious and reversible error in holding that the
"Yotai Maru" had been negligent and at fault in the collision with the "Don
Carlos – YES (MAIN ISSUE)
HELD:
1ST ISSUE: Res Judicata should apply
Tingson v. Court of Appeals
Bar by former judgment
Where as between the first case Where the judgment is rendered and the second
case where such judgment is invoked, there is identity of parties, subject-matter and
cause of action, the judgment on the merits in the first case constitutes an absolute
bar to the subsequent action not only as to every matter which was offered and
received to sustain or defeat the claim or demand, but also as to any other
admissible matter which might have been offered for that purpose and to all matters
that could have been adjudged in that case.
Conclusiveness of Judgment
Where the second action between the same parties is upon a different claim or
demand, the judgment in the prior action operates as an estoppel only as to those
matters in issue or points controverted, upon the determination of which the finding
or judgment was rendered. In fine, the previous judgment is conclusive in the
second case, only as those matters actually and directly controverted and
determined and not as to matters merely involved therein.
Lopez v.  Reyes
Bar by former judgment - bars the prosecution of a second action upon the same
claim, demand or cause of action
Conclusiveness of judgment - bars the re-litigation of particular facts or issues in
another litigation between the same parties on a different claim or cause of action.
IN THIS CASE:
 Applying the rule of conclusiveness of judgment, the question of which
vessel had been negligent in the collision between the two 2 vessels, had
long been settled by this Court and could no longer be relitigated in C.A.-
G.R. No. 61206- R.
 Go Thong was certainly bound by the ruling or judgment of Reyes, L.B., J.
and that of this Court.
 CA fell into clear and reversible error when it disregarded the Decision of
this Court affirming the Reyes Decision. 
 Identity of parties - Both the Fernandez Decision and Cuevas Decision
exhibited have the same identity of parties
 Subject matter - not identical
o the cargo which had been damaged in the one case and for which
indemnity was sought, was not the very same cargo which had
been damaged in the other case indemnity for which was also
sought
 CHAPTER 14 – CHARTER PARTIES | CHAPTER 16 – AVERAGES | CHAPTER 17 - COLLISIONS
 Cause of action – same right of the cargo owners to the safety and
integrity of their cargo had been violated by the same casualty, the
ramming of the "Yotai Maru" by the "Don Carlos."
 Final judgment – both final on the merits rendered by the 2 divisions of the
CA and by the SC, the jurisdiction of which has not been questioned.
2ND ISSUE:
RULE: What is a compromise?
A compromise is an agreement between two (2) or more persons who, in order to
forestall or put an end to a law suit, adjust their differences by mutual consent, an
adjustment which everyone of them prefers to the hope of gaining more, balanced
by the danger of losing more.  An offer to compromise does not, in legal
contemplation, involve an admission on the part of a defendant that he is legally
liable, nor on the part of a plaintiff that his claim or demand is groundless or even
doubtful, since the compromise is arrived at precisely with a view to avoiding further
controversy and saving the expenses of litigation.  
 True it is that by virtue of the compromise agreement, the owner of the
"Yotai Maru" paid a sum of money to the owner of the "Don Carlos."
 However, in the compromise agreement did the owner of the "Yotai Maru "
admit or concede that the "Yotai Maru" had been at fault in the collision.
Administrative Investigations
 The collision between the "Yotai Maru" and the "Don Carlos" spawned not
only sets of litigations but also administrative proceedings before the Board
of Marine Inquiry ("BMI"). BMI found both vessels to have been negligent in
the collision.
 Both parties moved for reconsideration. The Motions for Reconsideration
were resolved by the Philippine Coast Guard ("PCG") nine (9) years later
absolving the officers of Yotai Maru from responsibility. Go Thong MR
denied.
 Go Thong appealed to the Ministry of National Defense. He filed several
motions for extension of time. MND reversed the ruling of the PCG.
 Owners of Yotai Maru filed MR with the Office of the President. OP correctly
recognized that Go Thong failed to appeal in a seasonable manner.
 Nonetheless, acting under the misapprehension that certain "supervening"
events had taken place, the Office of the President held that the Minister of
National Defense could validly modify or alter the PCG Commandant's
decision
Examining the facts as found by Judge Cuevas, the Court believes that
there are three (3) principal factors which are constitutive of negligence
on the part of the "Don Carlos," which negligence was the proximate cause
of the collision:
I. Failure of the  "Don Carlos" to comply with the requirements of Rule 18
(a) of the International Rules of the Road ("Rules")
Rule 18 (a) of the International Rules of the Road
(a) When two power-driven vessels are meeting end on, or nearly end on, so as to
involve risk of collision, each shall alter her course to starboard, so that each may
pass on the port side of the other. This Rule only applies to cases where vessels are
meeting end on or nearly end on, in such a manner as to involve risk of collision,
and does not apply to two vessels which must, if both keep on their respective
course, pass clear of each other. The only cases to which it does apply are when
each of two vessels is end on, or nearly end on, to the other; in other words, to
cases in which, by day, each vessel sees the masts of the other in a line or nearly in
a line with her own; and by night to cases in which each vessel is in such a position
as to see both the sidelights of the other. It does not apply, by day, to cases in which
a vessel sees another ahead crossing her own course; or, by night, to cases where
the red light of one vessel is opposed to the red light of the other or where the
green light of one vessel is opposed to the green light of the other or where a red
light without a green light or a green light without a red light is seen ahead, or
Where both green and red lights are seen anywhere but ahead.
IN THIS CASE:
Don Carlos and Yotai’s evidence seem to agree that each vessel made a
visual sighting of each other ten minute before the collision. Both vessels
were sailing on exactly opposite paths 
German altered "Don Carlos" course by five degrees to the left at 0343
hours instead of to the right which maneuver was the error that caused the
collision in question. 
 “Don Carlos" was overtaking another vessel, the "Don Francisco", and was
then at the starboard (right side) of the aforesaid vessel at 3:40 a.m. It was
in the process of overtaking "Don Francisco" that "Don Carlos' was finally
brought into a situation where he was meeting end-on or nearly end-
on "Yotai Maru, thus involving risk of collision.
 For her part, the "Yotai Maru"  did comply with its obligations under Rule 18
(a). As the "Yotai Maru"  found herself on an "end-on" or a "nearly end-on"
situation vis-a-vis the "Don Carlos, " and as the distance between them was
rapidly shrinking, the "Yotai Maru"  turned starboard (to its right) and at the
same time gave the required signal consisting of one short horn blast.
 The "Don Carlos" turned to portside (to its left), instead of turning to
starboard as demanded by Rule 18 (a).
 The "Don Carlos" also violated Rule 28 (c) for it failed to give the required
signal of two (2) short horn blasts meaning "I am altering my course to
port."
 When the "Yotai Maru" saw that the "Don Carlos" was turning to port, the
master of the "Yotai Maru" ordered the vessel turned "hard starboard" at
3:45 a.m. and stopped her engines; at about 3:46 a.m. the "Yotai Maru"
went "full astern engine." The collision occurred at exactly 3:50 a.m.
II. The failure of the“ Don Carlos” to have on board, on the night of the
collision, a “proper look-out” constitutes negligence as required by Rule I
(B) Under Rule 29 of the same set of Rule
What is a proper look-out?
A "proper look-out" is one who has been trained as such and who is given no other
duty save to act as a look-out and who is stationed where he can see and hear best
and maintain good communication with the officer in charge of the vessel, and who
must, of course, be vigilant.
Urrutia & Co. vs. Baco River Plantation
MMA’S SHIPPING COMPANY - TRANSPORATION LAW DIGESTS 19
Nautical rules require that where a steamship and sailing vessel are approaching
each other from opposite directions, or on intersecting lines, the steamship, from
the moment the sailing vessel is seen, shall watch with the highest diligence her
course and movements so as to enable it to adopt such timely means of
precaution as will necessarily prevent the two boats from coming in contact.
IN THIS CASE:
 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.
o CA chose to overlook all the above facts constitutive of negligence
on the part of the "Don Carlos;"
o It also in effect used the very negligence on the part of the "Don
Carlos" to absolve it from responsibility and to shift that
responsibility exclusively onto the "Yotai Maru" the vessel which
had observed carefully the mandate of Rule 18 (a).
THEREFORE: The Court agrees with Judge Cuevas (just as it had agreed with Reyes,
L.B., J.), with Judge Fernandez and Nocon, J., that the "Don Carlos" had been
negligent and that its negligence was the sole proximate cause of the collision and
of the resulting damages.

III. Negligence on the part of the "Don Carlos"  relates to the fact that
Second Mate Benito German was, immediately before and during the DISPOSITIVE: FOR ALL THE FOREGOING, the Decision of the Court of Appeals dated
collision, in command of the "Don Carlos."  26 November 1980 in C.A.-G.R. No. 61206-R is hereby REVERSED and SET ASIDE.
The decision of the trial court dated 22 September 1975 is hereby REINSTATED and
RULE: AFFIRMED in its entirety. Costs against private respondent.
Article 633 of the Code of Commerce SO ORDERED.
Art. [633] — The second mate shall take command of the vessel in case of the
inability or disqualification of the captain and sailing mate, assuming, in such case,
their powers and liability.

IN THIS CASE:
 The evidence on record clearly discloses that "Don Carlos" was, at the time
of the collision and immediately prior thereto, under the command of
Benito German, a second mate although its captain, Captain Rivera, was
very much in the said vessel at the time.
 The Yatai's evidence appears bereft of any explanation as to why second
mate German was at the helm of the aforesaid vessel when Captain Rivera
did not appear to be under any disability at the time.
 The fact that second mate German was allowed to be in command of "Don
Carlos" and not the chief or the sailing mate in the absence of Captain
Rivera, gives rise to no other conclusion except that said vessel [had] no
chief mate.
 Worst still, aside from German's being only a second mate, is his apparent
lack of sufficient knowledge of the basic and generally established rules of
navigation.
o For instance, he appeared unaware of the necessity of employing
a "look- out"
o There is, therefore, every reasonable ground to believe that his
inability to grasp actual situation and the implication brought
about by inadequacy of experience and technical know-how was
mainly responsible and decidedly accounted for the collision of the
vessels involved in this case..

The Court of Appeals in C.A.-G.R. No. 61206-R did not make any findings of
fact which contradicted the findings of fact made by Judge Cuevas.
 What Sison, P.V., J. actually did was to disregard all the facts found by Judge
Cuevas, and discussed above and, astonishingly, found a duty on the "Yotai
Maru" alone to avoid collision with and to give way to the "Don Carlos ".
 The Court is unable to agree with the view thus taken by Sison, P.V., J. By
imposing an exclusive obligation upon one of the vessels, the "Yotai
Maru, " to avoid the collision