Transpo notes by ace

MARITIME LAW GENERAL CONCEPTS Maritime law is the system of laws which particularly relates to the affairs and business of the sea, to ships, their crews and navigation, and to marine conveyance of persons and property. The primary law on maritime commerce is still the New Civil Code provisions on common carriers. The Code of Commerce and special laws apply only suppletorily. REAL AND HYPOTHECARY NATURE There are two reasons why it is impossible to do away with these privileges, to wit 1. 2. The risk to which the thing is exposed The real nature of maritime law according to which liability of the parties is limited to a thing to which is at mercy of the waves. they go on, the remainder of the vessel as well as on the amount of the freightage of the cargo saved; but sailors whoa re engaged n shares shall not have any right whatsoever on the salvage of the hull, but only on the portion of the freightage saved. If they should have worked to recover the remainder of the shipwrecked vessel they shall be given from the amount of the salvage an award proportion of the efforts made and to the risks, encountered in order to accomplish the salvage. Art. 837 The civil liability incurred by the shipowners in the cases prescribed in this section shall be understood as limited to the value of the vessel with all her appurtenances and freight earned during the voyage. COVERAGE Article 837 applies the principle of limited liability in cases of collision, while Article 587 and 590 embody the universal principle of limited liability in all cases. Thus, taken together Articles 837, 587 and 590 covers only to wit 1. 2. 3. Liability to third parties Acts of the captain Collisions

The Supreme Court likewise explained in another case that the real and hypothecary nature of maritime law simply means that the liability of the carrier in connection with losses related to maritime contracts to the vessel which is hypothecated for such obligation or which stands as the guaranty for their settlement. Thus, the liability of the vessel owner and agent arising from the operation of such vessel were confined to the vessel itself, its equipment, freight and insurance if any which limitation served to induce capitalists into effectively wagering their resource against the consideration of the large profits attainable in the trade. STATUTORY PROVISIONS 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 equipments 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 contribution to the common fund for the results of the acts of the captain, referred to in Article 587. Each co-owner may exempt himself from this liability by the abandonment, before a notary, of that part of the vessel belonging to him. Art. 643 If the vessel and her cargo should be totally lost, by reason of capture or wreck, all rghts shall be extinguished, both as regards the crew to demand any wages whatsoever, and as regards the ship agent to recover the advances made. If a portion of the vessel of the cargo, or of both, should be saved, the crew engaged on wages, including the captain shall retain their rights on the salvage, so far as

No vessel, no liability expresses in a nutshell the limited liability rule. The total destruction of the vessel extinguishes maritime liens because there is no longer any res to which it can attach. EXCEPTIONS TO THE LIMITED LIABILITY RULE 1. Where the injury or death is due either to the fault of shipowner or to the concurring negligence of the shipowner and captain Where the vessel is insured In workmens compensation claims That the total destruction of the vessel affect the liability of the owner for repairs of the vessel completed before its loss

2. 3. 4.

NEGLIGENCE The limited liability rule applies if the captain or the crew caused the damage or injury. However, if the failure to maintain the seaworthiness of the vessel can be ascribed to the shipowner alone or the shipowner concurrently with the captain, then limited liability principle cannot be invoked. Ex. Allowing the ship to carry more passengers than it was allowed to carry, captain playing mahjong, unseaworthiness of the vessel at the time of its departure, authorizing a voyage notwithstanding knowledge of a typhoon, admittedly employing an unlicensed master and engineer

Transpo notes by ace

INSURANCE The Supreme Court explained that the total loss of the vessel did not extinguish the liability of the carriers insurer. Despite the loss of the vessel, therefore, its insurance answers for the damages that a shipowner or agent may be held liable for by reason of the death of passengers. WORKERS COMPENSATION The provision of Code of Commerce has no room in the application of Workmens Compensation act. If an accident is compensable under the Workmens Compensation Act, it must be compensated even when the workmans right is not recognized by or is in conflict with other provisions of the Civil Code or the Code of Commerce. The reason behind this principle is that the Workmens Compensation Act was enacted by the legislature in abrogation of other existing laws. ABANDONMENT Abandonment of the vessel, its appurtenance and the freightage is an indispensable requirement before the shipowner or shipagent can enjoy the benefits of the limited liability principle. If the carrier does not want to abandon the vessel, then he is still liable even beyond the value of the vessel. The Supreme Court held that the rule in the case of collision, abandonment of the vessel is necessary in order to limit the liability of the shipowner or the agent to the value of the vessel, its appurtenance and freightage earned in the voyage in accordance with Article 837 of the Code of Commerce. The only instance where such abandonment is dispensed with is when the vessel was entirely lost. In such case, the obligation is thereby extinguished. PROCEDURE FOR ENFORCEMENT In the sinking of the vessel, the claimants are limited in their recovery to the remaining value of accessible assets. In the case of a lost vessel, these are the insurance proceeds and pending freightage for the particular voyage. The court ruled that in fairness to the claimants, and as a matter of equity, the total proceeds of the insurance and pending freightage should be deposited in trust. PROTEST Protest is a written statement by the master of the vessel or any authorized officer, attested by proper officer or a notary, to the effect that damages has suffered by the ship. Protest is required under the Code of Commerce in the following cases: 1. 2. Arrival under stress Vessel is shipwrecked 3. Where the vessel has gone through a hurricane or the captain believes that the cargo has suffered damages or averages Maritime collisions

4.

ADMIRALTY JURISDICTION The Regional Trial Court has jurisdiction over admiralty and maritime cases where the demand or claim exceed P100,000 or if in Metro Manila a claim exceeds P200,000. If the claim does not exceed then jurisdiction is in the Municipal Trial Court. STANDARD OIL VS. CASTELO That the owner of the ship is a person to whom the plaintiff in this case may immediately look for reimbursement to the extent above stated is deducible not only from the general doctrines of admiralty jurisprudence but from the provisions of the Code of Commerce applicable to the case. It is universally recognized that the captain is primarily the representative of the owner; and article 586 of the Code of Commerce expressly declares that both the owner of the vessel and the naviero, or charterer, shall be civil liable for the acts of the master. In this connection, it may be noted that there is a discrepancy between the meaning of naviero, in articles 586 of the Code of Commerce, where the word is used in contradistinction to the term "owner of the vessel" ( propietario), and in article 587 where it is used alone, and apparently in a sense broad enough to include the owner. Fundamentally the word "naviero" must be understood to refer to the person undertaking the voyage, who in one case may be the owner and in another the charterer. But this is not vital to the present discussion. The real point to which we direct attention is that, by the express provision of the Code, the owner of the vessel is civilly liable for the acts of the captain; and he can only escape from this civil liability by abandoning his property in the ship and any freight that he may have earned on the voyage (arts. 587, 588, Code of Comm.). The shipper may in our opinion go at once upon the owner and the latter, if so minded, may have his recourse for indemnization against his captain. In considering the question now before us it is important to remember that the owner of the ship ordinarily has vastly more capital embarked upon a voyage than has any individual shipper of cargo. Moreover, the owner of the ship, in the person of the captain, has complete and exclusive control of the crew and of the navigation of the ship, as well as of the disposition of the cargo at the end of the voyage. It is therefore proper that any person whose property may have been cast overboard by order of the captain should have a right of action directly against the ship's owner for the breach of any duty which the law may have imposed on the captain with respect to such cargo. To adopt the interpretation of the law for which the appellant contends would place the shipowner in a position to escape all responsibility for a general average of this character by

Transpo notes by ace

means of the delinquency of his own captain. This cannot be permitted. The evident intention of the Code, taken in all of its provisions, is to place the primary liability upon the person who has actual control over the conduct of the voyage and who has most capital embarked in the venture, namely, the owner of the ship, leaving him to obtain recourse, as it is very easy to do, from other individuals who have been drawn into the venture as shippers. YU CON VS. IPIL Blanco, the commentator on mercantile law, in referring to the grammatical meaning of the word "ship" and "vessels," says, in his work aforecited, that these terms designate every kind of craft, large or small, whether belonging to the merchant marine or to the navy. And referring to their juridical meaning, he adds: "This does not differ essentially from the grammatical meaning; the words "ship" and "vessel" also designate every craft, large or small, so long as it be not an accessory of another, such as the small boat of a vessel, of greater or less tonnage. This definition comprises both the craft intended for ocean or for coastwise navigation, as well as the floating docks, mud lighters, dredges, dumpscows or any other floating apparatus used in the service of an industry or in that of maritime commerce. . . ." (Vol. 1, p. 389.)chanrobles virtual law library According to the foregoing definitions, then, we should that the banca called Maria, chartered by the plaintiff Yu Con from the defendant Narciso Lauron, was a "vessel", pursuant to the meaning this word has in mercantile law, that is, in accordance with the provisions of the Code of Commerce in force. virtual law library The name of captain or master is given, according to the kind of vessel, to the person in charge of it. The first denomination is applied to those who govern vessels that navigate the high seas or ships of large dimensions and importance, although they be engaged in the coastwise trade. Masters are those who command smaller ships engaged exclusively in the coastwise trade.\ For the purposes of maritime commerce, the words "captain" and "master" have the same meaning; both being the chiefs or commanders of ships. (Vol. 2, p. 168.) Article 587 of the Code of Commerce in force provides: The agent shall be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freight he may have earned during the trip. It is well and good that the shipowner be not held criminally liable for such crimes or quasi crimes; but the cannot be excused from liability for the damage and harm which, in consequence of those acts, may be suffered by the third parties who contracted with the captain, in his double capacity of agent and subordinate of the shipowner himself. In maritime commerce, the shippers and passengers in making contracts with the captain do so through the confidence they have in the shipowner who appointed him; they presume that the owner made a most careful investigation before appointing him, and, above all, they themselves are unable to make such an investigation, and even though they should do so, they could not obtain complete security, inasmuch as the shipowner can, whenever he sees fit, appoint another captain instead The shipowner is in the same case with respect to the members of the crew, for, though he does not appoint directly, yet, expressly or tacitly, he contributes to their appointment. On the other hand, if the shipowner derives profits from the results of the choice of the captain and the crew, when the choice turns out successful, it is also just that he should suffer the consequences of an unsuccessful appointment, by application of the rule of natural law contained in the Partidas, viz., that he who enjoys the benefits derived from a thing must likewise suffer the losses that ensue therefrom. The Code of Commerce in force omits the declaration of non-liability contained in the old code, and clearly makes the shipowner liable civilly for the loss suffered by those who contracted with the captain, in consequence of the misdemeanors and crimes committed by the latter or by the members of the crew. YANGCO VS. LASERNA May the shipowner or agent, notwithstanding the total loss of the vessel as a result of the negligence of its captain, be properly held liable in damages for the consequent death of its passengers? We are of the opinion and so hold that this question is controlled by the provisions of article 587 of the Code of Commerce. Said article reads: The agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freight he may have earned during the voyage. The provisions accords a shipowner or agent the right of abandonment; and by necessary implication, his liability is confined to that which he is entitled as of right to abandon - "the vessel with all her equipments and the freight it may have earned during the voyage." It is true that the article appears to deal only with the limited liability of shipowners or agents for damages arising from the misconduct of the captain in the care of the goods which the vessel carries, but this is a mere deficiency of language and in no way indicates the true extent of such liability

Transpo notes by ace

The present code (1829) does not determine the juridical status of the agent where such agent is not himself the owner of the vessel. This omission is supplied by the proposed code, which provides in accordance with the principles of maritime law that by agent it is to be understood the person intrusted with the provisioning of the vessel, or the one who represents her in the port in which she happens to be. This person is the only one who represents the vessel - that is to say, the only one who represents the interests of the owner of the vessel. This provision has therefore cleared the doubt which existed as to the extent of the liability, both of the agent and of the owner of the vessel. Such liability is limited by the proposed code to the value of the vessel and other things appertaining thereto. In Philippine Shipping Co. vs. Garcia (6 Phil., 281, 284286), we have expressed ourselves in such a comprehensive manner as to leave no room for doubt on the applicability of our ratio decidendi not only to cases of collision but also to those of shipwrecks, etc. We said: This is the difference which exists between the lawful acts and lawful obligations of the captain and the liability which he incurs on account of any unlawful act committed by him. In the first case, the lawful acts and obligations of the captain beneficial to the vessel may be enforced as against the agent for the reason that such obligations arise from the the contract of agency (provided, however, that the captain does not exceed his authority), while as to any liability incurred by the captain through his unlawful acts, the ship agent is simply subsidiarily civilly liable. This liability of the agent is limited to the vessel and it does not extend further. For this reason the Code of Commerce makes the agent liable to the extent of the value of the vessel, as the codes of the principal maritime nations provide with the vessel, and not individually. Such is also the spirit of our Code. It will be observed that these rights are correlative, and naturally so, because if the agent can exempt himself from liability by abandoning the vessel and freight money, thus avoiding the possibility of risking his whole fortune in the business, it is also just that his maritime creditor may for any reason attach the vessel itself to secure his claim without waiting for a settlement of his rights by a final judgment, even to the prejudice of a third person. . It only remains to be noted that the rule of limited liability provided for in our Code of Commerce reflects merely, or is but a restatement, imperfect though it is, of the almost universal principle on the subject. While previously under the civil or common law, the owner of a vessel was liable to the full amount for damages caused by the misconduct of the master, by the general maritime law of modern Europe, the liability of the shipowner was subsequently limited to his interest in the vessel. (Norwich & N. Y. Trans. Co. v. Wright, 80 U. S. 104, 20 Law. ed. 585.) A similar limitation was placed by the British Parliament upon the liability of English shipowners through a series of statutes beginning in 1734 with the Act of 7 George II, chapter 15. The legislatures of Massachusetts and Maine followed suit in 1818 and 1821, and finally, Congress enacted the Limited Liability Act of March 3, 1851, embodying most of the provisions contained in the British Statutes (see 24 R. C. L. pp. 13871389). Section 4283 of the Revised Statutes (sec. 183, Tit. 46, Code of Laws of U. S. A.) reads: LIABILITY OF OWNER NOT TO EXCEED INTEREST. - The liability of the owner of any vessel, for any embezzlement, loss, or destruction, by any person, of any property, goods, or merchandise, shipped or put on board of such vessel, or for any loss, damage, or injury by collision, or for any act, matter or thing, loss, damage, or forfeiture, done, occasioned, or incurred without the privity, or knowledge of such owner or owners, shall in no case exceed the amount or value of the interest of such owner in such vessel, and her freight then pending. The policy which the rule is designed to promote is the encouragement of shipbuilding and investment in maritime commerce. (Vide: Norwich & N. Y. Trans. Co. v. Wright, supra; The Main v. Williams, 152 U. S. 122; 58 C. J. 634.) And it is in that spirit that the American courts construed the Limited Liability Act of Congress whereby the immunities of the Act were applied to claims not only for lost goods but also for injuries and "loss of life of passengers, whether arising under the general law of admiralty, or under Federal or State statutes." (The City of Columbus, 22 Fed. 460; The Longfellow, 104 Fed. 360; Butler v. Boston & Savannah Steamship Co., 32 Law. ed. 1017; Craig v. Continental Insurance Co., 35 Law. ed. 836.) The Supreme Court of the United States in Norwich & N. Y. Trans. Co. v. Wright, 80 U. S. 104, 20 Law. ed. 585, 589-590, accounting for the history of the principle, clinches our exposition of the supporting authorities: The history of the limitation of liability of shipowners is matter of common knowledge. The learned opinion of Judge Ware in the case of The Rebecca, 1 Ware, 187-194, leaves little to be desired on the subject. He shows that it originated in the maritime law of modern Europe; that whilst the civil, as well as the common law, made the owner responsible to the whole extent of damage caused by the wrongful act or negligence of the matter or crew, the maritime law only made then liable (if personally free from blame) to the amount of their interest in the ship. So that, if they surrendered the ship, they were discharged. Grotius, in his law of War and Peace, says that men would be deterred from investing in ships if they thereby incurred the apprehension of being rendered liable to an indefinite amount by the acts of the master and, therefore, in Holland, they had never observed the Roman Law on that subject, but had a regulation that the ship owners should be bound no farther than the value of their ship and freight. So that it is evident that, by this law, the owner's liability was coextensive with his interest in the vessel and its freight, and ceased by his abandonment and surrender of these to the parties sustaining loss. In the light of all the foregoing, we therefore hold that if the shipowner or agent may in any way be held civilly liable at all for injury to or death of passengers arising

Transpo notes by ace

from the negligence of the captain in cases of collisions or shipwrecks, his liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. In arriving at this conclusion, we have not been unmindful of the fact that the ill-fated steamship Negros, as a vessel engaged in interisland trade, is a common carrier (De Villata v. Stanely, 32 Phil., 541), and that the as a vessel engaged in interisland trade, is a common carrier (De Villata v. Stanely, 32 Phil., 541), and that the relationship between the petitioner and the passengers who died in the mishap rests on a contract of carriage. But assuming that petitioner is liable for a breach of contract of carriage, the exclusively "real and hypothecary nature" of maritime law operates to limit such liability to the value of the vessel, or to the insurance thereon, if any. In the instant case it does not appear that the vessel was insured. law library Whether the abandonment of the vessel sought by the petitioner in the instant case was in accordance with law of not, is immaterial. The vessel having totally perished, any act of abandonment would be an idle ceremony CHUA YEK HONG VS. IAC SEPTEMBER 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 the equipments and the freight it may have earned during the voyage. The term "ship agent" as used in the foregoing provision is broad enough to include the ship owner (Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256 [1921]). Pursuant to said provision, therefore, both the ship owner and ship agent are civilly and directly liable for the indemnities in favor of third persons, which may arise from the conduct of the captain in the care of goods transported, as well as for the safety of passengers transported Yangco vs. Laserna, supra; Manila Steamship Co., Inc. vs. Abdulhaman et al., 100 Phil. 32 [1956]). However, under the same Article, this direct liability is moderated and limited by the ship agent's or ship owner's right of abandonment of the vessel and earned freight. This expresses the universal principle of limited liability under maritime law. The most fundamental effect of abandonment is the cessation of the responsibility of the ship agent/owner (Switzerland General Insurance Co., Ltd. vs. Ramirez, L-48264, February 21, 1980, 96 SCRA 297). It has thus been held that by necessary implication, the ship agent's or ship owner's liability is confined to that which he is entitled as of right to abandon the vessel with all her equipment and the freight it may have earned during the voyage," and "to the insurance thereof if any" (Yangco vs. Lasema, supra). In other words, the ship owner's or agent's liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. "No vessel, no liability" expresses in a nutshell the limited liability rule. The total destruction of the vessel extinguishes maritime liens as there is no longer any res to which it can attach (Govt. Insular Maritime Co. vs. The Insular Maritime, 45 Phil. 805, 807 [1924]).chanroblesvirtualawlibrary chanrobles virtual law library As this Court held: If the ship owner or agent may in any way be held civilly liable at all for injury to or death of passengers arising from the negligence of the captain in cases of collisions or shipwrecks, his liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. (Yangco vs. Laserna, et al., supra). As evidence of this real nature of the maritime law we have (1) the limitation of the liability of the agents to the actual value of the vessel and the freight money, and (2) the right to retain the cargo and the embargo and detention of the vessel even in cases where the ordinary civil law would not allow more than a personal action against the debtor or person liable. It will be observed that these rights are correlative, and naturally so, because if the agent can exempt himself from liability by abandoning the vessel and freight money, thus avoiding the possibility of risking his whole fortune in the business, it is also just that his maritime creditor may for any reason attach the vessel itself to secure his claim without waiting for a settlement of his rights by a final judgment, even to the prejudice of a third person. (Phil. Shipping Co. vs. Vergara, 6 Phil. 284 [1906]). The limited liability rule, however, is not without exceptions, namely: (1) where the injury or death to a passenger is due either to the fault of the ship owner, or to the concurring negligence of the ship owner and the captain (Manila Steamship Co., Inc. vs. Abdulhaman supra); (2) where the vessel is insured; and (3) in workmen's compensation claims Abueg vs. San Diego, supra). In this case, there is nothing in the records to show that the loss of the cargo was due to the fault of the private respondent as shipowners, or to their concurrent negligence with the captain of the vessel. CHUA YEK HONG VS. IAC DECEMBER The Appellate Court Decision, however, mentions only the ship captain as having been negligent in the performance of his duties (p. 3, Court of Appeals Decision, p. 15, Rollo). This is a factual finding binding on this Court. For the exception to the limited liability rule (Article 587, Code of Commerce) to apply, the loss must be due to the fault of the shipowner, or to the concurring negligence of the shipowner and the captain. As we held, there is nothing in the records showing such negligence (p. 6, Decision.) chanrobles virtual law library HEIRS OF AMPARO DE LOS SANTOS VS. CA The petition has merit. At the outset, We note that there is no dispute as to the finding of the captain's negligence in the mishap. The present controversy centers on the questions of Maritima's negligence and of the application of Article 587 of the Code of Commerce. The said article provides:

Transpo notes by ace

Art. 587. The ship agent shall also be civilly liable for indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel, but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freight it may have earned during the voyage. Under this provision, a shipowner or agent has the right of abandonment; and by necessary implication, his liability is confined to that which he is entitled as of right to abandon-"the vessel with all her equipments and the freight it may have earned during the voyage" (Yangco v. Laserna, et al., 73 Phil. 330, 332). Notwithstanding the passage of the New Civil Code, Article 587 of the Code of Commerce is still good law. The reason lies in the peculiar nature of maritime law which is exclusively real and hypothecary that operates to limit such liability to the value of the vessel, or to the insurance thereon, if any (Yangco v. Laserna, Ibid). As correctly stated by the appellate court, "(t)his rule is found necessary to offset against the innumerable hazards and perils of a sea voyage and to encourage shipbuilding and marine commerce. (Decision, Rollo, p. 29). Contrary to the petitioners' supposition, the limited liability doctrine applies not only to the goods but also in all cases like death or injury to passengers wherein the shipowner or agent may properly be held liable for the negligent or illicit acts of the captain (Yangco v. Laserna, Ibid). It must be stressed at this point that Article 587 speaks only of situations where the fault or negligence is committed solely by the captain. In cases where the shipowner is likewise to be blamed, Article 587 does not apply (see Manila Steamship Co., Inc. v. Abdulhanan, et al., 100 Phil. 32, 38). Such a situation will be covered by the provisions of the New Civil Code on Common Carriers. Owing to the nature of their business and for reasons of public policy, common carriers are tasked to observe extraordinary diligence in the vigilance over the goods and for the safety of its passengers (Article 1733, New Civil Code). Maritima claims that it did not have any information about typhoon 'Welming' until after the boat was already at sea. Modem technology belie such contention. The Weather Bureau is now equipped with modern apparatus which enables it to detect any incoming atmospheric disturbances. In his summary report on tropical cyclone 'Welming' which occurred within the Philippine Area of Responsibility, Dr. Roman L. Kintanar, Weather Bureau Director, stated that during the periods of November 15, 1967, the Bureau issued a total of seventeen (17) warnings or advisories of typhoon 'Welming' to shipping companies. While indeed it is true that all these things were done on the vessel, Maritima, however, could not present evidence that it specifically installed a radar which could have allowed the vessel to navigate safely for shelter during a storm. Consequently, the vessel was left at the mercy of ''Welming' in the open sea because although it was already in the vicinity of the Aklan river, it was unable to enter the mouth of Aklan River to get into New Washington, Aklan due to darkness and the Floripon Lighthouse at the entrance of the Aklan River was not functioning or could not be seen at all (Exh. 3-H, Index of Exhibits, p. 192-195; see also Exh. 2-A, Ibid, p. 160). Storms and typhoons are not strange occurrences. In 1967 alone before 'Welming,' there were about 17 typhoons that hit the country (Exh. M, Index of Exhibits, p. 115), the latest of which was typhoon Uring which occurred on October 20-25, which cost so much damage to lives and properties. With the impending threat of 'Welming,' an important device such as the radar could have enabled the ship to pass through the river and to safety. ABOITIZ SHIPPING CORP VS. GAFLAC The other issue raised is whether or not the carrier's liability is limited to $500.00 pursuant to section 8 of the Bill of Lading. The petitioner claims that the appellate court erred in disregarding the limitation of liability stipulated in the bill of lading. It argues that the consignee agreed to this amount (and) therefore is bound by this rate and that there is no basis for the appellate court's finding that the rate is unreasonable. The argument is not well-taken. As aptly stated by the appellate court: Generally speaking any stipulation, limiting the common carrier's liability to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value is valid. (Civil Code, Art. 1749) Such stipulation, however, must be reasonable and just under the circumstances and must have been fairly and freely agreed upon. (St. Paul Fire & Marine Insurance Co. v. Macondray & Co., 70 SCRA 122, 126-127 [1976] In the case at bar, the goods shipped on the M/V "P. Aboitiz" were insured for P278,536.50, which may be taken as their value. To limit the liability of the carrier to $500.00 would obviously put in its power to have taken the whole cargo. In Juan Ysmael & Co. v. Gabino Barretto & Co., 51 Phil. 90 [1927], it was held that a stipulation limiting the carrier's liability to P300.00 per package of silk, when the value of such package was P2,500.00, unless the true value had been declared and the corresponding freight paid; was void as against public policy. That ruling applies to this case. As argued by the respondent, a limitation of liability in this case would render inefficacious the extraordinary diligence required by law of common carriers. MONARCH INSURANCE CO VS. CA fault and/or negligence of Aboitiz, the captain and its crew, thereby barring Aboitiz from availing of the benefit of the limited liability rule. The principle of limited liability is enunciated in the following provisions of the Code of Commerce: Art. 587. The shipagent shall also be civilly liable for the indemnities in favor of

Transpo notes by ace

third persons which may arise from the conduct of the captain in the care of goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all the equipments and the freight it may have earned during the voyage. Art. 590. The co-owners of a 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 his 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 the freightage served during the voyage. Art. 837 appeals the principle of limited liability in cases of collision hence, Arts. 587 and 590 embody the universal principle of limited liability in all cases. In Yangco v. Laserna, this Court elucidated on the import of Art. 587 as follows: The provision accords a shipowner or agent the right of abandonment; and by necessary implication, his liability is confined to that which he is entitled as of right to abandon-"the vessel with all her equipments and the freight it may have earned during the voyage." It is true that the article appears to deal only with the limited liability of the shipowners or agents for damages arising from the misconduct of the captain in the care of the goods which the vessel carries, but this is a mere deficiency of language and in no way indicates the true extent of such liability. The consensus of authorities is to the effect that notwithstanding the language of the aforequoted provision, the benefit of limited liability therein provided for, applies in all cases wherein the shipowner or agent may properly be held liable for the negligent or illicit acts of the captain. 49 "No vessel, no liability," expresses in a nutshell the limited liability rule. The shipowner's or agent's liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. The total destruction of the vessel extinguishes maritime liens because there is no longer any res to which it can attach. 50 This doctrine is based on the real and hypothecary nature of maritime law which has its origin in the prevailing conditions of the maritime trade and sea voyages during the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and to encourage shipbuilding and maritime commerce, it was deemed necessary to confine the liability of the owner or agent arising from the operation of a ship to the vessel, equipment, and freight, or insurance, if any. Contrary to the petitioners' theory that the limited liability rule has been rendered obsolete by the advances in modern technology which considerably lessen the risks involved in maritime trade, this Court continues to apply the said rule in appropriate cases. This is not to say, however, that the limited liability rule is without exceptions, namely: (1) where the injury or death to a passenger is due either to the fault of the shipowner, or to the concurring negligence of the shipowner and the captain; 52 (2) where the vessel is insured; and (3) in workmen's compensation claims. However, once the vessel owner or any party asserts the right to limit its liability, the burden of proof as to lack of privity or knowledge on its part with respect to the matter of negligence or unseaworthiness is shifted to it. 79 This burden, Aboitiz had unfortunately failed to discharge. That Aboitiz failed to discharge the burden of proving that the unseaworthiness of its vessel was not due to its fault and/or negligence should not however mean that the limited liability rule will not be applied to the present cases

VESSELS GENERAL CONCEPTS DEFINITION When the mercantile codes speak of vessels, they refer solely and exclusively to merchant ships, as they do not include war ships and furthermore they almost refer to craft which are not accessory to another as is the case of launches and lifeboats. (see Yu Con vs. Ipil) The ship when it is found these provisions ought to be understood in the sense of a vessel serving the purpose of maritime navigation or seagoing vessel, and not in the sense of a vessel devoted to navigation of rivers. Other vessels of a minor nature not engaged in maritime commerce, such as river boats and those carrying passengers, must be governed as to their liability to passengers, by the provisions of the Civil Code or other appropriate special provisions of law. CONSTRUCTION , EQUIPMENT AND MANNING The construction, equipment and manning of vessels are subject to the rules issued by Maritime Industrial Authority (MARINA). PERSONAL PROPERTY

Transpo notes by ace

Vessels are personal property under the Civil Code. The same rule can be found in the Code of Commerce which provides: Art. 585 For all purposes of law not modified or restricted by the provisions of this Code, vessel shall continue to be considered as personal property. OWNERSHIP PRESCRIPTION Vessels may be acquired or transferred by any means recognized by law. PRESCRIPTION Art. 573 Merchant vessels constitute property which may be acquired and transferred by any means recognized by law. The acquisition of a vessel must appear in a written instrument which shall not produce any effect with respect to third persons if not inscribed in the registry of vessels. The ownership of a vessel shall likewise be acquired by possession in good faith, continued for three years, with a just title duly recorded. In the absence of any of these requisites, continuous possession for ten years shall be necessary, in order to acquire ownership. A captain may not acquire by prescription the vessel of which he is in command. SALE Art. 576 in the sale of a vessel it shall always be understood as included the rigging, masts, stores and engine of a streamer appurtenant thereto, which at the time belongs to the vendor. The vendor shall be under the obligation to deliver to the purchaser a certified copy of the record sheet of the vessel in the registry up to the date of the sale. REGISTRATION Vessels are now registered through the MARINA. It is a long standing rule that the person who is the registered owner of the vessel is presumed to be the owner of the vessel. Moreover, it is likewise a settled rule that the sale and transfer of the vessel is not binding on third persons unless the same is registered. SHIPS MANIFEST Vessels are required to carry manifests in coastwise trade. Under the Tariff and Customs Code, it provides that manifests shall be required for cargo and passengers transported from one place or port in the Philippines to another only when one or both of such places is a port of entry. 6. Name, citizenship, residence of owner, and nationality and Section 2. Who may Constitute a Ship Mortgage. Any citizen of the Philippines, or any association or corporation organized under the laws of the Philippines, at least sixty per cent of the capital of which is owned by citizens of the Philippines may, for the purpose of financing the construction, acquisition, purchase of vessels or initial operation of vessels, freely constitute a mortgage or any other lien or encumbrance on his or its vessels and its equipment with any bank or other financial institutions, domestic or foreign. Section 3. Mortgage of Vessel of Domestic Ownership; records. (a) No mortgage, which at the time such mortgage is made includes a vessel of domestic ownership as this term is defined in Presidential Decree No. 761, or any portion thereof, as the whole or any part of the property mortgaged, shall be valid, in respect to such vessel, against any person other than the mortgagor, his heir or assign, and a person having actual notice thereof, until such mortgage is recorded in the office of the Philippine Coast Guard of the port of documentation of such vessel. (b) The Coast Guard District or Station Commander shall record mortgages delivered to him, in the order of their reception, in books to be kept for that purpose and indexed to show 1. The name of the vessel; 2. The names of the parties tot he mortgage; 3. The time and date of reception of the instrument; 4. The interest mortgaged; in the vessel so A manifest is a declaration of the entire cargo. The object of a manifest is to furnish customs officers with a list to check against, to inform the revenue officers what goods are being brought into a port of the country on a vessel. PRESIDENTIAL DECREE 1521 THE SHIP MORTGAGE DECREE ACT OF 1978

5. The amount and date of maturity of the mortgage;

7. Any material change of condition in respect to any of the preceding items.

Transpo notes by ace

A copy of the instrument or mortgage shall be furnished the Central Bank of the Philippines. Section 4. Preferred Mortgages (a) A valid mortgage which at the time it is made includes the whole of any vessel of domestic ownership shall have, in respect to such vessel and as of the date of recordation, the preferred status given by the provisions of Section 17 hereof, if 1. The mortgage is recorded as provided in Section 3 hereof; 2. An affidavit is filed with the record of such mortgage to the effect that the mortgage is made in good faith and without any design to hinder, delay, or defraud any existing or future creditor of the mortgagor or any lien or of the mortgaged vessel; 3. The mortgage does not stipulate that the mortgagee waives the preferred status thereof; (b) Any mortgage which complies with the above conditions is hereafter called a "preferred mortgage". For purposes of this Decree, a vessel holding a Provisional Certificate of Philippine Registry is considered a vessel of domestic ownership such that it can be subject of preferred mortgage. The Philippine Coast Guard is hereby authorized to enter a vessel holding a Provisional Certificate of Philippine Registry in the Registry of Vessels and to record any mortgage executed thereon. Such mortgage shall have the preferred status as of the date of recordation upon compliance with the above conditions. (c) There shall be endorsed upon the documents of a vessel covered by a preferred mortgage 1. The names of the mortgagor and mortgagee; 2. The time and date the endorsement is made; 3. The amount and date of maturity of the mortgage; and 4. Any amount required to be endorsed by the provisions of paragraphs (e) or (f) of this Section. (d) Such endorsement shall be made (1) by the Coast Guard District or Station Commander of the port of documentation of the mortgaged vessel, or (2) by the Coast Guard District or Station Commander of any port in which the vessel is found, if such Coast Guard District or Station Commander is directed to make the endorsement by the Coast Guard District or Station Commander of the port of documentation. The Coast Guard District or Station Commander of the port of documentation shall give such direction by wire of letter at the request of the mortgagee and upon the tender of the cost of communication of such direction. Whenever any new document is issued for the vessel, such endorsement shall be transferred to and endorsed upon the new document by the Coast Guard District or Station Commander. In the case of a vessel holding a provincial certificate of Philippine Registry, the endorsement shall be made by the Philippine consul abroad upon direction by wire or letter from the Maritime Industry Authority at the request of the mortgagee and upon tender of the cost of communication of such direction. A certificate of such endorsement, giving the place, time and description of the endorsement, shall be recorded with the records of registration to be maintained at the Philippine Consulate. (e) A mortgage which includes property other than a vessel shall not be held a preferred mortgage unless the mortgage provides for the separate discharge of such property by the payment of a specified portion of the mortgage indebtedness. If a preferred mortgage so provides for the separate discharge, the amount of the portion of such payment shall be endorsed upon the documents of the vessel. (f) A preferred mortgage includes more than one vessel and provides for the separate discharge of each vessel by the payment of a portion of mortgage indebtedness, the amount of such portion of such payment shall be endorsed upon the documents of the vessel. In case such mortgage does not provide for the separate discharge of a vessel and the vessel is to be sold upon the order of a district court of the Philippines in a suit in rem in admiralty, the court shall determine the portion of the mortgage indebtedness increased by 20 per centum (1) which, in the opinion of the court, the approximate value of all the vessels covered by the mortgage, and (2) upon the payment of which the vessel shall be discharged from the mortgage. Section 5. Certified Copies of Mortgage; exhibition. The Coast Guard District or Station Commander upon the recording of a preferred mortgage shall deliver two certified copies thereof to the mortgagor who shall place, and use due diligence to retain, one copy on board the mortgaged vessel notice of which shall be posted in a conspicuous place thereat and cause such copy and the documents of the vessel to be exhibited by the master to any person having business with the vessel, which give rise to a maritime lien upon the vessel or to the sale,

Transpo notes by ace

conveyance, or mortgage thereof. The master of the vessel shall upon the request of any such person, exhibit to him the documents of the vessel placed on board thereof. The requirement of this Section that a copy of a preferred mortgage be placed and retained on board the mortgaged vessel shall not apply in the case of a mortgaged vessel which is not self-propelled (including but not limited to, barges, scors, lighters, and car floats). If the master of the vessel willfully fails to exhibit the documents of the vessel or the copy of any preferred mortgage thereof, the Philippine Coast Guard may suspend or cancel the master's license. Section 6. Prior and Subsequent Maritime Liens on Mortgaged Vessel. The mortgagor (1) shall, upon request of the mortgagee, disclose in writing to him prior to the execution of any preferred mortgage, the existence of any maritime lien, prior mortgage, or other obligation or liability upon the vessel to be mortgaged, that is known to the mortgagor, and (2) without the consent of the mortgagee, shall not incur, after the execution of such mortgage and before the mortgagee has had a reasonable time in which to record the mortgage and have indorsements in respect thereto made upon the documents of the vessel, any contractual obligation creating a lien upon the vessel other than a lien for wages of stevedores when employed directly by the owner, operator, master, ship's husband, or agent of the vessel, for wages of the crew of the vessel, for general average, or for salvage, including contract salvage, in respect to the vessel, tonnage dues and all other charges (not to exceed P20,000) of the Philippine Government in respect to the vessel. A mortgagor, who, with intent to defraud, violates the above provision and if the mortgagor is a corporation or association, the president or other principal executive officer of the corporation or association, shall be punished by a fine of not, more than P5,000 or imprisonment of not more than two years, or both. The mortgage indebtedness shall thereupon become immediately due and payable at the election of the mortgagee. Section 7. Record of Notice of Claim of Lien on Mortgaged Vessel; discharge of lien (a) The Coast Guard District or Station Commander of the port of documentation shall, upon the request of any person, record notice of his claim of a lien upon a vessel covered by a preferred mortgage, together with the nature, date of creation, and amount of the lien, and the name and address of the person. Any person who has caused notice of his claim of lien to be so recorded shall, upon a discharge in whole or in part of the indebtedness, forthwith file with the Coast Guard District or Station Commander a certificate of such discharge. The Coast Guard District or Station Commander shall thereupon record the certificate. (b) The mortgagor upon a discharge in whole or in part of the mortgage indebtedness, shall forthwith file with the Coast Guard District or Station Commander for the port of documentation of the vessel, a certificate of such discharge duly executed by the mortgagee. Such Coast Guard District or Station Commander shall there upon record the certificate. In case of a vessel covered by a preferred mortgage, the Coast Guard District or Station Commander at the port of documentation shall endorse upon the documents of the vessel, or direct the Coast Guard District or Station Commander at any port in which the vessel is found, to so endorse, the fact of such discharge. A certificate of such endorsement, giving the time, place and description of the endorsement, shall be recorded with the Philippine Coast Guard. Where the endorsement is made by a person other than the Coast Guard District or Station Commander such certificate shall be promptly forwarded to the Philippine Coast Guard. Section 8. Conditions Precedent to Record; interest on Preferred Mortgage (a) No mortgage shall be recorded unless it states the interest of the mortgagor in the vessel, and the interest so mortgaged. (b) No mortgage, notice of claim of lien, or certificate of discharge thereof, shall be recorded unless previously acknowledged before the Coast Guard District or Station Commander of the port of documentation or a notary public or other officer authorized by a law of the Philippines to take acknowledgment of deeds or before a Philippine consul or consular agent. (c) In case of a change in the port of documentation of a vessel of the Philippines, no mortgage shall be recorded at the new port of documentation unless there is furnished to the Coast Guard District or Station Commander of such port, together with the copy of the mortgage to be recorded, a certified copy of the record of the vessel at the former port of documentation furnished by the Coast Guard District or Station Commander of such port. The Coast Guard District or Station Commander at the new port of documentation is authorized and directed to record such certified copy. Section 10. Lien of preferred Mortgage; foreclosure; jurisdiction; procedure A preferred mortgage shall constitute a lien upon the mortgaged vessel in the amount of the outstanding mortgage indebtedness secured by such vessel. Upon the default of any term or condition of the mortgage such lien may be enforced by the mortgagee by suit in remaining admiralty, wherein the vessel itself may be made a partly defendant and be arrested in the manner as provided in Section 11 hereof. Original jurisdiction of all such suits is granted to the

Transpo notes by ace

Court of First Instance of the Philippines exclusively. In addition to any notice by publication, actual notice of commencement of any such suit shall direct, to (1) the master, other ranking officer, or caretaker of the vessel, and (2) any person who has recorded a notice of claim of an undischarged lien upon the vessel, as provided in Section 7 hereof, unless after search by the mortgage satisfactory to the court, such mortgagor, master, other ranking officer, caretaker, or claimant is not found within the Philippines. Failure to give notice to any such person, as required by this Section, shall be liable to such person for damages in the amount of his interest in the vessel terminated by the suit. In case of judicial foreclosure as provided herein, the provisions of Rule 68 of the New Rules of Court, if not inconsistent herewith, shall apply. The lien of a preferred ship mortgage may also be enforced by a suit in rem in admiralty or otherwise in any foreign country in which the vessel may be found pursuant to the procedure of said country for the enforcement of ship mortgages constituting maritime liens on vessels documented under the laws of said country. Section 11. Arrest of Vessels Upon the filing of the petition for the judicial foreclosure of a Preferred Ship Mortgage, or immediately thereafter, the applicant may apply exparte for an order for the arrest of the mortgaged vessel or vessels and the judge shall immediately issue the same, provided that it is made to appear by affidavit of the applicant, or of some other person who personally knows the facts that a default in the mortgage has occurred and that applicant files a bond executed to the adverse party in an amount to be fixed by the judge, not exceeding the applicant's claim, conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of such arrest, if the court shall finally adjudge that the applicant was not entitled thereto. Section 12. Discharge of Order of Arrest; Counterbond At any time after an order of arrest has been granted, the party whose vessel or vessels had been arrested, or the person appearing in his behalf, may, upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order discharging the order of arrest. That judge shall order the discharge of the arrest if a cash deposit is made, or counterbond executed to the creditor is filed, on behalf of the adverse party, with the clerk or judge of the court where the application is made in an amount double the value of the claim to secure the payment of any judgment that the creditor may recover in the action. Upon the filing of such counterbond, copy thereof shall forthwith be served on the creditor or his lawyer. Upon discharge of the order of arrest, the property arrested or seized shall be delivered to the party making the deposit or giving the counterbond, or the person appearing in his behalf, the deposit or counterbond aforesaid standing in place of the vessel or vessels released. Should such deposit or counterbond for any reason be found to be, or become insufficient, and the party furnishing the same fails to file an additional cocounterbond, the attaching creditor may apply for a new order of arrest or seizure. Section 13. Discharge of Order of Arrest for Improper or Irregular Issuance The party whose vessel/s has been arrested may also, at any time either before or after the release of the arrested vessel, or before any arrest or seizure has been effected, upon reasonable notice to the creditor, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order to discharge the order of arrest or seizure on the ground that the same improperly or irregularly issued. After hearing, the judge shall order the discharge of the order of arrest or seizure if it appears that it was improperly or irregularly issued and the defect is not cured forthwith. Section 14. Extrajudicial Foreclosure The provisions of the Chattel Mortgage Law on the remedy of extra-judicial foreclosure of mortgages in so far as they are not inconsistent herewith shall still apply. For the purpose of taking possession of the vessel or vessels, the foreclosing creditor may secure from a judge of the Court of First Instance of the province where the vessel may be found or where the creditor or debtor resides an order for the arrest or seizure of the vessel. Upon such order of seizure or arrest being issued, the sheriff shall immediately take possession of the vessel or vessels for the purpose of foreclosure and sale. The vessel may only be released in accordance with the provisions of Section 13 of this Act, or when the debtor pays the outstanding obligation. Section 15. Foreign Ship Mortgages As used in Sections 10 to 18 hereof, the term "preferred mortgage" shall include, in addition to a preferred mortgage made pursuant to the provisions of this Decree, any mortgage, hypothecation, or similar charge created as security upon any documented foreign vessel if such mortgage, hypothecation, or similar charge has been duly and validly executed in accordance with the laws of the foreign nation under the laws of which the vessel is documented and has been duly registered in accordance with such laws in a public register either at the port of registry of the vessel or at a central office; and the term "preferred mortgage lien" shall also include the lien of such mortgage, hypothecation, or similar charge: Provided, however, That such "preferred mortgage lien" in the case of a foreign vessel shall be subordinate to maritime liens for repairs, supplies, towage, use of drydock or marine railway, or other necessaries, performed or supplied in the Philippines. Section 16. Receiver in Foreclosure; possession by sheriff In any suit in rem in admiralty for the enforcement of the preferred mortgage lien, the court may appoint a receiver and, in its discretion, authorize the receiver to operate the mortgaged vessel. The sheriff may be authorized and directed by the court to take possession of the mortgaged vessel notwithstanding the fact that the vessel is in the possession or under the control of any person claiming a possessory common law lien.

Transpo notes by ace

Section 17. Preferred Maritime Lien, Priorities, Other Liens (a) Upon the sale of any mortgaged vessel in any extrajudicial sale or by order of a district court of the Philippines in any suit in rem in admiralty for the enforcement of a preferred mortgage lien thereon, all preexisting claims in the vessel, including any possessory common-law lien of which a lienor is deprived under the provisions of Section 16 of this Decree, shall be held terminated and shall thereafter attach in like amount and in accordance with the priorities established herein to the proceeds of the sale. The preferred mortgage lien shall have priority over all claims against the vessel, except the following claims in the order stated: (1) expenses and fees allowed and costs taxed by the court and taxes due to the Government; (2) crew's wages; (3) general average; (4) salvage; including contract salvage; (5) maritime liens arising prior in time to the recording of the preferred mortgage; (6) damages arising out of tort; and (7) preferred mortgage registered prior in time. (b) If the proceeds of the sale should not be sufficient to pay all creditors included in one number or grade, the residue shall be divided among them pro rata. All credits not paid, whether fully or partially shall subsist as ordinary credits enforceable by personal action against the debtor. The record of judicial sale or sale by public auction shall be recorded in the Record of Transfers and Encumbrances of Vessels in the port of documentation. Section 18. Suit in Personam in Admiralty on Default (a) Upon the default of any term or condition of a preferred mortgage upon a vessel, the mortgagee may, in addition to all other remedies granted by this Decree, bring suit in personal in admiralty in a district court of the Philippines, against the mortgagor for the amount of the outstanding mortgage indebtedness secured by such vessel or any deficiency in the full payment thereof. (b) This Decree shall not be construed, in the case of a mortgage covering, in addition to vessels, realty or personality other than vessels, or both, to authorize the enforcement by suit in rem in admiralty of the rights of the mortgage in respect to such realty or personality other than vessels. Section 19. Surrender of Documents; termination of mortgagee's interest; sale of mortgaged vessel (a) The documents of a vessel of the Philippines covered by a preferred mortgaged may not be surrendered (except in the case of the forfeiture of the vessel or its sale by the order of any court of the Philippines or any foreign country) without the approval of the Maritime Industry Authority. The Administrator shall not grant such approval without the mortgagee's consent. (b) The interest of the mortgage in a vessel of the Philippines covered by a mortgage, shall not be terminated by the forfeiture of the vessel for a violation of any law of the Philippines, unless the mortgage authorized, consented, or conspired to effect the illegal act, failure, or omission which constituted such violation. Neither shall the chance by the shipowner in the use or character of the vessel or in the business of the mortgagor, without the consent of the mortgagee, nor the failure by the mortgagor to comply with the provisions of Section 5 hereof affect the validity or preference of the preferred ship mortgage as against third persons. (c) Upon the sale of any vessel of the Philippines covered by a preferred mortgage in any extrajudicial sale or by order of a district court of the Philippines in any suit in rem in admiralty for the enforcement of a maritime lien other than a preferred maritime lien, the vessel shall be sold free from all pre-existing claims thereon; but the court shall, upon the request of the mortgagee, the plaintiff, or any intervenor, require the purchase at such sale to give and the mortgagee to accept a new mortgage of the vessel for the balance of the term of the original mortgage. The conditions of such new mortgage shall be the same, so far as practicable, as those of the original mortgage and shall be subject to the approval of the court. If such new mortgage is given, the mortgagee shall not be paid from the proceeds of the sale and the amount payable as the purchase price shall be held diminished in the amount of the new mortgage indebtedness. (d) No vessel of domestic ownership shall be mortgaged, nor, any rights under said mortgage shall be assigned, to any person not a citizen of the Philippines without the approval of the Maritime Industry Authority. The penalties and sanctions provided for under Commonwealth Act No. 606 shall apply in case of any violation hereof. (e) The foreclosure sale of vessels mortgaged under the provisions of this Decree, whether judicially or extra- judicially, shall not require the approval of the Maritime Industry Authority. Section 20. Who May Bid in the Foreclosure Sale The following persons are qualified to bid in the foreclosure sale of the mortgaged vessel: (a) Citizens of the Philippines or corporations 60% of the capital of which is owned by Filipino citizens. (b) A foreign mortgagee or foreign national whose country has diplomatic relations with the Philippines or whose country grants reciprocal rights to Filipino citizens. In case the purchaser is a foreign individual or entity, the Philippine Coast Guard shall, upon presentation of the

Transpo notes by ace

certificate of sale, cancel the registration of the vessel and issue a certificate to that effect upon request. Section 21. Maritime Lien for Necessaries; persons entitled to such lien Any person furnishing repairs, supplies, towage, use of dry dock or marine railway, or other necessaries to any vessel, whether foreign or domestic, upon the order of the owner of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall be necessary to allege or prove that credit was given to the vessel. Section 22. Persons Authorized to Procure Repairs, Supplies, and Necessaries The following persons shall be presumed to have authority from the owner to procure repairs, supplies, towage, use of dry dock or marine railway, and other necessaries for the vessel: The managing owner, ship's husband, master or any person to whom the management of the vessel at the port of supply is entrusted. No person tortuously or unlawfully in possession or charge of a vessel shall have authority to bind the vessel. Section 23. Notice to Person Furnishing Repairs, Supplies, and Necessaries The officers and agents of a vessel specified in Section 22 of this Decree shall be taken to include such officers and agents when appointed by a character, by an owner pro hac vice, or by an agreed purchaser in possession of the vessel; but nothing in this Decree shall be construed to confer a lien when the furnisher know, or by exercise of reasonable diligence could have ascertained, that because of the terms of a charter party, agreement for sale of the vessel, or for any other reason, the person ordering the repairs, supplies, or other necessaries was without authority to bind the vessel therefor. Section 24. Waiver of Right to Lien Nothing in this Decree shall be construed to prevent the furnisher of repairs, supplies, towage, use of dry dock or marine railway, or other necessaries, or the mortgagee, from waiving his right to a lien, or in the case of a preferred mortgage lien, to the preferred status of such lien, at any time by agreement or otherwise. Section 25. Existing Mortgages Not Affected; exception This Decree shall not apply (1) to any existing mortgage, or (2) to any mortgage hereafter placed at any vessel under an existing mortgage, so long as such existing mortgage remains undischarged. The Decree shall, however, apply to mortgages executed pursuant to Presidential Decree No. 214, provided, that no vested rights of third parties are affected thereby. Section 26. Rules and Regulations by Philippine Coast Guard and the Maritime Industry Authority The Philippine Coast Guard and the Maritime Industry Authority are hereby authorized to make such rules and regulations within their respective spheres of jurisdiction, as they may deem necessary for the efficient execution of the provisions of this Decree. Section 28. Instruments and Acts Validated All mortgages of any vessel of any part thereof, and all documentations, recordations, indorsements and indexing thereof, and proceedings incidental thereto made or done, prior to the effectivity of this Decree are declared valid to the extent they would have been valid if the port or ports at which it should have been documented in accordance with law; and this Section is declared retroactive so as to accomplish such validations: Provided, That nothing herein contained shall be construed to deprive any person of any vested right. Section 29. Repealing Clause The provisions of the New Civil Code, the Code of Commerce, the Chattel Mortgage Law, the Revised Rules of Court and of such other laws, decrees, executive orders, rules and regulations which are in conflict or inconsistent with the provisions of this Decree are hereby repealed, amended or modified accordingly. If for any reason, any section, subsection, sentence, clauses or term of this Decree is held to be unconstitutional such decision shall not affect the validity of the other provisions of this Decree. PNB VS. CA The applicable law on the matter is Presidential Decree No. 1521, otherwise known as the Ship Mortgage Decree of 1978. Sections 17 and 21 of the said Presidential Decree provides as follows: Sec. 17. Preferred Maritime Liens, Priorities, Other Liens (a) Upon the sale of any mortgaged vessel in any extrajudicial sale or by order of a district court of the Philippines in any suit in rem in admiralty for the enforcement of a preferred mortgage lien thereon, all preexisting claims on the vessel, including any possessory common-law lien of which a lienor is deprived under the provisions of Section 16 of this Decree, shall be held terminated and shall thereafter attach, in like amount and in accordance with the priorities established herein to the proceeds of the sale. The preferred mortgage lien shall have priority over all claims against the vessel, except the following claims in the order stated: (1) expenses and fees allowed and costs taxed by the court and taxes due to the government; (2) crews wages; (3) general average; (4) salvage; including contract salvage; (5) maritime liens arising prior in time to the recording of the preferred mortgage; and (6) damages arising out of tort; and (7) preferred mortgage registered prior in time. (b) If the proceeds of the sale should not be sufficient to pay all creditors included in one number or grade, the residue shall be divided among them pro rata. All credits not paid, whether fully or partially shall subsist as ordinary credits enforceable by personal action against the debtor. The record of judicial sale or sale by public auction shall be recorded in the Record of Transfers & Encumbrances of Vessels in the port of documentation. Sec. 21. Maritime Lien for Necessaries; persons entitled to such lien. Any person furnishing repairs, supplies, towage, use of dry dock or maritime railway, or other necessaries to any vessel, whether foreign or domestic, upon the

Transpo notes by ace

order of the owner, shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall be necessary to allege or prove that credit was given to the vessel. Under these provisions, any person furnishing repairs, supplies, or other necessaries to a vessel on credit will have a maritime lien on the said vessel. Such maritime lien, if it arose prior to the recording of a preferred mortgage lien, shall have priority over the said mortgage lien. As held by the public respondent Court of Appeals, those who provide credit to a master of a vessel for the purpose of discharging a maritime lien also acquire a lien over the said vessel. Under American jurisprudence, (f)urnishing money to a master in good faith to obtain repairs or supplies or to remove liens, in order to forward the voyage of the vessel, raises a lien just as though the things (for which) money was obtained to pay for had been furnished by the lender.[32 Likewise, (a)dvances to discharge maritime liens create a lien on the vessel, and one advancing money to discharge a valid lien gets a lien of equal dignity with the one discharged.[33 There is no reason why these doctrines cannot be given persuasive application in the instant case considering that they do not violate or contravene any of our existing laws. Moreover, as pointed out by the appellate court, these doctrines are in accord with our provisions on subrogation particularly Art. 1302, paragraph 2 of the New Civil Code which provides that there is legal subrogation when a third person, not interested in the fulfillment in the obligation, pays with the express or tacit approval of the debtor. Having thus established that private respondent CBC possessed a maritime lien over the vessel M/V Asean Liberty, the next issue is whether the said maritime lien is preferred over the mortgage lien of petitioners. As stated by a noted commentator on the subject, a maritime lien constitutes a present right of property in the ship, a jus in re, to be afterward enforced in admiralty by process in rem. From the moment the claim or privilege attaches, it is inchoate, and when carried into effect by legal process, by a proceeding in rem, it relates back to the period when it first attached.[40 In the case at bench, the maritime lien over the vessel M/V Asean Liberty arose or was constituted at the time Hongkong United Drydocks, Ltd. made repairs on the said vessel on credit. As such, as early as March 12, 1979, the date of the contract for the repair and conversion of M/V Asean Liberty, a maritime lien had already attached to the said vessel. When Citibank advanced the amount of US$242,225.00 for the purpose of paying off PISCs debt to Hongkong United Dockyards, Ltd., it acquired the existing maritime lien over the vessel. When private respondent honored its contract of guarantee with Citibank on March 30, 1983, it likewise acquired by subrogation the maritime lien that was already existing over the vessel M/V Asean Liberty. Thus, when private respondent CBC chose to exercise its right to the maritime lien during the proceedings in the trial court, it was actually enforcing a privilege that attached to the ship as early as March 12, 1979. The maritime lien of private respondent CBC thus arose prior in time to the recording of petitioners mortgage on September 25, 1979. As such, the said maritime lien has priority over the said mortgage lien. Pursuant to Section 17 of the Ship Mortgage Decree of 1978, a preferred mortgage lien shall have priority over all claims against the vessel except, among others, maritime liens arising prior in time to the recording of the preferred mortgage. The respondent court thus committed no reversible error when it ruled that the maritime lien of private respondent CBC is superior to the mortgage lien of petitioners. POLIAND INDUSTRIAL VS. NATIONAL DEVELOPMENT Section 2 of P.D. No. 1521 recognizes the constitution of a mortgage on a vessel, to wit: SECTION 2. Who may Constitute a Ship Mortgage. ' Any citizen of the Philippines, or any association or corporation organized under the laws of the Philippines, at least sixty per cent of the capital of which is owned by citizens of the Philippines may, for the purpose of financing the construction, acquisition, purchase of vessels or initial operation of vessels, freely constitute a mortgage or any other lien or encumbrance on his or its vessels and its equipment with any bank or other financial institutions, domestic or foreign. If the mortgage on the vessel is constituted for the purpose stated under Section 2, the mortgage obtains a preferred status provided the formal requisites enumerated under Section 4[53] are complied with. Upon enforcement of the preferred mortgage and eventual foreclosure of the vessel, the proceeds of the sale shall be first applied to the claim of the mortgage creditor unless there are superior or preferential liens, as enumerated under Section 17, namely: SECTION 17. Preferred Maritime Lien, Priorities, Other Liens. ' (a) Upon the sale of any mortgaged vessel in any extra-judicial sale or by order of a district court of the Philippines in any suit in rem in admiralty for the enforcement of a preferred mortgage lien thereon, all preexisting claims in the vessel, including any possessory common-law lien of which a lienor is deprived under the provisions of Section 16 of this Decree, shall be held terminated and shall thereafter attach in like amount and in accordance with the priorities established herein to the proceeds of the sale. The preferred mortgage lien shall have priority over all claims against the vessel, except the following claims in the order stated: (1) expenses and fees allowed and costs taxed by the court and taxes due to the Government; (2) crew's wages; (3) general average; (4) salvage including contract salvage; (5) maritime liens arising prior in time to the recording of the preferred mortgage; (6) damages arising out of tort; and (7) preferred mortgage registered prior in time. (b) If the proceeds of the sale should not be sufficient to pay all creditors included in one number or grade, the

Transpo notes by ace

residue shall be divided among them pro rata. All credits not paid, whether fully or partially shall subsist as ordinary credits enforceable by personal action against the debtor. The record of judicial sale or sale by public auction shall be recorded in the Record of Transfers and Encumbrances of Vessels in the port of documentation. (Emphasis supplied.) There is no question that the mortgage executed in favor of DBP is covered by P.D. No. 1521. Contrary to NDC's assertion, the mortgage constituted on GALLEON's vessels in favor of DBP may appropriately be characterized as a preferred mortgage under Section 2, P.D. No. 1521 because GALLEON constituted the same for the purpose of financing the construction, acquisition, purchase of vessels or initial operation of vessels. While it is correct that GALLEON executed the mortgage in consideration of DBP's guarantee of the prompt payment of GALLEON's obligations to the Japanese lenders, DBP's undertaking to pay the Japanese banks was a condition sine qua non to the acquisition of funds for the purchase of the GALLEON vessels. Without DBP's guarantee, the Japanese lenders would not have provided the funds utilized in the purchase of the GALLEON vessels. The mortgage in favor of DBP was therefore constituted to facilitate the acquisition of funds necessary for the purchase of the vessels. The provision of P.D. No. 1521 on the order of preference in the satisfaction of the claims against the vessel is the more applicable statute to the instant case compared to the Civil Code provisions on the concurrence and preference of credit. General legislation must give way to special legislation on the same subject, and generally be so interpreted as to embrace only cases in which the special provisions are not applicable.[55] POLIAND's maritime lien is superior to DBP's mortgage lien Before POLIAND's claim may be classified as superior to the mortgage constituted on the vessel, it must be shown to be one of the enumerated claims which Section 17, P.D. No. 1521 declares as having preferential status in the event of the sale of the vessel. One of such claims enumerated under Section 17, P.D. No. 1521 which is considered to be superior to the preferred mortgage lien is a maritime lien arising prior in time to the recording of the preferred mortgage. Such maritime lien is described under Section 21, P.D. No. 1521, which reads: SECTION 21. Maritime Lien for Necessaries; persons entitled to such lien. ' Any person furnishing repairs, supplies, towage, use of dry dock or marine railway, or other necessaries to any vessel, whether foreign or domestic, upon the order of the owner of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall be necessary to allege or prove that credit was given to the vessel. The trial court found that GALLEON's advances obtained from Asian Hardwood were used to cover for the payment of bunker oil/fuel, unused stores and oil, bonded stores, provisions, and repair and docking of the GALLEON vessels.[58] These expenses clearly fall under Section 21, P.D. No. 1521. As stated in Section 21, P.D. No. 1521, a maritime lien may consist in 'other necessaries spent for the vessel. The ship modification cost may properly be classified under this broad category because it was a necessary expenses for the vessel's navigation. As long as an expense on the vessel is indispensable to the maintenance and navigation of the vessel, it may properly be treated as a maritime lien for necessaries under Section 21, P.D. No. 1521. With respect to the claim for salary and wages of the crew, there is no doubt that it is also one of the enumerated claims under Section 17, P.D. No. 1521, second only to judicial costs and taxes due the government in preference and, thus, having a status superior to DBP's mortgage lien. All things considered, however, the Court finds that only NDC is liable for the payment of the maritime lien. A maritime lien is akin to a mortgage lien in that in spite of the transfer of ownership, the lien is not extinguished. The maritime lien is inseparable from the vessel and until discharged, it follows the vessel. Hence, the enforcement of a maritime lien is in the nature and character of a proceeding quasi in rem.[65] The expression 'action in rem is, in its narrow application, used only with reference to certain proceedings in courts of admiralty wherein the property alone is treated as responsible for the claim or obligation upon which the proceedings are based.[66] Considering that DBP subsequently transferred ownership of the vessels to NDC, the Court holds the latter liable on the maritime lien. Notwithstanding the subsequent transfer of the vessels to NDC, the maritime lien subsists. NEGROS NAVIGATION VS. CA The argument of THI is misplaced. There is no conflict as to which law should apply to the case at bench. THI wishes to impress this Court that its claim for repairmans lien is a maritime lien and, accordingly, may be enforced only in a proceeding in rem. The Court agrees that PD 1521 is the governing law concerning its maritime lien for the services it rendered to NNC. However, when NNC filed a petition for corporate rehabilitation and suspension of payments, and the Manila RTC found that the petition was sufficient in form and in substance and appointed the rehabilitation receiver, the admiralty proceeding was appropriately suspended in accordance with Section 6 of the Interim Rules on Corporate Rehabilitation It is undisputed that THI holds a preferred maritime lien over NNCs assets by virtue of THIs unpaid services. The issuance of the stay order by the rehabilitation court does not impair or in any way diminish THIs preferred status as a creditor of NNC. The enforcement of its claim through court action was merely suspended to give way to the speedy and effective rehabilitation of the distressed shipping company. Upon termination of the rehabilitation proceedings or in the event of the bankruptcy and

Transpo notes by ace

consequent dissolution of the company, THI can still enforce its preferred claim upon NNC. PERSONS WHO TAKE PART IN MARITIME COMMERCE SHIPOWNER AND SHIPAGENTS A shipagent is the person entrusted with provisioning of the vessel or who represents her in the port in which she happens to be. CAPTAIN OR MASTERS OF VESSELS For the purpose of maritime commerce, the words captain and masters have the same meaning both being the chiefs or commander of ships. QUALIFICATIONS 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 direct the vessel, as established by marine or navigation laws, ordinances, or regulations, and must not be disqualified according to the same for the discharge of the duties of the position. If the owner of the vessel desire to be captain thereof, without having the legal qualifications therefor, he shall limit himself to the financial administration of the vessel, and shall intrust the navigation to a person possessing the qualification required by said ordinances and regulations. ROLE OF CAPTAIN 1. 2. 3. He is a general agent of the shipowner He is commander and technical director of the vessel He is a representative of the country under whose flag he navigates On compulsory pilotage, the harbor pilot providing the service to a vessel shall be responsible for the damage caused to a vessel or to life and property at ports due to his negligence or fault. The master shall retain overall command of the vessel even on pilotage grounds whereby he can countermand or overrule the order or command of the harbor pilot on board. MASTER AND PILOT Under English and American authorities, the pilot supersedes the master for the time being in the command and navigation of the ship, and his orders must be obeyed in all matters connected with her navigation. However, there is overwhelming authority to the effect that the master does not surrender his vessel to the pilot and the pilot is not the master. The master is still in command of the vessel notwithstanding the presence of a pilot. There are occasions when the master may and should interfere and even displace the pilot as when the pilot is obviously incompetent or intoxicated and the circumstances may require the master to displace a compulsory pilot because of incompetency or physical disability. If however the master does not observe that a compulsory pilot is incompetent or physically incapacitated, the master is justified in relying on the pilot but not blindly. Ergo, the master is not wholly absolved from his duties while a pilot is on board his vessel. The master has overriding authority over the pilot. SHIPOWNER AND PILOT In general, a pilot is personally liable for damages caused by his own negligence or default to the owners of the vessel, and to third parties for damages sustained in a collision. Such negligence of the pilot in the performance of duty constitute maritime tort. Even though the pilot is compulsory, if his negligence was not the sole cause of the injury but the negligence of the master or crew contributed thereto, the owners are liable. PILOT AND HIS ASSOCIATION The fact that the pilot is a member of an association does not make the association jointly and severally liable. Article 2180 of the Civil Code does not apply because there is no employer-employee relationship. MINIMUM SAFE MANNING It is not enough that the officers manning the merchant vessel have all the qualifications imposed by law. It is also required that there is sufficient number of officers and crew that are serving the vessel. SECURITY OF TENURE The Labor Code provision applies to officers and crew of merchant vessels engaged in domestic trade or coastwise shipping.

The most important role is the role performed by the captain as commander of the vessel, it is analogous to being a CEO of a present-day corporation. DISCRETION OF CAPTAIN OR MASTER The applicable principle is that the captain has control of all departments of service in the vessel, and reasonable discretion as to its navigation. The discretionary authority is recognized with respect to his right to exercise his best judgment, with respect to navigating the vessel he commands. PILOTAGE A pilot in maritime law is a person duly qualified and licensed to conduct a vessel into or out of ports or in certain waters. In this jurisdiction COMPULSORY PILOTAGE is being implemented.

Transpo notes by ace

INTER ORIENT MARITIME ENTERPRISE VS. NLRC The captain of a vessel is a confidential and managerial employee within the meaning of the above doctrine. A master or captain, for purposes of maritime commerce, is one who has command of a vessel. A captain commonly performs three (3) distinct roles: (1) he is a general agent of the shipowner; (2) he is also commander and technical director of the vessel; and (3) he is a representative of the country under whose flag he navigates. 16 Of these roles, by far the most important is the role performed by the captain as commander of the vessel; for such role (which, to our mind, is analogous to that of "Chief Executive Officer" [CEO] of a present-day corporate enterprise) has to do with the operation and preservation of the vessel during its voyage and the protection of the passengers (if any) and crew and cargo. In his role as general agent of the shipowner, the captain has authority to sign bills of lading, carry goods aboard and deal with the freight earned, agree upon rates and decide whether to take cargo. The ship captain, as agent of the shipowner, has legal authority to enter into contracts with respect to the vessel and the trading of the vessel, subject to applicable limitations established by statute, contract or instructions and regulations of the shipowner. 17 To the captain is committed the governance, care and management of the vessel. 18 Clearly, the captain is vested with both management and fiduciary functions. More importantly, a ship's captain must be accorded a reasonable measure of discretionary authority to decide what the safety of the ship and of its crew and cargo specifically requires on a stipulated ocean voyage. The captain is held responsible, and properly so, for such safety. He is right there on the vessel, in command of it and (it must be presumed) knowledgeable as to the specific requirements of seaworthiness and the particular risks and perils of the voyage he is to embark upon. The applicable principle is that the captain has control of all departments of service in the vessel, and reasonable discretion as to its navigation. 20 It is the right and duty of the captain, in the exercise of sound discretion and in good faith, to do all things with respect to the vessel and its equipment and conduct of the voyage which are reasonably necessary for the protection and preservation of the interests under his charge, whether those be of the shipowners, charterers, cargo owners or of underwriters. 21 It is a basic principle of admiralty law that in navigating a merchantman, the master must be left free to exercise his own best judgment. The requirements of safe navigation compel us to reject any suggestion that the judgment and discretion of the captain of a vessel may be confined within a straitjacket, even in this age of electronic communications. 22 Indeed, if the ship captain is convinced, as a reasonably prudent and competent mariner acting in good faith that the shipowner's or ship agent's instructions (insisted upon by radio or telefax from their offices thousands of miles away) will result, in the very specific circumstances facing him, in imposing unacceptable risks of loss or serious danger to ship or crew, he cannot casually seek absolution from his responsibility, if a marine casualty occurs, in such instructions. MACONDRAY VS. PROVIDENT INSURANCE Article 586 of the Code of Commerce states that a ship agent is "the person entrusted with provisioning or representing the vessel in the port in which it may be found." Hence, whether acting as agent of the owner 10 of the vessel or as agent of the charterer, 11 petitioner will be considered as the ship agent 12 and may be held liable as such, as long as the latter is the one that provisions or represents the vessel. The trial court found that petitioner "was appointed as local agent of the vessel, which duty includes arrangement for the entrance and clearance of the vessel."13 Further, the CA found and the evidence shows that petitioner represented the vessel. The latter prepared the Notice of Readiness, the Statement of Facts, the Completion Notice, the Sailing Notice and Custom's Clearance.14 Petitioner's employees were present at Sangi, Toledo City, one day before the arrival of the vessel, where they stayed until it departed. They were also present during the actual discharging of the cargo. 15 Moreover, Mr. de la Cruz, the representative of petitioner, also prepared for the needs of the vessel, like money, provision, water and fuel.16 As ship agent, it may be held civilly liable in certain instances. The Code of Commerce provides: "Article 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was invested for the benefit of the same." "Article 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freight it may have earned during the voyage." CHARTER PARTIES Charter party was essentially defined as a contract whereby an entire ship or some principal part of said ship, is let by the owner thereof to a merchant or other person for a specified time or use for the conveyance of goods, in consideration of the payment of freight. The charter contract is often referred to as a mercantile lease for it involves a charterer, who is most often a merchant himself, who desires to lease a ship or vessel owned by another for the transport of his or her goods for commercial purposes. The charter may also involve the transportation of one person from one paort to another. The parties involved thereo are the charterer, charter party and the shipowner. DIFFERENT KINDS OF CHARTER PARTIES

Transpo notes by ace

1. 2. BAREBOAT OR DEMISE CHARTER CONTRACT OF AFFREIGHTMENT A. Time charter B. Voyage charter BAREBOAT CHARTER In a bareboat or demise charter, the shipowner leases the whole vessel, transferring to the latter the entire command, possession and consequent control over the vessels navigation, including the master and the crew who thereby become the charterers servants. Thus the charterer becomes the wner pro hac vice of the vessel since he mans the vessel with his own set of master and crew, effectively becoming the owner for the voyage or service stipulated, subject however to any liability or damages arising from negligence. CONTRACT OF AFFREIGHTMENT In a time charter, the vessel is leased to the charterer for a fixed period of time, whereas in a voyage charter, the vessel is leased for a single or particular voyage. EFFECTS OF CHARTER ON CHARACTER OF CARRIER Generally the character of common carrier as such is not affected by the charter party if the same is a contract of affreightment. PERSONS WHO MAY MAKE CHARTER The owner of the vessel, either in whole or in part or in majority part, who have legal control and possession of the vessel, may validly enter into charter parties with a charterer. A third person called a broker may however, intervene in the execution of the charter between the principals. The charterer may himself subcharter the entire vessel to a third person but only in the event that there is no prohibition in the original charter regarding any subcharter. The shipagent under the Code of Commerce is not allowed to make contracts for a new charter unless he is properly or duly authorized. On the other hand, it is one of the inherent powers of the captain or master of the vessel to enter into valid and binding charter parties, but only in the event of the absence of the ship agent or consignee. REQUISITES FO A VALID CHARTER PARTY 1. 2. 3. Consent of the contracting parties An existing vessel which should be placed at the disposition of the shipper Freight 4. Compliance with the requirements of Art. 652 of Code of Commerce which requires that a charter party must be drawn in duplicate, signed by the parties and by two witness at his the parties request.

FREIGHT The parties themselves may fix the manner or form in which the charter price or money shall be satisfied. DEMURRAGE AND DEADFREIGHT Demurrage means a sum of money due by express contract for the detention of the vessel in loading or unloading beyond the time allowed for that purpose in the charter party, in other words if the vessel is detained beyond the number of days agreed upon in the charter contract for the loading and unloading of the cargo or for eventual sail, the charterer shall answer for the demurrage incurred thereby, the sum of which is usually fixed by the parties in the charter party. EFFECT OF BILL OF LADING If a bill of lading was issued by the shipowner to the charterer, the charter party still governs their rights and the bill of lading may be used as proof of receipt of the goods. CALTEX VS. SULPICIO LINES The charterer has no liability for damages under Philippine Maritime laws. The respective rights and duties of a shipper and the carrier depends not on whether the carrier is public or private, but on whether the contract of carriage is a bill of lading or equivalent shipping documents on the one hand, or a charter party or similar contract on the other. 9 Petitioner and Vector entered into a contract affreightment, also known as a voyage charter. 10 of

A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight. 11 A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charterparty provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ship's store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship. 12 Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own people and

Transpo notes by ace

becomes, in effect, the owner for the voyage or service stipulated, subject to liability for damages caused by negligence. If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship. In this case, the charter party agreement did not convert the common carrier into a private carrier. The parties entered into a voyage charter, which retains the character of the vessel as a common carrier. In Planters Products, Inc. vs. Court of Appeals,
14

required by the Code of Commerce, while in simple loan the formal requisites of contract would apply Fourth, the loan on bottomry and respondentia must be recorded in the registry of vessels in order to bind third persons whereas no such registration is required in simple load Fifth, in the loan of bottomry and respondentia, preference is extended to the last lender if there be several lenders, on the theory that were it not for the last lender, then prior lenders would not have benefitted from the preservation of the security, whereas in simple laod, the first lender as a general rule enjoys preference. PARTIES TO THE LOANS

we said:

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole portion of a vessel of one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or the voyage charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a ship-owner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer

The shipowner may secure a loan on bottomry upon his ship. The cargo owner shall have the right to enter into a loan on respondentia. FORM OF THE LOANS Under the Code of Commerce, it must be; 1. 2. 3. By means of a public instrument By means of a policy signed by the contracting parties and the broker taking part therein By means of a private instrument

LOANS ON BOTTOMRY AND RESPONDENTIA BOTTOMRY in maritime law is a contract whereby the owner of a ship borrows for the use, equipment or repair of the vessel, for a definite term, and pledges the ship as the security with the stipulation that if the ship is lost during the voyage or during the limited time on account of the perils enumerated, the lender shall lose his money. RESPONDENTIA is where the goods or some part thereof, are hypothecated as security for a load, the repayment of which is dependent upon maritime risks, what ensues is a loan on respondentia. There must be a marine risk upon which the loan is predicated such that if the vessel is lost by virtue of that risk, the lender loses the capital or money lent. DISTINGUISHED FROM SIMPLE LOAN First, in bottomry or respondentia, the rate of interest is not subject to the Usury Law, whereas in simple loan it is subject to such law. Second, in bottomry or respondentia, there must necessarily be a marine risk, the existence of which must be duly established whereas in simple loan, there need not be such risks involved Third, the loan on bottomry and respondentia must be executed in accordance with the form and manner

Upon which of these forms the contract is executed, it shall be entered in the certificate of registry of the vessel and shall be recorded in the registry of vessels. Contracts which are not reduced into writing shall not give rise to judicial action. CONSEQUENCES OF LOSS OF EFFECTS OF THE LOANS If the effects of the loans be lost due to an accident of the sea during the time and on the occasion of the voyage which has been designated in the contract and it is proven that the cargo was on board, then the lender loses the right to institute the action which would pertain to him as such. AVERAGES Averages may be general averages or simple averages SIMPE AVERAGES Simple averages shall include all the expenses and damages caused to the vessel or to her cargo which have not inured to the common benefit and profit of all the person interested in the vessel and her cargo. BY WHOM BORNE Since simple or particular average do not inure to the common benefit, the owner of the goods that suffered the damage bears the loss. Res perit domio principles applies

Transpo notes by ace

GENERAL AVERAGES A general average shall include all the damages and expenses which are deliberately caused in order to save the vessel, its cargo or both at the same time, from real and known risk. REQUISITES FOR A GENERAL AVERAGE 1. 2. 3. There must be a common danger That for the common safety, part of the vessel or of the cargo or both is sacrificed deliberately That from the expenses or damages caused by the follows the successful saving of the vessel and cargo That the expenses or damages should have been incurred or inflicted after taking proper legal steps and authority The Code of Commerce expressly provides that general averages shall be borne by those who benefitted from the sacrifice. These include the shipowner and the owners of the cargoes that were saved. INSURERS Art. 859 of the Code of Commerce provides that insurers of the vessel of the freightage and of the cargo shall be obliged to pay for the indemnification of the gross average, insofar as it is required of each one of the objects respectively. LENDERS OF BOTTOMRY AND RESPONDENTIA Art. 732 of the same code provides that lenders on bottomry and respondentia shall suffer in proportion to their respective interest, the general average which may take place in the goods on which the loan is made. WHO IS ENTITLED TO INDEMNITY The owner of the goods which were sacrificed is entitled to receive the general average contribution. However, there are goods if sacrificed are not covered, to wit; 1. 2. 3. Goods carried on deck unless the rule, special law or customs of the place allow the same Goods that are not recorded in the books or record of the vessel Fuel for vessel if there is more than sufficient fuel for the voyage

4.

COMMON DANGER There can be no general average if there is no common danger at all to the ship or the cargo. There is no common danger if the measure was undertaken against a distant peril. There must be immediate peril and not distant. DELIBERATE SACRIFICE Normally, the sacrifice is made through the jettison of the cargo of the ship is thrown overboard during the voyage. There are also instances where there is general average even if the sacrifice was not made during the voyage such as: 1. Where the sinking of the vessel is necessary to extinguish a fire in a port and 2. Where cargo is transferred to lighten the ship on account of a storm to facilitate entry into the port. SACRIFICE MUST BE SUCCESFUL No general contribution can be demanded if the vessel and other cargo that are sought to be saved were in fact not saved. COMPLIANCE WITH LEGAL STEPS There must be a resolution of the captain adopted after deliberation with the sailing mate and other officers of the vessel, and after hearing the person interested in the cargo who may be present. The minutes of the resolution shall be stated in detail all the goods jettisoned, and mention should be made of the injury caused to those kept on board. The captain shall be obliged to deliver one copy of these minutes to the maritime judicial authority of the first port he may make, within 24 hours after his arrival, and to ratify it immediately under oath. BY WHOM BORNE

AMERICAN HOME ASSURANCE COMPANY VS. CA Art. 848 of the Code of commerce reads 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 cargo if it is gross average, and 1% of the goods damaged if particular averages, deducting in both cases the expenses of appraisal, unless there is an agreement to the contrary. COLLISIONS DEFINITION Collision is considered as an impact or sudden contact of a moving body with an obstruction in its line of motion whether both bodies are in motion or one stationary and the other no matter which, in motion. ERROR IN EXTREMIS In the first zone no rules apply. In the second zone the burden is on the vessel required to keep away and avoid the danger. The third zone covers the period in which error in extremis and the rule is that the vessel which has forced the privileged vessel into danger is responsible

Transpo notes by ace

even if the privileged vessel has committed an error within that zone. APPLICABLE LAW Civil Code on quasi-delicts. Code of Commerce for liabilities of shipowners and shipagents as well as captain and crew. RULES ON LIABILITY In some respect, however, the rules that apply to quasidelict cannot be applied in collision cases. For example, the view is that the doctrine of last clear chance and the rule on contributory negligence cannot be applied in collision cases. SPECIFIC RULES UNDER THE CODE OF COMMERCE ONE VESSEL AT FAULT Art. 826. If a vessel should collide with another , through or the fault, negligence, or lack of skill of the captain, sailing mate, or any other member of the complement, the owner of the vessel at fault shall indemnify the losses and damages suffered, after an expert appraisal. BOTH VESSELS AT FAULT Art. 827 If the collision is imputable to both vessels, each one shall suffer its own damage, and both shall be solidarily responsible for the losses and damages occasioned to their cargoes. DOCTRINE OF INSCRUTABLE FAULT; PARTY AT FAULT CANNOT BE DETERMINED Art. 828 The provisions of the preceding article are applicable to the use in it cannot be determined which of the two vessels caused the collision. PROTEST Art. 835 The action for the recovery of losses and damages arising from collisions cannot be admitted if a protest or declaration is not presented within 24 hours before the competent authority of the point where the collision took place, or that of the first port of arrival of the vessel, if in the Philippine territory, and to the consul of the Republic of the Philippines if it occurred in a foreign country. LIMITED LIABILITY RULE Art. 837 The civil liability incurred by the shipowners in the cases prescribed in this section shall be understood as limited to the value of the vessel with all her appurtenances and freight earned during the voyage. NDC VS. CA Agent/ naviero also liable although not expressly provided in Art. 826. LOPEZ VS. DURUELO e. b. c. The provision of the Code of Commerce on collision should not held to include minor craft engaged only in river and bay traffic, such vessel must be governed by the civil code or other provisions of law. Hence, protest is not required in this case. ARRIVAL UNDER STRESS Arrival under stress is the arrival of a vessel at the nearest and most convenient port which wsa decided upon after determining that there is well-founded fear of seizure, privateers, or pirates or reason of any accident of the sea disabling it to navigate. STEPS a. Captains should determine during the voyage if there is well founded fear of seizure The captain shall then assemble the officers The captain shall summon the persons interested in the cargo who may be present and who may attend without the right to vote The officers shall determine and agree if there is a well-founded fear. Captain shall have deciding vote The agreement shall be drafted and the proper minutes shall be signed and entered in the log book Objections and protest shall likewise be entered

d.

f.

SHIPWRECK Shipwreck has been defined as the demolition or shattering of a vessel caused by her driving ashore or on rocks and shoals in the midseas or by the violence of winds or waves in tempest. CODE OF COMMERCE PROVISION Art. 840 The losses and deteriorations suffered by the vessel and her cargo by reason of shipwreck or stranding shall be individually for the account of the owners, the part which may be saved belonging to them in the same proportion. Art. 841 If the wreck is caused by the malice, negligence of lack of skill of the captain or lack or repair or unseaworthiness of the vessel, the ship agent or the shipper may demand indemnity of the captain for damages caused to the vessel. SALVAGE PD 890 It is illegal for one to engage in the business of salvage if such is not license to do so. SALVAGE

Transpo notes by ace

Salvage is a service which one person renders to the owner of a ship or goods, by his own labor, preserving the goods or the ship which the owner or those entrusted with the care of them have either abandoned in distress at sea or are unable to protect and secure KINDS OF SALVAGE SERVICES 1. 2. 3. Voluntary, wherein the dependent upon success compensation is possession which can be maintained against the true owner. EXCEPTION: But when the owner or the master and crew who represent him, leave a vessel temporarily, without any intention of final abandonment but with the intent to return and resume the possession, she is not considered as a legal derelict. QUASI-DERELICT Prima facie vessel found at sea in a situation of peril with no one aboard f her is a derelict, but where the master and crew leave such vessel temporarily without any intention of final abandonment, for the purpose of obtaining assistance, she is not technically a derelict. BASIS FOR ENTITLEMENT TO SALVAGE REWARD Principal circumstance to be taken in consideration 1. 2. 3. The labor expended by the salvors in rendering the salvage service The promptitude, skill and energy displayed in rendering the service and saving the property The value of the property employed by the salvors in rendering the service, and danger to which such property was exposed The risk incurred by the salvors in rescuing the property from the impending peril The value of the property salved The degree of danger which the property was rescued

Rendered under a contract for a pier diem or per horam wage payable at all events Under a contract for a compensations payable only in cases of success

CLAIM FOR VALID SALVAGE AND ITS ELEMENTS Salvage" has been defined as "the compensation allowed to persons by whose assistance a ship or her cargo has been saved, in whole or in part, from impending peril on the sea, or in recovering such property from actual loss, as in case of shipwreck, derelict, or recapture." (Blackwall v. Saucelito Tug Company, 10 Wall. 1, 12, cited in Erlanger & Galinger v. Swedish East Asiatic Co., Ltd., 34 Phil. 178.) In the Erlanger & Galinger case, it was held that three elements are necessary to a valid salvage claim, namely, (1) a marine peril, (2) service voluntarily rendered when not required as an existing duty or from a special contract, and (3) success in whole or in part, or that the service rendered contributed to such success (4) the vessel is shipwrecked beyond the control of the crew or shall have been abandoned ABANDONMENT A derelict is a ship or her cargo which is abandoned and deserted at sea by those who were in charge of it, without any hope of recovering it or without any intention of returning it. whether the property is adjudged derelict is determined by ascertaining what was the intention and expectation of those in charge of it when they quitted it. if those in charge left with the intention of returning or of procuring assistance, the property is not derelict but if they quitted the property with the intention of finally leaving it, it is derelict and a change of their intention and an attempt to return will not change its nature. Nevertheless, if it is clear that the intention to return is slight, the salvage which was done therafter is considered valid. GENERAL RULE: When a vessel is found at sea, deserted, and has been abandoned by the master and crew without the intention of returning and resuming the possession, she is, in the sense of the law a derelict, and the finder who takes the possession with the intention of saving her gains a right of

4. 5. 6.

RIGHTS AND OBLIGATION OF SALVORS AND OWNERS Salvor is entitled to compensation. He has under the salvage law a lien upon the property salvaged. On the other hand, the owner does not denounce his right to the property. There is no ipresumption of an intention to abandon such property rights.

Section 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control of the crew, or shall have been abandoned by them, and picked up and conveyed to a safe place by other persons, the latter shall be entitled to a reward for the salvage. Those who, not being included in the above paragraph, assist in saving a vessel or its cargo from shipwreck, shall be entitled to a like reward. Sec. 2. If the captain of the vessel, or the person acting in his stead, is present, no one shall take from the sea, or from the shores or coast merchandise or effects

Transpo notes by ace

proceeding from a shipwreck or proceed to the salvage of the vessel, without the consent of such captain or person acting in his stead. Sec. 3. He who shall save or pick up a vessel or merchandise at sea, in the absence of the captain of the vessel, owner, or a representative of either of them, they being unknown, shall convey and deliver such vessel or merchandise, as soon as possible, to the Collector of Customs, if the port has a collector, and otherwise to the provincial treasurer or municipal mayor. Sec. 4. After the salvage is accomplished, the owner or his representative shall have a right to the delivery of the vessel or things saved, provided that he pays, or gives a bond to secure, the expenses and the proper reward. The amount and sufficiency of the bond, in the absence of agreement, shall be determined by the Collector of Customs or by the Judge of the Court of First Instance of the province in which the things saved may be found. . Sec. 6. If, while the vessel or things saved are at the disposition of the authorities, the owner or his representative shall claim them, such authorities shall order their delivery to such owner or his representative, provided that there is no controversy over their value, and a bond is given by the owner or his representative to secure the payment of the expenses and the proper reward. Otherwise, the delivery shall nor be made until the matter is decided by the Court of First Instance of the province. Sec. 7. No claim being presented in the three months subsequent to the publication of the advertisement prescribed in sub-section (c) of Section five, the things save shall be sold at public auction, and their proceeds, after deducting the expenses and the proper reward shall be deposited in the insular treasury. If three years shall pass without anyone claiming it, one-half of the deposit shall be adjudged to him who saved the things, and the other half to the insular government. Sec. 8. The following shall have no right to a reward for salvage or assistance: a. The crew of the vessel shipwrecked or which was is danger of shipwreck; b. He who shall have commenced the salvage in spite of opposition of the captain or his representative; and c. He who shall have failed to comply with the provisions of Section three. Sec. 9. If, during the danger, an agreement is entered into concerning the amount of the reward for salvage or assistance, its validity may be impugned because it is excessive, and it may be required to be reduced to an amount proportionate to the circumstances. Sec. 10. In a case coming under the last preceding section, as well as in the absence of an agreement, the reward for salvage or assistance shall be fixed by the Court of First Instance of the province where the things salvaged are found, taking into account principally the expenditures made to recover or save the vessel or the cargo or both, the zeal demonstrated, the time employed, the services rendered, the excessive express occasioned the number of persons who aided, the danger to which they and their vessels were exposed as well as that which menaced the things recovered or salvaged, and the value of such things after deducting the expenses. Sec. 11. From the proceeds of the sale of the things saved shall be deducted, first, the expenses of their custody, conservation, advertisement, and auction, as well as whatever taxes or duties they should pay for their entrance; then there shall be deducted the expenses of salvage; and from the net amount remaining shall be taken the reward for the salvage or assistance which shall not exceed fifty per cent of such amount remaining. Sec. 12. If in the salvage or in the rendering of assistance different persons shall have intervened the reward shall be divided between them in proportion to the services which each one may have rendered, and, in case of doubt, in equal parts. Those who, in order to save persons, shall have been exposed to the same dangers shall also have a right to participation in the reward. Sec. 13. If a vessel or its cargo shall have been assisted or saved, entirely or partially, by another vessel, the reward for salvage or for assistance shall be divided between the owner, the captain, and the remainder of the crew of the latter vessel, so as to give the owner a half, the captain a fourth, and all the remainder of the crew the other fourth of the reward, in proportion to their respective salaries, in the absence of an agreement to the contrary. The express of salvage, as well as the reward for salvage or assistance, shall be a charge on the things salvaged on their value.

G. URRUTIA VS. PASIG STREAMER The towage of a vessel in perilto some place of security, when the vessel by itself is unable to reach the same is a service of salvage. C.G ROBINSON VS. THE SHIP ALTA Salvor is bound by the contract even if expenses were larger than remuneration stipulated if contract is free from fraud, misrepresentation, etc. BARRIOS VS. GO THONG SECTION 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control of the crew, or shall have been abandoned by them, and picked up and conveyed to a safe place by other persons, the latter shall be entitled to a reward for the salvage.

Transpo notes by ace

Those who, not being included in the above paragraph, assist in saving a vessel or its cargo from shipwreck, shall be entitled to a like reward. According to this provision, those who assist in saving a vessel or its cargo from shipwreck, shall be entitled to a reward (salvage). "Salvage" has been defined as "the compensation allowed to persons by whose assistance a ship or her cargo has been saved, in whole or in part, from impending peril on the sea, or in recovering such property from actual loss, as in case of shipwreck, derelict, or recapture." (Blackwall v. Saucelito Tug Company, 10 Wall. 1, 12, cited in Erlanger & Galinger v. Swedish East Asiatic Co., Ltd., 34 Phil. 178.) In the Erlanger & Galinger case, it was held that three elements are necessary to a valid salvage claim, namely, (1) a marine peril, (2) service voluntarily rendered when not required as an existing duty or from a special contract, and (3) success in whole or in part, or that the service rendered contributed to such success.1 Was there a marine peril, in the instant case, to justify a valid salvage claim by plaintiff against defendant? Like the trial court, we do not think there was. It appears that although the defendant's vessel in question was, on the night of May 1, 1958, in a helpless condition due to engine failure, it did not drift too far from the place where it was. As found by the court a quo the weather was fair, clear, and good. The waves were small and too slight, so much so, that there were only ripples on the sea, which was quite smooth. During the towing of the vessel on the same night, there was moonlight. Although said vessel was drifting towards the open sea, there was no danger of it floundering or being stranded, as it was far from any island or rocks. In case of danger of stranding, its anchor could released, to prevent such occurrence. There was no danger that defendant's vessel would sink, in view of the smoothness of the sea and the fairness of the weather. That there was absence of danger is shown by the fact that said vessel or its crew did not even find it necessary to lower its launch and two motor boats, in order to evacuate its passengers aboard. Neither did they find occasion to jettison the vessel's cargo as a safety measure. Neither the passengers nor the cargo were in danger of perishing. All that the vessel's crew members could not do was to move the vessel on its own power. That did not make the vessel a quasi-derelict, considering that even before the appellant extended the help to the distressed ship, a sister vessel was known to be on its way to succor it. If plaintiff's service to defendant does not constitute "salvage" within the purview of the Salvage Law, can it be considered as a quasi-contract of "towage" created in the spirit of the new Civil Code? The answer seems to incline in the affirmative, for in consenting to plaintiff's offer to tow the vessel, defendant (through the captain of its vessel MV Don Alfredo) thereby impliedly entered into a juridical relation of "towage" with the owner of the vessel MV Henry I, captained by plaintiff, the William Lines, Incorporated. It often becomes material too, for courts to draw a distinct line between salvage and towage, for the reason that a reward ought sometimes to be given to the crew of the salvage vessel and to other participants in salvage services; and such reward should not be given if the services were held to be merely towage. (The Rebecca Shepherd, 148 F. 731.) The master and members of the crew of a tug were not entitled to participate in payment by liberty ship for services rendered by tug which were towage services and not salvage services. (Sause, et al. v. United States, et al., supra.) "The distinction between salvage and towage is of importance to the crew of the salvaging ship, for the following reasons: If the contract for towage is in fact towage, then the crew does not have any interest or rights in the remuneration pursuant to the contract. But if the owners of the respective vessels are of a salvage nature, the crew of the salvaging ship is entitled to salvage, and can look to the salvaged vessel for its share. (I Norris, The Law of Seamen, Sec. 222.) COGSA The New Civil Code is the primary law on goods that are being transported from a foreign port to the Philippines. Nevertheless, COGSA remaisn to be a suppletorily law for such type of transportation- international shipping. SEC 3 PAR. 6 Unless notice or loss or damage and the general nature of such loss or damage by given in writing to the carrier or his agent at the port of discharge or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the loss or damage is not apparent, the notice must be given within 3 days of the delivery. Said notice of loss or damage may be endorsed upon the receipt of the goods given by the person taking delivery thereof. The notice in writing need not be given if the state of the goods has at the time of their receipt been the subject of joint survey or inspection. In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within 1 year after delivery of the goods or the date when the goods should have been delivered: Provided, that if a notice of loss or damage either apparent or concealed, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within 1 year after delivery of the goods or the date the goods should have been delivered. In case of any actual or apprehended loss or damage, the carrier and the receiver shall give all reasonable facilities to each other for inspecting and tallying the goods.

Transpo notes by ace

ANG VS. AMERICAN STEAMSHIP AGENCIES defined in the Civil Code and as applied to Section 3 (6) paragraph 4 of the Carriage of Goods by Sea Act, "loss" contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared that their existence is unknown or they cannot be recovered. It does not include a situation where there was indeed delivery but delivery to the wrong person, or a misdelivery, as alleged in the complaint in this case. The distinction between non-delivery and misdelivery has reference to bills of lading. As this Court shall in Tan Pho vs. Hassamal Dalamal, 67 Phil. 555, 557-558: Considering that the bill of lading covering the goods in question has been made to order, which means that said goods cannot be delivered without previous payment of the value thereof, it is evident that, the said goods having been delivered to Aldeguer without paying the price of the same, these facts constitute misdelivery and not nondelivery, because their was in fact delivery of merchandise. We do not believe it can be seriously and reasonably argued that what took place, as contended of by the petitioner, is a case of misdelivery with respect to Aldeguer and at the same time nondelivery with respect to the PNB who had the bill of lading, because the only thing to consider in this question is whether Enrique Aldeguer was entitled to get the merchandise or whether, on the contrary, the PNB is the one entitled thereto. Under the facts, the defendant petitioner should not have delivered the goods to Aldeguer but to the Philippine National Bank. Having made the delivery to Aldeguer, the delivery is a case of misdelivery. If the goods have been delivered, it cannot at the same time be said that they have not been delivered. According to the bill of lading which was issued in the case at bar to the order of the shipper, the carrier was under a duty not to deliver the merchandise mentioned in the bill of lading except upon presentation of the bill of lading duly endorsed by the shipper. (10 C.J., 259) Hence, the defendant-petitioner Tan Pho having delivered the goods to Enrique Aldeguer without the presentation by the latter of the bill of lading duly endorsed to him by the shipper, the said defendant made a misdelivery and violated the bill of lading, because his duty was not only to transport the goods entrusted to him safely, but to deliver them to the person indicated in the bill of lading. (Emphasis supplied) The point that matters here is that the situation is either delivery or misdelivery, but not nondelivery. Thus, the goods were either rightly delivered or misdelivered, but they were not lost. There being no loss or damage to the goods, the aforequoted provision of the Carriage of Good by Sea Act stating that "In any event, the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered," does not apply. The reason is not difficult to see. Said one-year period of limitation is designed to meet the exigencies of maritime hazards. In a case where the goods shipped were neither last nor damaged in transit but were, on the contrary, delivered in port to someone who claimed to be entitled thereto, the situation is different, and the special need for the short period of limitation in cases of loss or damage caused by maritime perils does not obtain. It follows that for suits predicated not upon loss or damage but on alleged misdelivery (or conversion) of the goods, the applicable rule on prescription is that found in the Civil Code, namely, either ten years for breach of a written contract or four years for quasi-delict. (Arts. 1144[1], 1146, Civil Code) In either case, plaintiff's cause of action has not vet prescribed, since his right of action would have accrued at the earliest on May 9, 1961 when the ship arrived in Manila and he filed suit on October 30, 1963. AMERICAN INSURANCE VS. COMPANIA MARITIMA The transshipment of the cargo from Manila to Cebu was not a separate transaction from that originally entered into by Macondray, as general agent for the "M/S TOREADOR". It was part of Macondray's obligation under the contract of carriage and the fact that the transshipment was made via an inter-island vessel did not operate to remove the transaction from the operation of the Carriage of Goods by Sea Act. UNION CARBIDE PHILS. VS. MANILA RAILROAD The sensible and practical interpretation is that delivery within the meaning of section 3(6) of the Carriage of Goods by Sea Law means delivery to the arrastre operator. That delivery is evidenced by tally sheets which show whether the goods were landed in good order or in bad order, a fact which the consignee or shipper can easily ascertain through the customs broker. To use as basis for computing the one-year period the delivery to the consignee would be unrealistic and might generate confusion between the loss or damage sustained by the goods while in the carrier's custody and the loss or damage caused to the goods while in the arrastre operator's possession. EASTERN AND AMERICAN AUSTRALIAN STEAMSHIP VS. GREAT

A stipulation in a contract of carriage that the carrier will not be liable beyond a specified amount unless the shipper declares the goods to have a greater value is generally deemed to be valid and will operate to limit the carrier's liability, even if the loss or damage results from the carrier's negligence. Pursuant to such provision, where the shipper is silent as to the value of his goods, the carrier's liability for loss or damage thereto is limited to the amount specified in the contract of carriage and

Transpo notes by ace

where the shipper states the value of his goods, the carrier's liability for loss or damage thereto is limited to that amount. Under a stipulation such as this, it is the duty of the shipper to disclose, rather than the carrier's to demand the true value of the goods and silence on the part of the shipper will be sufficient to limit recovery in case of loss to the amount stated in the contract of carriage. There is no inconsistency between Section 4 (5) of the Carriage of Goods by Sea Act and Clause 17 of the Bill of Lading. The first part of the provision of Section 4 (5) of the Carriage of Goods by Sea Act limits the melee, amount that may be recovered by the shipper in the absence of an agreement as to the nature and value of goods shipped. Said provision does not prescribe the minimum and hence, it could be any amount which is below $500.00. Clause 17 of the questioned Bill of Lading also provides the melee, for which the carrier is liable. It prescribes that the carrier may only be held liable for an amount not more than L100 Sterling which is below the melee, limit required in the Carriage of Goods by Sea Act.virtual The second paragraph of Section 4 (5) of the Carriage of Goods by Sea Act prescribing the melee, amount shall not be less than $500.00 refers to a situation where there is an agreement other than set forth in the Bill of Lading providing for a melee, higher than $500.00 per package. In the case at bar, it is apparent that there had been no agreement between the parties, and hence, Clause 17 of the Bill of Lading shall prevail. MAYER STEEL PIPE CORP VS. CA Section 3(6) of the Carriage of Goods by Sea Act provides that "the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered." Respondent court ruled that this provision applies not only to the carrier but also to the insurer, citing Filipino Merchants Insurance Co., Inc. vs. Alejandro. Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability for loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been delivered. Under this provision, only the carrier's liability is extinguished if no suit is brought within one year. But the liability of the insurer is not extinguished because the insurer's liability is based not on the contract of carriage but on the contract of insurance. A close reading of the law reveals that the Carriage of Goods by Sea Act governs the relationship between the carrier on the one hand and the shipper, the consignee and/or the insurer on the other hand. It defines the obligations of the carrier under the contract of carriage. It does not, however, affect the relationship between the shipper and the insurer. The latter case is governed by the Insurance Code. MITSUI OSK LINES VS. CA Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage through Meister Transport, Inc., an international freight forwarder, with private respondent Lavine Loungewear Manufacturing Corporation to transport goods of the latter from Manila to Le Havre, France. Petitioner undertook to deliver the goods to France 28 days from initial loading. On July 24, 1991, petitioners vessel loaded private respondents container van for carriage at the said port of origin. However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with the result that the shipment arrived in Le Havre only on November 14, 1991. The consignee allegedly paid only half the value of the said goods on the ground that they did not arrive in France until the off season in that country. The remaining half was allegedly charged to the account of private respondent which in turn demanded payment from petitioner through its agent. There would be some merit in appellants insistence that the damages suffered by him as a result of the delay in the shipment of his cargo are not covered by the prescriptive provision of the Carriage of Goods by Sea Act above referred to, if such damages were due, not to the deterioration and decay of the goods while in transit, but to other causes independent of the condition of the cargo upon arrival, like a drop in their market value Said one-year period of limitation is designed to meet the exigencies of maritime hazards. In a case where the goods shipped were neither lost nor damaged in transit but were, on the contrary, delivered in port to someone who claimed to be entitled thereto, the situation is different, and the special need for the short period of limitation in cases of loss or damage caused by maritime perils does not obtain. In the case at bar, there is neither deterioration nor disappearance nor destruction of goods caused by the carriers breach of contract. Whatever reduction there may have been in the value of the goods is not due to their deterioration or disappearance because they had been damaged in transit. virtualawlibrary Precisely, the question before the trial court is not the particular sense of damages as it refers to the physical loss or damage of a shippers goods as specifically covered by 3(6) of COGSA but petitioners potential liability for the damages it has caused in the general sense and, as such, the matter is governed by the Civil Code, the Code of Commerce and COGSA, for the breach of its contract of carriage with private respondent. vir We conclude by holding that as the suit below is not for loss or damage to goods contemplated in 3(6), the question of prescription of action is governed not by the COGSA but by Art. 1144 of the Civil Code which provides for a prescriptive period of ten years. PHIL FIRST INSURANCE CO VS. WALLEM PHILS. SHIPPING

Transpo notes by ace

For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable for the cargo from the time it is turned over to him at the dock or afloat alongside the vessel at the port of loading, until he delivers it on the shore or on the discharging wharf at the port of unloading, unless agreed otherwise. In Standard Oil Co. of New York v. Lopez Castelo, the Court interpreted the ship captains liability as ultimately that of the shipowner by regarding the captain as the representative of the ship owner. Lastly, Section 2 of the COGSA provides that under every contract of carriage of goods by sea, the carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the responsibilities and liabilities and entitled to the rights and immunities set forth in the Act. Section 3 (2) thereof then states that among the carriers responsibilities are to properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried. PUBLIC UTILITIES Public utility is a business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity, gas water, transportation, telephone or telegraph service. As such public utility services are impressed with public interest and concern. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect grants to the public an interest in that use, and must submit to the control by the public for the common good, to the extent of the interest he has thus created. Public service includes every person that now or hereafter may own, operate, manage or control in the Philippines for hire or for compensation with general or limited clientele whether permanent, occasional, or accidental and done for general business. CONSTITUTIONAL PROVISION ART XII SEC. 11 No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least 60 % of whose capital is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than 50 years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration or repeal by the Congress when the common good requires. The state shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines. LTFRB They may adopt 2 methods in rate determination. 1. 2. Straight method Add-on method BASES OF REGULATION OF PUBLIC UTILITIES The police power of the State justifies the regulation of public utilities. In other words, regulation of public utilities is founded upon the police powers of the State and statutes prescribing rules for the control and regulation of public utilities are considered valid exercise thereof. OWNERSHIP OF PUBLIC UTILITIES ART XII SEC. 11 However, the limit imposed by the Constitution on foreign equity applies only to the operation of a public utility and not to ownership of the facilities. REGULATION OF RATES The regulations of public utilities include the regulation of the rates that they are charging the public. The fixing of just and reasonable rates involves a balancing of the investor and the consumer interests. NON-DELEGATION The power to fix the rates of public utilities is a power that has been delegated to the regulatory administrative agencies. As such it cannot be further delegated by the said administrative agencies. STANDARD IN FIXING RATES The only standard which the legislature is required to prescribe for the guidance of the administrative authority is that the rate be reasonable and just. FACTORS TO CONSIDER a. b. c. Rate of return Rate base The return itself or the computed revenue to be earned by the public utility based on the rate of return and rate base

Straight method is the process by which the actual distance travelled is multiplied by the authorized fare per succeeding kilometer Add-on method is adding the established minimum fare to the fare succeeding kilometer multiplied by distance covered.

Transpo notes by ace

PROVISIONAL INCREASE An administrative agency may be empowered by law to approve provisionally, when demanded by urgent public need, rates of public utilities without a hearing. The reason is easily discerned from the fact that a provisional rates are by their nature temporary and subject to adjustment in conformity with the definitive rates approved after final hearing. AUTHORITY TO OPERATE AS PUBLIC UTILITY The power to authorize and control the operation of a public utility is admittedly a prerogative of the legislature, since Congress is that branch of government vested with plenary powers of legislation. The franchise is a legislative grant, whether made directly by the legislature itself or by any one of its property constituted instrumentalities. It is up to congress whether it will delegate the power to authorize the operation of public utilities to administrative agencies. FRANCHISE AND CERTIFICATE OF PUBLIC CONVENIENCE A franchise is distinguished from a CPC in that the former is a grant or privilege from the sovereign power, while the latter is a form of regulation through the administrative agencies. A certificate of public convenience is not necessary for the issuance of a legislative franchise. However, a legislative franchise is necessary before a CPC can be issued to operate radio and television broadcasting companies. Consequently, even if there was already a delegation of authority to a specific administrative agency to issue a CPC, it does not follow that a legislative franchise is no longer necessary. NATURE OF CPC A certificate is a mere privilege that is always subject to the regulation of the State. Insofar as the State is concerned, a certificate of public convenience constitute neither a franchise nor a contract, confers no property right, and is a mere license or privilege. TRANSFER OF CERTIFICATE The law really requires the approval of the Public Service Commission in order that a franchise or any privilege pertaining thereto may be sold or leased without infringing the certificate issued to the grantee. The registered owner rule applies if the transfer of the franchise was not approved by the regulating agency. REVOCATION OF CERTIFICATE Since the holding of public convenience is just a privilege, the same certificate may be revoked by the administrative agency concerned. INSTANCES WHERE CANCELLATION OF CPC IS HELD VALID 1. 2. Where holder is a mere dummy Where operator ceased operation and placed his buses on storage Where the operator abandons totally the service

3.

LUQUE VS. VILLEGAS Second, the same situation holds true with respect to the provision of the Public Service Act. Although the Public Service Commission is empowered, under its Section 16(m), to amend, modify or revoke certificates of public convenience after notice and hearing, yet there is no provision, specific or otherwise, which can be found in this statute (Commonwealth Act No. 146) vesting power in the Public Service Commission to superintend, regulate, or control the streets of respondent City or suspend its power to license or prohibit the occupancy thereof. On the other hand, this right or authority, as hereinabove concluded is conferred upon respondent City of Manila. The power vested in the Public Service Commission under Section 16(m) is, therefore, subordinate to the authority granted to respondent City, under said section 18 (hh). . . . That the powers conferred by law upon the Public Service Commission were not designed to deny or supersede the regulatory power of local governments over motor traffic, in the streets subject to their control is made evident by section 17 (j) of the Public Service Act (Commonwealth Act No. 146) that provides as follows: "SEC. 17. Proceedings of Commission without previous hearing. The Commission shall have power, without previous hearing, subject to established limitations and exceptions, and saving provisions to the contrary: (j) To require any public service to comply with the laws of the Philippines, and with any provincial resolution or municipal ordinance relating thereto, and to conform to the duties imposed upon it thereby, or by the provisions of its own charter, whether obtained under any general or special law of the Philippines." (Emphasis supplied) The petitioner's contention that, under this section, the respective ordinances of the City can only be enforced by the Commission alone is obviously unsound. Subsection (j) refers not only to ordinances but also to "the laws of the Philippines," and it is plainly absurd to assume

Transpo notes by ace

that even laws relating to public services are to remain a dead letter without the placet of the Commission; and the section makes no distinction whatever between enforcement of laws and that of municipal ordinances. Contending that they possess valid and subsisting certificates of public convenience, the petitioning public services aver that they acquired a vested right to operate their public utility vehicles to and from Manila as appearing in their said respective certificates of public convenience. Petitioner's argument pales on the face of the fact that the very nature of a certificate of public convenience is at cross purposes with the concept of vested rights. To this day, the accepted view, at least insofar as the State is concerned, is that "a certificate of public convenience constitutes neither a franchise nor a contract, confers no property right, and is a mere license or privilege."9 The holder of such certificate does not acquire a property right in the route covered thereby. Nor does it confer upon the holder any proprietary right or interest of franchise in the public highways.10 Revocation of this certificate deprives him of no vested right.11 Little reflection is necessary to show that the certificate of public convenience is granted with so many strings attached. New and additional burdens, alteration of the certificate, and even revocation or annulment thereof is reserved to the State. We need but add that the Public Service Commission, a government agency vested by law with "jurisdiction, supervision, and control over all public services and their franchises, equipment, and other properties" 12 is empowered, upon proper notice and hearing, amongst others: (1) "[t]o amend, modify or revoke at any time a certificate issued under the provisions of this Act [Commonwealth Act 146, as amended], whenever the facts and circumstances on the strength of which said certificate was issued have been misrepresented or materially changed";13 and (2) "[t]o suspend or revoke any certificate issued under the provisions of this Act whenever the holder thereof has violated or wilfully and contumaciously refused to comply with any order, rule or regulation of the Commission or any provision of this Act: Provided, That the Commission, for good cause, may prior to the hearing suspend for a period not to exceed thirty days any certificate or the exercise of any right or authority issued or granted under this Act by order of the Commission, whenever such step shall in the judgment of the Commission be necessary to avoid serious and irreparable damage or inconvenience to the public or to private interests."14 Jurisprudence echoes the rule that the Commission is authorized to make reasonable rules and regulations for the operation of public services and to enforce them.15 In reality, all certificates of public convenience issued are subject to the condition that all public services "shall observe and comply [with] ... all the rules and regulations of the Commission relative to" the service.16 To further emphasize the control imposed on public services, before any public service can "adopt, maintain, or apply practices or measures, rules, or regulations to which the public shall be subject in its relation with the public service," approval must first be had.17 the Commission's

And more. Public services must also reckon with provincial resolutions and municipal ordinances relating to the operation of public utilities within the province or municipality concerned. The Commission can require compliance with these provincial resolutions or municipal ordinances.18 KILUSANG MAYO UNO VS. GARCIA Public utilities are privately owned and operated businesses whose service are essential to the general public. They are enterprises which specially cater to the needs of the public and conduce to their comfort and convenience. As such, public utility services are impressed with public interest and concern. The same is true with respect to the business of common carrier which holds such a peculiar relation to the public interest that there is superinduced upon it the right of public regulation when private properties are affected with public interest, hence, they cease to be juris privati only. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect grants to the public an interest in that use, and must submit to the control by the public for the common good, to the extent of the interest he has thus created. 1 An abdication of the licensing and regulatory government agencies of their functions as the instant petition seeks to show, is indeed lamentable. Not only is it an unsound administrative policy but it is inimical to public trust and public interest as well. Such delegation of legislative power to an administrative agency is permitted in order to adapt to the increasing complexity of modern life. As subjects for governmental regulation multiply, so does the difficulty of administering the laws. Hence, specialization even in legislation has become necessary. Given the task of determining sensitive and delicate matters as route-fixing and ratemaking for the transport sector, the responsible regulatory body is entrusted with the power of subordinate legislation. With this authority, an administrative body and in this case, the LTFRB, may implement broad policies laid down in a statute by "filling in" the details which the Legislature may neither have time or competence to provide. However, nowhere under the aforesaid provisions of law are the regulatory bodies, the PSC and LTFRB alike, authorized to delegate that power to a common carrier, a transport operator, or other public service. In the case at bench, the authority given by the LTFRB to the provincial bus operators to set a fare range over and above the authorized existing fare, is illegal and invalid as it is tantamount to an undue delegation of legislative authority. Potestas delegata non delegari potest. What has been delegated cannot be delegated. This doctrine is based on the ethical principle that such a delegated power constitutes not only a right but a duty to be performed by the delegate through the instrumentality of

Transpo notes by ace

his own judgment and not through the intervening mind of another. The above-quoted provision is entirely incompatible and inconsistent with Section 16(c)(iii) of the Public Service Act which requires that before a CPC will be issued, the applicant must prove by proper notice and hearing that the operation of the public service proposed will promote public interest in a proper and suitable manner. On the contrary, the policy guideline states that the presumption of public need for a public service shall be deemed in favor of the applicant. In case of conflict between a statute and an administrative order, the former must prevail. By its terms, public convenience or necessity generally means something fitting or suited to the public need. 16 As one of the basic requirements for the grant of a CPC, public convenience and necessity exists when the proposed facility or service meets a reasonable want of the public and supply a need which the existing facilities do not adequately supply. The existence or non-existence of public convenience and necessity is therefore a question of fact that must be established by evidence, real and/or testimonial; empirical data; statistics and such other means necessary, in a public hearing conducted for that purpose. The object and purpose of such procedure, among other things, is to look out for, and protect, the interests of both the public and the existing transport operators. Verily, the power of a regulatory body to issue a CPC is founded on the condition that after full-dress hearing and investigation, it shall find, as a fact, that the proposed operation is for the convenience of the public. 17 Basic convenience is the primary consideration for which a CPC is issued, and that fact alone must be consistently borne in mind. Also, existing operators in subject routes must be given an opportunity to offer proof and oppose the application. Therefore, an applicant must, at all times, be required to prove his capacity and capability to furnish the service which he has undertaken to render. 18 And all this will be possible only if a public hearing were conducted for that purpose. Otherwise stated, the establishment of public need in favor of an applicant reverses well-settled and institutionalized judicial, quasi-judicial and administrative procedures. It allows the party who initiates the proceedings to prove, by mere application, his affirmative allegations. Moreover, the offending provisions of the LTFRB memorandum circular in question would in effect amend the Rules of Court by adding another disputable presumption in the enumeration of 37 presumptions under Rule 131, Section 5 of the Rules of Court. Such usurpation of this Court's authority cannot be countenanced as only this Court is mandated by law to promulgate rules concerning pleading, practice and procedure.