Maritime Commerce Chap 4-12 Cases

TRANSPORT LAW Atty.
Padilla
MARITIME COMMERCE
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CHAPTER IV - MARITIME CONTRACTS: CHARTERPARTIES (Arts. 652 - 718, Code of

Commerce)
1.DEFINITION
2. KINDS
LITONJUA SHIPPING COMPANY INC v. NATIONAL SEAMEN BOARD

G.R. No. L-51910 August 10, 1989
Facts:
Petitioner Litonjua is the duly appointed local crewing Managing Office of the
Fairwind Shipping Corporation('Fairwind). The M/V Dufton Bay is an ocean-going vessel of
foreign registry owned by the R.D. Mullion Ship Broking Agency Ltd. ("Mullion"). While
the Dufton Bay was in the port of Cebu and while under charter by Fairwind, the vessel's
master contracted the services of, among others, private respondent Gregorio Candongo to
serve as Third Engineer for a period of twelve (12) months with a monthly wage of
US$500.00. This agreement was executed before the Cebu Area Manning Unit of the NSB.
Thereafter, private respondent boarded the vessel. Before expiration of his contract, private
respondent was required to disembark at Port Kelang, Malaysia, and was returned to the
Philippines. The cause of the discharge was described in his Seaman's Book as 'by owner's
arrange". Private respondent filed a complaint before public respondent NSB for violation of
contract, against Mullion as the shipping company and petitioner Litonjua as agent of the
shipowner and of the charterer of the vessel. At the hearing, private respondent testified
that when he was recruited by the Captain of the Dufton Bay, the latter was accompanied to
the NSB Cebu Area Manning Unit by two (2) supercargos sent by petitioner Litonjua to Cebu,
and that the two (2) supercargos Edmond Cruz and Renato Litonjua assisted private
respondent in the procurement of his National Investigation and Security Agency (NISA)
clearance. Petitioner Litonjua contends that the shipowner, not the charterer, was the
employer of private respondent; and that liability for damages cannot be imposed upon
petitioner which was a mere agent of the charterer. It is insisted that private respondent's
contract of employment and affidavit of undertaking clearly showed that the party with
whom he had contracted was none other than Mullion, the shipowner, represented by the
ship's master.
Issue:
Held:
The Supreme Court ruled that a charter party which existed between Mullion,
the shipowner, and Fairwind, the charterer. In modern maritime law and usage, there are
three (3) distinguishable types of charter parties: (a) the "bareboat" or "demise" charter; (b)
the "time" charter; and (c) the "voyage" or "trip" charter.
A bareboat or demise charter is a demise of a vessel, much as a lease of an unfurnished
house is a demise of real property. The shipowner turns over possession of his vessel to the
charterer, who then undertakes to provide a crew and victuals and supplies and fuel for her
during the term of the charter. The shipowner is not normally required by the terms of a
demise charter to provide a crew, and so the charterer gets the "bare boat", i.e., without a
crew. Sometimes, of course, the demise charter might provide that the shipowner is to
furnish a master and crew to man the vessel under the charterer's direction, such that the
master and crew provided by the shipowner become the agents and servants or employees
of the charterer, and the charterer (and not the owner) through the agency of the master,
has possession and control of the vessel during the charter period.
A time charter, upon the other hand, like a demise charter, is a contract for the use of a
vessel for a specified period of time or for the duration of one or more specified voyages. In
TRANSPORT LAW Atty. Padilla
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this case, however, the owner of a time-chartered vessel (unlike the owner of a vessel under
a demise or bare-boat charter), retains possession and control through the master and crew
who remain his employees. What the time charterer acquires is the right to utilize the
carrying capacity and facilities of the vessel and to designate her destinations during the
term of the charter.
A voyage charter, or trip charter, is simply a contract of affreightment, that is, a contract for
the carriage of goods, from one or more ports of loading to one or more ports of unloading,
on one or on a series of voyages. In a voyage charter, master and crew remain in the
employ of the owner of the vessel.
In a demise or bare boat charter, the charterer is treated as owner pro hac vice of the
vessel, the charterer assuming in large measure the customary rights and liabilities of the
shipowner in relation to third persons who have dealt with him or with the vessel. In such
case, the Master of the vessel is the agent of the charterer and not of the shipowner. The
charterer or owner pro hac vice, and not the general owner of the vessel, is held liable for
the expenses of the voyage including the wages of the seamen.
It is important to note that petitioner Litonjua did not place into the record of this case a
copy of the charter party covering the M/V Dufton Bay. We must assume that petitioner
Litonjua was aware of the nature of a bareboat or demise charter and that if petitioner did
not see fit to include in the record a copy of the charter party, which had been entered into
by its principal, it was because the charter party and the provisions thereof were not
supportive of the position adopted by petitioner Litonjua in the present case, a position
diametrically opposed to the legal consequence of a bareboat charter. Treating Fairwind as
owner pro hac vice, petitioner Litonjua having failed to show that it was not such, we believe
and so hold that petitioner Litonjua, as Philippine agent of the charterer, may be held liable
on the contract of employment between the ship captain and the private respondent.
There is a second and ethically more compelling basis for holding petitioner Litonjua liable
on the contract of employment of private respondent. The charterer of the vessel, Fairwind,
clearly benefitted from the employment of private respondent as Third Engineer of
the Dufton Bay, along with the ten (10) other Filipino crewmembers recruited by Captain Ho
in Cebu at the same occasion.
Last, but certainly not least, there is the circumstance that extreme hardship would result for
the private respondent if petitioner Litonjua, as Philippine agent of the charterer, is not held
liable to private respondent upon the contract of employment. Clearly, the private
respondent, and the other Filipino crew members of the vessel, would be defenseless
against a breach of their respective contracts. While wages of crew members constitute a
maritime lien upon the vessel, private respondent is in no position to enforce that lien. If
only because the vessel, being one of foreign registry and not ordinarily doing business in
the Philippines or making regular calls on Philippine ports cannot be effectively held to
answer for such claims in a Philippine forum. Upon the other hand, it seems quite clear that
petitioner Litonjua, should it be held liable to private respondent for the latter's claims,
would be better placed to secure reimbursement from its principal Fairwind. In turn, Fairwind
would be in an indefinitely better position (than private respondent) to seek and obtain
recourse from Mullion, the foreign shipowner, should Fairwind feel entitled to reimbursement
of the amounts paid to private respondent through petitioner Litonjua.
We conclude that private respondent was properly regarded as an employee of the charterer
Fairwind and that petitioner Litonjua may be held to answer to private respondent for the
latter's claims as the agent in the Philippines of Fairwind. We think this result, which public
respondent reached, far from constituting a grave abuse of discretion, is compelled by
equitable principles and by the demands of substantial justice.
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3. Effect on Carriers Character

4. Persons who may make Charterparty
5. REQUISITES; FORM
CRUZ, J:
MARKET DEVELOPERS v. IAC

GR No. 74978. September 8, 1989
FACTS: On June 20, 1978, petitioner Market Developers, Inc. (MADE) entered into a written
barging and towage contract with private respondent Gaudioso Uy for the shipment of the
former's cargo from Iligan City to Kalibo, Aklan, at the rate of P1.45 per bag.
The petitioner was allowed 4 lay days and agreed to pay demurrage at the rate of
P5,000.00 for every day of delay, or in excess of the stipulated allowance. On June 26, 1978,
Uy sent a barge and a tugboat to Iligan City and loading of the petitioner's cargo began
immediately. It is not clear who made the request, but upon completion of the loading on
June 29, 1978, the parties agreed to divert the barge to Culasi, Roxas City, with the cargo
being consigned per bill of lading to Modern Hardware in that city. This new agreement was
not reduced to writing.
The shipment arrived in Roxas City on July 13, 1978, and the cargo was eventually
unloaded and duly received by the consignee. There is some dispute as to the time
consumed for such unloading. At any rate, about six months later, Uy demanded payment of
demurrage charges in the sum of P40,855.40 for an alleged delay of eight days and 4/25
hours.
MADE ignored this demand, and Uy filed suit. He was sustained by the trial court,
which ordered the petitioner to pay him the said amount with interest plus P4,000.00
attorney's fees and the cost of the suit. This decision was fully affirmed on appeal to the
respondent court, which is the reason for this petition. Agreeing with the trial court, the
respondent court held that since the diversion of the cargo to Roxas City was not covered by
a new written agreement, the original agreement must prevail.
ISSUE: Whether or not the first written contract must prevail since the new contract did not
contain any stipulation for demurrage and because it was not in writing.
HELD: No.
To hold that the old agreement was still valid and subsisting notwithstanding this substantial
change was to impose upon the petitioner a condition he had not, and would not have,
accepted under the new agreement.
Article 1356 of the Civil Code provides:
Contracts shall be obligatory in whatever form they may have been entered into, provided
all the essential requisites for their validity are present. However, when the law requires that
a contract be in some form in order that it may be valid or enforceable, or that a contract be
proved in a certain way, that requirement is absolute and indispensable . . .
We affirmed this rule only recently when we said in Tong v. Intermediate Appellate Court that
"a contract may be entered into in whatever form except where the law requires a document
or other special form as in the contracts enumerated in Article 1388 of the Civil Code. The
general rule, therefore, is that a contract may be oral or written."
The contract executed by MADE and Uy was a contract of affreightment. As defined, a
contract of affreightment is a contract with the shipowner to hire his ship or part of it, for the
carriage of goods, and generally takes the form either of a charter party or a bill of lading.
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Article 652 of the Code of Commerce provides that "a charter party must be drawn in
duplicate and signed by the contracting parties" and enumerates the conditions and
information to be embodied in the contract, including "the lay days and extra lay days to be
allowed and the demurrage to be paid for each of them." (requisites of charter party)
But while the rule clearly shows that this kind of contract must be in writing, the succeeding
Article 653 just as clearly provides:
If the cargo should be received without a charter party having been signed, the contract
shall be understood as executed in accordance with what appears in the bill of lading, the
sole evidence of title with regard to the cargo for determining the rights and obligations of
the ship agent, of the captain and of the charterer. (form of charter party)
We read this last provision as meaning that the charter party may be oral, in which case the
terms thereof, not having been reduced to writing, shall be those embodied in the bill of
lading.
Therefore, the first written contract was cancelled and replaced by the second verbal
contract because of the change in the destination of the cargo.
6. Related Concepts
7. Charterparty Rights
8. Character of Bill of Lading in Charterparty Arrangements
WESTERN SHIPPING v. PHILAM
Facts: Nichimen Corporation shipped to Universal Motors Corporation (Universal Motors) 219
packages containing 120 units of brand new Nissan Pickup Truck Double Cab 4x2 model,
without engine, tires and batteries, on board the vessel S/S Calayan Iris from Japan to
Manila. The shipment, which had a declared value of US$81,368 or P29,400,000, was
insured with Philam against all risks under Marine Policy
The carrying vessel arrived at the port of Manila on April 20, 1995, and when the shipment
was unloaded by the staff of ATI, it was found that the package marked as was in bad order.5
The Turn Over Survey of Bad Order Cargoes6 dated April 21, 1995 identified two packages,
as being dented and broken. Thereafter, the cargoes were stored for temporary safekeeping
inside CFS Warehouse.
the shipment was withdrawn by R.F. Revilla Customs Brokerage, Inc., the authorized broker
of Universal Motors, and delivered to the latters warehouse in Mandaluyong City. Upon the
request7 of Universal Motors, a bad order survey was conducted on the cargoes and it was
found that one Frame Axle Sub without LWR was deeply dented on the buffle plate while six
Frame Assembly with Bush were deformed and misaligned.8 Owing to the extent of the
damage to said cargoes, Universal Motors declared them a total loss.
Universal Motors filed a formal claim for damages in the amount of P643,963.84 against
Westwind,9 ATI10 and R.F. Revilla Customs Brokerage, Inc.11 When Universal Motors
demands remained unheeded, it sought reparation from and was compensated in the sum of
P633,957.15 by Philam. Accordingly, Universal Motors issued a Subrogation Receipt12 dated
November 15, 1995 in favor of Philam.
Philam, as subrogee of Universal Motors, filed a Complaint13 for damages against Westwind,
ATI and R.F. Revilla Customs Brokerage
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The court a quo ruled that there was sufficient evidence to establish the respective
participation of Westwind and ATI in the discharge of and consequent damage to the
shipment. It found that the subject cargoes were compressed while being hoisted using a
cable that was too short and taut. The trial court observed that while the staff of ATI
undertook the physical unloading of the cargoes from the carrying vessel, Westwinds duty
officer exercised full supervision and control throughout the process. It held Westwind
vicariously liable for failing to prove that it exercised extraordinary diligence in the
supervision of the ATI stevedores who unloaded the cargoes from the vessel. However, the
court absolved R.F. Revilla Customs Brokerage, Inc. from liability in light of its finding that
the cargoes had been damaged before delivery to the consignee.
The trial court acknowledged the subrogation between Philam and Universal Motors on the
strength of the Subrogation Receipt
The appellate court accordingly affirmed Westwind and ATIs joint and solidary liability for
the damage to only one (1) unit of Frame Axle Sub without Lower inside Case No. 03-24542K/1. It also noted that when said cargo sustained damage, it was not yet in the custody of
the consignee or the person who had the right to receive it. The CA pointed out that
Westwinds duty to observe extraordinary diligence in the care of the cargoes subsisted
during unloading thereof by ATIs personnel since the former exercised full control and
supervision over the discharging operation.
Similarly, the appellate court held ATI liable for the negligence of its employees who carried
out the offloading of cargoes from the ship to the pier.
the appellate court also held that Philams action for damages had not prescribed
notwithstanding the absence of a notice of claim.
Issue: who between ATI and Westwind is liable for the damage suffered by the subject cargo
and to what extent.
Ruling: The court a quo found both petitioners Westwind and ATI, jointly and severally, liable
for the damage to the cargo. It observed that while the staff of ATI undertook the physical
unloading of the cargoes from the carrying vessel, Westwinds duty officer exercised full
supervision and control over the entire process. The appellate court affirmed the solidary
liability of Westwind and ATI, but only for the damage to one Frame Axle Sub without Lower.
Upon a careful review of the records, the Court finds no reason to deviate from the finding
that petitioners Westwind and ATI are concurrently accountable for the damage to the
content of Steel Case.
Section 251 of the COGSA provides that under every contract of carriage of goods by the
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)52 thereof then states that
among the carriers responsibilities are to properly load, handle, stow, carry, keep, care for
and discharge the goods carried.53
It is settled in maritime law jurisprudence that cargoes while being unloaded generally
remain under the custody of the carrier.57 The Damage Survey Report58 of the survey
conducted by Phil. Navtech Services, Inc. from April 20-21, 1995 reveals that Case No. 03245-42K/1 was damaged by ATI stevedores due to overtightening of a cable sling hold during
discharge from the vessels hatch to the pier. Since the damage to the cargo was incurred
during the discharge of the shipment and while under the supervision of the carrier, the
latter is liable for the damage caused to the cargo.
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This is not to say, however, that petitioner ATI is without liability for the damaged cargo.
The functions of an arrastre operator involve the handling of cargo deposited on the wharf or
between the establishment of the consignee or shipper and the ships tackle. Being the
custodian of the goods discharged from a vessel, an arrastre operators duty is to take good
care of the goods and to turn them over to the party entitled to their possession.59
Handling cargo is mainly the arrastre operators principal work so its drivers/operators or
employees should observe the standards and measures necessary to prevent losses and
damage to shipments under its custody.60
While it is true that an arrastre operator and a carrier may not be held solidarily liable at all
times,61 the facts of these cases show that apart from ATIs stevedores being directly in
charge of the physical unloading of the cargo, its foreman picked the cable sling that was
used to hoist the packages for transfer to the dock. Moreover, the fact that 218 of the 219
packages were unloaded with the same sling unharmed is telling of the inadequate care with
which ATIs stevedore handled and discharged
9. CODE OF COMMERCE PROVISIONS
CIA & MALAYSIAN NAVIGATION v. CA
Facts:
At the same time O'Farrel y Cia. (Malaysian Navigation Company) was, during the
period with which we are here concerned, a shipping company engaged in operating freight
vessels in Oriental seas. In the operation engaged in operating freight vessels in Oriental
seas. In the operation of its plant the defendant company consumers large quantities of
coal, and in years past it has taken its supplies in part from the coal company in Hongay. The
old arrangement under which the defendant had been purchasing coal from said company
having been found to be unsatisfactory, for some reason or other, to the defendant, a new
contract was entered into, in the month of August, 1923, whereby the coal company agreed
to sell and the defendant agreed to buy, in the period from September 1, 1923, to August
31, 1924, 75,000 tons of dust coal, with a margin of 10 per cent more or less.
In this contract it was agreed that delivery should be taken by the defendant in lots of
about from 2,000 to 4,000 tons at regular intervals, as could best be arranged to suit both
purchasers and sellers, the purchasers agreeing to take not less than about 6,000 tons per
month and to send not more than one steamer to be loaded at the same time. It was also
stipulated that the dust coal, the subject of the sale, should be loaded either in the stream
or alongside the wharf or quay at Hongay, at the option of the coal company, "with quick
despatch, vessels taking their turn in loading." As neither the coal company nor the Manila
Electric Company was engaged in operating seagoing vessels, it became necessary for the
defendant to make arrangement with some shipping company for the service necessary to
transport the coal to Manila. This need being apparent, Gaston O'Farrel, the agent of the coal
company, in Manila, directed the attention of the defendant company to the Malaysian
Navigation Company, the trade-name of O'Farrel y Cia., as operating vessels that would be
available for transporting the coal. In this connection it should be noted that O'Farrel was
agent both of the coal company and the Malaysian Navigation Company.
The practice followed by the parties in the performance of the contract between the
plaintiff and the defendant for the transportation of the coal purchased by the defendant
from the coal company, was that, upon the receipt of information in Manila by the defendant
company from the coal company, advising that a cargo of coal was, or soon would be
available in Hongay, the message was turned over to O'Farrel y Cia., and the latter company
made the arrangements for the sending of a boat to Hongay. But delay in the taking on of
coal occurred in Hongay, owing to the inability of the coal company to deliver the coal to the
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waiting boats. The preponderance of the proof shows that this delay was due to the fact that
the cranes of the coal company at Hongay were defective and often out of order. At any rate
the result was that the plaintiff's boats were frequently kept waiting in the port; and it in fact
appears that altogether they were held there idle one hundred twenty-three days, to say
nothing of the time occupied in the lading of the ships after their turn had come for taking
cargo. There can be no doubt, we think, that these delays were attributable to the coal
company.
It appears that, upon the visits that plaintiff's ships made to Hongay, the coal
necessary for the operation of said ships was there taken on board with the assent of the
coal company; and in the end the plaintiff became indebted, to the coal company, on
account of such advances of coal, in the amount of $21,817.79, Hongkong currency. As a
result of the inability of the plaintiff to liquidate this claim for coal advanced to the plaintiff,
the officers of the latter became reluctant to send its vessels any longer to Hongay, for fear
that the ships would be libeled for the coal company's claim.
Owing to the causes above suggested, deliveries of coal to the defendant company
under its contract with the coal company amounted in June, 1924, only to about 41,375
tons, or some 18,625 tons less than the amount that should have been delivered; and the
only delivery thereafter made to the defendant was a shipment that came on the Sealda in
the latter part of August, 1924. This boat did not belong to the Malaysian Navigation
Company but was obtained by tit from another owner. Upon giving notice of the dispatch of
the Sealda for coal in the latter part of August, 1924, the general manager of the Manila
Electric Company called the attention of the coal company to the fact that that company
was short nearly 20,000 tons in its contractual deliveries, and in view of this fact the coal
company was advised to consider the contract closed. This step received the approval of the
coal company, and contractual relations between it and the defendant terminated. In a
conversation that occurred at about this time between an officer of the defendant and a
representative of the Malaysian Navigation Company, the latter communicated to the former
the fact that it would be unable to proceed further under the contract for the transportation
of coal, herein-above quoted, and, on behalf of the Malaysian Navigation Company, he
acquiesced in the termination of the contract existing between them.
In the plaintiff's complaint three separate causes of action are stated, in the first of
which the plaintiff seeks to recover the sum of P80,190, as compensation which the plaintiff
would have received had all of the coal been delivered to it for transportation, as
contemplated in the contract between the plaintiff and the defendant. In the second cause
of action the plaintiff seeks to recover the sum of P73,800, being the amount represented by
the demurrage claimed by the plaintiff, at the rate of P600 per day, for the one hundred
twenty-three days during which its ships were detained in Hongay awaiting their turn to take
on coal. In the third cause of action the plaintiff seeks to recover the sum of P10,000 for
demurrage of a boat at Hongay which had to sail for Saigon in ballast and without cargo.
Issue: Whether or not O Farelly Cia and/or Malaysian Navigation Company breached its
contract with Manila Electric Company.
Held:
No. Delay in the taking of cargo at the port embarkation, resulting from the failure of
the coal company to make prompt delivery, was not imputable to the buyer and the latter
was not liable for demurrage incident to such delay. Because the plaintiff, the Malaysian
Navigation Company, was unable to fulfill its contract to supply ships for the transportation
of the coal and desisted therefrom. Also, because in the end, the contract was in effect
cancelled by mutual consent. The difficulty in which the plaintiff found itself was due
evidently to the failure of the coal company to make prompt deliveries of coal aboard the
plaintiff's boats at Hongay. But the defendant was in no wise chargeable with either the
causes or consequences of these delays, as will be more clearly seen in our discussion of the
second cause of action.
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The theory underlying the plaintiff's case throughout is that the coal company was
agent of the defendant in the matters affecting the performance of the contract between the
plaintiff and the defendant. We are unable to see any basis for this contention; and, on the
contrary, the position of O'Farrel as agent both of the coal company and of the plaintiff
indicates the impropriety of considering the coal company as the agent of the defendant. No
error was in our opinion committed in denying damages to the plaintiff under the cause of
action.
In connection with this matter it will be noted, upon careful inspection of the contract
between the plaintiff and the defendant, that the stipulation for demurrage at the rate of
P600 per day, or fraction thereof, is found in the paragraph of the contract which deals
especially with the discharge of coal at Manila. There is no stipulation for demurrage incident
to delay at Hongay; and, on the contrary, it is stipulated, in the third paragraph of the
contract, that loading at Hongay should be "according to customary quick despatch subject
to turn of mines." In appellant's brief emphasis has been placed upon the words customary
quick despatch and the other words subject to turn of mines have not been taken so much
into account. It appears in the proof that the vessels desirous of landing coal at Hongay were
laden according to the custom of the port, in strict rotation, except in one instance where a
Malaysian ship was given preference over, two other ships whose owners did not object. The
expression "subject to turn of mines" should be interpreted, we think, to mean that the
lading of the vessels should be subject to the output of the mines and that vessels should be
subject to the output of the mines and that vessels should take their turn in taking on the
coal. It results that the lading of the coal was dependent upon the output of the mines and
the order of ships seeking cargo at the loading places. The expression "subject to turn of
mines" was no doubt inserted in the contract in lieu of a stipulation for demurrage. The
insertion of that expression in clause 3 made the Malaysian ships dependent upon the
loading facilities of the coal company at Hongay, and relieved the defendant from any
liability for demurrage by reason of delays that might occur in the port incident to the
obtaining and loading of the coal.
CHAPTER V MARITIME CONTRACTS: AFFREIGHTMENT
A. Affreightment
1. Definition
2. Types of Cargo
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B. BILL OF LADING
1. Concept
2. When Effective
3. THREE-FOLD CHARACTER: BILL OF LADING AS CONTRACT
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURG, v. CA
GR No. 87958 April 26, 1990
FACTS: United Coconut Chemicals Inc (SHIPPER) engaged the services of Stolt-Nielsen
Philippines Inc (CARRIER) for the shipment of 404 metric tons of distilled fatty acid which
was to be shipped on board the MT Stolt Scepter from Bauan, Batangas, Philippines to
Rotterdam, Netherlands which was consigned to Nieuwe Matex covered by a bill of lading
which contained a general statement of incorporation of the terms of a Charter Party. The
shipment was then insured by herein petitioner, National Union Fire Insurance company of
Pittsburg.
It appears that the Bill of Lading issued by the Carrier contained a general statement
of incorporation of the terms of a Charter Party between the SHIPPER and Parcel Tankers,
Inc., entered into in Greenwich, Connecticut, U.S.A.
Upon receipt of the cargo by the consignee in the Netherlands, it was found to be
discolored and totally contaminated. The Insurer then indemnified the shipper. Upon
subrogation of rights, the insurer then filed suit against the carrier before the RTC of Makati
Branch 58 for the recovery of the sum P1,619,469.21 with interest which the insurer had
paid the shipper-assured. The carrier moved to dismiss/suspend the proceedings on the
ground that the insurer as the subrogee is subject to the provisions of the bill of lading which
includes a provision that the shipment is carried out under the terms of a Charter Party
which provides for arbitration. The Insurer then opposed the dismissal/suspension of the
proceedings on the ground that it was not legally bound to submit their claims for arbitration
and that such arbitration is void and unjust. RTC, denied the insurers motion but
subsequently reconsidered. The carrier then filed a petition for certiorari.
The insurer postulates that it cannot be bound by the Charter Party because, as
insurer, it is subrogee only with respect to the Bill of Lading; that only the Bill of Lading
should regulate the relation among the insurer, the holder of the Bill of Lading, and the
carrier; and that in order to bind it, the arbitral clause in the Charter Party should have been
incorporated into the Bill of Lading.
ISSUE: Are the terms of the Charter Party, particularly the provision on arbitration binding
on the insurer?
HELD: The Supreme Court held that the insurer cannot avoid the binding effect of the
arbitration clause. By subrogation, it became privy to the Charter Party as fully as the
shipper before the latter was indemnified, because as subrogee it stepped into the shoes of
the shipper-assured and is subrogated merely to the latter's rights. It can recover only the
amount that is recoverable by the assured. And since the right of action of the shipperassured is governed by the provisions of the Bill of Lading, which includes by reference the
terms of the Charter Party, necessarily, a suit by the insurer is subject to the same
agreements.
CEBU SALVAGE CORPORATION v. PHILIPPINE HOME ASSURANCE CORP
MARITIME COMMERCE
(Chapter 4-12)
G.R. No. 150403
SY 2013-2014
January 25, 2007
Facts:
Petitioner Cebu Salvage Corporation (as carrier) and Maria Cristina Chemicals
Industries, Inc. [MCCII] (as charterer) entered into a voyage charter wherein petitioner was
to load 800 to 1,100 metric tons of silica quartz on board the M/T Espiritu Santo at Ayungon,
Negros Occidental for transport to and discharge at Tagoloan, Misamis Oriental to consignee
Ferrochrome Phils., Inc. Pursuant to the contract, on December 23, 1984, petitioner received
and loaded 1,100 metric tons of silica quartz on board the M/T Espiritu Santo which left
Ayungon for Tagoloan the next day. The shipment never reached its destination, however,
because the M/T Espiritu Santo sank in the afternoon of December 24, 1984 off the beach of
Opol, Misamis Oriental, resulting in the total loss of the cargo.
MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine
Home Assurance Corporation. Respondent paid the claim in the amount of P211,500 and
was subrogated to the rights of MCCII. Thereafter, it filed a case in the RTC against petitioner
for reimbursement of the amount it paid MCCII.
Petitioner argues that the CA erred when it affirmed the RTC finding that the voyage
charter it entered into with MCCII was a contract of carriage. It insists that the agreement
was merely a contract of hire wherein MCCII hired the vessel from its owner, ALS Timber
Enterprises (ALS). Not being the owner of the M/T Espiritu Santo, petitioner did not have
control and supervision over the vessel, its master and crew. Thus, it could not be held liable
for the loss of the shipment caused by the sinking of a ship it did not own.
Issue:
Held:
The Supreme Court ruled that based on the agreement signed by the parties
and the testimony of petitioners operations manager, it is clear thatit was a contract of
carriage petitioner signed with MCCII. It actively negotiated and solicited MCCIIs account,
offered its services to ship the silica quartz and proposed to utilize the M/T Espiritu Santo in
lieu of the M/T Seebees or the M/T Shirley (as previously agreed upon in the voyage charter)
since these vessels had broken down.
Petitioner was the one which contracted with MCCII for the transport of the cargo. It
had control over what vessel it would use. All throughout its dealings with MCCII, it
represented itself as a common carrier. The fact that it did not own the vessel it decided to
use to consummate the contract of carriage did not negate its character and duties as a
common carrier. The MCCII (respondents subrogor) could not be reasonably expected to
inquire about the ownership of the vessels which petitioner carrier offered to utilize. As a
practical matter, it is very difficult and often impossible for the general public to enforce its
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rights of action under a contract of carriage if it should be required to know who the actual
owner of the vessel is. In fact, in this case, the voyage charter itself denominated petitioner
as the "owner/operator" of the vessel.
The bill of lading was merely a receipt issued by ALS to evidence the fact that the
goods had been received for transportation. It was not signed by MCCII, as in fact it was
simply signed by the supercargo of ALS. This is consistent with the fact that MCCII did not
contract directly with ALS. While it is true that a bill of lading may serve as the contract of
carriage between the parties, it cannot prevail over the express provision of the voyage
charter that MCCII and petitioner executed:
[I]n cases where a Bill of Lading has been issued by a carrier covering goods shipped aboard
a vessel under a charter party, and the charterer is also the holder of the bill of lading, "the
bill of lading operates as the receipt for the goods, and as document of title passing the
property of the goods, but not as varying the contract between the charterer and the
shipowner." The Bill of Lading becomes, therefore, only a receipt and not the contract of
carriage in a charter of the entire vessel, for the contract is the Charter Party, and is the law
between the parties who are bound by its terms and condition provided that these are not
contrary to law, morals, good customs, public order and public policy.
To summarize, a contract of carriage of goods was shown to exist; the cargo was
loaded on board the vessel; loss or non-delivery of the cargo was proven; and petitioner
failed to prove that it exercised extraordinary diligence to prevent such loss or that it was
due to some casualty or force majeure. The voyage charter here being a contract of
affreightment, the carrier was answerable for the loss of the goods received for
transportation.
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4. THREE-FOLD CHARACTER: BILL OF LADING AS RECEIPT

UNITED STATES LINE INC. v. COMM. of CUSTOMS
G.R. No. 73490. June 18, 1987
PARAS, J
FACTS: On October 15, 1976, the vessel "American Venture" arrived in Manila from
Hongkong. Among the shipments on board were cargoes consigned by the same shipper and
from the same loading port consisting of two (2) containers which were described in the
respective bills of lading (B/L No. 38 and B/L No. 39) as follows:
"Shipper's Load and Count"
1 Container (Part) Cont. # 2020984
Seal # 601-04725
38 cases 100% Cotton brushed denim
broken twill"
1 Container Cont. # 2101730
Seal # 601-04707
40 Cases 100% Cotton Sulphur Dyed denim
Total: One Container Only
"Shipper's Load and Count"
The aforestated information as furnished by the Shipper, was copied or entered into the
vessel's Inward Foreign Manifest. Upon opening of the containers by the Bureau of Customs,
it was discovered that:
a) Container No. USLU-2020984 contained 34 cases of cotton denim instead of 38
cases and
b) Container No. USLU - 2101730 contained 44 cases of cotton denim instead of 40
cases.
The total number of cases in the two containers was the same, however, to wit, 78 cases.
Having been informed of the differences herein petitioner had the Manifest amended with
the consent of the customs authorities on November 3, 1976 to reflect the actual quantity of
the cases in each of the containers. Subsequently, the Collector of Customs instituted
proceedings against herein petitioner for alleged violation of Sec. 1005 in relation to Sec.
2521 of the Tariff and Customs Code.
Not finding the explanation of the herein petitioner satisfactory, the Collector of Customs
found petitioner guilty of violating said provisions of the Tariff and Customs Code and
ordered it to pay a fine of P10,000.00. Appeal was made by the petitioner to the
Commissioner of Customs, who affirmed the said decision in toto. Upon a petition to review
the decision of the Commissioner of Customs, the Court of Tax Appeals (CTA) affirmed the
assailed decision
ISSUE: Whether or not appellant had violated Sec. 1005 of the Tariff and Customs Code
notwithstanding that the total content of the two-container shipment in question (78 bales)
is exactly the same quantity (78 bales) of the merchandise described in the bills of lading
and the Inward Foreign Manifest.
HELD: No.
An examination of said Customs Administrative Order in relation to Sec. 1005 and Sec. 2521
shows that containerized cargoes on "Shipper's Load and Count" shipping arrangement are
not required to be checked and inventoried by the carrier at the port of loading or before
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said carrier enters the port of unloading in the Philippines since it is the shipper who has the
sole responsibility for the quantity, description and condition of the cargoes shipped in
container vans, each container van considered as a unit of transport.
Petitioner's vessel, the "American Venture" faithfully complied with the requirements of Sec.
1005 of the Tariff and Customs Code. Said vessel submitted a complete manifest of all her
cargoes. However there was a slight error thru no fraudulent intent or negligence of the
vessel. Said vessel relied on the information in the bill of lading submitted by the shipper in
making the Manifest. There was no way for the vessel to discover until after the opening of
the containers and the inventory of their contents, that the first container contained 34
cases and the second container contained 44 cases. Furthermore, noteworthy is the fact that
Container No. 2020984 is described expressly in both the bill of lading and the vessel's
manifest as a "Part" of the goods contained in the second Container No. 2101730, an
important indication that the contents of Container No. 2020984 and Container No. 2101730
are parts of the same importation coming from one and the same shipper and destined to
the same consignee and that in the examination of contents for Customs purposes, the
number of cases should be the total in the 2 containers, to wit 78 cases.
Considering therefore, that the total number of cases of cotton denims as declared by the
shipper in the manifest is 78 as borne on two containers, and considering the undisputed
fact that the same total number of 78 cases of cotton denims were found by the Bureau of
Customs on board petitioner's vessel, it is clear that the vessel's Manifest reflects a
complete and substantially accurate statement of the cargoes contained therein in
accordance with the requirement of Sec. 1005 in relation to Sec. 2521 of the Tariff and
Customs Code. Accordingly, therefore, the imposition by respondent-appellee of a fine of
P10,000.00 upon petitioner-appellant's vessel allegedly for the failure of the latter to have
on board a complete manifest of all her cargoes is patently baseless, unfair, inconsiderate,
and illegal. Besides the clerical error cannot be attributed to the shipper. Finally, there was
no financial loss for the government.
REYMA BROKERAGE V. PHILIPPINE HOME ASSURANCE CORP.
Facts: The vessel 'MS Malmros Monsoon' received onboard at Fremantle, Brisbane
Queensland, Australia from shipper Craig Mostyn & Co., Pty. Ltd. (of Brisbane, Queensland) a
shipment of 2,680 cartons of hard frozen boneless beef contained in five (5) containers
complete and in good order and condition for transport to Manila in favor of the eventual
consignee RFM Corp. under Bill of Lading dated. the MS 'Malmros Monsoon' arrived at the
Port of Manila and discharged the shipment into the possession and custody of the
defendant, the arrastre operator in the case at bar (Exh. 'A'). From the port, the shipment
was transferred to the Reefer Van Area of Pier 13 and the defendant arrastre contractor
loaded the containers in two (2) trucks and delivered them to Grech Food Industries Cold
Storage in Pasig, Rizal arriving there at 1:00 o'clock A.M., the following morning. Four (4)
personnel of defendant, a driver and a helper in each truck made the delivery. On October
23, 1979 at 9:00 o'clock in the morning, the containers were stripped and the representative
of the defendant and consignee counted the contents of five (5) containers and after an
inventory of Container No. BROU-430656[1], it was discovered that 203 cartons were found
short out of the loaded 2,680 cartons of hard frozen boneless beef which according to the
consignee was totally attributable to the defendant as it occurred while the said container in
question was in the custody and responsibility of the defendant. Consignee filed claim for
the recovery of the missing 203 cartons but the same was denied and consequently,
consignee filed the claim with the plaintiff under its Marine Cargo Insurance Policy. The
consignee was paid by plaintiff the amount of P88,658.22 (Exhs.'F' and 'G'). The payment of
consignee's claim by the plaintiff had subrogated the latter to file this instant claim for the
recovery of the said amount (Exh. 'H'). 4
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The lower courts ruled against the herein petitioner despite its pleas specifically the
following:
I.
That, in the light of US Lines case (G.R. NO. 73490, June 18, 1987), a "said-to-contain"
bill of lading for sealed containers is "receipt' only of the containers but not of their contents
which the carrier was not in a position to verify.
II. That, since there is no evidence of tampering of seals, presumptions cannot take the
place of proof in a due-process system where the burden of proof lies on the plaintiff (private
respondent), and [where] the rule is that plaintiff must rely on the strength of his own
evidence and not on the weakness of the defense.
III. That, if, as claimed by private respondent, the "tampering" was ingeniously done and the
tampered seal cannot be determined unless "separated" from the container, then plaintiff
(private respondent) virtually admits that the containers could have been tampered from the
very start (i.e., before petitioner took possession of them) but nobody noticed the
tampering.
IV.
That, in the light of the foregoing, it was not procedurally and equitably sound of
private respondent to sue petitioner alone without joining the carrier and the arrastre
contractor as alternative defendants; petitioner should not be singled out as defendant.
V.
That, this case is barred by prescription, as previously alleged in petitioner's Answer
in the lower court; as a mere subrogee, private respondent cannot have more rights than the
consignee itself who could not have brought this action beyond the one-year prescriptive
period (one year from October 22, 1979) fixed by the carriage of goods by sea act. 5
Issue: whether or not the respondent court committed a reversible error in declaring the
petitioner liable for the short delivery of 203 cartons from the containerized shipments.
HELD: The petition is without merit.
Evidently, the carrier, by signifying in the bill of lading that "it is a receipt ... for the number
of packages shown above," had explicitly admitted that the containerized shipments had
actually the number of packages declared by the shipper in the bill of lading. And this
conclusion is bolstered by the stipulation printed in the bill of lading, "unless expressly
acknowledged and agreed to." Therefore, the phrase "said to contain" also appearing in the
bill of lading must give way to this reality.
Hence, this express acknowledgment of the carrier makes the case at bar an exception to
the doctrine enunciated in United States Lines. The rule enunciated by United States Lines
applies to a situation where the carrier of the containerized cargo simply admits the
information furnished by the shipper with regard to the goods it shipped as reflected in the
bill of lading ("said to contain") but not where the carrier of the containerized cargo makes
an explicit admission as to the weight, measurement marks, numbers, quality contents, and
value, and more so. inscribed these admissions as stipulations in the bill of lading itself, or
made them an addendum thereto, to which the carrier affixed its express acknowledgment
as what happened in this case. In its stead, the dictum that the bill of lading shall be prima
facie evidence of the receipt by the carrier of the goods as therein described 10 governs.
The petitioner contradicts itself for contrary to these posturings, it included allegations in its
answer that all the containerized shipments arrived in Manila with the seals intact, 12 and
that the petitioner received the said sealed containers of the shipments, particularly
container No. BROU-4306561 which sustained the loss of 203 cartons from the arrastre
operator, also with the seals intact. 13 It can therefore be concluded that the petitioner
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received all the shipments as itemized in the bill of lading. For the rule is well-established
that the facts alleged in a party's pleading are deemed admissions of that party and binding
upon it. 14
As the petitioner prima facie received all the shipments in the sealed containers, it has the
burden to rebut the conclusion that it received the same without shortage.
Granting arguendo that petitioner can still put up prescription as its defense, nonetheless it
will not prosper considering that the petitioner is not a carrier or a vessel or a charterer or
the legal holder of the bill of lading. The petitioner is the broker. And the private respondent
is the insurer. The prescriptive period of this cause of action is ten years. In the present case,
ten years have not yet lapsed from the delivery of the shipment.
ASIAN TERMINALS, INC v. SIMON ENTERPRISES, INC
GR No 177116 Feb 27, 2013
Facts:
On October 25, 1995, Contiquincybunge Export Company loaded 6,843.700 metric tons of
U.S. Soybean Meal in Bulk on board the vessel M/V "Sea Dream" at the Port of Darrow,
Louisiana, U.S.A., for delivery to the Port of Manila to respondent Simon Enterprises, Inc., as
consignee. When the vessel arrived at the South Harbor in Manila, the shipment was
discharged to the receiving barges of petitioner Asian Terminals, Inc. (ATI), the arrastre
operator. Respondent later received the shipment but claimed having received only
6,825.144 metric tons of U.S. Soybean Meal, or short by 18.556 metric tons, which is
estimated to be worth US$7,100.16 or P186,743.20.
On November 25, 1995, Contiquincybunge Export Company made another shipment
to respondent and allegedly loaded on board the vessel M/V "Tern" at the Port of Darrow,
Louisiana, U.S.A. 3,300.000 metric tons of U.S. Soybean Meal in Bulk for delivery to
respondent at the Port of Manila. The carrier issued its clean Berth Term Grain Bill of Lading.
EIDAC
On January 25, 1996, the carrier docked at the inner Anchorage, South Harbor,
Manila. The subject shipment was discharged to the receiving barges of petitioner ATI and
received by respondent which, however, reported receiving only 3,100.137 metric tons
instead of the manifested 3,300.000 metric tons of shipment. Respondent filed against
petitioner ATI and the carrier a claim for the shortage of 199.863 metric tons, estimated to
be worth US$79,848.86 or P2,100,025.00, but its claim was denied.
Thus, on December 3, 1996, respondent filed with the Regional Trial Court (RTC) of
Manila an action for damages against the unknown owner of the vessels M/V "Sea Dream"
and M/V "Tern," its local agent Inter-Asia Marine Transport, Inc., and petitioner ATI alleging
that it suffered the losses through the fault or negligence of the said defendants.
Respondent sought to claim damages plus attorney's fees and costs of suit. Its claim against
the unknown owner of the vessel M/V "Sea Dream," however, was later settled in a Release
and Quitclaim dated June 9, 1998, and only the claims against the unknown owner of the
M/V "Tern," Inter-Asia Marine Transport, Inc., and petitioner ATI remained.
The unknown owner of the vessel M/V "Tern" and its local agent Inter-Asia Marine
Transport, Inc., prayed for the dismissal of the complaint essentially alleging lack of cause of
action and prescription. Petitioner ATI meanwhile alleged in its Answer that it exercised the
required diligence in handling the subject shipment. It moved for the dismissal of the
complaint, and alleged by way of special and affirmative defense that plaintiff has no valid
cause of action against petitioner ATI.
RTC Ruling: holding petitioner ATI and its co-defendants solidarily liable to respondent for
damages arising from the shortage
CA Ruling: Affirmed RTC ruling.
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Issue:
Whether or not petitioner ATI (being an arrastre) is solidarily liable with its codefendants for the shortage incurred in the shipment of the goods to respondent.
Held:
No. the Supreme Court ruled that the Court of Appeals erred in its decision, thereby ruling in
favor of ATI. Petitioner ATI is correct in arguing that the respondent failed to prove that the
subject shipment suffered actual shortage, as there was no competent evidence to prove
that it actually weighed 3,300 metric tons at the port of origin. In this case, respondent
failed to prove that the subject shipment suffered shortage, for it was not able to establish
that the subject shipment was weighed at the port of origin at Darrow, Louisiana, U.S.A. and
that the actual weight of the said shipment was 3,300 metric tons.
The Berth Term Grain Bill of Lading, the Proforma Invoice, and the Packing List, being
used by respondent to prove that the subject shipment weighed 3,300 metric tons, do not,
in fact, help its cause.
The Berth Term Grain Bill of Lading states that the subject shipment was carried with
the qualification "Shipper's weight, quantity and quality unknown," meaning that it was
transported with the carrier having been oblivious of the weight, quantity, and quality of the
cargo. [T]he recital of the bill of lading for goods thus transported [i.e., transported in sealed
containers or "containerized"] ordinarily would declare "Said to Contain", "Shipper's Load
and Count", "Full Container Load", and the amount or quantity of goods in the container in a
particular package is only prima facie evidence of the amount or quantity.
A shipment under this arrangement is not inspected or inventoried by the carrier
whose duty is only to transport and deliver the containers in the same condition as when the
carrier received and accepted the containers for transport . . . .
Hence, as can be culled from the above-mentioned cases, the weight of the shipment
as indicated in the bill of lading is not conclusive as to the actual weight of the goods.
Consequently, the respondent must still prove the actual weight of the subject shipment at
the time it was loaded at the port of origin so that a conclusion may be made as to whether
there was indeed a shortage for which petitioner must be liable. This, the respondent failed
to do.
The respondent having failed to present evidence to prove the actual weight of the
subject shipment when it was loaded onto the M/V "Tern," its cause of action must then fail
because it cannot prove the shortage that it was alleging. Indeed, if the claimant cannot
definitively establish the weight of the subject shipment at the point of origin, the fact of
shortage or loss cannot be ascertained. The claimant then has no basis for claiming
damages resulting from an alleged shortage.
5. THREE-FOLD CHARACER: BILL OF LADING AS DOCUMENT OF TITLE
6. TRANSPORTATION NAD DELIVERY OF CARGO SUBJECT OF BILL OF LADING
6. RELATED CONCEPTS and OTHER CHARTER CLAUSES
6.6 DEMURRAGE
KENG HUA PAPER v. CA
Facts: Plaintiff (herein private respondent), a shipping company, is a foreign corporation
licensed to do business in the Philippines. plaintiff received at its Hong Kong terminal a
sealed container, containing seventy-six bales of "unsorted waste paper" for shipment to
defendant (herein petitioner), Keng Hua Paper Products, Co. in Manila. A bill of lading (Exh.
A) to cover the shipment was issued by the plaintiff.
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the shipment was discharged at the Manila International Container Port. Notices of arrival
were transmitted to the defendant but the latter failed to discharge the shipment from the
container during the "free time" period or grace period. The said shipment remained inside
the plaintiff's container from the moment the free time period expired on July 29, 1982 until
the time when the shipment was unloaded from the container on November 22, 1983, or a
total of four hundred eighty-one (481) days. During the 481-day period, demurrage charges
accrued. Within the same period, letters demanding payment were sent by the plaintiff to
the defendant who, however, refused to settle its obligation which eventually amounted to
P67,340.00. Numerous demands were made on the defendant but the obligation remained
unpaid. Plaintiff thereafter commenced this civil action for collection and damages.
In its answer, defendant, by way of special and affirmative defense, alleged that it
purchased fifty (50) tons of waste paper from the shipper in Hong Kong, Ho Kee Waste Paper,
as manifested in Letter of Credit, issued by Equitable Banking Corporation, with partial
shipment permitted; that under the letter of credit, the remaining balance of the shipment
was only ten (10) metric tons that the shipment plaintiff was asking defendant to accept was
twenty (20) metric tons which is ten (10) metric tons more than the remaining balance; that
if defendant were to accept the shipment, it would be violating Central Bank rules and
regulations and custom and tariff laws; that plaintiff had no cause of action against the
defendant because the latter did not hire the former to carry the merchandise; that the
cause of action should be against the shipper which contracted the plaintiff's services and
not against defendant; and that the defendant duly notified the plaintiff about the wrong
shipment through a letter
The RTC found petitioner liable for demurrage
Issue: petitioner submits the following issues:
I.
Whether or not petitioner had accepted the bill of lading;
II.
Whether or not the award of the sum of P67,340.00 to private respondent was
proper;
III.
Whether or not petitioner was correct in not accepting the overshipment;
IV.
Whether or not the award of legal interest from the date of private respondent's
extrajudicial demand was proper
ISSUE: Whether or not petitioner is bound by the bill of lading
HELD: We affirm petitioner's liability for demurrage, but modify the interest rate thereon.
Liability Under the Bill of Lading
A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it is a
contract by which three parties, namely, the shipper, the carrier, and the consignee
undertake specific responsibilities and assume stipulated obligations. A "bill of lading
delivered and accepted constitutes the contract of carriage even though not signed,
because the "(a)cceptance of a paper containing the terms of a proposed contract generally
constitutes an acceptance of the contract and of all of its terms and conditions of which the
acceptor has actual or constructive notice." In a nutshell, the acceptance of a bill of lading
by the shipper and the consignee, with full knowledge of its contents, gives rise to the
presumption that the same was a perfected and binding contract.
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In the case at bar, both lower courts held that the bill of lading was a valid and perfected
contract between the shipper (Ho Kee), the consignee (Petitioner Keng Hua), and the carrier
(Private Respondent Sea-Land). Section 17 of the bill of lading provided that the shipper and
the consignee were liable for the payment of demurrage charges for the failure to discharge
the containerized shipment beyond the grace period allowed by tariff rules. Applying said
stipulation, both lower courts found petitioner liable.
Petitioner Bound by the Bill of Lading
Petitioner admits that it "received the bill of lading immediately after the arrival of the
shipment" Having been afforded an opportunity to examine the said document, petitioner
did not immediately object to or dissent from any term or stipulation therein. It was only six
months later that petitioner sent a letter to private respondent saying that it could not
accept the shipment. Petitioner's inaction for such a long period conveys the clear inference
that it accepted the terms and conditions of the bill of lading. Moreover, said letter spoke
only of petitioner's inability to use the delivery permit, i.e. to pick up the cargo, due to the
shipper's failure to comply with the terms and conditions of the letter of credit, for which
reason the bill of lading and other shipping documents were returned by the "banks" to the
shipper. The letter merely proved petitioner's refusal to pick up the cargo, not its rejection of
the bill of lading.
Petitioner's attempt to evade its obligation to receive the shipment on the pretext that this
may cause it to violate customs, tariff and central bank laws must likewise fail. Mere
apprehension of violating said laws, without a clear demonstration that taking delivery of the
shipment has become legally impossible, 20 cannot defeat the petitioner's contractual
obligation and liability under the bill of lading.
In the case at bar, the prolonged failure of petitioner to receive and discharge the cargo from
the private respondent's vessel constitutes a violation of the terms of the bill of lading. It
should thus be liable for demurrage to the former.
Demurrage is merely an allowance or compensation for the delay or detention of a vessel. It
is often a matter of contract, but not necessarily so. The very circumstance that in ordinary
commercial voyages, a particular sum is deemed by the parties a fair compensation for
delays, is the very reason why it is, and ought to be, adopted as a measure of compensation,
in cases ex delicto. What fairer rule can be adopted than that which founds itself upon
mercantile usage as to indemnity, and fixes a recompense upon the deliberate consideration
of all the circumstances attending the usual earnings and expenditures in common voyages?
It appears to us that an allowance, by way of demurrage, is the true measure of damages in
all cases of mere detention, for that allowance has reference to the ship's expenses, wear
and tear, and common employment.
Amount of Demurrage Charges
the longer the cargo remained unclaimed, the higher the demurrage. Thus, while in his letter
dated April 24, 1983, 26 private respondent's counsel demanded payment of only P37,800,
the additional demurrage incurred petitioner due to its continued refusal to receive delivery
of the cargo ballooned to P67,340
Bill of Lading Separate from Other Letter of Credit Arrangements
the contract of carriage,
treated independently of
contract for the issuance
discrepancy between the
as stipulated in the bill of lading in the present case, must be

the contract of sale between the seller and the buyer, and the
of a letter of credit between the buyer and the issuing bank. Any
amount of the goods described in the commercial invoice in the
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contract of sale and the amount allowed in the letter of credit will not affect the validity and
enforceability of the contract of carriage as embodied in the bill of lading. As the bank
cannot be expected to look beyond the documents presented to it by the seller pursuant to
the letter of credit, 29 neither can the carrier be expected to go beyond the representations
of the shipper in the bill of lading and to verify their accuracy vis-a-viz the commercial
invoice and the letter of a credit. Thus, the discrepancy between the amount of goods
indicated in the invoice and the amount in the bill of lading cannot negate petitioner's
obligation to private respondent arising from the contract of transportation. Furthermore,
private respondent, as carrier, had no knowledge of the contents of the container. The
contract of carriage was under the arrangement known as "Shipper's Load And Count," and
shipper was solely responsible for the loading of the container while carrier was oblivious to
the contents of the shipment. Petitioner's remedy in case of overshipment lies against the
seller/shipper, not against the carrier.
Payment of Interest
The case before us involves an obligation not arising from a loan or forbearance of money;
thus, pursuant to Article 2209 of the Civil Code, the applicable interest rate is six percent per
annum. Since the bill of lading did not specify the amount of demurrage, and the sum
claimed by private respondent increased as the days went by, the total amount demanded
cannot be deemed to have been established with reasonable certainty until the trial court
rendered its judgment. Indeed, "(u)nliquidated damages or claims, it is said, are those which
are not or cannot be known until definitely ascertained, assessed and determined by the
courts after presentation of proof. " Consequently, the legal interest rate is six percent, to be
computed from September 28, 1990, the date of the trial court's decision. And in accordance
with Philippine National Bank and Eastern Shipping, the rate of twelve percent per annum
shall be charged on the total then outstanding, from the time the judgment becomes final
and executory until its satisfaction.
7. NOTICE OF CLAIM AND PRESCRIPTIVE PERIOD
ROLDAN v. PONZO
G.R. No. L 11325 December 7, 1917
FACTS: The case at bar is an action for the recovery of damages in the amount of
/P3,780.12 for the defendant companys failure to live up to its contract for the
transportation of 2,244 packages of sugar from Roldans hacienda to Iloilo. Defendant admits
fault in the partial loss of the goods due to wreck of the companys lorcha in which only
1,022 packages were saved in a more or less damaged condition. However, the defendants
counsel alleges that the crew, owner or patron was free from fault in the loss of the goods.
During the trial, the plaintiff submitted evidence which shows that the goods were
lost due to the lack of skill of the master of the vessel. While the case was on going, the
judge peremptorily dismissed the complaint on the ground that it was neither alleged nor
proved that the plaintiff had complied with the provisions of Section 366 of the Commercial
Code which states:
Within the twenty-four hours following the receipt of the merchandise a claim may be
brought against the carrier on account of damage or average found therein on opening the
packages, provided that the indication of the damage of average giving rise to the claim
cannot be case said claim would only admitted on the receipt of the packages.lawphi1.net
After the periods mentioned have elapsed, or after the transportation charges have
been paid, no claim whatsoever shall be admitted against the carrier with regards to the
condition in which the goods transported were delivered.
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ISSUE: Whether or not Section 366 of the Commercial Code is applicable in the case at bar?
HELD: The court agrees with plaintiffs counsel that the dismissal of the complaint on this
ground was erroneous due to the fact that the specific section is applicable only when the
goods are actually delivered to the consignee which is contrary to the facts in the case at
bar as the goods were not delivered to Monico Roldan ( plaintiff ) who through his own
efforts saved the goods from total loss, himself.
The court concludes that until the defendant has had an opportunity to submit his
evidendence it is impossible to determine under what conditions these 1,022 packages of
sugar came into possession of the plaintiff. Judgment is REVERSED and the records
remanded to the court below for the conduction of a NEW TRIAL.
ABOITIZ SHIPPING CORPORATION v. INSURANCE COMPANY OF NORTH AMERICA
G.R. No. 168402 August 6, 2008
Facts:
MSAS Cargo International Limited and/or Associated and/or Subsidiary
Companies (MSAS) procured a marine insurance policy from respondent ICNA UK Limited
ofLondon. The insurance was for a transshipment of certain wooden work tools and
workbenches purchased for the consignee Science Teaching Improvement Project
(STIP), Ecotech Center, Sudlon Lahug, Cebu City, Philippines. ICNA issued an all-risk open
marine policy. The cargo, packed inside one container van, was shipped freight prepaid
fromHamburg, Germany on board M/S Katsuragi. A clean bill of lading was issued by HapagLloyd which stated the consignee to be STIP, Ecotech Center, Sudlon Lahug, Cebu City. The
container van was then off-loaded at Singapore and transshipped on board M/S
Vigour Singapore. The ship arrived and docked at the Manila International Container Port
where the container van was again off-loaded. The cargo was received by petitioner Aboitiz
Shipping Corporation (Aboitiz) through its duly authorized booking representative, Aboitiz
Transport System. The bill of lading issued by Aboitiz contained the notation grounded
outside warehouse. The container van was stripped and transferred to another
crate/container van without any notation on the condition of the cargo on the
Stuffing/Stripping Report. The container van was loaded on board petitioners vessel, MV
Super Concarrier I. The vessel left Manila en route to Cebu City. The shipment arrived
in Cebu City and discharged onto a receiving apron of the Cebu International Port. It was
then brought to the Cebu Bonded Warehousing Corporation pending clearance from the
Customs authorities. In the Stripping Report, petitioners checker noted that the crates were
slightly broken or cracked at the bottom. The cargo was withdrawn by the representative of
the consignee, Science Teaching Improvement Project (STIP) and delivered
to Don Bosco Technical High School, Punta Princesa, Cebu City. It was received by Mr.
Bernhard Willig. Mayo B. Perez, then Claims Head of petitioner, received a telephone call
from Willig informing him that the cargo sustained water damage. Perez, upon receiving the
call, immediately went to the bonded warehouse and checked the condition of the container
and other cargoes stuffed in the same container. He found that the container van and other
cargoes stuffed there were completely dry and showed no sign of wetness. Perez found that
except for the bottom of the crate which was slightly broken, the crate itself appeared to be
completely dry and had no watermarks. But he confirmed that the tools which were stored
inside the crate were already corroded. He further explained that the grounded outside
warehouse notation in the bill of lading referred only to the container van bearing the
cargo. Willig informed Aboitiz of the damage noticed upon opening of the cargo. The letter
stated that the crate was broken at its bottom part such that the contents were
exposed. The work tools and workbenches were found to have been completely soaked in
water with most of the packing cartons already disintegrating. The crate was properly sealed
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off from the inside with tarpaper sheets. On the outside, galvanized metal bands were
nailed onto all the edges. The letter concluded that apparently, the damage was caused by
water entering through the broken parts of the crate. The Claimsmen Adjustment
Corporation (CAC) conducted an ocular inspection and survey of the damage. CAC reported
to ICNA that the goods sustained water damage, molds, and corrosion which were
discovered upon delivery to consignee.
Issue:
Held:
The Supreme Court ruled that a foreign corporation not licensed to do
business in the Philippines is not absolutely incapacitated from filing a suit in
local courts. Only when that foreign corporation is transacting or doing business in the
country will a license be necessary before it can institute suits.
Respondents cause of action is founded on it being subrogated to the rights of
the consignee of the damaged shipment. The right of subrogation springs from Article
2207 of the Civil Code, which states:
Article 2207. If the plaintiffs property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the wrong or
breach of contract complained of, the insurance company shall be subrogated to the rights
of the insured against the wrongdoer or the person who has violated the contract. If the
amount paid by the insurance company does not fully cover the injury or loss, the aggrieved
party shall be entitled to recover the deficiency from the person causing the loss or injury.
The giving of notice of loss or injury is a condition precedent to the action for loss
or injury or the right to enforce the carriers liability. Circumstances peculiar to
this case lead Us to conclude that the notice requirement was complied with.
Under the Code of Commerce, the notice of claim must be made within twenty four (24)
hours from receipt of the cargo if the damage is not apparent from the outside of the
package. For damages that are visible from the outside of the package, the claim must be
made immediately.
UCPB GENERAL INSURANCE v. ABOITIZ
G.R. No. 168433. February 10, 2009
Tinga, J:
FACTS: On June 18, 1991, three (3) units of waste water treatment plant with accessories
were purchased by San Miguel Corporation (SMC for brevity) from Super Max Engineering
Enterprises, Co., Ltd. of Taipei, Taiwan. The goods came from Charleston, U.S.A. and arrived
at the port of Manila on board MV "SCANDUTCH STAR". The same were then transported to
Cebu on board MV "ABOITIZ SUPERCON II". After its arrival at the port of Cebu and clearance
from the Bureau of Customs, the goods were delivered to and received by SMC at its plant
site on August 2, 1991. It was then discovered that one electrical motor of DBS Drive Unit
Model DE-30-7 was damaged.
Pursuant to an insurance agreement, plaintiff-appellee paid SMC the amount of
P1,703,381.40 representing the value of the damaged unit. In turn, SMC executed a
Subrogation Form dated March 31, 1992 in favor of plaintiff-appellee. HDTCSI
Consequently, plaintiff-appellee filed a Complaint on July 21, 1992 as subrogee of
SMC seeking to recover from defendants the amount it had paid SMC.
On September 20, 1994, plaintiff-appellee moved to admit its Amended Complaint whereby
it impleaded East Asiatic Co. Ltd. (EAST for brevity) as among the defendants for being the
"general agent" of DAMCO. In its Order dated September 23, 1994, the lower court admitted
the said amended complaint.
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Upon plaintiff-appellee's motion, defendant DAMCO was declared in default by the

lower court in its Order dated January 6, 1995.
In the meantime, on January 25, 1995, defendant EAST filed a Motion for Preliminary
Hearing on its affirmative defenses seeking the dismissal of the complaint against it on the
ground of prescription, which motion was however denied by the court a quo in its Order
dated September 1, 1995. Such denial was elevated by defendant EAST to this Court
through a Petition for Certiorari on October 30, 1995 in CA G.R. SP No. 38840. Eventually,
this Court issued its Decision dated February 14, 1996 setting aside the lower court's
assailed order of denial and further ordering the dismissal of the complaint against
defendant EAST. Plaintiff-appellee moved for reconsideration thereof but the same was
denied by this Court in its Resolution dated November 8, 1996. As per Entry of Judgment,
this Court's decision ordering the dismissal of the complaint against defendant EAST became
final and executory on December 5, 1996.
Accordingly, the court a quo noted the dismissal of the complaint against defendant
EAST in its Order dated December 5, 1997. Thus, trial ensued with respect to the remaining
defendants.
On November 29, 1999, the lower court rendered its assailed Decision, the
dispositive portion of which reads:
WHEREFORE, all the foregoing premises considered, judgment is hereby rendered declaring
DAMCO Intermodal Systems, Inc., Eagle Express Lines, Inc. and defendant Aboitiz Shipping
solidarily liable to plaintiff-subrogee for the damaged shipment and orders them to pay
plaintiff jointly and severally the sum of P1,703,381.40.
No costs.
SO ORDERED.
Not convinced, defendants-appellants EAGLE and ABOITIZ now come to this Court through
their respective appeals.
The appellate court, as previously mentioned, reversed the decision of the trial court
and ruled that UCPB's right of action against respondents did not accrue because UCPB
failed to file a formal notice of claim within 24 hours from (SMC's) receipt of the damaged
merchandise as required under Art. 366 of the Code of Commerce. According to the Court of
Appeals, the filing of a claim within the time limitation in Art. 366 is a condition precedent to
the accrual of a right of action against the carrier for the damages caused to the
merchandise.
ISSUE: Whether or not Aboitiz may be held liable by UCPB.
HELD:
In charging Aboitiz with liability for the damaged cargo, the trial court condoned UCPB's
wrongful suit against Aboitiz to whom the damage could not have been attributable since
there was no evidence presented that the cargo was further damaged during its trans
shipment to Cebu. Even by the exercise of extraordinary diligence, Aboitiz could not have
undone the damage to the cargo that had already been there when the same was shipped
on board its vessel.
That said, it is nonetheless necessary to ascertain whether any of the remaining parties may
still be held liable by UCPB. The provisions of the Code of Commerce, which apply to
overland, river and maritime transportation, come into play.
Art. 366 of the Code of Commerce states:
Art. 366.Within twenty-four hours following the receipt of the merchandise, the claim against
the carrier for damage or average which may be found therein upon opening the packages,
may be made, provided that the indications of the damage or average which gives rise to
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the claim cannot be ascertained from the outside part of such packages, in which case the
claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no
claim shall be admitted against the carrier with regard to the condition in which the goods
transported were delivered.
The law clearly requires that the claim for damage or average must be made within 24 hours
from receipt of the merchandise if, as in this case, damage cannot be ascertained merely
from the outside packaging of the cargo.
In Philippine Charter Insurance Corporation v. Chemoil Lighterage Corporation, petitioner, as
subrogee of Plastic Group Phil., Inc. (PGP), filed suit against respondent therein for the
damage found on a shipment of chemicals loaded on board respondent's barge. Respondent
claimed that no timely notice in accordance with Art. 366 of the Code of Commerce was
made by petitioner because an employee of PGP merely made a phone call to respondent's
Vice President, informing the latter of the contamination of the cargo. The Court ruled that
the notice of claim was not timely made or relayed to respondent in accordance with Art.
366 of the Code of Commerce.
The requirement to give notice of loss or damage to the goods is not an empty formalism.
The fundamental reason or purpose of such a stipulation is not to relieve the carrier from
just liability, but reasonably to inform it that the shipment has been damaged and that it is
charged with liability therefor, and to give it an opportunity to examine the nature and
extent of the injury. This protects the carrier by affording it an opportunity to make an
investigation of a claim while the matter is still fresh and easily investigated so as to
safeguard itself from false and fraudulent claims.
We have construed the 24-hour claim requirement as a condition precedent to the accrual of
a right of action against a carrier for loss of, or damage to, the goods. The shipper or
consignee must allege and prove the fulfillment of the condition. Otherwise, no right of
action against the carrier can accrue in favor of the former.
7.2 INTERNATIONAL CARRIAGE OF GOODS BY SEA
PHILIPPINE AMERICAN GENERAL V. SWEETLINES
Facts: The vessel SS "VISHVA YASH" belonging to or operated by the foreign common carrier,
took on board at Baton Rouge, LA, two (2) consignments of cargoes for shipment to Manila
and later for transhipment to Davao City, consisting of 600 bags Low Density Polyethylene
631 and another 6,400 bags Low Density Polyethylene 647, both consigned to the order of
Far East Bank and Trust Company of Manila, with arrival notice to Tagum Plastics, Inc.,
Madaum, Tagum, Davao City. Said cargoes were covered, respectively, by Bills of Lading Nos.
6 and 7 issued by the foreign common carrier (Exhs. E and F). The necessary packing or
Weight List (Exhs. A and B), as well as the Commercial Invoices (Exhs. C and D)
accompanied the shipment. The cargoes were likewise insured by the Tagum Plastics Inc.
with plaintiff Philippine American General Insurance Co., Inc., (Exh. G).
The said vessel arrived at Manila and discharged its cargoes in the Port of Manila for
transhipment to Davao City. For this purpose, the foreign carrier awaited and made use of
the services of the vessel called M/V "Sweet Love" owned and operated by defendant
interisland carrier.
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Subject cargoes were loaded in Holds Nos. 2 and 3 of the interisland carrier. These were
commingled with similar cargoes belonging to Evergreen Plantation and also Standfilco.
The shipment(s) were discharged from the interisland carrier into the custody of the
consignee. A later survey conducted upon the instance of the plaintiff, shows the following:
Of the cargo covered by Bill of Lading No. 6, supposed to contain 6,400 bags of Low Density
Polyethylene 647 originally inside 160 pallets, there were delivered to the consignee 5,413
bags in good order condition. The survey shows shortages, damages and losses.
Of the 600 bags of Low Density Polyethylene 631, the survey conducted on the same day
shows an actual delivery to the consignee of only 507 bags in good order condition. Likewise
noted were the following losses, damages and shortages.
Therefore, of said shipment totalling 7,000 bags, originally contained in 175 pallets, only a
total of 5,820 bags were delivered to the consignee in good order condition, leaving a
balance of 1,080 bags. Such loss from this particular shipment is what any or all defendants
may be answerable to (sic).
As already stated, some bags were either shortlanded or were missing, and some of the
1,080 bags were torn, the contents thereof partly spilled or were fully/partially emptied, but,
worse, the contents thereof contaminated with foreign matters and therefore could no
longer serve their intended purpose. The position taken by the consignee was that even
those bags which still had some contents were considered as total losses as the remaining
contents were contaminated with foreign matters and therefore did not (sic) longer serve the
intended purpose of the material. Each bag was valued.
Before trial, a compromise agreement was entered into between petitioners, as plaintiffs,
and defendants S.C.I. Line and F.E. Zuellig, upon the latter's payment of P532.65 in
settlement of the claim against them.
The trial court then rendered judgment in favor of herein petitioners.
Due to the reversal on appeal by respondent court of the trial court's decision on the ground
of prescription, in effect dismissing the complaint of herein petitioners, and the denial of
their motion for reconsideration, petitioners filed the instant petition for review on certiorari.
ISSUE: (1) in upholding, without proof, the existence of the so-called prescriptive period; (2)
granting arguendo that the said prescriptive period does exist, in not finding the same to be
null and void; and (3) assuming arguendo that the said prescriptive period is valid and legal,
in failing to conclude that petitioners substantially complied therewith.
HELD: The Court of Appeals resolved that although the bills of lading were not offered in
evidence, the litigation obviously revolves on such bills of lading which are practically the
documents or contracts sued upon, hence, they are inevitably involved and their provisions
cannot be disregarded in the determination of the relative rights of the parties thereto.
In the case at bar, prescription as an affirmative defense was seasonably raised by SLI in its
answer, except that the bills of lading embodying the same were not formally offered in
evidence, thus reducing the bone of contention to whether or not prescription can be
maintained as such defense and, as in this case, consequently upheld on the strength of
mere references thereto.
The carriage of the cargo involved was effected pursuant to an "Application for Delivery of
Cargoes without Original Bill of Lading" with the notation therein that said application
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corresponds to and is subject to the terms of bills of lading MD-25 and MD-26. It would be a
safe assessment to interpret this to mean that, sight unseen, petitioners acknowledged the
existence of said bills of lading. By having the cargo shipped on respondent carrier's vessel
and later making a claim for loss on the basis of the bills of lading, petitioners for all intents
and purposes accepted said bills. Having done so they are bound by all stipulations
contained therein. Verily, as petitioners are suing for recovery on the contract, and in fact
even went as far as assailing its validity by categorizing it as a contract of adhesion, then
they necessarily admit that there is such a contract, their knowledge of the existence of
which with its attendant stipulations they cannot now be allowed to deny.
On the issue of the validity of the controverted paragraph 5 of the bills of lading above
quoted which unequivocally prescribes a time frame of thirty (30) days for filing a claim with
the carrier in case of loss of or damage to the cargo and sixty (60) days from accrual of the
right of action for instituting an action in court, which periods must concur, petitioners posit
that the alleged shorter prescriptive period which is in the nature of a limitation on
petitioners' right of recovery is unreasonable and that SLI has the burden of proving
otherwise. They postulate this on the theory that the bills of lading containing the same
constitute contracts of adhesion and are, therefore, void for being contrary to public policy.
Stipulations in bills of lading or other contracts of shipment which require notice of claim for
loss of or damage to goods shipped in order to impose liability on the carrier operate to
prevent the enforcement of the contract when not complied with, that is, notice is a
condition precedent and the carrier is not liable if notice is not given in accordance with the
stipulation, as the failure to comply with such a stipulation in a contract of carriage with
respect to notice of loss or claim for damage bars recovery for the loss or damage suffered.
In the case at bar, there is neither any showing of compliance by petitioners with the
requirement for the filing of a notice of claim within the prescribed period nor any allegation
to that effect. It may then be said that while petitioners may possibly have a cause of action,
for failure to comply with the above condition precedent they lost whatever right of action
they may have in their favor or, token in another sense, that remedial right or right to relief
had prescribed.
The shipment in question was discharged into the custody of the consignee on May 15,
1977, and it was from this date that petitioners' cause of action accrued, with thirty (30)
days therefrom within which to file a claim with the carrier for any loss or damage which
may have been suffered by the cargo and thereby perfect their right of action. The findings
of respondent court as supported by petitioners' formal offer of evidence in the court below
show that the claim was filed with SLI only on April 28, 1978, way beyond the period
provided in the bills of lading and violative of the contractual provision. petitioners had no
right of action to begin with or, at any rate, their claim was time-barred.
Under Art. 366 of the Code of Commerce which reads as follows:
Art. 366.
Within the twenty-four hours following the receipt of the merchandise, the
claim against the carrier for damage or average which may be found therein upon opening
the packages, may be made, provided that the indications of the damage or average which
gives rise to the claim cannot be ascertained from the outside part of the packages, in which
case the claims shall be admitted only at the time of the receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no
claim shall be admitted against the carrier with regard to the condition in which the goods
transported were delivered.
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Under paragraph 5 of said Bill of Lading, it is crystal clear that the commencement of the
instant suit on May 12, 1978 was indeed fatally late. In view of the express provision that
"suits arising from. . . damage or loss shall be instituted within 60 days from date of accrual
of right of action," the present action necessarily fails on ground of prescription.
Non-compliance with the requirement of filing a notice of claim under Article 366 of the Code
of Commerce does not affect the consignee's right of action against the carrier because said
requirement applies only to cases for recovery of damages on account of loss of or damage
to cargo, not to an action for refund of overpayment, and on the further consideration that
neither the Code of Commerce nor the bills of lading therein provided any time limitation for
suing for refund of money paid in excess, except only that it be filed within a reasonable
time.
DOLE v. MARITIME CO.
GR No. 77638 July 12, 1990
Facts:
This is a claim for loss and/or damage to a shipment of machine parts sought to be enforced
by the consignee, appellant Dole Philippines, Inc. (hereinafter called Dole) against the
carrier, Maritime Company of the Philippines (hereinafter called Maritime), under the
provisions of the Carriage of Goods by Sea Act.
The cargo subject of the instant case was discharged in Dadiangas unto the custody
of the consignee on December 18, 1971;
The corresponding claim for the damages sustained by the cargo was filed by the
plaintiff with the defendant vessel on May 4, 1972;
On June 11, 1973 the plaintiff filed a complaint in the Court of First Instance of Manila,
docketed therein as Civil Case No. 91043, embodying three (3) causes of action involving
three (3) separate and different shipments. The third cause of action therein involved the
cargo now subject of this present litigation;
On December 11, 1974, Judge Serafin Cuevas issued an Order in Civil Case No. 91043
dismissing the first two causes of action in the aforesaid case with prejudice and without
pronouncement as to costs because the parties had settled or compromised the claims
involved therein. The third cause of action which covered the cargo subject of this case now
was likewise dismissed but without prejudice as it was not covered by the settlement. The
dismissal of that complaint containing the three causes of action was upon a joint motion to
dismiss filed by the parties;
Because of the dismissal of the (complaint in Civil Case No. 91043 with respect to the
third cause of action without prejudice, plaintiff instituted this present complaint on January
6, 1975.
To the complaint in the subsequent action Maritime filed an answer pleading inter alia the
affirmative defense of prescription under the provisions of the Carriage of Goods by Sea Act,
and following pre-trial, moved for a preliminary hearing on said defense. The Trial Court
granted the motion, scheduling the preliminary hearing on April 27, 1977. The record before
the Court does not show whether or not that hearing was held, but under date of May 6,
1977, Maritime filed a formal motion to dismiss invoking once more the ground of
prescription. The motion was opposed by Dole and the Trial Court, after due consideration,
resolved the matter in favor of Maritime and dismissed the complaint. Dole sought a
reconsideration, which was denied, and thereafter took the present appeal from the order of
dismissal.
Issue:
Whether or not Article 1155 of the Civil Code providing that the prescription of
actions is interrupted by the making of an extrajudicial written demand by the creditor is
applicable to actions brought under the Carriage of Goods by Sea Act which, in its Section 3,
paragraph 6.
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Held:
No. The Supreme Court ruled that in such a case the general provisions of the new
Civil Code (Art. 1155) cannot be made to apply, as such application would have the effect of
extending the one-year period of prescription fixed in the law. It is desirable that matters
affecting transportation of goods by sea be decided in as short a time as possible; the
application of the provisions of Article 1155 of the new Civil Code would unnecessarily
extend the period and permit delays in the settlement of questions affecting transportation,
contrary to the clear intent and purpose of the law.
The effect of that demand would have been to renew the one-year prescriptive period
from the date of its making Stated otherwise, under Dole's theory, when its claim was
received by Maritime, the one-year prescriptive period was interrupted "tolled" would be
the more precise term and began to run anew from May 4, 1972, affording Dole another
period of one (1) year counted from that date within which to institute action on its claim for
damage. Unfortunately, Dole let the new period lapse without filing action. It instituted Civil
Case No. 91043 only on June 11, 1973, more than one month after that period has expired
and its right of action had prescribed.
Dole's contention that the prescriptive period ". . . remained tolled as of May 4,
1972 . . . (and that) in legal contemplation . . . (the) case (Civil Case No. 96353) was filed on
January 6, 1975 . . . well within the one-year prescriptive period in Sec. 3(6) of the Carriage
of Goods by Sea Act," equates tolling with indefinite suspension. It is clearly fallacious and
merits no consideration.
C. COGSA
1. History
2. Governing Law
THE AMERICAN INSURANCE COMPANY v. COMPAIA MARITIMA, ET AL
G.R. No. L-24515
November 18, 1967
Facts:
A certain cargo insured with plaintiff corporation was shipped in New York, U.S.
aboard "M/S TOREADOR", of which the general agent in the Philippines is appellee
Macondray & Co., Inc. The cargo was consigned to the order of the importer Atlas
Consolidated Mining and Development Corporation. The " M/S TOREADOR" arrived at the
port of Manila and on the same date discharged the cargo in question. Pursuant to the
arrangement the cargo was subsequently loaded aboard the "SS SIQUIJOR", an inter-island
vessel. The shipment was finally discharged in Cebu. When the consignee took delivery of
the shipment it was found to be short of two (2) pieces of tractor parts. Plaintiff paid the
insured value of the lost merchandise to the consignee. Plaintiff, as subrogee of the
consignee rights, filed a complaint against the Compaia Maritima and the Visayan Cebu
Terminal Co., Inc. as alternative defendants. The former was sued as operator and owner of
"SS SIQUIJOR" and the latter as operator of the arrastre service at the port of Cebu charged
with the care and custody of all cargo discharged there.
Issue:
Held:
The Supreme Court ruled that according to paragraph 4 of the amended
complaint the cargo was loaded on board the "M/S TOREADOR" in New York, "freight prepaid
to Cebu City . . . pursuant to the bill of lading No. 13." In other words, the action is based on
the contract of carriage up to the final port of destination, which was Cebu City, for which
the corresponding freight had been prepaid. The following provisions of the bill of lading are
the ones directly in point:
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1. This bill of lading shall have effect subject to the provisions of the Carriage of
Goods by Sea Act of the United States of America, approved April 16, 1936, which shall be
deemed to be incorporated herein and nothing herein contained shall be deemed a
surrender by the Carrier of any of its rights or immunities or an increase of any of its
responsibilities or liabilities under said Act. The provisions stated in said Act (except as may
be otherwise specifically provided herein) shall govern before the goods are loaded on and
after they are discharged from the ship and throughout the entire time the goods are in the
custody of the Carrier. . . .
19. In any event the Carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the goods or the date
when the goods should have been delivered. . . .
The transshipment of the cargo from Manila to Cebu was not a separate transaction
from that originally entered into by Macondray, as general agent for the "M/S TOREADOR". It
was part of Macondray's obligation under the contract of carriage and the fact that the
transshipment was made via an inter-island vessel did not operate to remove the transaction
from the operation of the Carriage of Goods by Sea Act.
3. NOTICE OF CLAIM AND PRESC. PERIOD

INSURANCE COMPANY OF NORTH AMERICA v. ASIAN TERMINALS
G.R. No. 180784. February 15, 2012
Peralta J,.
FACTS: On November 9, 2002, Macro-Lito Corporation, through M/V DIMI P vessel, 185
packages of electrolytic tin free steel, complete and in good condition.
The goods are covered by a bill of lading, had a declared value of $169,850.35 and
were insured with the Insurance Company of North America (Petitioner) against all risk.
The carrying vessel arrived at the port of Manila on November 19, 2002, and when
the shipment was discharged therefrom, it was noted that 7 of the packages were damaged
and in bad condition.
On November 21, 2002, the shipment was then turned over to the custody of Asian
Terminals. Inc. (Respondent) for storage and safekeeping pending its withdrawal by the
consignee.
On November 29, 2002, prior to the withdrawal of the shipment, a joint inspection of
the said cargo was conducted. The examination report showed that an additional 5 packages
were found to be damaged and in bad order.
On January 6, 2003, the consignee, San Miguel Corporation filed separate claims
against both the Petioner and the Respondent for the damage caused to the packages.
The Petitioner then paid San Miguel Corporation the amount of PhP 431,592.14 which
is based on a report of its independent adjuster.
The Petitioner then formally demanded reparation against the Respondent for the
amount it paid San Miguel Corporation.
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For the failure of the Respondent to satisfy the demand of the Petitioner, the
Petitioner filed for an action for damages with the RTC of Makati.
The trial court found that indeed, the shipment suffered additional damage under the
custody of the Respondent prior to the turnover of the said shipment to San Miguel.
As to the extent of liability, Respondent invoked the Contract for Cargo Handling
Services executed between the Philippine Ports Authority and the Respondent. Under the
contract, the Respondents liability for damage to cargoes in its custody is limited to
PhP5,000 for each package, unless the value of the cargo shipment is otherwise specified or
manifested in writing together with the declared Bill of Lading. The trial Court found that the
shipper and consignee with the said requirements.
However, the trial court dismissed the complaint on the ground that the Petitioners
claim was barred by the statute of limitations. It held that the Carriage of Goods by Sea Act
(COGSA), embodied in Commonwealth Act No. 65 is applicable. The trial court held that
under the said law, the shipper has the right to bring a suit within one year after the delivery
of the goods or the date when the goods should have been delivered, in respect of loss or
damage thereto.
Petitioner then filed before the Supreme Court a petition for review on certiorari
assailing the trial courts order of dismissal.
ISSUE/S:
1.) Whether or not the trial court committed an error in dismissing the complaint of the
petitioner based on the one-year prescriptive period for filing a suit under the COGSA to an
arrastre operator? YES.
2.)
Whether or not the Petitioner is entitled to recover actual damages against the
Respondent? YES, but only PhP164,428.76
HELD:
1.) YES.
The term carriage of goods covers the period from the time when the goods are loaded to
the time when they are discharged from the ship. Thus, it can be inferred that the period of
time when the goods have been discharged from the ship and given to the custody of the
arrastre operator is not covered by the COGSA.
The prescriptive period for filing an action for the loss or damage of the goods under the
COGSA is found in paragraph (6), Section 3, thus:
6) Unless notice of loss or damage and the general nature of such loss or damage be given
in writing to the carrier or his agent at the port of discharge before 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 three days of the delivery.
Said notice of loss or damage maybe endorsed upon the receipt for 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.
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In any event the carrier and the ship shall be discharged from all liability in
respect of loss or damage unless suit is brought within one year after delivery of
the goods or the date when the goods should have been delivered: Provided, That if
a notice of loss or damage, either apparent or concealed, is not given as provided for in this
section, that fact shall not affect or prejudice the right of the shipper to bring suit within one
year after the delivery of the goods or the date when the goods should have been delivered.
xxx
From the provision above, the carrier and the ship may put up the defense of prescription if
the action for damages is not brought within one year after the delivery of the goods or the
date when the goods should have been delivered. It has been held that not only the shipper,
but also the consignee or legal holder of the bill may invoke the prescriptive period.
However, the COGSA does not mention that an arrastre operator may invoke the prescriptive
period of one year; hence, it does not cover the arrastre operator
2.) YES.
The Petitioner, who filed the present action for the 5 packages that were damaged while in
the custody of the respondent was not forthright in its claim, as it knew that the damages it
sought, based on the report of its adjuster covered 9 packages. Based on the report, only
four of the nine packages were damaged in the custody of the Respondent. The Petitioner
can be granted only the amount of damages that is due to it.
DOCTRINE:
The term carriage of goods in the Carriage of Goods by Sea Act (COGSA) covers the period
from the time the goods are loaded to the vessel to the time they are discharged therefrom.
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.
4. LIMITATION OF LIABILITY
PHILIPPINE CHARTER INSURANCE CORPORATION v. NEPTUNE ORIENT LINES
GR No. 145044 June 12, 2008
Facts:
On September 30, 1993, L.T. Garments Manufacturing Corp. Ltd. shipped from Hong Kong
three sets of warp yarn on returnable beams aboard respondent Neptune Orient Lines'
vessel, M/V Baltimar Orion, for transport and delivery to Fukuyama Manufacturing
Corporation (Fukuyama) of No. 7 Jasmin Street, AUV Subdivision, Metro Manila.
The said cargoes were loaded in Container No. IEAU-4592750 in good condition under
Bill of Lading No. HKG-0396180. Fukuyama insured the shipment against all risks with
petitioner Philippine Charter Insurance Corporation (PCIC) under Marine Cargo Policy No.
RN55581 in the amount of P228,085.
During the course of the voyage, the container with the cargoes fell overboard and was lost.
Thus, Fukuyama wrote a letter to respondent Overseas Agency Services, Inc. (Overseas
Agency), the agent of Neptune Orient Lines in Manila, and claimed for the value of the lost
cargoes. However, Overseas Agency ignored the claim. Hence, Fukuyama sought payment
from its insurer, PCIC, for the insured value of the cargoes in the amount of P228,085, which
claim was fully satisfied by PCIC.
On February 17, 1994, Fukuyama issued a Subrogation Receipt to petitioner PCIC for
the latter to be subrogated in its right to recover its losses from respondents.
PCIC demanded from respondents reimbursement of the entire amount it paid to
Fukuyama, but respondents refused payment.
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On March 21, 1994, PCIC filed a complaint for damages against respondents with the
Regional Trial Court (RTC) of Manila, Branch 35.
Respondents filed an Answer with Compulsory Counterclaim denying liability. They
alleged that during the voyage, the vessel encountered strong winds and heavy seas making
the vessel pitch and roll, which caused the subject container with the cargoes to fall
overboard. Respondents contended that the occurrence was a fortuitous event which
exempted them from any liability, and that their liability, if any, should not exceed US$500
or the limit of liability in the bill of lading, whichever is lower.
RTC Ruling: ruled against the respondents. That as a common carrier, it failed to prove that
they observed the required extraordinary diligence to prevent loss of the subject cargoes in
accordance with the pertinent provisions of the Civil Code.
CA Ruling: Affirmed RTC Ruling.
Issue:
Whether or not the Court of Appeals err in holding respondents liable for damages to
petitioner subject to the US$500 per package limited liability provision in the bill of lading.
Held:
No. The bill of lading submitted in evidence by petitioner did not show that the shipper in
Hong Kong declared the actual value of the goods as insured by Fukuyama before shipment
and that the said value was inserted in the Bill of Lading, and so no additional charges were
paid. Hence, the stipulation in the bill of lading that the carrier's liability shall not exceed
US$500 per package applies.
Such stipulation in the bill of lading limiting respondents' liability for the loss of the subject
cargoes is allowed under Art. 1749 of the Civil Code, and Sec. 4, paragraph (5) of the
COGSA.
(Legal Basis: New Civil Code)
Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods
appearing in the bill of lading, unless the shipper or owner declares a greater value, is
binding.'
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the
loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon.
CHAPTER VI MARITIME CONTRACTS (Bottomry/ Respondentia)
CHAPTER VII OTHER MARITIME CONTRACTS
EMPLOYMENT OF SEAFARER
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DOUGLAS MILLARES AND ROGELIO LAGDA v. NLRC

G.R. No. 110524 July 29, 2002
FACTS: Douglas Millares was employed by ESSO International through its local manning
agency, Trans-Global, in 1968 as a machinist. In 1975, he was promoted as Chief Engineer
which position he occupied until he opted to retire in 1989. In 1989, petitioner Millares filed a
leave of absence and applied for optional retirement plan under the Consecutive Enlistment
Incentive Plan (CEIP) considering that he had already rendered more than twenty years of
continuous service. Esso International denied Millares request for optional retirement on the
following grounds, to wit:
1) he was employed on a contractual basis
2) his contract of enlistment (COE) did not provide for retirement before the age of sixty
years;
3) he did not comply with the requirement for claiming benefits under the CEIP, i.e., to
submit a written advice to the company of his intention to terminate his employment within
thirty days from his last disembarkation date.
Subsequently, after failing to return to work after the expiration of his leave of absence,
Millares was dropped from the roster of crew members effective September 1, 1989. On the
other hand, petitioner Lagda was employed by Esso International as wiper/oiler in 1969. He
was promoted as Chief Engineer in 1980, a position he continued to occupy until his last COE
expired in 1989. In 1989, Lagda likewise filed a leave of absence and applied to avail of the
optional early retirement plan in view of his twenty years continuous service in the company.
Trans-global similarly denied Lagdas request for availment of the optional early retirement
scheme on the same grounds upon which Millares request was denied. Unable to return for
contractual sea service after his leave of absence expire, Lagda was also dropped from
the roster of crew members effective September 1, 1989.
Millares and Lagda filed a complaint-affidavit for illegal dismissal and non-payment of
employee benefits against private respondents Esso International and Trans-Global before
the POEA. The POEA rendered a decision dismissing the complaint for lack of merit. On
appeal, NLRC affirmed the decision of the POEA dismissing the complaint. NLRC
rationcinated that Millares and Lagda, as seamen and overseas contract workers are not
covered by the term regular employment as defined under Article 280 of the Labor Code.
The POEA, which is tasked with protecting the rights of the Filipino workers for overseas
employment to fair and equitable recruitment and employment practices and to ensure their
welfare, prescribes a standard employment contract for seamen on board ocean-going
vessels for a fixed period but in no case to exceed twelve months.
ISSUE: Whether or not seafarers are considered regular employees under Article 280 of the
Labor Code
HELD: No, It is for the mutual interest of both the seafarer and the employer why the
employment status must be contractual only or for a certain period of time. Quoting Brent
School Inc. v. Zamora, 1990, and Pablo Coyoca v. NLRC, 1995, the Supreme Court ruled that
seafarers are considered contractual employees. They cannot be considered as
regular employees under Article 280 of the Labor Code. Their employment is governed by
the contracts they sign everytime they are rehired and their employment is terminated
when the contract expires. Their employment is contractually fixed for a certain period of
time. They fall under the exception of Article 280 whose employment has been fixed for a
specific project or undertaking the completion or termination of which has been determined
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at the time of engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.
CHAPTER VIII MARITIME RISKS: AVERAGES
MAGSAYSAY v. AGAN
G.R. No. L-6393
January 31, 1955
FACTS:
The S S "San Antonio", vessel owned and operated by plaintiff left
Manila bound for Cagayan with general cargo belonging to different shippers, among them
the defendant. The vessel reached Aparri and after a day's stopover in that port, weighed
anchor to proceed to Basco. But while still in port, it ran aground at the mouth of the
Cagayan river, and, attempts to refloat it under its own power having failed, plaintiff have it
refloated by the Luzon Stevedoring Co. at an agreed compensation. Once afloat the vessel
returned to Manila to refuel and then proceeded to Basco, the port of destination. There the
cargoes were delivered to their respective owners or consignees, who, with the exception of
defendant, made a deposit or signed a bond to answer for their contribution to the average.
On the theory that the expenses incurred in floating the vessel constitute general average to
which both ship and cargo should contribute, plaintiff brought an action to make defendant
pay his contribution, which, as determined by the average adjuster, amounts to P841.40.
Defendant, in his answer, denies liability to his amount, alleging, among other things, that
the stranding of the vessel was due to the fault, negligence and lack of skill of its master,
that the expenses incurred in putting it afloat did not constitute general average, and that
the liquidation of the average was not made in accordance with law.
ISSUE:
HELD:
Whether or not the expenses incurred constitute general average.

No, the expenses incurred did not constitute general average.
The Supreme Court ruled that the law on averages is contained in the Code of
Commerce. Under that law, averages are classified into simple or particular and general or
gross. Generally speaking, simple or particular averages include all expenses and damages
caused to the vessel or cargo which have not inured to the common benefit (Art. 809), and
are, therefore, to be borne only by the owner of the property gave rise to same (Art. 810);
while general or gross averages 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 a
real and known risk" (Art. 811). Being for the common benefit, gross averages are to be
borne by the owners of the articles saved (Art. 812).
In classifying averages into simple o particular and general or gross and defining
each class, the Code (Art. 809 and 811) at the same time enumerates certain specific cases
as coming specially under one or the other denomination. Going over the specific cases
enumerated we find that, while the expenses incurred in putting plaintiff's vessel afloat may
well come under number 2 of article 809-which refers to expenses suffered by the vessel "by
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reason of an accident of the sea of the force majuere" and should therefore be classified
as particular average, the said expenses do not fit into any of the specific cases of general
average enumerated in article 811. No. 6 of this article does mention "expenses caused in
order to float a vessel," but it specifically refers to "a vessel intentionally stranded for the
purpose of saving it" and would have no application where, as in the present case, the
stranding was not intentional.
Requisites for General Average:

First, there must be a common danger. This means, that both the ship and the cargo, after
has been loaded, are subject to the same danger, whether during the voyage, or in the port
of loading or unloading; that the danger arises from the accidents of the sea, dispositions of
the authority, or faults of men, provided that the circumstances producing the peril should
be ascertained and imminent or may rationally be said to be certain and imminent. This last
requirement exclude measures undertaken against a distant peril.
Second, that for the common safety part of the vessel or of the cargo or both is sacrificed
deliberately.
Third, that from the expenses or damages caused follows the successful saving of the
vessel and cargo.
Fourth, that the expenses or damages should have been incurred or inflicted after taking
proper legal steps and authority.
With respect to the first requisite, the evidence does not disclose that the expenses sought
to be recovered from defendant were incurred to save vessel and cargo from a common
danger. The vessel ran aground in fine weather inside the port at the mouth of a river, a
place described as "very shallow". It would thus appear that vessel and cargo were at the
time in no imminent danger or a danger which might "rationally be sought to be certain and
imminent." It is, of course, conceivable that, if left indefinitely at the mercy of the elements,
they would run the risk of being destroyed. In the present case there is no proof that the
vessel had to be put afloat to save it from imminent danger. What does appear from the
testimony of plaintiff's manager is that the vessel had to be salvaged in order to enable it
"to proceed to its port of destination." But as was said in the case just cited it is the safety of
the property, and not of the voyage, which constitutes the true foundation of the general
average.
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As to the second requisite, the expenses in question were not incurred for the common
safety of vessel and cargo, since they, or at least the cargo, were not in imminent peril. The
cargo could, without need of expensive salvage operation, have been unloaded by the
owners if they had been required to do so.
With respect to the third requisite, the salvage operation, it is true, was a success. But as the
sacrifice was for the benefit of the vessel to enable it to proceed to destination and not
for the purpose of saving the cargo, the cargo owners are not in law bound to contribute to
the expenses.
The final requisite has not been proved, for it does not appear that the expenses here in
question were incurred after following the procedure laid down in article 813 et seq.
3.4.2.1 MARITIME RISK: Where Carrier at Fault

NDC and MARITIME CO. V. CA
GR L-49469
Paras, J:
FACTS: In accordance with a memorandum agreement entered into between National
Development Corporation (NDC) and Maritime Corporation of the Philippines Inc. (MCP) on
13 September 1962, NDC as the first preferred mortgagee of three ocean going vessels
including one with the name Doa Nati appointed MCP as its agent to manage and operate
said vessel for and in its behalf and account. Thus, on 28 February 1964 the E. Philipp
Corporation of New York loaded on board the vessel Doa Nati at San Francisco, California,
a total of 1,200 bales of American raw cotton consigned to the order of Manila Banking
Corporation, Manila and the Peoples Bank and Trust Company acting for and in behalf of the
Pan Asiatic Commercial Company, Inc., who represents Riverside Mills Corporation. Also
loaded on the same vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd.,
consigned to the order of Manila Banking Corporation consisting of 200 cartons of sodium
lauryl sulfate and 10 cases of aluminum foil. En route to Manila the vessel Doa Nati figured
in a collision at 6:04 a.m. on 15 April 1964 at Ise Bay, Japan with a Japanese vessel SS
Yasushima Maru as a result of which 550 bales of aforesaid cargo of American raw cotton
were lost and/or destroyed, of which 535 bales as damaged were landed and sold on the
authority of the General Average Surveyor for Y6,045,500 and 15 bales were not landed and
deemed lost. The damaged and lost cargoes was worth P344,977.86 which amount, the
Development Insurance and Surety Corporation (DISC) as insurer, paid to the Riverside Mills
Corporation as holder of the negotiable bills of lading duly endorsed. Also considered totally
lost were the aforesaid shipment of Kyokuto, Boekui, Kaisa Ltd., consigned to the order of
Manila Banking Corporation, Manila, acting for Guilcon, Manila. The total loss was
P19,938.00 which DISC as insurer paid to Guilcon as holder of the duly endorsed bill of
lading. Thus, DISC had paid as insurer the total amount of P364,915.86 to the consignees or
their successors-in-interest, for the said lost or damaged cargoes.
On 22 April 1965, DISC filed before the then Court of First Instance of Manila an action for
the recovery of the sum of P364,915.86 plus attorneys fees of P10,000.00 against NDC and
MCP. On 12 November 1969, after DISC and MCP presented their respective evidence, the
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trial court rendered a decision ordering MCP and NDC to pay jointly and solidarily to DISC the
sum of P364,915.86 plus the legal rate of interest to be computed from the filing of the
complaint on 22 April 1965, until fully paid and attorneys fees of P10,000.00. Likewise, in
said decision, the trial court granted MCPs cross-claim against NDC.
MCP interposed its appeal on 20 December 1969, while NDC filed its appeal on 17 February
1970 after its motion to set aside the decision was denied by the trial court in its order dated
13 February 1970. On 17 November 1978, the Court of Appeals promulgated its decision
affirming in toto the decision of the trial court. Hence, the appeals by certiorari. On 25 July
1979, the Supreme Court ordered the consolidation of the above cases.
The Supreme Court denied the subject petitions for lack of merit, and affirmed the assailed
decision of the Appellate Court.
ISSUE: The pivotal issue in these consolidated cases is the determination of which laws
govern loss or destruction of goods due to collision of vessels outside Philippine waters.
HELD: This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v.
IAC (150 SCRA 469-470 [1987]) where it was held under similar circumstances that "the law
of the country to which the goods are to be transported governs the liability of the common
carrier in case of their loss, destruction or deterioration" (Article 1753, Civil Code). Thus, the
rule was specifically laid down that for cargoes transported from Japan to the Philippines, the
liability of the carrier is governed primarily by the Civil Code and in all matters not regulated
by said Code, the rights and obligations of common carrier shall be governed by the Code of
Commerce and by special laws (Article 1766, Civil Code). Hence, the Carriage of Goods by
Sea Act, a special law, is merely suppletory to the provisions of the Civil Code.
In the case at bar, it has been established that the goods in question are transported from
San Francisco, California and Tokyo, Japan to the Philippines and that they were lost or
damaged due to a collision which was found to have been caused by the negligence or fault
of both captains of the colliding vessels. Under the above ruling, it is evident that the laws of
the Philippines will apply, and it is immaterial that the collision actually occurred in foreign
waters, such as Ise Bay, Japan.
STANDARD OIL COMPANY v. CASTELO
G.R. No. L-13695
October 18, 1921
FACTS:
By contract of character, Manuel Lopez Castelo, as owner, let the small
interisland steamer Batangueo for the term of one year to Jose Lim Chumbuque for use in
the conveying of cargo between certain ports of the Philippine Islands. In this contract it was
stipulated that the officers and crew of the Batangueo should be supplied by the owner,
and that the charterer should have no other control over the captain, pilot, and engineers
than to specify the voyages that they should make and to require the owner to discipline or
relieve them as soon as possible in case they should fail to perform the duties respectively
assigned to them. While the boat was being thus used by the charterer in the interisland
trade, the standard Oil Company delivered to the agent of the boat in Manila a quantity of
petroleum to be conveyed to the port of Casiguran, in the Province of Sorsogon. For this
consignment a bill of lading of the usual form was delivered, with the stipulation that freight
should be paid at the destination. Said bill of lading contained no provision with respect to
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the storage of the petroleum, but it was in fact placed upon the deck of the ship and not in
the hold. While the boat was on her way to the port mentioned, and off the western coast of
Sorsogon, a violent typhoon passed over that region, and while the storm was at its height
the captain was compelled for the safety of all to jettison the entire consignment of
petroleum consisting of two hundred cases. When the storm abated the ship made port, and
thirteen cases of the petroleum were recovered, but the remainder was wholly lost to
recover the value of the petroleum thus jettisoned but not recovered, the present action was
instituted by the Standard Oil Company against the owner of the ship.
ISSUE:
HELD:
Whether or not the loss of the petroleum is a general average loss.
Yes, the loss of the petroleum is a general average loss.
The Supreme Court ruled that the cargo was carried upon deck; and it is a
general rule, both under the Spanish Commercial Code and under the doctrines prevailing in
the courts of admiralty of England America, as well as in other countries, that ordinarily the
loss of cargo carried on deck shall not be considered a general average loss. This is clearly
expressed in Rule I of the York-Antwerp Rules, as follows: "No jettison of deck cargo shall be
made good as general average." The reason for this rule is found in the fact that deck cargo
is in an extra-hazardous position and, if on a sailing vessel, its presence is likely to obstruct
the free action of the crew in managing the ship. Moreover, especially in the case of small
vessels, it renders the boat top-heavy and thus may have to be cast overboard sooner than
would be necessary if it were in the hold; and naturally it is always the first cargo to go over
in case of emergency. Indeed, in subsection 1 of article 815 of the Code of Commerce, it is
expressly declared that deck cargo shall be cast overboard before cargo stowed in the hold.
But this rule, denying deck cargo the right to contribution by way of general average in case
of jettison, was first mad in the days of sailing vessels; and with the advent of the steamship
as the principal conveyer of cargo by sea, it has been felt that the reason for the rule has
become less weighty, especially with reference to coastwise trade; and it is now generally
held that jettisoned goods carried on deck, according to the custom of trade, by steam
vessels navigating coastwise and inland waters, are entitled to contribution as a general
average loss.
The reason for adopting a more liberal rule with respect to deck cargo on vessels used in the
coastwise trade than upon those used for ordinary ocean borne traffic is to be found of
course in the circumstance that in the coastwise trade the boats are small and voyages are
short, with the result that the coasting vessel can use more circumspection about the
condition of the weather at the time of departure; and if threatening weather arises, she can
often reach a port of safety before disaster overtakes her. Another consideration is that the
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coastwise trade must as a matter of public policy be encouraged, and domestic traffic must
be permitted under such conditions as are practically possible, even if not altogether ideal.
From what has been said it is evident that the loss of this petroleum is a general and not a
special average, with the result that the plaintiff is entitled to recover in some way and from
somebody an amount bearing such proportion to its total loss as the value of both the ship
and the saved cargo bears to the value of the ship and entire cargo before the jettison was
effected.
Who is the person, or persons, who are liable to make good this loss, and what
are the conditions under which the action can be maintained?
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.
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.).
Now, by article 852 of the Code of Commerce the captain is required to initiate the
proceedings for the adjustment, liquidation, and distribution of any gross average to which
the circumstances of the voyage may have given origin; and it is therefore his duty to take
the proper steps to protect any shipper whose goods may have been jettisoned for the
general safety.
It is true that if the captain does not comply with the article relating to the adjustment,
liquidation, and distribution of the general average, the next article (852) gives to those
concerned whether shipowner (naviero) or shipper the right to maintain an action
against the captain for indemnification for the loss; but the recognition of this right of action
does not by any means involve the suppression of the right of action which is elsewhere
recognized in the shipper against the ship's owner. 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.
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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.
CHAPTER IX MARITIME RISKS: COLLISIONS

A URRUTIA & CO., v. BACO RIVER PLANTATION CO.
GR No. 7675 March 25, 1913
FACTS: There was a collision between the steamship Nuestra Senora del Pilar, owned by the
plaintiff, and the schooner Mangyan, owned by defendant, which occurred in the early
morning of the 8th of April, 1910, in Verde Island North Passage. The sail vessel was sailing
with a fresh breeze dead astern, her sails wing and wing. The steamer was seen by those on
board the sailing vessel some time before the actual collision, sailing erratically. The sail
vessel kept her course steady until just before the actual contract when her helmsman threw
her hard to port in an effort to avoid the collision. The movement, however, was
unsuccessful and the sail vessel rammed the steamer sank and eight lives were lost. The sail
vessel was considerably injured.
This action was brought by the owners of the steamship against the owners of the
sail vessel, to recover the value of the destroyed steamer and the damages caused by
reason of its destruction, alleging as a basis therefore the negligence of the sail vessel.
The defendant denied the material allegations of the complaint and set up a
counterclaim for damages, alleging as grounds therefore that the injuries sustained by
the sail vessel were due to the gross negligence of those handling plaintiff's steamer.
The case turns upon the question which of the vessels was negligence in failing to
conform to the International Rules for the Prevention of Collisions at Sea. The learned
trial court found that those managing the steamer were guilty of gross negligence and
that for that reason plaintiff could recover nothing.
An examination of the record leaves no doubt that the finding of the trial court that
steamer was handled in a grossly negligent manner is clearly and fully supported by the
evidence. No other finding could be sustained.
RTC Ruling: Ruled against the petitioner (the owner of the steamship at fault).
ISSUE:
Whether or not A Urrutia & Co. was negligent.
HELD: Yes. The Supreme Court affirmed the decision of the lower court, thereby ruling
against the petitioner, A Urrutia & Co. Generally speaking, in collisions between vessels
there exist there divisions of time, or zones: The first division covers all the time up to the
moment when the risk of collision may be said to have begun. Within this zone no rule is
applicable because none is necessary. Each vessel is free to direct its course as it deems
best without reference to the movements of the other vessel. The second division covers the
time between the moment when the risk of collision begins and the moment when it has
become a practical certainty. The third division covers the time between the moment of
actual contact.
It was during the time when the sail vessel was passing through the third zone
that it changed its course to port in order to avoid, if possible, the collision. This act may
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be said to have been done in extremis, and, even if wrong, the sailing vessel is not
responsible for the result.
This case exemplifies the three-zone theory already referred to. In the first zone
no rules apply. In the second the burden is on the vessel required to keep away and void
the danger. The third zone covers the period in which errors in extremis occur; and the
rule is that the vessel which has forced the privileged vessel into danger is responsible
even if the privileged vessel has committed an error within that zone.
Nautical rules requires that, where a steamship and sailing vessel are
approaching each other from opposite directions, or on intersecting lines, the steamship,
from the moment the sailing vessel is seen, shall watch with the highest diligence her
course and movements so as to be able to adopt such timely means of precaution as will
necessarily prevent the two boats from coming in contact.
Nautical rules also require that, where a steamship and a sailing vessel are
approaching each other from opposite directions, or on intersecting lines, the sailing
vessel is required to keep her course unless the circumstances are such as to render a
departure from the rule necessary in order to avoid immediate danger. Where a
steamship and a sailing vessel are approaching each other bow on, or on
intersecting lines, the steamship must give way. In case of a collision between
such vessels the steamship is prima facie in fault.
Fault on the part of the sailing vessel at the moment preceding a collision, that is,
during the third division of time, does not absolve the steamship which has suffered
herself and a sailing vessel to get into such dangerous proximity as to cause inevitable
alarm and confusion, and a collision results as a consequence. The steamer having
incurred a far greater fault in allowing such proximity to be brought about is chargeable
with all the damage resulting from the collision; and the act of the sailing vessel having
been done in extremis, even if wrong, it is not responsible for the result.
The responsibility of the owner of a steamship for the damage caused by a
collision between the steamer and a sailing vessel brought about by the negligence of
the steamship is extinguished where said steamship is sunk totally lost by reason of the
collision.
Where, however, such steamship is insured and the insurance is collected by the
owner, the insurance substitutes the vessel and the owner becomes responsible for the
injuries caused the sailing vessel to the extent of the insurance collected.
In an action brought by a steamship owner against the owner of a sailing vessel
for damages caused to the steamship by a collision, a passenger who suffered a loss of
baggage and freight by reason of such collision cannot intervene in the action for the
adjudication of his rights. He has "no legal interest in the matter in litigation, or in the
success of either of the parties, or an interest against both."
THE UNITED STATES, v. SMITH, BELL & COMPANY

G.R. No. 1876
September 30, 1905
FACTS:
The plaintiff filed an action against the defendant to recover the sum of
$1,600 for damages occasioned to the Navy boat Barcelo by a collision with a casco that was
then and there being towed by the launch Alexandra (property of the defendant). The
inferior court found that the defendant had not complied with the rules of navigation in
Manila Bay, in that it failed to display lights in accordance with such regulations, and that, by
reason of such failure, the collision and consequent damages occurred. The defendant
claimed that the plaintiff could not recover in the action because it had not complied with
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the provisions of the Code of Commerce, relying particularly upon article 835 of the same.
Article 835 provides: "The action for the recovery of loss and damages arising from collisions
can not be admitted if a sworn statement or declaration is not presented within twenty-four
hours to competent authority of the point where the collision took place, or that of the first
port of arrival of the vessel." The plaintiff claimed that this provision of the Commercial Code
did not apply to it.
ISSUE:
HELD:
The Supreme Court ruled that Article 835 of the Code of Commerce applies to
all persons engaged in traffic upon the waters of the Philippine Archipelago; that the
defendant has as much right to insist upon compliance with this provision of the code where
the damages were done to a boat operated by the Government as if such boat had been
operated by a private individual or company. This provision of the Commercial Code,
requiring protest to be made and presented to the proper authority within twenty-four hours
after the collision, or after the arrival of the injured boat in port, is a prerequisite to the
bringing of an action for damages. By having failed to comply with this provision of the
Commercial Code it cannot maintain this action for damages.
SMITH BELL v CA
FACTS: In the early morning of 3 May 1970at exactly 0350 hours, on the approaches to
the port of Manila near Caballo Island, a collision took place between the M/V "Don Carlos,"
an inter-island vessel owned and operated by private respondent Carlos A. Go Thong and
Company ("Go Thong"), and the M/S "Yotai Maru," a merchant vessel of Japanese registry.
The "Don Carlos" was then sailing south bound leaving the port of Manila for Cebu, while the
"Yotai Maru" was approaching the port of Manila, coming in from Kobe, Japan. The bow of the
"Don Carlos" rammed the portside (left side) of the "Yotai Maru" inflicting a three (3) cm.
gaping hole on her portside near Hatch No. 3, through which seawater rushed in and flooded
that hatch and her bottom tanks, damaging all the cargo stowed therein.
The consignees of the damaged cargo got paid by their insurance companies. The insurance
companies in turn, having been subrogated to the interests of the consignees of the
damaged cargo, commenced actions against private respondent Go Thong for damages
sustained by the various shipments in the then Court of First Instance of Manila.
Two (2) cases were filed in the Court of First Instance of Manila.
ISSUE: WON Don Carlos is negligent and the proximate cause of the collision and not Yotai
Maru
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HELD: YES. SC ruled that there are three (3) principal factors which are constitutive of
negligence on the part of the "Don Carlos," which negligence was the proximate cause of the
collision.
The first of these factors was the failure of the "Don Carlos" to comply with the requirements
of Rule 18 (a) of the International Rules of the Road ("Rules")," which provides as follows:
(a) When two power-driven vessels are meeting end on, or nearly end on,so as to
involve risk of collision, each shall alter her course to starboard,so that each may
pass on the port side of the other. This Rule only applies to cases where vessels are
meeting end on or nearly end on, in such a manner as to involve risk of collision,
and does not apply to two vessels which must, if both keep on their respective
course, pass clear of each other. The only cases to which it does apply are when
each of two vessels is end on, or nearly end on, to the other; in other words, to
cases in which, by day, each vessel sees the masts of the other in a line or nearly in
a line with her own; and by night to cases in which each vessel is in such a position
as to see both the sidelights of the other. It does not apply, by day, to cases in
which a vessel sees another ahead crossing her own course; or, by night, to cases
where the red light of one vessel is opposed to the red light of the other or where
the green light of one vessel is opposed to the green light of the other or where a
red light without a green light or a green light without a red light is seen ahead, or
Where both green and red lights are seen anywhere but ahead. (Emphasis
supplied)
The evidence on this factor was summarized by Judge Cuevas in the following manner:
Plaintiff's and defendant's evidence seem to agree that each vessel made a visual sighting
of each other ten minute before the collision which occurred at 0350. German's version of
the incident that followed, was that "Don Carlos" was proceeding directly to [a] meeting [on
an] "end-on or nearly end-on situation" (Exh. S, page 8).
The second circumstance constitutive of negligence on the part of the "Don Carlos" was its
failure to have on board that night a "proper look-out" as required by Rule I (B) Under Rule
29 of the same set of Rules, all consequences arising from the failure of the "Don Carlos" to
keep a "proper look-out" must be borne by the "Don Carlos." Judge Cuevas' summary of the
evidence said:
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The evidence on record likewise discloses very convincingly that "Don Carlos" did not have
"look-out" whose sole and only duty is only to act as Such. .
A "proper look-out" is one who has been trained as such and who is given no other duty save
to act as a look-out and who is stationed where he can see and hear best and maintain good
communication with the officer in charge of the vessel, and who must, of course, be vigilant.
Judge Cuevas wrote:
In the case at bar, the failure of the "Don Carlos" to recognize in a timely manner the risk of
collision with the "Yotai Maru" coming in from the opposite direction, was at least in part due
to the failure of the "Don Carlos" to maintain a proper look-out.
The third factor constitutive of negligence on the part of the "Don Carlos" relates to the fact
that Second Mate Benito German was, immediately before and during the collision, in
command of the "Don Carlos." In violation of the provision: Art. [633] The second mate
shall take command of the vessel in case of the inability or disqualification of the captain
and sailing mate, assuming, in such case, their powers and liability.
The fact that second mate German was allowed to be in command of "Don Carlos" and not
the chief or the sailing mate in the absence of Captain Rivera, gives rise to no other
conclusion except that said vessel [had] no chief mate. Otherwise, the defense evidence
should have at least explained why it was German, only a second mate, who was at the
helm of the vessel "Don Carlos" at the time of the fatal collision.
CHAPTER X SHIPWRECK AND STRANDING
CHAPTER XI OTHER MARITIME RISKS: Oil Pollution
CHAPTER XII PIRACY

THE PEOPLE OF THE PHILIPPINE ISLANDS v. LOL-LO and SARAW
G.R. No. 17958
February 27, 1922
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FACTS:
Two boats left matuta, a Dutch possession, for Peta, another Dutch
possession. In one of the boats was one individual, a Dutch subject, and in the other boat
eleven men, women, and children, likewise subjects of Holland. After a number of days of
navigation, the second boat arrived between the Islands of Buang and Bukid in the Dutch
East Indies. There the boat was surrounded by sixvintas manned by twenty-four Moros all
armed. The Moros first asked for food, but once on the Dutch boat, too for themselves all of
the cargo, attacked some of the men, and brutally violated two of the women by methods
too horrible to the described. All of the persons on the Dutch boat, with the exception of the
two young women, were again placed on it and holes were made in it, the idea that it would
submerge, although as a matter of fact, these people, after eleven days of hardship and
privation, were succored violating them, the Moros finally arrived at Maruro, a Dutch
possession. Two of the Moro marauder were Lol-lo, who also raped one of the women, and
Saraw. At Maruro the two women were able to escape.
Lol-lo and Saraw later returned to their home in South Ubian, Tawi-Tawi, Sulu, Philippine
Islands. There they were arrested and were charged in the Court of First Instance of Sulu
with the crime of piracy.
ISSUE:
HELD:
The Supreme Court ruled that Pirates are in law hostes humani generis. Piracy
is a crime not against any particular state but against all mankind. It may be punished in the
competent tribunal of any country where the offender may be found or into which he may be
carried. The jurisdiction of piracy unlike all other crimes has no territorial limits. As it is
against all so may it be punished by all. Nor does it matter that the crime was committed
within the jurisdictional 3-mile limit of a foreign state, "for those limits, though neutral to
war, are not neutral to crimes."
CHAPTER XII SALVAGE LAW; Act No. 2616

BARRIOS v. GO THONG
GR L-17192 | 30 March 1963
Barrera, J:
FACTS:
Honorio M. Barrios was, on May 1 and 2, 1958, captain and/or master of the
MV Henry I of the William Lines Incorporated, of Cebu City, plying between and to and from
Cebu City and other southern cities and ports, among which are Dumaguete City,
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Zamboanga City, and Davao City. At about 8:00 p.m. of 1 May 1958, Barrios in his capacity
as such captain and/or master of the aforesaid MV Henry I, received or otherwise intercepted
an S.O.S. distress signal by blinkers from the MV Alfredo, owned and/or operated by Carlos A.
Go Thong & Company. Acting on and/or answering the S.O.S. call, Barrios, also in his
capacity as captain and/or master of the MV Henry I, which was then sailing or navigating
from Dumaguete City, altered the course of said vessel, and steered and headed towards
the beckoning MV Don Alfredo, which Barrios found to be in trouble, due to engine failure
and the loss of her propeller, for which reason, it was drifting slowly southward from Negros
Island towards Borneo in the open China Sea, at the mercy of a moderate easterly wind.
At about 8:25 p.m. on the same day, the MV Henry, under the command of Barrios,
succeeded
in getting near the MV Don Alfredo in fact as near as 7 seven meters from the latter ship
and with the to be tied to, or well-secured and connected with tow lines from the MV
Henry I; and in that manner, position and situation, the latter had the MV Don Alfredo in tow
and proceeded towards the direction of Dumaguete City, as evidenced by a written
certificate to this effect executed and accomplished by the Master, the Chief Engineer, the
Chief Officer, and the Second Engineer of the MV Don Alfredo, who were then on board the
latter ship at the time of the occurrence stated above. At about 5:10 a.m., 2 May 1958, or
after almost 9 hours during the night, with the MV Don Alfredo still in tow by the MV Henry I,
and while both vessels were approaching the vicinity of Apo Island off Zamboanga town,
Negros Oriental, the MV Lux, a sister ship of the MV Don Alfredo, was sighted heading
towards the direction of the aforesaid two vessels, reaching then 15 minutes later, or at
about 5:25 a.m. Thereupon, at the request and instance of the captain and/or master of the
MV Don Alfredo, Barrios caused the tow lines to be released, thereby also releasing the MV
Don Alfredo.
Barrios concludes that they establish an impending sea peril from which salvage of a ship
worth more than P100 000.00, plus life and cargo was done, while Go Thong insists that the
FACTS made out no such case, but that what merely happened was only mere towage from
which Barrios cannot claim any compensation or remuneration independently of the
shipping company that owned the vessel commanded by him. Brought to the CFI of Manila
(Civil Case 37219), the court therein dismissed the case; with cost against Barrios. Barrios
interposed an appeal.
The Supreme Court affirmed the decision of the lower court in all respects, with costs against
Barrios.
ISSUE/S: Whether under the FACTS of the case, the service rendered by plaintiff to
defendant constituted "salvage" or "towage", and if so, whether plaintiff may recover from
defendant compensation for such service.
HELD:
Concept of Salvage Law
Section 1 of the Salvage Law (Act No. 2616), provides that 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.
Salvage Law Defined.
According to Section 1, Act 2616, 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,
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in whole or in part, from impending peril on the sea, or in recovering such property from
actual loss, as in case of shipwreck, derelict, or recapture.
Elements for a valid salvage claim; Erlanger & Galinger case
In the Erlanger & Galinger case, it was HELD that three elements are necessary to a valid
salvage claim, namely, (1) a marine peril, (2) service voluntarily rendered when not required
as an existing duty or from a special contract, and (3) success in whole or in part, or that the
service rendered contributed to such success.
No marine peril to justify valid salvage claim; No Cure No Pay
There was no marine peril to justify a valid salvage claim by Barrios against Go Thong. It
appears that although Go Thongs vessel in question was, on the night of 1 May 1958, in a
helpless condition due to engine failure, it did not drift too far from the place where it was.
The weather was fair, clear, and good. The waves were small and too slight, so much so,
that there were only ripples on the sea, which was quite smooth. During the towing of the
vessel on the same night, there was moonlight. Although said vessel was drifting towards
the open sea, there was no danger of its foundering or being stranded, as it was far from any
island or rocks. In case of danger of stranding, its anchor could be released, to prevent such
occurrence. There was no danger that Go Thongs 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 vessels cargo as a safety measure. Neither the passengers nor
the cargo were in danger of perishing. All that the vessels crew members could not do was
to move the vessel on its own power. That did not make the vessel a quasi-derelict
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?
YES. Tug which put line aboard liberty ship which was not in danger or peril but which had
reduced its engine speed because of hot grounds, and assisted ship over bar and, thereafter,
dropped towline and stood by while ship proceeded to dock under own power, was entitled,
in absence of written agreement as to amount to be paid for services, to payment for
towage services, and not for salvage services. Herein, in consenting to Barrios offer to tow
the vessel, Go Thong (through the captain of its vessel MV Don Alfredo) thereby impliedly
entered into a juridical relation of towage with the owner of the vessel MV Henry I,
captained by Barrios, the William Lines.
Only owner entitled to remuneration in towage; Distinguished from towage
If the contract thus created is one for towage, then only the owner of the towing vessel, to
the exclusion of the crew of the said vessel, may be entitled to remuneration. The courts
have to draw a distinct line between salvage and towage; for the reason that a reward ought
sometimes to be given to the crew of the salvage vessel and to other participants in salvage
services, and such reward should not be given if the services were HELD to be merely
towage. The master and members of the crew of a tug were not entitled to participate in
payment by liberty ship for services rendered by tug which were towage services and not
salvage services. The distinction between salvage and towage is of importance to the crew
of the salvaging ship, for the following reasons: If the contract for towage is in fact towage,
then the crew does not have any interest or rights in the remuneration pursuant to the
contract. But if the owners of the respective vessels are of a salvage nature, the crew of the
salvaging ship is entitled to salvage, and can look to the salved vessel for its share.
Owner expressly waived claim for compensation, captain not entitled therefore
As the vessel-owner, William Lines, had expressly waived its claim for compensation for the
towage service rendered to Go Thong, it is clear that Barrios, whose right if at all depends
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(Chapter 4-12)
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upon and not separate from the interest of his employer, is not entitled to payment for such
towage service.
Equity cannot be resorted if there is an express provision of law
Barrios cannot invoke equity in support of his claim for compensation against Go Thong.
There being an express provision of law (Art. 2142, Civil Code) applicable to the relationship
created in the case, i.e. that of a quasi-contract of towage where the crew is not entitled to
compensation separate from that of the vessel, there is no occasion to resort to equitable
considerations.
8.6
Atlantic Gulf & Pacific Co. vs. Uchida Kisen Kaisha
GR 15871 | 7 November 1921
Johnson J,:
FACTS:
On 21 October 1918, while the steamship Kyodo Maru was discharging
a cargo of coal, the property of Vicente Madrigal, in the harbor of Manila, inside the
breakwater, one of the lighters alongside said vessel sank. In swinging with the tide, the
Kyodo Maru came violently in contact with this submerged lighter, the result being that her
hull was perforated. The said steamer began to sink during the morning of October 22 and
touched the bottom of the harbor at 10 a.m. She continued to sink deeper into the mud
until, on October 23, the forward half of the vessel was entirely submerged, while the stern
half was still afloat. The depth of the water in that part of the harbor where the vessel was
moored at the time of the accident is about 21 feet at low tide. The depth of the vessel from
deck to keel is about 35 feet. The value of the vessel at the time of the
accident was about P1,300,000, Philippine currency. On the afternoon of October 23, the
Atlantic Gulf & Pacific Company of Manila and Simmie & Grilk, at the request of the captain
and agents of the ship, took possession of the sinking vessel as salvors and commenced
salvage operation at once. At that time they had submitted two propositions to the captain
and agents of the ship as to compensation for the salvage services to be performed: one for
P150,000 in case of success and reimbursement of expenses in case of failure, and another
for P300,000 no cure no pay. Atlantic Gulf and Simmie were informed that the propositions
would be transmitted to the owners of the vessel in Japan for acceptance or rejection, but
they were requested to continue work in the meantime, upon the understanding that if no
special contract should be made they would be compensated as salvors. The vessel was
floated on October 30 and the salvage operations ended the
following day. On the afternoon of October 30, Atlantic Gulf and Simmie were informed in
writing that the head office of the steamship company in Japan had, by cable, rejected both
of the propositions, and that it was proposed to settle with them on the basis of the
reasonable value of their services as salvors. Atlantic Gulf and Simmie then made demand
for payment of P150,000. Uchida Kisen Kaisha and Mitsui Bussan Kaisha (not including
Madrigal) offered to pay P75,000. Atlantic Gulf and Simmie then made a counter offer of
P125,000. This was rejected.
Atlantic Gulf and Simmie then brought the present action for the recovery of a salvage
award of P300,000; but, in their trial brief, they reduced this demand to P297,443.40. During
the pendency of the negotiations regarding the value of the salvage services, it was agreed
that the vessel should be freed from any lien which Atlantic Gulf and Simmie might have
upon her as salvors, in consideration of the agreement of Mitsui Bussan Kaisha to respond in
solidum with the owner of the vessel, Uchida Kisen Kaisha, for whatever might be found due
the salvors upon final judgment. Judgment was rendered in favor of Atlantic Gulf and Simmie
and against the Uchida Kisen Kaisha and Mitsui Bussan Kaisha in solidum for the sum of
P140,000 and for costs. The action was dismissed as regards Vicente Madrigal, the owner of
the cargo. From that judgment Altantic Gulf
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and Simmie and Uchida Kisen Kaisha and Mitsui Bussan Kaisha appealed to the Supreme
Court.
The Supreme Court modified the judgment appealed from, ordered decreed that Atlantic
Gulf and Simmie have and recover the sum of P98,000, Philippine currency, from Uchida
Kisen Kaisha and Mitsui Bussan Kaisha, jointly and severally, and the sum of P2,000,
Philippine currency, from Vicente Madrigal, without any finding as to costs.
ISSUE/S: (1) with regard to the amount of compensation to be awarded to the plaintiffs for
the salvage of the ship in question, and (2) whether or not the defendant-appellee Vicente
Madrigal, as owner of the cargo, is liable for any contribution to such compensation
HELD: Elements involved in compensation; Charges exorbitant
The question of compensation involves two elements: (a) The actual expenses incurred in
the salvageoperation, and (b) the reward for services rendered by the plaintiffs as salvors.
Attached to Atlantic Gulfs and Simmies complaint is a statement of the expenses alleged to
have been incurred by them, aggregating the sum of P63,074.45. Uchida Kisen Kaisha and
Mitsui Bussan Kaisha, in their brief, vigorously challenge the reasonableness of these
charges, alleging that they are palpably, grossly and sinfully exaggerated. Suffice it to say
that after a perusal of the luminous briefs of the eminent counsel for both parties, in relation
with the evidence adduced during the trial of the cause, most of the charges for expenses
made by Atlantic Gulf and Simmie are really exorbitant. Considering all of the FACTS and
circumstances of the case, and specially the inflated war prices of materials at the time the
salvage in question was performed, the sum of P50,000 would be a very reasonable
allowance to Altantic Gulf and Simmie for their cash outlay and the rental value of their
equipment
Section 10, Act 2616; Determination of the reward for salvage
Section 10 of Act 2616, which prescribes the rule for determining the reward for salvage,
provides
that 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 expenses
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.
Madrigal benefited from salvage, should share a proportionate amount
Although the removal of the 573 tons of coal from the vessel was merely incidental to, and
necessitated by, the raising of said vessel, it cannot be said that such removal did not
operate in any way to benefit the cargo, nor save it from any risk or damage. Had the
vessel completely sunk and listed, extreme difficulty would no doubt have been encountered
in removing the coal in question from her hold, thus occasioning considerable expense and
loss to Madrigal. It is also undeniable that part of Altantic Gulfs and Simmies expenses were
incurred in carrying such coal to the shore. It is but just, then, that Madrigal should share a
proportionate amount of the award.

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TRANSPORT LAW Atty.

CHAPTER IV - MARITIME CONTRACTS: CHARTERPARTIES (Arts. 652 - 718, Code of

LITONJUA SHIPPING COMPANY INC v. NATIONAL SEAMEN BOARD

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

3. Effect on Carriers Character

MARKET DEVELOPERS v. IAC

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

CHAPTER V MARITIME CONTRACTS: AFFREIGHTMENT

TRANSPORT LAW Atty. Padilla

CEBU SALVAGE CORPORATION v. PHILIPPINE HOME ASSURANCE CORP

TRANSPORT LAW Atty. Padilla

G.R. No. 150403

January 25, 2007

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

4. THREE-FOLD CHARACTER: BILL OF LADING AS RECEIPT

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

Whether or not petitioner had accepted the bill of lading;

Whether or not petitioner was correct in not accepting the overshipment;

TRANSPORT LAW Atty. Padilla

as stipulated in the bill of lading in the present case, must be

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

Upon plaintiff-appellee's motion, defendant DAMCO was declared in default by the

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

3. NOTICE OF CLAIM AND PRESC. PERIOD

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla

CHAPTER VI MARITIME CONTRACTS (Bottomry/ Respondentia)

CHAPTER VII OTHER MARITIME CONTRACTS

TRANSPORT LAW Atty. Padilla

DOUGLAS MILLARES AND ROGELIO LAGDA v. NLRC

TRANSPORT LAW Atty. Padilla

CHAPTER VIII MARITIME RISKS: AVERAGES

January 31, 1955

Whether or not the expenses incurred constitute general average.

TRANSPORT LAW Atty. Padilla

Requisites for General Average:

TRANSPORT LAW Atty. Padilla

3.4.2.1 MARITIME RISK: Where Carrier at Fault

TRANSPORT LAW Atty. Padilla

October 18, 1921

TRANSPORT LAW Atty. Padilla

Whether or not the loss of the petroleum is a general average loss.

Yes, the loss of the petroleum is a general average loss.

TRANSPORT LAW Atty. Padilla

TRANSPORT LAW Atty. Padilla