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University of San Jose Recoletos

Magallanes St., Cebu City, 6000

School of Law

LlB 314
Transportation and Public Service Act

1st Semester, S.Y. 2016-2017


Schedule: Saturday 8:00-10:00

Atty. GERALD R. YU, CPA, CRB


Professor

Submitted by:
Abangan, Richard Jr.
Atienza, Joao
Chanyapat, Mary
Garcia, Stephen John
Jongoy, Kent Francesco C.
Lim, Hadjie
Patinggan, Denmark

Table of Contents:
1. Synthesis/Discussion

2. Case Digests

27

Monarch Insurance Co. vs. CA

27

Aboitiz Shipping vs. New India

29

Aboitiz Shipping Corp. vs. CA

31

Dela Torre vs. CA

33

Lopez vs. Duruelo

35

Rubiso vs. Rivera

36

PNB vs. CA

38

Crescent Petroleum vs. M/V

42

Poliand Industrial vs. National Development

46

Tsuneshi vs. Negros Navigation Co. Inc

47

Inter-Orient Maritime Enterprises vs. NLRC

49

Macondray vs. Provident Insurance

51

Ace Navigation Co. Inc. vs. FGU Insurance Corp.

52

Caltex Inc. vs. Sulpicio Lines, Inc.

56

Phil. Home Assurance Corporation vs. CA

58

National Development Co. vs. CA

59

Mecenas vs. CA

60

Barrios vs. Go Thong

62

Ang vs. American Steamship Agencies Inc.

63

American Insurance Co. vs. Compania Maritima

65

Union Carbide Phils Inc. vs. Manila Railroad Co.

66

Eastern & Australian Steamship Co. vs. Great Americans Inc.

68

Universal Shipping Lines Inc. vs. IAC

69

Mayer Steel Pipe Corp. vs. CA

71

Mitsui OSK Line Ltd. Vs. CA

72

Liao vs. American President Line Inc.

73

Phil. Charter Insurance Corp. vs. Neptune Orient

75

Philippines First insurance Co Inc vs. Wallem Phils Shipping

78

UCPB General Insurance Co vs. Aboitiz Shipping Corp.

80

Wallem Philippines, Inc. vs. S.R. Farms, Inc.

82

GENERAL CONCEPTS
MARITIME LAW

The system of laws which particularly relates to the


affairs and business of the sea, to ships, their crews and
navigation, and to marine conveyance of persons and
property.
Includes:
Book II, Code of Commerce (Maritime Commerce)
Act No. 2616 (The Salvage Law)
C.A. No. 65 (Carriage of Goods by Sea Act)
P.D. 1521 (Ship Mortgage Decree of 1978)
R.A. 9295 (The Domestic Shipping Act of 2004)
Other special laws relating to maritime commerce
Synthesis
Maritime Law
Real and Hypothecary Nature
The Supreme Court explained in one case that the spirit
of the Code of Commerce set forth in a treatise of Madriaga
on maritime law:
That which distinguishes the maritime from the
civil law and even from the mercantile law in general is
the real and hypothecary nature of the former, and the
many securities of a real nature that maritime customs
from time immemorial, the laws, the codes, and the later
jurisprudence, have provided for the protection of the
various and conflicting interest which are ventured and
risked in maritime expeditions.
As evidence of this real nature of the maritime
law we have (1) the limitation of the liability of the
agents to the actual value of the vessel and the freight
money, and (2) the right to retain the cargo and the
embargo and detention of the vessel even in cases
where the ordinary civil law would not allow more than a
personal action against the debtor or person liable.

The liability of the carrier in connection with losses


related to maritime contracts is confined to the vessel, which
is hypothecated for such obligations or which stands as the
guaranty for their settlement.
REAL
A vessel is essentially a personal property because it is
movable. But the Supreme Court characterized maritime
transactions as having a real nature insofar as these
transactions are similar to transactions over real property
with respect to effectivity against third persons which are
effected through registration.
HYPOTHECARY
The liability of the owner of the vessels is limited to the
vessel itself. If the vessel sinks, generally the liability of the
owner is extinguished, although he may have other
properties.
Doctrine of limited liability
No vessel, No liability
The shipowners or agents liability is merely coextensive with his interest in the vessel such that a total loss
thereof results in its extinction. The total destruction of the
vessel extinguishes maritime liens because there is no
longer any res to which it can attach.
The Limited Liability Rule in Maritime Law has not been
rendered obsolete by the advances in modern technology
which have considerably lessen the risks involved in
maritime trade. As explained inMonarch Insurance Co. vs.
Court of Appeals:
This is in accordance with the rule that in cases
involving the limited liability of shipowners, the initial
burden of proof of negligence or unseaworthiness rests
on the claimants. However, once the vessel owner or any

party asserts the right to limit its liability, the burden of


proof as to lack of privity or knowledge on its part with
respect to the matter of negligence or unseaworthiness
is shifted to it. This burden, Aboitiz had unfortunately
failed to discharge.
This doctrine is based on the real and hypothecary
nature of maritime law which has its origin in the
prevailing conditions of the maritime trade and sea
voyages during the medieval ages, attended by
innumerable hazards and perils. To offset against these
adverse conditions and to encourage shipbuilding and
maritime commerce, it was deemed necessary to
confine the liability of the owner or agent arising from
the operation of a ship to the vessel, equipment, and
freight, or insurance, if any.
Statutory Provisions
The provisions that provide for the limited liability rule
are Articles 587 (Liability to third persons), 643 and 837
(collision cases) of the Code of Commerce.
Art. 587
The ship agent shall also be civilly liable for
the indemnities in favor of third persons which may
arise from the conduct of the captain in the care of
the goods which he loaded on the vessel; but he
may exempt himself therefrom by abandoning the
vessel with all her equipment and the freight it may
have earned during the voyage.
Art. 590
The co-owners of the vessel shall be civilly
liable in the proportion of their contribution to the
common fund for the results of the acts of the
captain, Art. 587.
Each co-owner may exempt himself from this
liability by the abandonment, before a notary, of
that part of the vessel belonging to him.
Art. 643

If the vessel and her cargo should be totally


lost, by reason of capture or wreck, all rights shall
be extinguished, both as regards the crew to
demand any wages whatsoever, and as regards the
ship agent to recover the advances made.
If a portion of the vessel or of the cargo, or
both, should be saved, the crew engaged on wages,
including the captain shall retain their rights on the
salvage, so far as they go, on the remainder of the
vessel as well as on the amount of freightage of the
cargo saved;
But sailors who are engaged on shares shall
not have any right whatsoever on the salvage of
the hull, but only on the portion of the freightage
saved. If they should have worked to recover the
remainder of the shipwrecked vessel they shall be
given from the amount of the salvage an award in
proportion of the efforts made and to the risks
encountered in order to accomplish the salvage.
Art. 837
The civil liability incurred by the shipowners in
the cases prescribed in this section, shall be
understood as limited to the value of the vessel
with all her appurtenances and freight.
Coverage of Limited Liability
As explained in Aboitiz Shipping Corporation vs. General
Accident Fire and Life Assurance Corporation Ltd.;
The rights of vessel owner or agent under the Limited
Liability Rule are akin to those of the rights of shareholders
to limited liability under our Corporation Law.In both
insolvency of a corporation and the sinking of a vessel, the
claimants or creditors are limited in their recovery to the
remaining value of accessible assets.
As related to Articles 839, 587 and 590 of the Code of
Commerce, cover only: (1) liability to third persons, (2) acts
of the captain, and (3) collisions.
As in accordance to the case of Aboitiz Shipping vs. New
India:

Trial court, citing the Court of Appeals decision in


General Accident Fire and Life Assurance Corporation v.
Aboitiz Shipping Corporation involving the same
incident, ruled in favor of respondent. It held petitioner
liable for the total value of the lost cargo plus legal
interest.
Where the shipowner fails to overcome the
presumption of negligence, the doctrine of limited
liability cannot be applied.
From the nature of their business and for reasons of
public policy, common carriers are bound to observe
extraordinary diligence over the goods they transport
according to all the circumstances of each case. In the
event of loss, destruction or deterioration of the insured
goods, common carriers are responsible, unless they can
prove that the loss, destruction or deterioration was
brought about by the causes specified in Article 1734 of
the Civil Code. In all other cases, common carriers are
presumed to have been at fault or to have acted
negligently, unless they prove that they observed
extraordinary diligence. Moreover, where the vessel is
found unseaworthy, the shipowner is also presumed to
be negligent since it is tasked with the maintenance of
its vessel. Though this duty can be delegated, still, the
shipowner must exercise close supervision over its men.
Thus, petitioner has the burden of showing that it
exercised extraordinary diligence in the transport of the
goods it had on board in order to invoke the limited
liability doctrine.
Exceptions to the Limited Liability Doctrine

The exceptions to the limited liability rule are:


(1) Where the injury or death to a passenger is due
either to the fault of the shipowner, or to the
concurring negligence of the shipowner and the
captain;
(2)

Where the vessel is insured; and

(3)

In workmens compensation claims.

In the case of Aboitiz Shipping Corp. vs. Court of


Appeals:
Aboitiz cannot avail limited liability on the basis of
the real and hypothecary doctrine of maritime law.
Reiterating the well-settled principle that the exception
to the limited liability doctrine applies when the damage
is due to the fault of the shipowner or to the concurrent
negligence of the shipowner and the captain.
Where the shipowner fails to overcome the
presumption of negligence, the doctrine of limited
liability cannot be applied. In New India, the Court
clarified that the earlier pronouncement in Monarch
Insurance was not an abandonment of the doctrine of
limited liability and that the circumstances therein still
made the doctrine applicable.
As a general rule, a ship owners liability is merely
co-extensive with his interest in the vessel, except where
actual fault is attributable to the shipowner. Thus, as an
exception to the limited liability doctrine, a shipowner or
ship agent may be held liable for damages when the
sinking of the vessel is attributable to the actual fault or
negligence of the shipowner or its failure to ensure the
seaworthiness of the vessel.

Chartered/Sub-charter cannot invoke limited liability


rule against shipowner
In the case of Dela Torre vs. Court of Appeals;
With respect to petitioners position that the
Limited Liability Rule under the Code of Commerce
should be applied to them, the argument is misplaced.
The said rule has been explained to be that of the real
and hypothecary doctrine in maritime law where the
shipowner or ship agents liability is held as merely coextensive with his interest in the vessel such that a total
loss thereof results in its extinction.

The only person who could avail of this is the


shipowner, Concepcion. He is the very person whom the
Limited Liability Rule has been conceived to protect. The
petitioners cannot invoke this as a defense.
Vessels
A vessel or watercraft is defined under Presidential
Decree No. 474 as any barge, lighter. Bulk carrier,
passenger ship freighter, tanker, container ship, fishing
boats, or other artificial contrivance utilizing any source of
motive power, designed, used or capable of being used as a
means of transportation operating either as a common
contract carrier, including fishing vessels covered under
Presidential Decree No. 43, except: (i) those owned and/or
operated by the Armed Forces of the Philippines and by
foreign governments for military purposes, and (ii) bancas,
sailboats and other waterborne contrivance of less than
three gross tons capacity and not motorized.
Ship or vessel
Is any kind, class or type of craft or artificial contrivance
capable of floating in water, designed to be used, or capable
of being used, as a means of floating in water transport in
the domestic trade for the carriage of passengers or cargo,
or both, utilizing its own motive power or that of another.
[R.A. 9295]
The word vessel serves to designate every kind of craft
by whatever particular or technical name it may now be
known or which nautical advancements may give it in the
future.
However, in the case of Lopez vs, Duruelo, in relation
to protest contemplated under Article 835 of the Code of
Commerce dealing with collision, the vessel contemplated
are sea-going vessels. Article 835 cannot be applied to small
boats engaged in river and bay traffic;
The word vessel as used in the third section of tile
IV, Book III of the Code of Commerce, dealing with

collisions, does not include all ships, craft or floating


structures of any kind without limitation. The said
section does not apply to minor craft engaged in a river
and bay traffic. Therefore, a passenger on boat like the
Jison, is not required to make protest as a condition
precedent to his right of action for the injury suffered by
him in the collision described in the complaint. Article
835 of the Code of Commerce does not apply.
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."

Registration of Vessels
Vessels are now registered through the Maritima
industry Authority. It is a rule that the person who is the
registered owner of the vessel is presumed to be the owner
of the vessel. Moreover, it is likewise a settled rule that the
sale or transfer of the vessel is not binding on third persons
unless the same is registered. As stated in the case of
Rubiso vs. Rivera;
The requisite of registration on the registry, of the
purchase of a vessel, is necessary and indispensable in
order that the purchasers rights may be maintained
against a claim filed by a third person. Such registration
is required both by the Code of Commerce and by Act
No. 1900.
The sale on behalf of the defendant Rivera was
prior to that made at public auction to Rubiso, but the
registration of this latter sale was prior by many days to
the sale made to the defendant.
However, the requisites of registration in the
registry, of the purchase of a vessel, is necessary and
indispensable in order that the purchaser's rights may be

maintained against a claim filed by a third person. Such


registration is required both by the code of Commerce
and by Act No. 1900.
The legal rule set down in the Mercantile Code
subsists, inasmuch as the amendment solely refers
to the official who shall make the entry; but, with
respect to the rights of the two purchasers,
whichever of them first registered his acquisition of
the vessel is the one entitled to enjoy the
protection of the law, which considers him the
absolute owner of the purchased boat, and this
latter to be free of all encumbrance and all claims
by strangers for, pursuant to article 582 of the said
code, after the bill of the judicial sale at auction
has been executed and recorded in the commercial
registry, all the other liabilities of the vessel in
favor of the creditors shall be considered canceled.

Ship Mortgage and Maritime Liens


- Presidential Decree No. 1521
Mortgage and other encumbrances over vessels are
governed by the provisions of Presidential Decree (PD) 1521,
Ship Mortgage Decree of 1978. The same law as well as
Section 12 of executive Order No. 125 as amended is being
implemented with respect to annotation/cancellation of
mortgages and transfer of rights and other encumbrances of
vessels by Memorandum Circular No. 100 which was issued
by the MARINA in April, 1995.
- Maritime Liens
Maritime lien is a privileged claim on a vessel for some
service rendered to it to facilitate its use in navigation. It is a
special property right in a ship given to a creditor by law as
security for a debt or claim subsisting from the moment the
debt arises with right to have the ship sold and debt paid out
of the proceeds.

Preferred Claim on how proceeds of sale disposed as being


indicated in Section 17, P.D. 1521.
Preferred mortgaged lien takes priority over all claims
against the vessel. Exceptions:
1. Expenses and fees allowed and costs taxed by the court
and taxes due to the government.
2. Crews wages.
3. General average.
4. Salvage, including contract salvage.
5. Maritime liens arising prior in time to the recording of
the preferred mortgage.
6. Damages arising out of tort.
7. Preferred mortgaged registered prior in time.
If proceeds of the sale are not sufficient to pay all
creditors included in one number or grade, the residue shall
be divided among them pro rata.
All credits not paid, whether fully or partially shall subsist
as ordinary credits enforceable by personal action against
the debtor.
Maritime Lien for Necessaries (Sec. 21, P.D. 1521)
Repairs, supplies, towage, use of drydock or marine
railway, or other necessaries were furnished to the
vessel.The work is done on orders of the ship owner or
person authorized by the owner.Such credit must be alleged
or proved that it was given to the vessel.Enforceable by suit
in rem.
Subrogation
As emphasized in the case of PNB vs. Court of
Appeals; that the third person who satisfies the obligation
to an original maritime lienor may claim from the debtor

because the third person is subrogated to the rights of the


maritime lienor over the vessel.
The claim for US$242,225.00 is in the nature of a
maritime lien. The applicable law on the matter is PD
No. 1521, otherwise known as the Ship Mortgage
Decree of 1978, specifically sections 17 and 21 of the
said PD.
Under these provisions, any person furnishing
repairs, supplies or other necessaries to a vessel on
credit will have a maritime lien on the said vessel. Such
maritime lien, if it arose prior to the recording of a
preferred mortgage lien, shall have priority over the
said mortgage lien.
Art. 1302 of the Civil Code provides a presumption
that there is legal subrogation when a third person not
interested in the obligations pays with the express or
tacit approval of the debtor. Accordingly, since CBCs
payment to the lienors was with the express consent of
the debtor owner of the vessels repaired, legal
subrogation took place in CBC favor.
"A person who extends credit for the purpose of
discharging a maritime lien is not entitled to the said
lien where the funds were not furnished to the ship on
the order of the master and there was no evidence that
the money was actually used to pay debts secured by
the lien. As applied in the instant case, it becomes
necessary to prove that the credit advanced by Citibank
to PISC was actually utilized for the repair and
conversion of M/V Asean Liberty. Otherwise, Citibank
could not have acquitted the maritime lien of HongKong
United Dockyards, Ltd. over the vessel M/V Asean
Liberty."
Maritime lien is preferred over the mortgage lien of
petitioners.
The maritime lien over the vessel M/V Asean
Liberty arose or was constituted at the time Hongkong
UnitedDrydocks, Ltd. made repairs on the said vessel
on credit.
The maritime lien of private respondent CBC thus
arose prior in time to the recording of petitioners
mortgage on September 25,1979. As such, the said

maritime lien has priority over the said mortgage lien.


Pursuant to Section 17 of the Ship Mortgage Decree
of1978, a preferred mortgage lien shall have priority
over all claims against the vessel except, among
others, maritime liens arising prior in time to the
recording of the preferred mortgage. The respondent
court thus committed no reversible error when it ruled
that the maritime lien of private respondent CBC is
superior to the mortgage lien of petitioners.
When proceeds not sufficient
If the proceeds of the sale should not be sufficient to
pay all creditors included in one number or grade, the
residue shall be divided among them pro rata. All credits not
paid, whether fully or partially shall subsist as ordinary
credits enforceable by personal action against the debtor.
Test to determine the presence of lien.
In the case of Crescent Petroleum vs. M/V Lok
Maheshwari, the Supreme court applied the tests used in
the US to determine whether a maritime lien exists:
One. In a suit to establish and enforce a maritime lien
for supplies furnished to a vessel in a foreign port, whether
such lien exists, or whether the court has or will exercise
jurisdiction, depends on the law of the country where the
supplies were furnished, which must be pleaded and proved.
Two. The Lauritzen-Romero-Rhoditis trilogy of cases,
which replaced such single-factor methodologies as the law
of the place of supply.
In Lauritzen v. Larsen, the following factors were
considered: 1) place of the wrongful act; 2) law of the flag; 3)
allegiance or domicile of the injured; 4) allegiance of the
defendant shipowner; 5) place of contract; 6) inaccessibility
of foreign forum; and 7) the law of the forum.

In the case of Romero v. International Terminal


Operating co, the case of Lauritzen were applicable not only
to personal injury claims arising under the Jones Act but to
all matters arising under maritime law in general.
In Hellenic Lines, Ltd v. Rhodotis, the US Supreme Court
observed that of the seven factors listed in the Lauritzen
test, four were in favor of the shipowner and against
jurisdiction.
Three. The factors provided in Restatement (Second) of
Conflict of Law have also been applied, especially in
resolving cases brought under the Federal Maritime Lien Act.
Their application suggests that in the absence of an effective
choice of law by the parties, the forum contacts to be
considered include: a) the place of contracting; b) the place
of negotiation of the contract; c) the place of performance;
d) the location of the subject matter of the contract; and the
domicile, residence, nationality, place of incorporation and
place of business of the parties.
Furthermore, the Supreme Court in this case laid down
the requisites for maritime liens on necessaries to exist: 1)
the necessaries must have been furnished to and for the
benefit of the vessel; 2) the necessaries must have been
necessary for the continuation of the voyage of the vessel;
3) the credit must have been extended to the vessel; 4)
there must be necessity for the extension of the credit; and
5) the necessaries must be ordered by persons authorized to
contract on behalf of the vessel.
In the case of
Development;

Poliand

Industrial

vs.

National

The interest rate should be computed from the


date of extrajudicial demand.
The finding of the trial court that an extrajudicial
demand was made by Poliand on NDC for the payment
of a determinate amount equivalent to its maritime
lien, unmodified as it was by the appellate court,
constitutes basis to conclude that as of said date.
Poliand's claim was already due and demandable. Such
factual finding of the trial court, duly supported as it is
by the evidence on record, deserves great weight and
respect and is binding on the Court.

In the case of Negros Navigation Co. Inc. vs. CA;


The maritime liens against the vessels or
admiralty court's jurisdiction over those liens are not
impaired by the Stay Order issued by the Manila RTC.
There is no conflict as to which law should apply to
the case at bench. THI wishes to impress this Court that
its claim for repairman's lien is a maritime lien and,
accordingly, may be enforced only in a proceeding in
rem. The Court agrees that PD 1521 is the governing
law concerning its maritime lien for the services it
rendered to NNC. However, when NNC filed a petition
for corporate rehabilitation and suspension of
payments, and the Manila RTC found that the petition
was sufficient in form and in substance and appointed
the rehabilitation receiver, the admiralty proceeding
was appropriately suspended in accordance with
Section 6 of the Interim Rules on Corporate
Rehabilitation.

The THI's maritime liens are not covered by, and


are not subject to the Manila RTC's jurisdiction, NNC's
rehabilitation proceedings.
True enough, a maritime lien is not affected by
bankruptcy or reorganization. However, in the instant
case, we are not dealing with bankruptcy or
reorganization; rather, we are confined with NNC's
rehabilitation. Otherwise, we would, in effect, violate
the law, specifically the provisions of PD 902-A. The
rationale behind PD 902-A is to effect a feasible and
viable rehabilitation of an ailing corporation.
The preferred maritime lien of THI can still be
enforced upon the termination of the rehabilitation
proceedings, or if it such be unsuccessful, upon the
dissolution of the corporation.

Persons who takes part in maritime commerce


Captains and Masters of Vessels
On the Code of Commerce,
Captain are those who govern vessels that navigate
the high seas or ships of large dimensions and importance,
although they may be engaged in coastwise trade.
Masters are those who command smaller ships engaged
exclusively in the coastwise trade.
Powers & Functions
Nature of his position is confidential and managerial.
Distinct roles he performs:
(1) As general agent. If he is also a co-owner, his
agency becomes one coupled with interest. He may not be
dismissed if he is a co-owner or the partnership agreement
stipulates as a condition as ship captain [see Art. 602 & 606
-607];
(2) As commander and technical director of the vessel;
and
(3) As representative of the country under whose flag
he navigates.
The Supreme Court explained in the case of InterOrient Maritime Enterprises vs. NLRC;
the captain of a vessel is a confidential and
managerial employee within the meaning of Article 609,
Code of Commerce. A master or captain, for purposes of
maritime commerce, is one who has command of a vessel.
A captain commonly performs three distinct roles: 1) he is
a general agent of the shipowner;' 2) he is also
commander and technical director of the vessel; and 3) he
is a representative of the country under whose flag he
navigates. Of these roles, by far the most important is the
role performed by the captain as commander of the
vessel; for such role has to do with the operation and
preservation of the vessel during its voyage and the
protection of the passengers and crew and cargo. In his
role as general agent of the shipowner, the captain has
authority to sign bills of lading, carry goods aboard and
deal with the freight earned, agree upon rates and decide
whether to take cargo. The ship captain, as agent of the

shipowner, has legal authority to enter into contracts with


respect to the vessel and the trading of the vessel, subject
to applicable limitations established by statute, contract
or instructions and regulations of the shipowner. To the
captain is committed the governance, care and
management of the vessel. Clearly, the captain is vested
with both management and fiduciary functions."
The petitioners contention that the assailed
Resolution has no factual and legal bases is belied by
the adoption with approval by the public respondent of
the findings of the POEA Administrator, which recites at
length the reasons for holding that the deceased Pineda
was mentally sick prior to his death and concomitantly,
was no longer in full control of his mental faculties.
Furthermore, the Supreme Court explained the
concept of ship agent and its liability in the case of
Macondray & Co., Inc. vs Provident Insurance
Corporation:
"A ship agent is a person entrusted with
provisioning or representing the vessel in the port in
which it may be found. Hence, whether acting as agent
of the owner of the vessel or as agent of the charterer,
petitioner (Macondray & Co) will be considered as the
ship agent and may be held liable as such, as long as
the latter is the one that provisions or represents the
vessel."
Notwithstanding the fact that the petitioner
(Macondray & Co) is not an agent of the operator (Trade
& Transport), it can still be the ship agent of the vessel
M/V Trade Carrier. Macondray & Co cannot deny its
liability over the losses incurred to the vessel on the
basis that it is merely a local representative of the
shipper, the charterer of M/V Trade Carrier, and that it
has no control over the acts of the captain and crew of
the carrier since, evidence shows, that petitioner clearly
represented the vessel when it's employees were
present at the port of destination one day before the
arrival of the vessel, where they stayed until it
departed. They were also present during the actual
discharging of the cargo. Moreover, the representative

of the petitioner prepared the needs of the vessel.


These acts all point to the conclusion that it was entity
that represented the vessel at port of destination and
was the ship agent within the meaning and context of
ARt. 586 of the Code of Commerce.
To determine whether or not a person or a
corporation is a ship agent insofar as his/its liability is
concerned, the Supreme Court in the case of Ace
Navigation Co., Inc. v. FGU Insurance Corp. held that:
When there is no evidence offered to establish
that a person/corporation had a hand in the
provisioning of the vessel or that it represented the
carrier, its charterers, or the vessel at any time during
the unloading of the goods, there is a presumption
that its/his participation was simply to assume
responsibility over the cargo when they were unloaded
from the vessel. Hence, it/he is not a ship agent within
the meaning and context of Article 586 of the Code of
Commerce, but a mere agent of the shipper.
Art. 586. The ship owner and the ship agent shall
be civilly liable for the acts of the captain and for the
obligations contracted by the latter to repair, equip,
and provision of the vessel, provided the creditor
proves that the amount claimed was invested therein.
Art. 1868. By the contract of agency, a person
binds himself to render some service or to do
something in representation or on behalf of another,
with the consent or authority of the latter.
Corollarily, Art. 1897 of the same Code provides
that an agent is not personally liable to the party with
whom he contracts, unless he expressly binds himself
or exceeds the limits of his authority without giving
such party sufficient notice of his powers.
Both exceptions do not obtain in this case.
Records are bereft of any showing that ACENAV
(petitioner) exceeded in the discharge of its duties as
a mere agent of CARDIA. Neither was it alleged, much

less proved, that ACENA's limited obligation as a gent


of the shipper, CARDIA, was not known to HEINDRICH,
the consignee.
Special Contracts
Charter Party
In Caltex (Phil.), Inc. v. Sulpicio Lines, Inc. etc., a charter
party was essentially defined as a contract whereby an
entire ship, or some principal part of the said ship, is let by
the owner thereof to a merchant or other person for a
specified time or use for the conveyance of goods, in
consideration of the payment of freight.
There are two kinds of Charter Parties, to wit: 1) The
Bareboat or Demise Charter, and 2) Contract of
Affreightment. The latter is further subdivided into (a) Time
Charter and (b) Voyage Charter.
In a bareboat or demise charter on one hand, the
shipowner leases to the charterer the whole vessel,
transferring to the latter the entire command, possession
and consequent control over the vessel's navigation,
including the master and the crew, who thereby become the
charterer's "servants."
Contract of Affreightment, on the other hand, have two
kinds: The Time Charter and the Voyage Charter. In a time
charter, the vessel is leased to the charterer for a fixed
period of time, whereas in a voyage charter, the vessel is
leased for a single or particular voyage.
Loans and Bottomry and Respondents
Bottomry, in maritime law, is a contract whereby the
owner of a ship borrows for the use, equipment or repair of
the vessel, for a definite term, and pledges the ships (or the
keel or bottom of the ship pars pro toto) as security, with the
stipulation that if the ship is lost during the voyage or during

the limited time on account of the perils enumerated, the


lender shall lose his money.
The loan on bottomry or respondentia may be
distinguished from simple loan in the following manner
(Essentials of Transportation and Public Utilities, Aquino):
1. In bottomry or representia, the rate of interest is not
subject to the Usury Law on account of the extraordinary
risks involved whereas in simple loan, the rate of interest
must not exceed the ceiling fixed by the Usury Law.
2. In bottomry or respondentia, there must necessarily
be a marine risk the existence of which must be duly
established whereas in a simple loan, there need not be such
risks involved.
3. In the loan on bottomry or respondentia must be
executed in accordance with form and manner required in
the Code of Commerce whereas in a simple loan, the formal
requisites regarding contracts in general would apply
4. The loan on bottomry or respondentia must be
recorded in the registry or vessels in order to bind third
persons whereas no such registration is required in the case
of a simple loan.
5. In the loan on bottomry or respondentia, preference
is extended to the last lender if there be several lenders, on
the theory that were it not for the last lender, then the prior
lenders would not have benefited from the preservation of
the security. Whereas, in a simple loan, the first lender, as a
general rule, enjoys preference over subsequent ones.
Accidents
Averages
There are two types of Averages: General and Simple:

Art. 806 of the Code of Commerce provides that the


following shall be considered averages:
1. All extraordinary or accidental expenses which may
be incurred during the voyage in order to preserve the
vessel, the cargo, or both.
2. Any damages or deteriorations which the vessel may
suffer from the time it puts to sea from the port of departure
until it casts anchor in the port of destination, and those
suffered by the merchandise from the time they are loaded
in the port of shipment until they are unloaded in the port of
their consignment.
To reiterate, the Supreme Court ruled said that General
or gross averages include all damages and expenses
deliberately caused in order to save the vessel, cargo, or
both from a real or known risk. To avail of the general
average under Art. 806, however, the person must first
comply with the formalities of art. 813 and 814 of the said
Code (Philippine Home Assurance Corporation vs. CA).
In Simple or particular averages, they shall include all
the expenses and damages caused to the vessel or to her
cargo which have not inured to the common benefit and
profit of all the persons interested in the vessel and her
cargo.
Caveat, the rule on averages is only applicable when
the damage is incurred when cargoes are purposely being
jettisoned to save some other pieces of cargo and vessel
(National Development Company vs. CA)
Collisions
Collision is defined as an impact or sudden contact of a
moving body with an obstruction in its line of motion,
whether both bodies are in motion or one stationary and the
other, no matter which, in motion.
Zones in Collisions

Generally speaking, in collisions between vessels, there


exist three (3) 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 of actual
contract (Urrutia & Co v. Baco River Plantation)
Liability
Liability for negligence in the absence of contract is
governed by Art. 2176 of the New Civil Code- the provision
on quasi delict. However, the liabilities of shipowners and
ship agents as well as the captain or crew in collision cases
is still governed by the provisions of the Code of Commerce
on Collision. Although collision may be said to involve
maritime tort, the special rules under the Code of Commerce
will govern the rights and liabilities of the persons or entities
involved (National Development Company v. CA)
Collision falls among matters not specifically regulated
by the Civil Code, so that no reversible error can be found in
respondent's application to the case at bar of Articles 826 to
839, Book Three of the Code of Commerce, which deal
exclusively
with
collision
of
vessels
(National
Development Company v. CA).
Furthermore, those who willfully or negligently caused
the collision shall not only be liable for actual damages but
also compensatory, exemplary, and moral damages,
depending upon the discretion of the proper court (Mecenas
v. CA).
Salvage Law (Act No. 2616)
In general, salvage may be defined as a service which
one person renders to the owner of a ship or goods, by his

own labor, preserving the goods or the ship which the owner
or those entrusted with the care of them have either
abandoned in distress at sea, or are unable to protect and
secure.
Claim for Valid Salvage
In the case of Barrios vs. Go Thong & Co., the Court
found that "no marine peril attended the claim for salvage,
and what transpired was a quasi-contract of 'towage'
because in consenting to plaintiff's offer to tow the vessel,
defendant thereby impliedly entered into a juridical relation
of 'towage' with the owner of the towing vessel, captained by
plaintiff. Thus, 'the circumstances that although the
defendant's vessel was in a helpless condition due to engine
failure, it did not drift too far from the place where it was,
that the weather was fair, clear and good, that there were
only ripples on the sea which was quiete smooth, that there
was moonlight, that although said vessel was drifting
towards the open sea, there was no danger of its floundering
or being stranded as it was far from any island or rocks, and
its anchor could be released to prevent such occurrence, all
show that there was no marine peril, and the vessel was not
a quasi-derelict, as to warrant a valid salvage claim for the
towing of the vessel."
COGSA (ARTS. 1753 and 1766, NCC; Applications)
History
The Carriage of Goods by Sea was originally passed by
the Congress of the United States on April 16, 1936 as Public
Act. No. 521. COGSA contains advanced legislation, which is
in consonance with modern maritime rules and the practices
of great shipping countries of the world. However, when the
New Civil Code took effect On August 30, 1950, it becomes
the primary law on goods that are being transported from a
foreign port to the Philippines, and the COGSA becomes to
be a suppletory law for such type of transportation international shipping.
Moreover, the Supreme Court ruled that the rights and
obligations of common carrier are governed by the

provisions of the Civil Code, and the COGSA, which is a


special law, applies suppletorily (Philippine Charter
Insurance
Corporation
v.
Neptune
Orient
Lines/Overseas Agency Services).
The Notice of Claim and Prescription Period.
Generally, the notice of claim must be within three days
from delivery if the damage is not apparent. The same
period is not mandatory. However, the prescriptive period of
one year from delivery for the filing of the case is a condition
precedent or mandatory.
The prescription of the action under Section 3(6), Title I,
of the Carriage of Goods by Sea Act which provides that: "the
carrier and the ship shall be discharged from all liability in
respect of loss or damage unless suit is brought within one
year after delivery of the goods or the date when the goods
should have been delivered."
The aforecited provision of the law admits of an
exception: If the one year period is suspended by express
agreement of the parties. The exchange of correspondence
between the parties and/or their associates/representatives
show that the parties had mutually agreed to extent the time
within which the plaintiff or its predecessors-in-interest may
file suit until December 27, 1967. When the complaint was
filed on June 25, 1976, that deadline had not yet expired.
Hence, it is still within the one-year period prescribed by law
(Universal Shipping Lines, Inc. CA)
Caveat, the one year prescriptive period does not apply
to cases of misdelivery or conversion (Domingo Ang v.
American Steamship Agencies, Inc.). "As defined in the
Civil Code and as applied to Section 3(6), paragraph 4 of the
Carriage of Goods by Sea Act, 'loss' contemplates merely a
situation where no delivery at all was made by the shipper of
the goods because the same had perished, gone out of
commerce, or disappeared in such a way that their existence
is unknown or they cannot be recovered. It does not include
a situation where there was indeed delivery - "but delivery to
the wrong person, or a delivery. The prescriptive is designed
to meet the exigencies of maritime hazards."(Underline

suppled) (Domingo
Agencies, Inc.).

Ang

v.

American

Steamship

Furthermore, transshipment cargo made via an interisland vessel is governed under the Carriage of Goods by Sea
Act, hence, it may be a subject to the prescription required
therein (American Insurance Co v. Compania Maritima).
Definition of delivery
Since the prescriptive period under COGSA is computed
from the delivery of the goods or the date when the goods
should have been delivered, the Supreme Court in the case
of Union Carbide Phils Inc. v. Manila Railroad defined
delivery as delivery to the arrastre operator. That delivery is
evidenced by tally sheets which show whether the goods
were landed in good order or in bad order, a fact which the
consignee or shipper can easily ascertain through the
customs broker.
No retroactivity of amended complaint
An amended complaint does not retroact to the date of
filing the original except if the amendment merely
supplements and amplifies the facts alleged in the original
pleading. This exception, however does not apply to parties
impleaded for the first time in an amended complaint.
In the case at bar, "respondent failed to meet the
requirement of filing a notice of loss or damages and
therefore the prescriptive period of one year started to run of
April 15, 1992. While the initial complaint filed on March 11,
1993 was within the prescriptive period, Wallem was only
impleaded on June 7, 1993. Therefore, the complaint against
Wallem should be dismissed. (Wallem Philippines
Shipping, Inc. v. S.R. Farms, Inc.)
COGSA and Bill of Lading
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.

In the case of Eastern & Australian Shipment Co v.


Great Americans Inc, herein petitioners contend that the
COGSA prescribes a maximum liability of the vessel of the
vessel/carrier. Such maximum liability, however, is not
applicable in a shipment wherein the nature and a higher
valuation of the goods are indicated in the Bill of Lading; that
the second paragraph refers to an agreement of the shipper
and the carrier which provides for another maximum
necessarily higher than $500.00 and that said proviso should
not be read in connection with stipulations in Bills of Lading
limiting the vessel's liability to less than $500.00 per
package, otherwise, the very intent of the law setting the
sum of $500.00 as the maximum liability of the carrier, per
package, in the absence of a higher valuation of the goods
as indicated in the Bill of Lading would be nullified, for it
would thereby become not the maximum, but the minimum
liability of the carrier.. However, the Supreme Court held that
there is no inconsistency between the COGSA and the Bill of
Lading. The COGSA limits the melee, amount that may be
recovered by the shipper in the absence of an agreement as
to the nature and value of the goods shipped. Said law does
not prescribe the minimum, hence it could be any amount
which is below $500.00. The Bill of Lading also provides the
melee, for which the carrier is liable. It prescribes that the
carrier may only be held liable which is below the melee,
limit required in the COGSA. Hence, the Bill of Lading is valid.
It is a well-settled rule that neither the carrier nor the
ship shall in any event be or become liable for any loss or
damage to or in connection with the transportation of goods
in an amount exceeding $500 per package lawful money of
the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent of
that sum in other currency, unless the nature and value of
such goods have been declared by the shipper before
shipment and inserted in the bill of lading. This declaration, if
embodied in the bill of lading shall be prima facie evidence,
but shall be conclusive on the carrier (Sec. 4, par. (5) of the
COGSA).In the instant case, the bill of lading failed to 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 carriers liability shall not exceed
US$500 per package applies.Therefore, CA did not err in

holding respondents liable for damages to petitioner subject


to the US$500 per package limited-liability provision in the
bill of lading (Philippine Charter Insurance Corporation
vs. Neptune Orient Lines/Overseas Agency Services).
Non-applicability of COGSA
Jurisprudence dictates that COGSA shall apply to
actions brought by the shipper against the insurer. Since
both parties are not under the contract of carriage but are
governed by the stipulations of the insurance contract,
hence the Insurance Code must be applied (Mayer Steel
Pipe Corp. v. CA).
In the case at bar, the applicable law is the New Civil
Code, specifically Art. 1144, which provides for ten (10)
years prescriptive period. Commonwealth Act No. 65
otherwise known as the Carriage of Goods by Sea Act
(COGSA) provision on liability due to damages refers to the
physical loss or damage of a shippers goods but petitioners
potential liability for the damages it has caused in the
general sense and, as such, the matter is governed by the
Civil Code on the other hand, the Code of Commerce and
COGSA, for the breach of its contract of carriage with
respondents. The damages contemplated of the respondents
does not fall part of either deterioration or disappearance or
destruction of goods caused by the carriers breach of the
contract of carriage. Whatever reduction there may have
been in the value of the goods is not due to their
deterioration or disappearance because they had been
damaged in transit.
Hence, the general application of
general laws, in this case the New Civil Code should be
applied as not to discourage the ends of justice (Mitsui OSK
Line Ltd. v. CA).
COGSA cannot also be applied when the plaintiff failed
to raise such law before the trial court and was only cited in
its Memorandum (UCBP General Insurance Co., vs.
Aboitiz Shipping Corp.)
COGSA and Code of Commerce

The provision of the Code of Commerce, which apply to


overland, river and maritime transportation, may come into
play.
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 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.
Supreme Court have construed the 24-hour claim
requirement as a condition precedent to the accrual of a
right of action against acarrier 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.
The Court of Appeals found out that the claims were
more than three months from receipt of the shipment and, at
that, even after the extent of the loss had already been
determined by SMC's surveyor. The claim was, therefore,
clearly filed beyond the 24-hour time frame prescribed by
Art. 366 of the Code of Commerce.
"Sec. 3(6) of the COGSA provides a similar mechanism
as the Code of Commerce but prescribes a period of three
days within which notice of claim must be given if the loss or
damage is not apparent (UCBP General Insurance Co.,
vs. Aboitiz Shipping Corp.)
Distinction between damage to the goods and damages to
the shipper/consignee

In the case of Liao v. American President Line Inc.,


the plaintiff makes a distinction between damage to the
goods and damages to the shipper or consignee, and claims
that while the former falls within the prescriptive period in
question, the latter is governed by the provision of the Code
of Civil Procedure (now the New Civil Code) on limitation of
actions. However, the Supreme Court ruled that there is no
difference between the two. Whatever damage or injury is
suffered by the goods while in transit would result in loss or
damage to either the shipper or the consignee. As long as it
is claimed, therefore, as it is done here, that the losses or
damages suffered by the shipper or consignee were due to
the arrival of the goods in damaged or deteriorated
condition, the action is still basically one for damage to the
goods, and must be filled within the period of one year from
delivery or receipt, under the specific provision of the
Carriage of Goods by Sea Act.
COGSA: The liability of arrastre operator
Handling cargo is mainly the arrastre operator's
principal work so its drivers/operators or employees should
observe the standards and measures necessary to prevent
losses and damage to shipments under its custody.
"The liability of the arrastre operator and the carrier are
not always and necessarily solidarily liable as the facts of a
case may vary the rule. Thus, in the case at bar, the
appellate court is correct insofar as it ruled than an arrastre
operator and a carrier may not be held solidarily liable at all
times. It is settled in maritime law jurisprudence that
cargoes while being unloaded generally remain under the
custody of the carrier (Philippines First Insurance Co.,
Inc vs. Wallem Phils Shipping).

Maritime Law
1.
[G.R. No. 92735. June 8, 2000]
MONARCH INSURANCE CO., INC., TABACALERA
INSURANCE CO., INC and Hon. Judge AMANTE
PURISIMA, petitioners,
-versusCOURT OF APPEALS and ABOITIZ SHIPPING
CORPORATION, respondents.
Facts:
Monarch and Tabacalera are insurance carriers of lost
cargoes. They indemnified the shippers and were
consequently subrogated to their rights, interests and
actions against Aboitiz, the cargo carrier. Because Aboitiz
refused to compensate Monarch, it filed two complaints
against Aboitiz.
Monarch sought recovery of P29,719.88 representing
the value of three (3) pallets of glass tubing that sank with
the M/V P. Aboitiz, plus attorneys fees of not less than
P5,000.00, litigation expenses, interest at the legal rate on
all these amounts, and cost of suit. Tabacalera sought

against Franco Belgian Services, F. E. Zuellig and Aboitiz in


Civil Case No. 82-2768 the recovery of P284,218.00
corresponding to the value of nine (9) cases of Renault spare
parts, P213,207.00 for the value of twenty-five (25) cases of
door closers and P42,254.00 representing the value of
eighteen (18) cases of plastic spangle, plus attorneys fees of
not less than P50,000.00 and cost of suit.
In its answer with counterclaim, Aboitiz rejected
responsibility for the claims on the ground that the sinking of
its cargo vessel was due to force majeure or an act of God.
Aboitiz was subsequently declared as in default for its failure
to appear during the pre-trial. Its counsel filed a motion to
set aside the order of default with notice of his withdrawal as
such counsel. However, since Aboitiz had repeatedly failed to
appear in court, the trial court denied the said motion and
allowed Monarch and Tabacalera to present evidence exparte.
Monarch and Tabacalera proffered in evidence the
survey of Perfect Lambert, a surveyor commissioned to
investigate the possible cause of the sinking of the cargo
vessel. The survey established that on her voyage to Manila
from Hong Kong, the vessel did not encounter weather so
inclement that Aboitiz would be exculpated from liability for
losses.
In due course, the trial court rendered judgment against
Aboitiz but the complaint against all the other defendants
was dismissed. Aboitiz filed a motion for reconsideration of
the decision and/or for new trial to lift the order of default.
The court denied the motion.
Aboitiz appealed to the Court of Appeals but the appeal
was dismissed for its failure to file appellants brief. It
subsequently filed an urgent motion for reconsideration of
the dismissal with prayer for the admission of its attached
appellants brief. The appellate court denied that motion for
lack of merit.
Issue:
Whether or not the doctrine of limited liability applies in the
instant
case.
Ruling:

Yes.
The failure of Aboitiz to present sufficient evidence to
exculpate itself from fault and/or negligence in the sinking of
its vessel in the face of the foregoing expert testimony
constrains us to hold that Aboitiz was concurrently at fault
and/or negligent with the ship captain and crew of the M/V P.
Aboitiz. [This is in accordance with the rule that in cases
involving the limited liability of shipowners, the initial burden
of proof of negligence or unseaworthiness rests on the
claimants. However, once the vessel owner or any party
asserts the right to limit its liability, the burden of proof as to
lack of privity or knowledge on its part with respect to the
matter of negligence or unseaworthiness is shifted to it. This
burden, Aboitiz had unfortunately failed to discharge.] That
Aboitiz failed to discharge the burden of proving that the
unseaworthiness of its vessel was not due to its fault and/or
negligence should not however mean that the limited
liability rule will not be applied to the present cases. The
peculiar circumstances here demand that there should be no
strict adherence to procedural rules on evidence lest the just
claims of shippers/insurers be frustrated. The rule on limited
liability should be applied in accordance with the latest ruling
in Aboitiz Shipping Corporation v. General Accident Fire and
Life Assurance Corporation, Ltd.,] promulgated on January
21, 1993, that claimants be treated as "creditors in an
insolvent corporation whose assets are not enough to satisfy
the totality of claims against it."

2.
[G.R. No. 156978 May 2, 2006]
ABOITIZ SHIPPING CORPORATION, Petitioner,
-versusNEW INDIA ASSURANCE COMPANY, LTD., Respondent.
Facts:
Societe Francaise Des Colloides loaded a cargo of
textiles and auxiliary chemicals from France on board a
vessel owned by Franco-Belgian Services, Inc. The cargo was
consigned to General Textile, Inc., in Manila and insured by
respondent New India Assurance Company, Ltd. While in

Hongkong, the cargo was transferred to M/V P. Aboitiz for


transshipment to Manila.
Before departing, the vessel was advised by the
Japanese Meteorological Center that it was safe to travel to
its destination. But while at sea, the vessel received a report
of a typhoon moving within its general path. To avoid the
typhoon, the vessel changed its course. However, it was still
at the fringe of the typhoon when its hull leaked. On October
31, 1980, the vessel sank, but the captain and his crews
were saved.
Thereafter, petitioner notified the consignee, General
Textile, of the total loss of the vessel and all of its cargoes.
General Textile, lodged a claim with respondent for the
amount of its loss. Respondent paid General Textile and was
subrogated to the rights of the latter.
Respondent hired a surveyor, Perfect, Lambert and
Company, to investigate the cause of the sinking. In its
report, the surveyor concluded that the cause was the
flooding of the holds brought about by the vessels
questionable seaworthiness.
Respondent alleged that the proximate cause of the
loss of the shipment was the fault or negligence of the
master and crew of the vessel, its unseaworthiness, and the
failure of defendants therein to exercise extraordinary
diligence in the transport of the goods. Hence, respondent
added, defendants therein breached their contract of
carriage.
Franco-Belgian Services and Zuellig responded,
claiming that they exercised extraordinary diligence in
handling the shipment while it was in their possession; its
vessel was seaworthy; and the proximate cause of the loss of
cargo was a fortuitous event.
Trial court, citing the Court of Appeals decision in
General Accident Fire and Life Assurance Corporation v.
Aboitiz Shipping Corporation involving the same incident,
ruled in favor of respondent. It held petitioner liable for the
total value of the lost cargo plus legal interest.
Petitioner elevated the case to the Court of Appeals and
presented the findings of the BMI. However, on August 29,
2002, the appellate court affirmed in toto the trial courts

decision. It held that the proceedings before the BMI was


only for the administrative liability of the captain and crew,
and was unilateral in nature, hence not binding on the
courts. Petitioner moved for reconsideration but the same
was denied on January 23, 2003.
Issue:
WON the limited liability doctrine applies in this case
Ruling:
No
Where the shipowner fails to overcome the presumption
of negligence, the doctrine of limited liability cannot be
applied.
From the nature of their business and for reasons of
public policy, common carriers are bound to observe
extraordinary diligence over the goods they transport
according to all the circumstances of each case. In the event
of loss, destruction or deterioration of the insured goods,
common carriers are responsible, unless they can prove that
the loss, destruction or deterioration was brought about by
the causes specified in Article 1734 of the Civil Code. In all
other cases, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that
they observed extraordinary diligence. Moreover, where the
vessel is found unseaworthy, the shipowner is also presumed
to be negligent since it is tasked with the maintenance of its
vessel. Though this duty can be delegated, still, the
shipowner must exercise close supervision over its men.
In the present case, petitioner has the burden of
showing that it exercised extraordinary diligence in the
transport of the goods it had on board in order to invoke the
limited liability doctrine. Differently put, to limit its liability
to the amount of the insurance proceeds, petitioner has the
burden of proving that the unseaworthiness of its vessel was
not due to its fault or negligence.
Considering
the
evidence
presented
and
the
circumstances obtaining in this case, we find that petitioner
failed to discharge this burden. Both the trial and the
appellate courts, in this case, found that the sinking was not
due to the typhoon but to its unseaworthiness. Evidence on
record showed that the weather was moderate when the
vessel sank. These factual findings of the Court of Appeals,

affirming those of the trial court are not to be disturbed on


appeal, but must be accorded great weight. These findings
are conclusive not only on the parties but on this Court as
well.

3.
[G.R. No. 121833]
ABOITIZ SHIPPING CORPORATION, Petitioner,
-versus COURT OF APPEALS, MALAYAN INSURANCE COMPANY,
INC., COMPAGNIE MARITIME DES CHARGEURS REUNIS,
and F.E. ZUELLIG (M), INC., Respondents.
Facts:
Respondent
Malayan
Insurance
Company,
Inc.
(Malayan) filed five separate actions against several
defendants for the collection of the amounts of the cargoes
allegedly paid by Malayan under various marine cargo
policies issued to the insurance claimants. The shipments
were supported by their respective bills of lading and insured
separately by Malayan against the risk of loss or damage. In
the five consolidated cases, Malayan sought the recovery of
amounts totaling P639,862.02.
Aboitiz raised the defenses of lack of jurisdiction, lack of
cause of action and prescription. It also claimed that M/V P.
Aboitiz was seaworthy, that it exercised extraordinary
diligence and that the loss was caused by a fortuitous event.
After trial on the merits, the RTC of Manila rendered a
Decision dated 27 November 1989, adjudging Aboitiz liable
on the money claims. Aboitiz, CMCR and Zuellig appealed
the RTC decision to the Court of Appeals.
On 31 March 1995, the Court of Appeals (Ninth Division)
affirmed the RTC decision. It disregarded Aboitizs argument
that the sinking of the vessel was caused by a force majeure,
in view of this Courts finding in a related case, Aboitiz
Shipping Corporation v. Court of Appeals, et al. (the 1990
GAFLAC case). In said case, this Court affirmed the Court of
Appeals finding that the sinking of M/V P. Aboitiz was caused
by the negligence of its officers and crew. It is one of the
numerous collection suits against Aboitiz, which eventually
reached this Court in connection with the sinking of M/V P.
Aboitiz.

Issue:
Whether or not Aboitiz can avail limited liability on the basis
of the real and hypothecary doctrine of maritime law.
Ruling:
DENIED PETITION.
On 02 May 2006, the Court rendered a decision in
Aboitiz Shipping Corporation v. New India Assurance
Company, Ltd. (New India), reiterating the well-settled
principle that the exception to the limited liability doctrine
applies when the damage is due to the fault of the
shipowner or to the concurrent negligence of the shipowner
and the captain. Where the shipowner fails to overcome the
presumption of negligence, the doctrine of limited liability
cannot be applied. In New India, the Court clarified that the
earlier pronouncement in Monarch Insurance was not an
abandonment of the doctrine of limited liability and that the
circumstances therein still made the doctrine applicable.
In New India, the Court declared that Aboitiz failed to
discharge its burden of showing that it exercised
extraordinary diligence in the transport of the goods it had
on board in order to invoke the limited liability doctrine.
Thus, the Court rejected Aboitizs argument that the award of
damages to respondent therein should be limited to its pro
rata share in the insurance proceeds from the sinking of M/V
P. Aboitiz.
The instant petitions provide another occasion for the
Court to reiterate the well-settled doctrine of the real and
hypothecary nature of maritime law. As a general rule, a ship
owners liability is merely co-extensive with his interest in the
vessel, except where actual fault is attributable to the
shipowner. Thus, as an exception to the limited liability
doctrine, a shipowner or ship agent may be held liable for
damages when the sinking of the vessel is attributable to the
actual fault or negligence of the shipowner or its failure to
ensure the seaworthiness of the vessel. The instant petitions
cannot be spared from the application of the exception to
the doctrine of limited liability in view of the unanimous
findings of the courts below that both Aboitiz and the crew
failed to ensure the seaworthiness of the M/V P. Aboitiz.

Chartered/Sub-charter cannot invoke limited liability


rule against shipowner

4.
[G.R. No. 160088 July 13, 2011]
AGUSTIN P. DELA TORRE
-versusTHE HONORABLE COURT OF APPEALS
FACTS:
Respondent Crisostomo G. Concepcion (Concepcion)
owned LCT-Josephine, a vessel registered with the Philippine
Coast Guard. On February 1, 1984, Concepcion entered into
a "Preliminary Agreement" with Roland de la Torre (Roland)
for the dry-docking and repairs of the said vessel as well as
for its charter afterwards. Under this agreement, Concepcion
agreed that after the dry-docking and repair of LCTJosephine, it "should" be chartered for P 10,000.00 per
month.
On June 20, 1984, Concepcion and the Philippine Trigon
Shipyard Corporation (PTSC), represented by Roland, entered
into a "Contract of Agreement," wherein the latter would
charter LCT-Josephine retroactive to May 1, 1984.
On November 22, 1984, TSL, this time represented by
Roland per Agustins Special Power of Attorney, subchartered LCT-Josephine to Ramon Larrazabal (Larrazabal)
for the transport of cargo consisting of sand and gravel to
Leyte.
On November 23, 1984, the LCT-Josephine with its
cargo of sand and gravel arrived at Philpos, Isabel, Leyte.
The vessel was beached near the NDC Wharf. With the
vessels ramp already lowered, the unloading of the vessels
cargo began with the use of Larrazabals payloader. While
the payloader was on the deck of the LCT-Josephine scooping
a load of the cargo, the vessels ramp started to move
downward, the vessel tilted and sea water rushed in. Shortly
thereafter, LCT-Josephine sank.

Concepcion demanded that PTSC/ Roland refloat LCTJosephine. The latter assured Concepcion that negotiations
were underway for the refloating of his vessel. Unfortunately,
this did not materialize.
For this reason, Concepcion was constrained to institute
a complaint for "Sum of Money and Damages" against PTSC
and Roland before the RTC.
RTC ruled that defendants should pay LCT-Josephine.
Agustin, PTSC and Roland went to the CA on appeal. The
appellate court, in agreement with the findings of the RTC,
affirmed its decision in toto.
Issue:
Whether or not there is applicability of the Code of
Commerce, more specifically, the Limited Liability Rule.
Ruling:
With respect to petitioners position that the Limited
Liability Rule under the Code of Commerce should be applied
to them, the argument is misplaced. The said rule has been
explained to be that of the real and hypothecary doctrine in
maritime law where the shipowner or ship agents liability is
held as merely co-extensive with his interest in the vessel
such that a total loss thereof results in its extinction.
The only person who could avail of this is the
shipowner, Concepcion. He is the very person whom the
Limited Liability Rule has been conceived to protect. The
petitioners cannot invoke this as a defense.

Vessels
Minor Craft
5.
[G.R. No. L-29166 October 22, 1928]
AUGUSTO LOPEZ, plaintiff-appellant,
-versusJUAN DURUELO, ET AL., defendants.
ALBINO JISON, appellee.
Facts:
On February 10, 1927, plaintiff Augusto Lopez was
desirous of embarking upon the interisland steamer San
Jacinto in order to go to Cebu, the plaintiff embarked at the
landing in the motorboat Jison which was engaged in
conveying passengers and luggage back and forth from the
landing to the boats at anchor.
As the motorboat approached San Jacinto in a perfectly
quiet sea, it came too near to the stern of the ship, and as
the propeller of the ship had not yet ceased to turn, the
blades of the propeller strucked the motorboat and sank it at
once. As it sank, the plaintiff was thrown into the water
against the propeller, and the revolving blades inflicted
various injuries upon him. The plaintiff was hospitalized. He
filed a complaint seeking to recover damages from the
defendant. The defendant however alleged that the
complaint does not have a right of action, a demurrer was
submitted directed to the fact that the complaint does not
allege that the protest had been presented by the plaintiff,
within twenty-four hours after the occurrence to the

competent authority at the port where the accident occurred


as provided for Article 835 of the Code of Commerce.
Issue:
Whether the motorboat Jison is a vessel provided for by
Article 835 of the Code of Commerce?
Ruling:
The word vessel as used in the third section of tile IV,
Book III of the Code of Commerce, dealing with collisions,
does not include all ships, craft or floating structures of any
kind without limitation. The said section does not apply to
minor craft engaged in a river and bay traffic. Therefore, a
passenger on boat like the Jison, is not required to make
protest as a condition precedent to his right of action for the
injury suffered by him in the collision described in the
complaint. Article 835 of the Code of Commerce does not
apply.
Importance of Registration
6.
[G.R. No. L-15260 August 18, 1920]
FAUSTO RUBISO, plaintiff-appellant,
-versusFLORENTINO RIVERA, ET AL., defendants-appellees.
Facts:
In the complaint, Rubiso alleged that his clients were the
owners of the pilot boat named Valentina, which had been in bad
condition and was stranded in the placed called Tingloy, of the
municipality of Bauan, Batangas. Rivera took charge or possession of
said vessel without the knowledge or consent of Rubiso and refused
to deliver it to them, under claim that he was the owner thereof.
However, counsel of Rivera denied all the facts set forth in the
complaint, with the except of those admitted that said pilot boat
belonged to the concern named "Gelito and Co.," Bonifacio Gelito
being a copartner thereof to the extent of two-thirds, and the
Chinaman Sy Qui, to that of the one-third, of the value of said vessel.
Subsequently, Bonifacio sold his share to his copartner Sy. Later, Sy,
as the absolute owner of the vessel, sold the said pilot boat to Rivera.

For that reason, Rivera took possession of said pilot boat Valentina,
as its sole owner.

On the same year, after the sale of the boat, suit having been
brought in the justice of the pace court against Sy to enforce payment
of a certain sum of money, the latter's creditor Rubiso acquired said
vessel at a public auction sale. The certificate of sale and
adjudication of the boat in question was issued by the sherrif on
behalf of Rubiso, in the office of the Collector of Customs, on the
same year and was also entered in the commercial registry after two
months.

So that the pilot boat Valentina was twice sold: first privately by
its owner Sy to Rivera and afterwards by the sheriff at public auction
in conformity with the order contained in the judgment rendered by
the justice of the pace, court, on the same year, against Sy and in
behalf of Rubiso.

Issue:
Which of the parties (Rubiso and Rivera) is the real owner of Pilot
Boat Valentina?

Ruling:
It is undeniable that Rivera acquired by purchase the pilot boat
Valentina on a date prior to that of the purchase and adjudication
made at publication, by and on behalf of Rubiso; but it is no less true
that the sale of the vessel by Qui to Rivera, on January 4, 1915, was
entered in the customs registry on March 17, 1915, while its sale at
public action to Rubiso on the 23rd of January of the same year,
1915, was recorded in the office of the Collector of Customs on the

27th of the same month, and in the commercial registry on the 4th of
March, following; that is, the sale on behalf of the defendant Rivera
was prior to that made at public auction to Rubiso, but the registration
of this latter sale was prior by many days to the sale made to the
defendant.

However, the requisites of registration in the registry, of the


purchase of a vessel, is necessary and indispensable in order that
the purchaser's rights may be maintained against a claim filed by a
third person. Such registration is required both by the code of
Commerce and by Act No. 1900.
In view of said legal provisions, it is undeniable that Rivera's
rights cannot prevail over those acquired by Rubiso in the ownership
of the pilot boat Valentina, inasmuch as, though the latter's acquisition
of the vessel at public auction, on January 23, 1915, was subsequent
to its purchase by Rivera, nevertheless said sale at public auction
was antecendently recorded in the office of the Collector of Customs,
on January 27, and entered in the commercial registry - an
unnecessary proceeding - on March 4th; while the private and
voluntary purchase made by Rivera on a prior date was not recorded
in the office of the Collector of Customs until many days afterwards,
that is, not until March 17, 1915.

The legal rule set down in the Mercantile Code subsists,


inasmuch as the amendment solely refers to the official who
shall make the entry; but, with respect to the rights of the two
purchasers, whichever of them first registered his acquisition of
the vessel is the one entitled to enjoy the protection of the law,
which considers him the absolute owner of the purchased boat,
and this latter to be free of all encumbrance and all claims by
strangers for, pursuant to article 582 of the said code, after the
bill of the judicial sale at auction has been executed and
recorded in the commercial registry, all the other liabilities of the
vessel in favor of the creditors shall be considered canceled.

The purchaser at public auction, Fausto Rubiso, who


careful to record his acquisition, opportunely and on a
date, has, according to the law, a better right than
defendant Rivera who subsequently recorded his purchase.
latter is a third person, who was directly affected by
registration which the plaintiff made of his acquisition.

was
prior
the
The
the

Mortgage and Maritime Liens


- Presidential Decree No. 1521
- Maritime Liens
7.
[G.R. No. 128661. August 8, 2000]
PHILIPPINE NATIONAL BANK/NATIONAL INVESTMENT
DEVELOPMENT CORPORATION, petitioners,
-versusTHE COURT OF APPEALS, CHINA BANKING
CORPORATION, respondents.
Facts:
To finance the acquisition of seven (7) ocean-going
vessels, the Philippine International Shipping Corporation
(PISC) applied for and was granted by National Investment
and
Development
Corporation
(NIDC)
guaranty
accommodations.
As
security
for
the
guaranty
accommodations, PISC mortgaged its ocean-going vessels.
Meanwhile, PISC entered into a Contract Agreement
with Hong Kong United Dockyards, Ltd. for the repair and
conversion of the vessel M/V Asean Liberty of
KHK$2,200,000.00.
The Central Bank of the Philippines authorized PISC to
open with China Bank Corporation (CBC) a standby letter of
credit for US$545,000.00 in favor of Citibank to cover the
repair and partial conversion of the M/V Asean Liberty.
PISC executed an Application and Agreement for
Commercial Letter of credit for $545,000.00 with private
respondent CBC in favor of Citibank. Pursuant to this

application and agreement, private respondent CBC issued


its irrevocable Standby Letter of Credit for US$545,000.00 in
favor of Citibank for account of PISC.
A Promissory note for US$545,000.00 was executed by
PISC in favor of Citibank pursuant to the Loan Agreement for
US$545,000.00 between PISC, as borrower, and Citibank as
lender.
Upon failure of PISC to fulfill its obligations under the
said promissory note, Citibank sent to private respondent
CBC drawing on Letter of Credit. In this letter, Citibank
certified that the draft attached thereto represented the
principal balance due to Citibank under the promissory note
executed by PISC, the proceeds of which were used for the
repair and conversion of M/V Asean Liberty. Thus, CBC
instructed its corresponding Irving Trust Co., by cable, to pay
to Citibank the amount of US$242,225.00. On the same date,
Irving Trust Co. advised private respondent CBC by mail that
the amount of US$242,225.00 had been debited against
CBCs account and remitted to Citibank.
For failure of PISC to settle its obligations in the amount
of US$64,789,470.98, petitioner PNB conducted, thru the
Sherrif's Office, an auction sale of the mortgaged vessels,
except for the vessel M/V Asean Objective. Petitioner NIDC
emerged as the highest bidder in these auctions.
Claiming that the foreclosure sale of its mortgaged was
illegal, unjust, irregular and oppressive, PISC instituted
before the RTC a civil case against petitioners for the
annulment of the foreclosure and auction sale of its vessels
and damages.
In the meantime, NIDC acquired the vessels as highest
bidder in the foreclosure thereof initiated by PNB, NIDC
having thereafter disposed of said vessels in favor of
National Steel Corporation NSC.
Complaints in intervention were filed by and for
Unitor Ships Services PTE, Ltd., IMO Industries AB,
UDDVALLARVARVET AB, Hyundai, Shipyard Co., Lloyds,
China bank, Chiang Tung Enterprises Co., Ltd., Pan Asia,
Inc., and HANMF Marine Service, Co., Ltd., for recovery
upon maritime liens against the proceeds of the sale of
the foreclosed vessels. The parties concerned, except
for intervenors Lloyds and China Bank, eventually
submitted a Compromise Agreement dated July 12,

1989, and made the basis for the Decision of August


23, 1989.
Intervenor Lloyds claim is for the service of herein
intervenor
Lloyds
Register
of
Shipping
to
class
aforementioned vessels (M/V Asean Nations and Asean
Greatness) during the period covering July 22, 1981 to
July 14, 1983 and the cost for said maritime surveys in
the sum of HK$65,930.00, UKC10,363.45 and P9,653.00 said
to have been unpaid by PISC despite demands. NIDC
traversed the Lloyds claim as not being preferred
maritime liens and in any event inferior in nature.
Issue:
Whether or not private respondent CBCs claim
US$242,225.00 is in the nature of a maritime lien.

for

Whether or not the said maritime lien is preferred over the


mortgage lien of petitioners.
Ruling:
1. Yes.
The applicable law on the matter is PD No. 1521,
otherwise known as the Ship Mortgage Decree of 1978,
specifically sections 17 and 21 of the said PD.
Under these provisions, any person furnishing repairs,
supplies or other necessaries to a vessel on credit will have a
maritime lien on the said vessel. Such maritime lien, if it
arose prior to the recording of a preferred mortgage lien,
shall have priority over the said mortgage lien.
In the instant case, it was HongKong United Dockyards,
Ltd. which originally possessed a maritime lien over the
vessel M/V Asean Liberty by virtue of its repair of the said
vessel on credit.
In the evidence presented, CBC was a guarantor of the
loan extended by Citibank to PISC. It was Citibank, which
advanced the money to PISC. It was only upon the failure of
PISC to fulfill its obligation under its promissory note to
Citibank that CBC was called upon by Citibank to exercise its
duties under the Standby Letter of Credit.
It is the holding of the appellate court, however, that
private respondent stepped into the shoes of HongKong

United Dockyards,. Ltd. by legal subrogation and thus


acquired the maritime lien of the latter over the vessel M/V
Asean Liberty.
It is not disputed that CBCs claim for US$242,225.00
and US$648,002.54 refer to the repair and conversion of two
of PISCs vessels undertaken by HongKong United Dockyards,
Ltd. and the China Shipbuilding Corporation of Taiwan,
respectively.
Art. 1302 of the Civil Code provides a presumption that
there is legal subrogation when a third person not interested
in the obligations pays with the express or tacit approval of
the debtor. Accordingly, since CBCs payment to the lienors
was with the express consent of the debtor owner of the
vessels repaired, legal subrogation took place in CBC favor.
"A person who extends credit for the purpose of
discharging a maritime lien is not entitled to the said lien
where the funds were not furnished to the ship on the order
of the master and there was no evidence that the money
was actually used to pay debts secured by the lien. As
applied in the instant case, it becomes necessary to prove
that the credit advanced by Citibank to PISC was actually
utilized for the repair and conversion of M/V Asean Liberty.
Otherwise, Citibank could not have acquitted the maritime
lien of HongKong United Dockyards, Ltd. over the vessel M/V
Asean Liberty."
2. Yes. In the case at bench, the maritime lien over the
vessel M/V Asean Liberty arose or was constituted at the
time Hongkong UnitedDrydocks, Ltd. made repairs on the
said vessel on credit. As such, as early as March 12, 1979,
the date of the contract for the repair and conversion of M/V
Asean Liberty, a maritime lien had already attached to the
said vessel. When Citibank advanced the amount of
US$242,225.00 for the purpose of paying off PISCs debt to
Hongkong United Dockyards, Ltd., it acquired the existing
maritime lien over the vessel. When private respondent
honored its contract of guarantee with Citibank on March 30,
1983, it likewise acquired by subrogation the maritime lien
that was already existing over the vessel M/V Asean Liberty.
Thus, when private respondent CBC chose to exercise its
right to the maritime lien during the proceedings in the trial
court, it was actually enforcing a privilege that attached to
the ship as early as March 12, 1979.

The maritime lien of private respondent CBC thus arose


prior in time to the recording of petitioners mortgage on
September 25,1979. As such, the said maritime lien has
priority over the said mortgage lien. Pursuant to Section 17
of the Ship Mortgage Decree of1978, a preferred mortgage
lien shall have priority over all claims against the vessel
except, among others, maritime liens arising prior in time to
the recording of the preferred mortgage. The respondent
court thus committed no reversible error when it ruled that
the maritime lien of private respondent CBC is superior to
the mortgage lien of petitioners.

8.
[G.R. No. 155014 November 11, 2005]
CRESCENT PETROLEUM, LTD., Petitioner,
- versus M/V LOK MAHESHWARI,
THE SHIPPING CORPORATION OF INDIA, and PORTSERV
LIMITED Promulgated: and/or TRANSMAR SHIPPING, INC.,
Respondents.
Facts:
An oceangoing vessel of Indian registry is owned by
SCI, a corporation organized and existing under the laws of
India and principally owned by the Government of India. It
was time-chartered by SCI to Halla, a South Korean company.
Halla, in turn, sub-charted the Vessel through a time charter
to Transmar. Transfer further sub-charted the Vessel to
Portserv. Both Transmar and Portserv are corporations
organized and existing under the laws of Canada.
Later, Portserv requested Crescent, a corporation
organized and existing under the laws of Canada that is
engaged in the business of selling petroleum and oil

products for the use and operation of oceangoing vessels, to


deliver marine fuel oils (bunker fuels) to the Vessel. Crescent
granted and confirmed the request. As security for the
payment of the bunker fuels and related services, Crescent
received two checks. Thus, Crescent contracted with its
supplier, Marine Petrobulk, another Canadian corporation, for
the physical delivery of the bunker fuels to the Vessel.
Marin Petrobulk delivered the bunker fuels amounting
to US$103,544 inclusive of barging and demurrage charges
to the Vessel at the port of Pioneer Grain, Vancouver,
Canada. The Chief Engineer Officer of the Vessel duly
acknowledged and received the delivery receipt. Marine
Petrobulk issued an invoice to Crescent for the US$101,44.00
worth of the bunker fuels. Crescent issued a check for the
same amount in favor of Marine Petrobulk, which check was
duly encashed.
Having paid Marine Petrobulk, Crescent issued a revised
invoice to Portserv Limited, and/or the Master, and/or
Owners, and/or Operators, and/or charterers of M/V Lok
Maheshwari in the amount of US$103,544.00 with instruction
to remit the amount on or before the date agreed upon. The
period lapsed and several demands were made but no
payment was received. Also, the checks issued to Crescent
as security for the payment of the bunker fuels were
dishonored for insufficiency of funds. As a consequence,
Crescent incurred additional expenses of US$8,572.61 for
interest, tracking fees, and legal fees.
Issue:
1. Is Crescent entitled to a maritime lien under our laws?
2. If not, which law should petitioner Crescent prove the
existence of its maritime lien?
Ruling:
1. No.
The Ship Mortgage Decree of 1978 was enacted to
accelerate the growth and development of the shipping
industry and to extent the benefits accorded to overseas
shipping under PD No. 214 to domestic shipping. It is
patterned closely from the US Ship Mortgage Act of 1920 and
the Liberian Maritime Law relating to preferred mortgages.
Some of the sections of our law are identical to subsections

of US Ship Mortgage Act, which is part of the Federal


Maritime Lien Act. Hence, US jurisprudence finds relevance
to determine whether PD No. 1521 or the Ship Mortgage
Decree of 1978 applies in the instant case.
The various tests used in the US to determine whether
a maritime lien exists are the following:
One. In a suit to establish and enforce a maritime lien
for supplies furnished to a vessel in a foreign port, whether
such lien exists, or whether the court has or will exercise
jurisdiction, depends on the law of the country where the
supplies were furnished, which must be pleaded and proved.
Two. The Lauritzen-Romero-Rhoditis trilogy of cases,
which replaced such single-factor methodologies as the law
of the place of supply.
In Lauritzen v. Larsen, the following factors were
considered: 1) place of the wrongful act; 2) law of the flag; 3)
allegiance or domicile of the injured; 4) allegiance of the
defendant shipowner; 5) place of contract; 6) inaccessibility
of foreign forum; and 7) the law of the forum.
In the case of Romero v. International Terminal
Operating co, the case of Lauritzen were applicable not only
to personal injury claims arising under the Jones Act but to
all matters arising under maritime law in general.
In Hellenic Lines, Ltd v. Rhodotis, the US Supreme Court
observed that of the seven factors listed in the Lauritzen
test, four were in favor of the shipowner and against
jurisdiction.
Three. The factors provided in Restatement (Second) of
Conflict of Law have also been applied, especially in
resolving cases brought under the Federal Maritime Lien Act.
Their application suggests that in the absence of an effective
choice of law by the parties, the forum contacts to be
considered include: a) the place of contracting; b) the place
of negotiation of the contract; c) the place of performance;
d) the location of the subject matter of the contract; and the
domicile, residence, nationality, place of incorporation and
place of business of the parties.
Finding the guidance from the foregoing decisions, the
Court cannot sustain Crescents insistence on the application

of the Ship Mortgage Decree of 1978 and hold a maritime


lien exists.
First. Out of the seven basic factors listed in the case of
Lauritzen, Philippine law only falls under one the law of the
forum. All other elements are foreign Canada is the place of
the wrongful act, of the allegiance or domicile of the injured
and the place of contract; India is the law of the flag and the
allegiance of the defendant shipowner. Balancing these basic
interests, it is inconceivable that the Philippine court has any
interest in the case that outweighs the interests of Canada or
India for that matter.
Second. P.D. No. 1521 or the Ship Mortgage Decree of
1978 is inapplicable following the factors under Restatement
(Second) of Conflict of Laws. Like the Federal Maritime Lien
Act of the U.S., P.D. No. 1521 or the Ship Mortgage Decree
of1978 was enacted primarily to protect Filipino suppliers
and was not intended to create a lien from a contract for
supplies between foreign entities delivered in a foreign port.
Third. Applying P.D. No. 1521 or the Ship Mortgage
Decree of 1978 and rule that a maritime lien exists would
not promote the public policy behind the enactment of the
law to develop the domestic shipping industry. Opening up
our courts to foreign suppliers by granting them a maritime
lien under our laws even if they are not entitled to a
maritime lien under their laws will encourage forum
shopping.
Finally. The submission of petitioner is not in keeping
with the reasonable expectation of the parties to the
contract. Indeed, when the parties entered into a contract for
supplies in Canada, they could not have intended the laws of
a remote country like the Philippines to determine the
creation of a lien by the mere accident of the Vessels being
in Philippine territory.
2. Canada. The injured party is a Canadian corporation, the
sub-charterer which placed the orders for the supplies is also
Canadian, the entity which physically delivered the bunker
fuels is in Canada, the place of contracting and negotiation is
in Canada, and the supplies were delivered in Canada.
However, Crescent never alleged and proved Canadian
law as basis for the existence of a maritime lien. To the end,
it insisted on its theory that Philippine law applies. Petitioner

contends that even if foreign law applies, since the same


was not properly pleaded and proved, such foreign law must
be presumed to be the same as Philippine law pursuant to
the doctrine of processual presumption.
Thus, the Supreme court left with two choices: 1)
dismiss the case for petitioners failure to establish a cause of
action or 2) presume that Canadian law is the same as
Philippine law. In either case, the case has to be dismissed.
It is a well-settled that a party whose cause of action or
defense depends upon a foreign law has the burden of
proving the foreign law. Such foreign law is treated as a
question of fact to be properly pleaded and proved.
Petitioner crescents insistence on enforcing a maritime lien
before our courts depended on the existence of a maritime
lien under the proper law.By erroneously claiming a maritime
lien under Philippine law instead of proving that a maritime
lien exists under Canadian law, petitioner Crescent failed to
establish a cause of action.
Even if we apply the doctrine of processual
presumption, the result will still be the same. Under P.D. No.
1521 or the Ship Mortgage Decree of 1978, the following are
the requisites for maritime liens on necessaries to exist: (1)
the necessaries must have been furnished to and for the
benefit of the vessel; (2) the necessaries must have been
necessary for the continuation of the voyage of the vessel;
(3) the credit must have been extended to the vessel; (4)
there must be necessity forthe extension of the credit; and
(5) the necessaries must be ordered by persons authorized
to contract on behalf of the vessel.
These do not avail in the instant case.

9.
[G.R. No. 143866. August 22, 2005]
POLIAND INDUSTRIAL LIMITED, petitioner,

-versusNATIONAL DEVELOPMENT COMPANY, DEVELOPMENT


BANK OF THE PHILIPPINES, and THE HONORABLE
COURT OF APPEALS (Fourteenth
Division) respondents.
Facts:
Both Poliand and NDC separately filed motions for
partial reconsideration. Poliand, for its part, asserted that the
computation of interest should be reckoned from Sep. 12,
1984, the date of the last foreclosure sale of the vessels. The
Supreme Court denied the said separate motions. More than
simply denying Poliand's motion for reconsideration, said
Resolution passed upon for the first time the issue on the
computation of interest and, thus, modified the decision by
reckoning the computation of interest from the date of the
finality of judgment. Not satisfied with the Court's ruling,
Poliand
filed
the
instant
subsequent
motion
for
reconsideration with leave of court, praying that in the
alternative that the interest rate should be computed from
the date of extrajudicial demand that is, in conformity with
the tack ordered in the Decision.
Issue:
Whether or not the interest rate should be computed from
the date of extrajudicial demand.
Ruling:
Yes. The finding of the trial court that an extrajudicial
demand was made by Poliand on NDC for the payment of a
determinate amount equivalent to its maritime lien,
unmodified as it was by the appellate court, constitutes basis
to conclude that as of said date. Poliand's claim was already
due and demandable. Such factual finding of the trial court,
duly supported as it is by the evidence on record, deserves
great weight and respect and is binding on the Court.
Poliands main stance that the interest payment on its
maritime lien should be reckoned from the date of the last
foreclosure sale of the vessels has no merit, apart from being
barred by the rule against second motions for
reconsideration.

Poliand contends that the Courts finding that the


institution of the extrajudicial foreclosure proceedings was
tainted with bad faith provides the basis to reckon the
computation of legal interest from the date of the foreclosure
sale. Suffice it to say, this theory has no basis in law. An act
done in bad faith may be the basis of some other award but
not the award of legal interest.
Next, Poliand argues that the payment of legal interest
should be reckoned from the date of the last foreclosure sale
of the vessels or on September 12, 1984 on the basis of
Section 17 (a) of Presidential Decree No. 1521.[4] The
provision is inapplicable to the question of interest payment
as it merely enumerates the prioritized liens which are
entitled to satisfaction upon the sale of a mortgaged vessel.

10.
[G.R. NO. 166845 December 10, 2008]
TSUNEISHI HEAVY INDUSTRIES (CEBU),
INC., Petitioner,
-versusNEGROS NAVIGATION CO., INC., SULFICIO O. TAGUD,
JR., AND THE REHABILITATION RECEIVER FOR NEGROS
NAVIGATION CO., INC.
Facts:
NCC is a shipping company that is primarily engaged in
the business of transporting through shipping vessels,
passengers and cargoes at various ports of call in the
country. THI, on the other hand, is engaged in the business
of shipbuilding and repair. NCC engaged the services of THI
for the repair of its vessels.
THI filed a case for sum of money and damages against
NNC for failure of the latter to pay the services of the former
for the repair of the vessels.
The Cebu RTC issued an order granting the issuance of
a writ of preliminary attachment against the properties of
NNC. By virtue of the writ of preliminary attachment, Sheriff
levied on one of the vessels of NNC, the M/V St. Peter the
Apostle.

NCC filed a petition for Corporate Rehabilitation with


Prayer for Suspension of Payments with Manila RTC. RTC
granted the NNCs petition and issued a Stay Order.
Issue:
1.) Whether or not the maritime liens against the vessels or
admiralty court's jurisdiction over those liens is impaired by
the Stay Order issued by the Manila RTC.
2.) Whether or not THI's maritime liens are covered by, and
are subject to the Manila RTC's jurisdiction, NNC's
rehabilitation proceedings.
Ruling:
No. There is no conflict as to which law should apply to
the case at bench. THI wishes to impress this Court that its
claim for repairman's lien is a maritime lien and, accordingly,
may be enforced only in a proceeding in rem. The Court
agrees that PD 1521 is the governing law concerning its
maritime lien for the services it rendered to NNC. However,
when NNC filed a petition for corporate rehabilitation and
suspension of payments, and the Manila RTC found that the
petition was sufficient in form and in substance and
appointed the rehabilitation receiver, the admiralty
proceeding was appropriately suspended in accordance with
Section 6 of the Interim Rules on Corporate Rehabilitation.
The enforcement of its claim through court action was
merely suspended to give way to the speedy and effective
rehabilitation of the distressed shipping company. Upon
termination of the rehabilitation proceedings or in the event
of the bankruptcy and consequent dissolution of the
company, THI can still enforce its preferred claim upon NNC.
When a distressed company is placed under
rehabilitation,
the
appointment
of
a
management
committee follows to avoid collusion between the
previous management and creditors it might favor, to
the prejudice of the other creditors. The stay order is
effective on all creditors of the corporation without
distinction, whether secured or unsecured. All assets of
a corporation under rehabilitation receivership are held
in trust for the equal benefit of all creditors to preclude
one from obtaining an advantage or preference over
another by the expediency of attachment, execution or

otherwise. As between the creditors, the key phrase is


equality in equity. Once the corporation threatened by
bankruptcy is taken over by a receiver, all the creditors
ought to stand on equal footing. Not any one of them
should be paid ahead of the others. This is precisely
the reason for suspending all pending claims against the
corporation under receivership.
2. No. True enough, a maritime lien is not affected by
bankruptcy or reorganization. However, in the instant case,
we are not dealing with bankruptcy or reorganization; rather,
we are confined with NNC's rehabilitation. Otherwise, we
would, in effect, violate the law, specifically the provisions of
PD 902-A. The rationale behind PD 902-A is to effect a
feasible and viable rehabilitation of an ailing corporation.
There is no conflict between PD 1521 and PD 902-A.
The Manila RTC acting as a rehabilitation court merely
suspended the proceedings in the admiralty case in the Cebu
RTC. It did not divest the Cebu RTC of its jurisdiction over the
maritime claims of THI against NNC. The preferred maritime
lien of THI can still be enforced upon the termination of the
rehabilitation proceedings, or if it such be unsuccessful, upon
the dissolution of the corporation.
Persons who takes part in maritime commerce

11.
[G.R. No. 115286 August 11, 1994]
INTER-ORIENT MARITIME ENTERPRISES, INC., SEA
HORSE SHIP, INC. and TRENDA WORLD SHIPPING
(MANILA), INC., petitioners,
-versusNATIONAL LABOR RELATIONS COMMISSION and
RIZALINO D. TAYONG, respondents.
Facts:
This is a claim for death compensation benefits filed by
Constancia Pineda as heir of her deceased son, seaman
Jeremias Pineda, against Interorient Maritime Enterprises,
Inc. and its foreign principal, Fircroft Shipping Corporation

and the Times Surety and Insurance Co., Inc. The following
facts were found by the POEA Administrator.
On September 28, 1989, he finished his contract and
was discharged from the port of Dubai for repatriation to
Manila; that his flight schedule from Dubai to the Philippines
necessitated a stopover at Bangkok, Thailand, and during
said stopover he disembarked on his own free will and failed
to join the connecting flight to Hongkong with final
destination to Manila; that on October 5, 1990, it received a
fax transmission from the Department of Foreign Affairs to
the effect that Jeremias Pineda was shot by a Thai Officer on
duty on October 2, 1989 at around 4:00 P.M.; that the police
report submitted to the Philippine Embassy in Bangkok
confirmed that it was Pineda who "approached and tried to
stab the police sergeant with a knife and that therefore he
was forced to pull out his gun and shot Pineda"
Petitioner contends that they are not liable to pay any
death/burial benefits pursuant to the provisions of Par. 6,
Section C. Part II, POEA Standard Format of Employment
which state(s) that "no compensation shall be payable in
respect of any injury, (in)capacity, disability or death
resulting from a willful (sic) act on his own life by the
seaman"; that the deceased seaman died due to his own
willful (sic) act in attacking a policeman in Bangkok who shot
him in self-defense.
After the parties presented their respective evidence,
the POEA Administrator rendered his decision holding
petitioners liable for death compensation benefits and burial
expenses.
Petitioners appealed the POEA decision to the public
respondent. In a Decision dated March 30, 1994, public
respondent upheld the POEA.
Thus, this recourse to this Court by way of a special civil
action for certiorari per Rule 65 of the Rules of Court.
Issue:
Whether the petitioners can be held liable for the death of
seaman Jeremias Pineda?

Held:
The petitioners contention that the assailed Resolution
has no factual and legal bases is belied by the adoption with
approval by the public respondent of the findings of the
POEA Administrator, which recites at length the reasons for
holding that the deceased Pineda was mentally sick prior to
his death and concomitantly, was no longer in full control of
his mental faculties.
WHEREFORE, premises considered, the petition is
hereby DISMISSED and the Decision assailed in this petition
is AFFIRMED. Costs against petitioners.

12.
[G.R. No. 154305. December 9, 2004]
MACONDRAY & CO., INC., petitioner,
-versusPROVIDENT INSURANCE CORPORATION, respondent.
Facts:
CANPOTEX SHIPPING SERVICES LIMITED INC., shipped
on board the vessel M/V Trade carrier certain goods in favor
of ATLAS FERTILIZER CORPORATION. Subject shipments were
insured with Provident Insurance Corp. against all risks.
When the shipment arrived, consignee discovered that
the shipment sustained losses. Provident paid for said losses.
Formal claims were then filed with Trade & Transport but
MACONDRAY refused and failed to settle the same.
MACONDRAY denies liability over the losses, it, having no
absolute relation with Trade & Transport, the alleged
operator of the vessel who transported the shipment; that
accordingly, MACONDRAY is the local representative of the
shipper; the charterer of M/V Trade Carrier and not party to
this case; that it has no control over the acts of the captain
and crew of the carrier and cannot be held responsible for
any damage arising from the fault or negligence of said
captain and crew; that upon arrival at the port, M/V Trade

Carrier discharged the full amount of shipment as shown by


the draft survey.
Issue:
Whether or not MACONDRAY & CO. INC., as an agent, is
responsible for any loss sustained by any party from the
vessel owned by Trade & Transport.
Held:
Although petitioner is not an agent of Trade &
Transport, it can still be the ship agent of the vessel M/V
Trade Carrier. A ship agent is the person entrusted with
provisioning or representing the vessel in the port in which it
may be found. Hence, whether acting as agent of the owner
of the vessel or as agent of the charterer, petitioner will be
considered as the ship agent and may be held liable as such,
as long as the latter is the one that provisions or represents
the vessel.
The trial court found that petitioner was appointed as
local agent of the vessel, which duty includes arrangement
for the entrance and clearance of the vessel.
Further, the CA found that the evidence shows that
petitioner represented the vessel. The latter prepared the
Notice of Readiness, the Statement of Facts, the Completion
Notice, the Sailing Notice and Customs Clearance.
Petitioners employees were present at the port of
destination one day before the arrival of the vessel, where
they stayed until it departed. They were also present during
the actual discharging of the cargo. Moreover, Mr. de la Cruz,
the representative of petitioner, also prepared for the needs
of the vessel. These acts all point to the conclusion that it
was the entity that represented the vessel at the port of
destination and was the ship agent within the meaning and
context of Article 586 of the Code of Commerce.
EXTRAORDINARY DILIGENCE; PRESUMPTION OF FAULT
OR NEGLIGENCE REBUTTABLE

13.

[G.R. No. 171591 June 25, 2012]


Ace Navigation Co., Inc., Petitioner,
-versusFGU Insurance Corporation and Pioneer Insurance and
Surety Corporation, Respondent
Facts:
The subject vessel is owned by P.T. Pakarti Tata
(PAKARTI) which it chartered to Shinwa Kaiun Kaisha Ltd.
(SHINWA). Representing itself as owner of the vessel,
SHINWA entered into a charter party contract with Sky
International, Inc. (SKY), an agent of Kee Yeh Maritime Co.
(KEE YEH), which further chartered it to Regency Express
Lines S.A. (REGENCY). Thus, it was REGENCY that directly
dealt with consignee HEINDRICH, and accordingly, issued
Clean Bill of Lading No. SM-1.
On July 23, 1990, the vessel arrived at the Port of
Manila and the shipment was discharged. However, upon
inspection of HEINDRICH and petitioner Ace Navigation Co.,
Inc. (ACENAV), agent of CARDIA, it was found that out of the
165,200 bags of cement, 43,905 bags were in bad order and
condition. Unable to collect the sustained damages in the
amount of P1,423,454.60 from the shipper, CARDIA, and the
charterer, REGENCY, the respondents, as co-insurers of the
cargo, each paid the consignee, HEINDRICH, the amounts of
P427,036.40
and
P284,690.94,
respectively,
and
consequently became subrogated to all the rights and
causes of action accruing to HEINDRICH.
Thus, on August 8, 1991, respondents filed a complaint
for damages against the following defendants: "REGENCY
EXPRESS LINES, S.A./UNKNOWN CHARTERER OF THE VESSEL
'PAKARTI TIGA'/UNKNOWN OWNER and/or DEMIFE (sic)
CHARTERER OF THE VESSEL 'PAKARTI TIGA', SKY
INTERNATIONAL, INC. and/or ACE NAVIGATION COMPANY,
INC."
In their answer with counterclaim and cross-claim,
PAKARTI and SHINWA alleged that the suits against them
cannot prosper because they were not named as parties in
the bill of lading.
Proceedings Before the RTC and the CA

The RTC dismissed the complaint, the fallo of which


reads:
WHEREFORE, premises considered, plaintiffs' complaint
is DISMISSED. Defendants' counter-claim against the
plaintiffs are likewise dismissed, it appearing that plaintiff[s]
did not act in evident bad faith in filing the present complaint
against them.
Defendant Pakarti and Shinwa's cross-claims against
their co-defendants are likewise dismissed for lack of
sufficient evidence. No costs. SO ORDERED.
Dissatisfied, the respondents appealed to the CA which,
in its assailed June 22, 2004 Decision, found PAKARTI,
SHINWA, KEE YEH and its agent, SKY, solidarily liable for 70%
of the respondents' claim, with the remaining 30% to be
shouldered solidarity by CARDIA and its agent, ACENAV,
thus:
WHEREFORE, premises considered, the Decision dated
November 26, 2001 is hereby MODIFIED

Issues Before the Court


PAKARTI, SHINWA, SKY and ACENAV filed separate
petitions for review on certiorari before the Court, docketed
as G.R. Nos. 171591, 171614, and 171663, which were
ordered consolidated in the Court's Resolution dated July 31,
2006.
On April 21, 2006, SKY manifested that it will no longer
pursue its petition in G.R. No. 171614 and has preferred to
await the resolution in G.R. No. 171663 filed by PAKARTI and
SHINWA. Accordingly, an entry of judgment against it was
made on August 18, 2006. Likewise, on November 29, 2007,
PAKARTI and SHINWA moved for the withdrawal of their
petitions for lack of interest, which the Court granted in its
January 21, 2008 Resolution. The corresponding entry of
judgment against them was made on March 17, 2008.
Maintaining that it was not a party to the bill of lading,
ACENAV asserts that it cannot be held liable for the damages
sought to be collected by the respondents. It also alleged
that since its principal, CARDIA, was not impleaded as a
party-defendant/respondent in the instant suit, no liability

can therefore attach to it as a mere agent. Moreover, there is


dearth of evidence showing that it was responsible for the
supposed defective packing of the goods upon which the
award was based.
The Court's Ruling
A bill of lading is defined as "an instrument in writing,
signed by a carrier or his agent, describing the freight so as
to identify it, stating the name of the consignor, the terms of
the contract for carriage, and agreeing or directing that the
freight to be delivered to the order or assigns of a specified
person at a specified place."
As such, it shall only be binding upon the parties who
make them, their assigns and heirs.
In this case, the original parties to the bill of lading are:
(a) the shipper CARDIA; (b) the carrier PAKARTI; and (c) the
consignee HEINDRICH. However, by virtue of their
relationship
with
PAKARTI
under
separate
charter
arrangements, SHINWA, KEE YEH and its agent SKY likewise
became parties to the bill of lading. In the same vein,
ACENAV, as admitted agent of CARDIA, also became a party
to the said contract of carriage.
The respondents, however, maintain that ACENAV is a
ship agent and not a mere agent of CARDIA, as found by
both the CA and the RTC.
The Court disagrees.
ART. 586. The ship owner and the ship agent shall be
civilly liable for the acts of the captain and for the obligations
contracted by the latter to repair, equip, and provision the
vessel, provided the creditor proves that the amount claimed
was invested therein.
Records show that the obligation of ACENAV was limited
to informing the consignee HEINDRICH of the arrival of the
vessel in order for the latter to immediately take possession
of the goods. No evidence was offered to establish that
ACENAV had a hand in the provisioning of the vessel or that
it represented the carrier, its charterers, or the vessel at any
time during the unloading of the goods. Clearly, ACENAV's
participation was simply to assume responsibility over the
cargo when they were unloaded from the vessel. Hence, no
reversible error was committed by the courts a quo in

holding that ACENAV was not a ship agent within the


meaning and context of Article 586 of the Code of
Commerce, but a mere agent of CARDIA, the shipper.
ART. 1868. By the contract of agency, a person binds
himself to render some service or to do something in
representation or on behalf of another, with the consent or
authority of the latter.
Corollarily, Article 1897 of the same Code provides that
an agent is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceeds the
limits of his authority without giving such party sufficient
notice of his powers.
Both exceptions do not obtain in this case. Records are
bereft of any showing that ACENAV exceeded its authority in
the discharge of its duties as a mere agent of CARDIA.
Neither was it alleged, much less proved, that ACENAV's
limited obligation as agent of the shipper, CARDIA, was not
known to HEINDRICH.
WHEREFORE, the assailed Decision and Resolution of
the Court of Appeals are hereby REVERSED. The complaint
against petitioner Ace Navigation Co., Inc. is hereby
DISMISSED.

Special Contracts

Charter Party

14.
[G.R. No. 131166. September 30, 1999]
CALTEX (PHILIPPINES), INC. petitioner,
-versusSULPICIO LINES, INC., GO SIOC SO, ENRIQUE S. GO,
EUSEBIO S. GO, CARLOS S. GO, VICTORIANO S. GO,
DOMINADOR S. GO, RICARDO S. GO, EDWARD S. GO,
ARTURO S. GO, EDGAR S. GO, EDMUND S. GO,
FRANCISCO SORIANO, VECTOR SHIPPING
CORPORATION, TERESITA G. CAEZAL AND SOTERA E.
CAEZAL, respondents.

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

First: The charterer has no liability for damages under


Philippine Maritime laws.
Petitioner and Vector entered into a contract of
affreightment, also known as a voyage charter.
A charter party is a contract by which an entire ship, or
some principal part thereof, is let by the owner to another
person for a specified time or use; a contract of
affreightment is one by which the owner of a ship or other
vessel lets the whole or part of her to a merchant or other
person for the conveyance of goods, on a particular voyage,
in consideration of the payment of freight. A contract of
affreightment may be either time charter, wherein the
leased vessel is leased to the charterer for a fixed period of
time, or voyage charter, wherein the ship is leased for a
single voyage. In both cases, the charter-party provides for
the hire of the vessel only, either for a determinate period of
time or for a single or consecutive voyage, the ship owner to
supply the ships store, pay for the wages of the master of
the crew, and defray the expenses for the maintenance of
the ship. If the charter is a contract of affreightment, which
leaves the general owner in possession of the ship as owner
for the voyage, the rights and the responsibilities of
ownership rest on the owner. The charterer is free from
liability to third persons in respect of the ship.
Second: MT Vector is a common carrier.
The charter party agreement did not convert the
common carrier into a private carrier. The parties entered
into a voyage charter, which retains the character of the
vessel as a common carrier. It is imperative that a public
carrier shall remain as such, notwithstanding the charter of
the whole or portion of a vessel by one or more persons,
provided the charter is limited to the ship only, as in the case
of a time-charter or voyage charter. It is only when the
charter includes both the vessel and its crew, as in a
bareboat or demise that a common carrier becomes private,
at least insofar as the particular voyage covering the charterparty is concerned. Indubitably, a ship-owner in a time or
voyage charter retains possession and control of the ship,
although her holds may, for the moment, be the property of
the charterer. A common carrier is a person or corporation
whose regular business is to carry passengers or property for
all persons who may choose to employ and to remunerate

him. 16 MT Vector fits the definition of a common carrier


under Article 1732 of the Civil Code.
The public must of necessity rely on the care and skill of
common carriers in the vigilance over the goods and safety
of the passengers, especially because with the modern
development of science and invention, transportation has
become more rapid, more complicated and somehow more
hazardous. For these reasons, a passenger or a shipper of
goods is under no obligation to conduct an inspection of the
ship and its crew, the carrier being obliged by law to
impliedly warrant its seaworthiness.
Third: Is Caltex liable for damages under the Civil Code?
The charterer of a vessel has no obligation before
transporting its cargo to ensure that the vessel it chartered
complied with all legal requirements. The duty rests upon
the common carrier simply for being engaged in "public
service." The relationship between the parties in this case is
governed by special laws. Because of the implied warranty of
seaworthiness, shippers of goods, when transacting with
common carriers, are not expected to inquire into the
vessels seaworthiness, genuineness of its licenses and
compliance with all maritime laws. To demand more from
shippers and hold them liable in case of failure exhibits
nothing but the futility of our maritime laws insofar as the
protection of the public in general is concerned. Such a
practice would be an absurdity in a business where time is
always of the essence. Considering the nature of
transportation business, passengers and shippers alike
customarily presume that common carriers possess all the
legal requisites in its operation.
Accidents
15.
[G.R. No. 106999. June 20, 1996]
PHILIPPINE HOME ASSURANCE
CORPORATION, petitioner,
-versusCOURT OF APPEALS and EASTERN SHIPPING LINES,
INC., respondents.
Facts:

Eastern Shipping Lines Inc. (ESLI) loaded on board the


SS Eastern Explorer goods consigned to various companies
for shipment from Kobe, Japan to Manila and Cebu. While off
the coast of Okinawa, a flame was detected on an acetylene
cylinder near the engine room. There was an explosion and
the master and crew were forced to abandon the ship.
During the salvage operations, the goods which were saved
were shipped to their destinations by another carrier, who in
turn charged for additional freight and salvage charges.
One of the contentions of ESLI was that the losses
incurred in salvaging the cargo should be considered general
average and as such may claim for contribution from the
consignees.
Issue:
Whether or not additional expenses for salvage and freight
charges after an accident should fall under general average.
Ruling:
There was no general average. General or gross
averages include all damages and expenses deliberately
caused in order to save the vessel, cargo, or both from a real
or known risk. The caveat, however, is that the formalities of
articles 813 and 814 of the Code of Commerce must be
complied with. Evidence in the present case, however,
showed no such compliance. While technically the case
would have fallen within the purview of the concept of
general average, failure to comply with the formalities
makes ESLIs contention untenable.

16.
[G.R. No. L-49407 August 19, 1988]
NATIONAL DEVELOPMENT COMPANY, petitionerappellant,
-versusTHE COURT OF APPEALS and DEVELOPMENT
INSURANCE & SURETY CORPORATION, respondentsappellees.
Facts:

NDC (National Development Company) appointed MCP


Maritime Company of the Philippines) as its agent to operate
and manage three vessels including the Dona Nati. Some
goods were loaded on the Dona Nati in San Francisco and
also some in Tokyo. On the way to Manila, collided with a
Japanese vessel, the SS Yasushima Maru. The trial court
found that despite the excessive fog, both vessels did not
change their excessive speed under the circumstances.
Some of the damages goods were sold, and others
considered lost. All in all, a total of P344,977.96 worth in
goods was lost or destroyed.
The trial court ruled that both NDC and MCP should be
held jointly and severally liable for the damage to the goods.
NDC argues that it cannot be held liable for the damage
resulting from thr act, neglect or default of the master,
mariner, pilot or the servants of the carrier in the navigation
or management of the ship.
MCP argues that the rule on averages should be applied
to determine its liability.
Issue:
1. Whether or not NDC is liable for damages in case of
collision.
2. Whether or not the rule on averages should be applied.
Ruling:
1. While the Civil Code provides for the liability of common
carriers, it would appear as though collisions are not
regulated specifically by the Civil Code and as such, the
Code of Commerce is to be applied.
Article 826 of the Code of Commerce provides that if
there is a collision which may be attributed to the personnel
of the vessel, the owner of the vessel at fault will be liable
for the damages. Should both vessels be at fault, art. 827
provides that the two shall be solidarily liable for loss and
damage. Even if it be proven that it was the captain of the
ship that was negligent, articles 826 839 of the Code of
Commerce imposes primary liability on the shipowner or
carrier. Therefore, NDC cannot escape liability.

2. The rule on averages should not be applied in the case at


bar. The rule applies only when the damage is incurred
when cargoes are purposely being jettisoned to save some
other pieces of cargo and the vessel. The trial court found
that that this circumstance was not present in the case.

17.
[G.R. No. 88052 December 14, 1989]
JOSE P. MECENAS, ROMEO P. MECENAS, LILIA P.
MECENAS, ORLANDO P. MECENAS, VIOLETA M.
ACERVO, LUZVIMINDA P. MECENAS; and OFELIA M.
JAVIER, petitioners,
-versusHON. COURT OF APPEALS, CAPT. ROGER SANTISTEBAN
and NEGROS NAVIGATION CO., INC., respondents.
Facts:
On April 22, 1980, two vessels, the M/T Tacloban City
(owned by the Philippine National Oil Company (PNOC) and
operated by PNOC Shipping and Transport Company) and the
M/V Don Juan (owned and operated by Negros Navigation
Co., Inc.) collided in the Talbas Strait. As a result of the
collision, the Don Juan sank despite the good weather and
calm seas. Hundreds of passengers died. Some heirs of the
deceased passengers filed suit against Negros Navigation
and the captain of the Don Juan, Captain Roger Santisteban.
The trial court awarded P400,000 in damages for the death
of plaintiffs parents while the court of appeals reduced the
amount to P100,000 for actual and compensatory
damages.
Issue:
Whether or not the CA erred in reducing the award of the
trial court.
Ruling:
The Supreme Court ruled that Negros Navigation is
liable to pay P800,000 total in damages broken down as
follows:
P126,000 as actual damages
P60,000 as compensatory damages
P307,000 as exemplary damages

P307,000 as moral damages


With regard to the addition of moral damages, the court
ruled that the controversy is grounded on a contract of
carriage, and under the law, moral damages may arise from
negligence or willful act of the carriers employees even if
the latter acted beyond the scope of their authority or even
in violation of the instruction of their employer. As such,
moral damages may be awarded provided the sinking of the
Don Juan was attended with negligence.
With regard to the addition of exemplary damages, the
court pointed out article 2332 of the Civil Code which says
that in contracts, the court may award exemplary damages if
the defendant acted in a reckless manner, that is, grossly
negligent.
During the trial, it was found that Captain
Santisebastian was playing mahjong before and up to the
time of collision. The court found this to be simply
unacceptable the part of the master of a vessel to whose
hands the lives and welfare of at least seven hundred fifty
(750) passengers had been entrusted. Further, whether or
not he was on duty at the time is immaterial as the law
requires extraordinary diligence for common carriers.
Further, it was shown that the Don Juan was certified to
carry 864 passengers and while the manifest listed only 750
passengers on that voyage,the actual number was 1,004
people.
Finally, the court found it negligent that the Don Juan
failed to take preventive action even if it had sighted the
Tacloban City when it was still a long way off. While the
Tacloban City failed to follow Rule 18 of the International
Rules of the Road (when two vessels are meeting head on,
they should both turn starboard so they pass each other),
had the Don Juan taken preventive action earlier, the
collision could have been avoided.

Salvage Law
18.
[G.R. No. L-17192 March 30, 1963]

HONORIO M. BARRIOS, plaintiff-appellant,


-versusCARLOS A. GO THONG & COMPANY, defendantappellee.
Facts:
The plaintiff Honorio M. Barrios was 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. Plaintiff received or
otherwise intercepted an S.O.S. or distress signal by blinkers
from the MV Don Alfredo which plaintiff found to be in
trouble, due to engine failure and the loss of her propeller.
The plaintiff caused the latter vessel to be tied to, or wellsecured and connected with two 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. The MV Lux, a sister ship of the MV Don
Alfredo, was sighted heading towards the direction of the
aforesaid two vessels. Thereupon, at the request and
instance of the captain and/or master of the MV Don Alfredo,
the plaintiff caused the tow lines to be released, thereby also
releasing the MV Don Alfredo. plaintiff 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, the defendant insists that the facts made out no such
case, but that what merely happened was only mere towage
from which plaintiff cannot claim any compensation or
remuneration independently of the shipping company that
owned the vessel commanded by him.
The trial court dismissed the case.
Issue:
Whether or not the service rendered by plaintiff to defendant
constituted "salvage" or "towage".
Ruling:
It only constitute a towage. Salvage Law (Act No. 2616),
provides: SECTION 1. When in case of shipwreck, the vessel
or its cargo shall be beyond the control of the crew, or shall
have been abandoned by them, and picked up and conveyed
to a safe place by other persons, the latter shall be entitled
to a reward for the salvage. 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.
During the towing of the vessel on the same night,
there was moonlight. Although said vessel was drifting
towards the open sea, there was no danger of it floundering
or being stranded, as it was far from any island or rocks. In
case of danger of stranding, its anchor could released, to
prevent such occurrence. There was no danger that
defendant's vessel would sink. If the contract thus created,
in this case, 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.
William Lines, Incorporated, had expressly waived its
claim for compensation for the towage service rendered to
defendant, it is clear that plaintiff, whose right if at all
depends upon and not separate from the interest of his
employer, is not entitled to payment for such towage
service.

COGSA
19.
[G.R. No. L-22491 January 27, 1967]
DOMINGO ANG, plaintiff-appellant,
-versusAMERICAN STEAMSHIP AGENCIES, INC., defendantappellee.
Facts:
Yau Yue Commercial Bank Ltd. of Hongkong agreed to
sell 140 packages of galvanized steel durzinc sheets to one
Herminio G. Teves for the sum of $32,458.26 subject to
terms and agreements. Pursuant to said terms and
arrangements, Yau Yue through Tokyo Boeki Ltd. shipped the,
of which the American Steamship Agencies, Inc. is the agent
in the Philippines, under a shipping agreement, consigned
"to order of the shipper with Herminio G. Teves as the party
to be notified of the arrival of the 140 packages of

galvanized steel durzinc sheets in Manila. The bill of lading


was indorsed to the order of and delivered to Yau Yue by the
shipper. Upon receipt thereof, Yau Yue drew a demand draft
together with the bill of lading against Herminio G. Teves,
through the Hongkong & Shanghai Bank.
Hongkong & Shanghai Bank notified Teves, the "notify
party" under the bill of lading, of the arrival of the goods and
requested payment of the demand draft representing the
purchase price of the articles. Teves, however, did not pay
the demand draft, prompting the bank to make the
corresponding protest. The bank likewise returned the bill of
lading and demand draft to Yau Yue which indorsed the said
bill of lading to Domingo Ang. Meanwhile, despite his nonpayment of the purchase price of the articles, Teves was able
to obtain a bank guaranty in favor of the American
Steamship Agencies, Inc., as carrier's agent, to the effect
that he would surrender the original and negotiable bill of
lading duly indorsed by Yau Yue. Domingo Ang claimed for
the articlesbut he was informed by the latter that it had
delivered the articles to Teves.
Domingo Ang filed a complaint in the Court of First
Instance of Manila against the American Steamship
Agencies, Inc. The lower court dismissed the action on the
ground of prescription.
Issue:
Whether or not there was "loss" of the goods subject matter
of the complaint.
Ruling:
No. Article 1189 of the Civil Code defines the word
"loss" in cases where conditions have been imposed with the
intention of suspending the efficacy of an obligation to give.
Paragraph 2 thereof which provides that, it is understood
that a thing is lost when it perishes, or goes out of
commerce, or disappears in such a way that its existence
unknown or it cannot be recovered. The contract of carriage
under American Steamship Agencies, Inc. and the Yau Yue is
one involving an obligation to give or to deliver the goods "to
the order of shipper", that is, upon the presentation and
surrender of the bill of lading. Section 3 (6) paragraph 4 of
the Carriage of Goods by Sea Act, "loss" contemplates

merely a situation where no delivery at all was made by the


shipper of the goods because the same had perished, gone
out of commerce, or disappeared that their existence is
unknown or they cannot be recovered. It does not include a
situation where there was indeed delivery but delivery to the
wrong person, or a misdelivery, as alleged in the complaint
in this case.
In this case, the goods cannot be deemed "lost". They
were delivered to Herminio G. Teves, so that there can only
be either delivery or misdelivery. There being no loss or
damage to the goods, the aforequoted provision of the
Carriage of Good by Sea Act does not apply. Also, plaintiff's
cause of action has not vet prescribed.
20.
[G.R. No. L-24515 November 18, 1967]
THE AMERICAN INSURANCE COMPANY, plaintiffappellant,
-versusCOMPAIA MARITIMA, ET AL., defendants.
Facts:
On August 11, 1962, a certain cargo insured with
plaintiff corporation was shipped in New York, U.S. of which
the general agent in the Philippines is appellee Macondray &
Co., Inc. On September 18, 1962, the "M/S TOREADOR"
arrived at the port of Manila and on the same date
discharged the cargo in question. Pursuant to the
arrangement the cargo was subsequently loaded aboard the
"SS SIQUIJOR", an inter-island vessel.
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 filed a complaint against the Compaia
Maritima and the Visayan Cebu Terminal Co., Inc. as
alternative defendants. Subsequently, plaintiff filed an
amendment complaint and was admitted in view of
defendant Maritima's assertion and records tending to show
that the lost merchandise was delivered to Maritima.
Macondray moved to dismiss the amended complaint
against it on the ground that plaintiff's action had already
prescribed.

The motion to dismiss was granted and plaintiff


interposed the present appeal from the order of dismissal.
Issue:
Whether or not plaintiff's action had already prescribed
under the provisions of the Carriage of Goods by Sea Act.
Ruling:
Yes. 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. Provisions of the bill of lading states that In any
event the Carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought
within one year after delivery of the goods or the date when
the goods should have been delivered.

21.
[G.R. No. L-27798 June 15, 1977]
UNION CARBIDE PHILIPPINES, INC. (formerly National
Carbon Philippines, Inc.), plaintiff-appellant,
-versusMANILA RAILROAD CO., substituted by the PHILIPPINE
NATIONAL RAILWAYS, MANILA PORT SERVICE and
AMERICAN STEAMSHIP AGENCIES, INC., defendantsappellees.
Facts:
On December 18, 1961 the vessel Daishin Maru arrived
in Manila with a cargo of 1,000 bags of synthetic resin
consigned to General Base Metals, Inc. which later sold the
cargo to Union Carbide Philippines, Inc. On the following day
that cargo was delivered to the Manila Port Service in good
order and condition except for twenty- five bags which were
in bad order. Only eight hundred ninety-eight (898) bags of
resin (out of the 1,000 bags) were delivered by the customs
broker to the consignee. One hundred two bags were

missing. The contents of twenty-five bags were damaged or


pilfered while they were in the custody of the arrastre
operator.
Formal claims were made by the consignee with the
arrastre operator and the agent of the carrier. As the claims
were not paid, Union Carbide Philippines, Inc. filed a
complaint in the Court of First Instance of Manila against the
Manila Railroad Company, the Manila Port Service and the
American Steamship Agencies, Inc. for the recovery of
damages.
The trial court in its decision dismissed the case as to the
carrier's agent on the ground that the action had already
prescribed because it was not "brought within one year after
delivery of the goods", as contemplated in section 3(6) of the
Carriage of Goods by Sea Act.
Issue:
Whether or not the action was barred by the statute of
limitations.
Ruling:
Yes. It was barred by statute of limitations. The oneyear period within which the consignee should sue the
carrier is computed from "the delivery of the goods or the
date when the goods should have been delivered". The
Carriage of Goods by Sea Act provides: (6) Unless notice of
loss or damage and the general nature of such loss or
damage be given in writing to the carrier or hi 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. 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.
What is the meaning of "delivery" in section 3(6) of the
Carriage of Goods by Sea Act. The trial court construed

delivery as referring to the discharge or landing of the cargo.


The Tarifff and Customs Code allow the delivery of imported
merchandise to the arrastre operator. The Bureau of
Customs shall have "elusive supervision and control over the
receiving, handling, custody and delivery of articles on the
wharves and piers at all ports of entry.
The sensible and practical interpretation is that delivery
within the meaning of section 3(6) of the Carriage of Goods
by Sea Law means delivery to the arrastre operator. That
delivery is evidenced by tally sheets which show whether the
goods were landed in good order or in bad order, a fact
which the consignee or shipper can easily ascertain through
the customs broker.

22.
[G.R. No. L-37604 October 23, 1981]
EASTERN AND AUSTRALIAN STEAMSHIP CO., LTD. AND
F. E. ZUELLIG, INC., petitioners,
vs.
GREAT AMERICAN INSURANCE CO. and COURT OF
FIRST INSTANCE OF MANILA, BRANCH
XIII,respondents.
FACTS:
Steamship Chitral, owned and operated in the
Philippines by Eastern and Australian Steamship Co., Ltd.
was under a contract of carriage of goods by shipper Jackson
and Spring (Sydney) Pty. Ltd. The said contract of carriage
pertains to the shipment of a one (1) case warman pump
from the shipper to its consignee, Benguet Consolidated
located in Manila, Philippines. The said cargo equipment was
insured through the Great American Insurance, Co. for P
35,921.81 against all risks. However, upon the vessels
arrival in the Philippines, the shipment was not delivered
even with the consistent demand from the consignee and
shipper. Due to the existence of an insurance contract, the

insurer was compelled to pay the consignee in the agreed


amount insured by the former. The insurance company, in
turn filed a case against the shipping company for the
recovery of the amount in the insurance contract as well as
for attorneys fees and legal interest.
The trial court ruled in favor of the insurance company
and rendered the shipping company liable in the amount
$500.00 or its peso equivalent of Php 3,217.50 with legal
interest, damages and attorneys fees. In a petition for
review, the petitioners/ shipping company asks the Supreme
Court to reserve the trial courts decision propounded by the
contention that its liability is limited only to L100 Sterling or
its peso equivalent of Php 1,544.40 as stipulated in the Bill of
Lading. Asstipulated Bill of Lading, the shipping company
shall only be liable for L100 Sterling or the peso equivalent
thereof. This contention is also supported by the New Civil
Code, under Articles 1749 and 1750 which allows the
limitation of the carriers liability provided that it is just and
reasonable. The petitioner strongly contends that the
stipulated and agreed value of liability in case of the
occurrence an unfortunate event is legally binding and valid.
On the other hand, the respondent insurance company
alleges that in order for the provisions under the New Civil
Code to be applied it must meet the requirements of having
it written, mutually agreed by both parties and must not be
contrary to public policy. Hence, what should be followed is
the provision under the Carriage of Goods by Sea Act, Sec. 4
(5) that liability is at the minimum value of $500 per
package.
ISSUE:
Whether or not the petitioners liability is limited to L100
Sterling as stipulated in the Bill of Lading or whether
petitioners liability should be $500 in pursuant to Sec. 4(5)
of the Carriage of Goods by Sea Act.
RULING:
The Supreme Court reversed the trial courts ruling and
found that the petitioner is only liable for L100 Sterling as
stipulated in the Bill of Lading. The New Civil Code expressly
allow the limitation of carriers liability under Article 1749
that the carriers 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. Decision is further
supported by the Northern Motors, Inc. jurisprudence.

23.
[G.R. No. 74125 July 31, 1990]
UNIVERSAL SHIPPING LINES, INC., petitioner,
-versusINTERMEDIATE APPELATE COURT and ALLIANCE
ASSURANCE COMPANY, LTD., respondents.
FACTS:
Petitioner is the Manila agent, owner and operator of
SEVALCO Ltd. In March 1974, through M/V Taiwan,
SEVALCO Ltd. entered into a contract to deliver shipments to
consignee S. Lersen Company, Ltd. and Muang Ngarm
Retreads,Ltd. located in Bangkok, Thailand. The shipments
were insured by Alliance Assurance Company, Ltd. MV
Taiwan arrived in Thailand but failed to unload and deliver
the shipment for S. Lersen Company, Ltd. However, the
shipment for Muang Ngarm Retreads, Ltd. was delivered but
was with weight shortage. According to the report submitted
by the vessel master, the shipment was damaged due to
partial or total dissolution to saltwater caused by a broken
pipe line in the vessel wherein the cargoes were placed.
Consignees filed formal claims for loss and damage to their
cargoes against the insurer. The insurer paid both claims in
the amounts of I2,180 and 2,547, respectively. The
respondent/ insurer-subrogee filed an action against
petitioner to collect the amount it paid to the consignees.
The trial court ordered the petitioners to pay the
respondent/insurer-subrogee the amount it paid to the
consignee. It was also upheld by the Court of Appeals, hence
this petition for review on certiorari.
ISSUE/S:
1. Whether or not the Philippine courts have jurisdiction over
the case.
2. Whether or not the respondent/ insurer-subrogees cause
of action has already prescribed.
RULING/S:
The court denied the petition for review on certiorari for
lack of merits.

YES, the Philippine courts have jurisdiction to try the


case. The private respondent may sue in Philippine courts
upon the marine insurance policies issued by it abroad to
cover international-bound cargoes shipped by a Philippine
carrier, even if it has no license to do business in this
country, for it is not the lack of the prescribed license (to do
business in the Philippines) but doing business without such
license, which bars a foreign corporation from access to our
courts. (Pacific Vegetable Oil Corporation vs. Singzon L-7919,
April 29, 1955; Eastboard Navigation, Ltd. vs. J. Ysmael &
Co., Inc., L-9090, Sept. 10, 1957.)
NO, prescription of the action under Section 3(6), Title I,
of the Carriage of Goods by Sea Act (Commonwealth Act No.
65) which provides that: the carrier and the ship shall be
discharged from all liability in respect of loss or damage
unless suit is brought within one year after delivery of the
goods or the date when the goods should have been
delivered. This provision of the law admits of an exception:
if the one-year period is suspended by express agreement of
the parties. The exchange of correspondence between the
parties and/or their associates/representatives show that
the parties had mutually agreed to extend the time within
which the plaintiff or its predecessors-in-interest may file suit
until December 27,1976. When the complaint was filed on
June 25, 1976, that deadline had not yet expired. Hence, it is
still within the one-year period prescribed by law.

24.
[G.R. No. 124050. June 19, 1997]
MAYER STEEL PIPE CORPORATION and HONGKONG
GOVERNMENT SUPPLIES DEPARTMENT, petitioners,
-versusCOURT OF APPEALS, SOUTH SEA SURETY AND
INSURANCE CO., INC. and the CHARTER INSURANCE
CORPORATION, respondents.

FACTS:
Petitioner, Mayer Pipe Corporation was contracted by
Hong
Kong
Government
Supplies
Department
to
manufacture and supply various types of steel pipes and
fittings. Under its contract, Mayer agreed to deliver the steel
pipes and fittings to Hong Kong. It also insured the same
against all risks with South Sea Surety and Insurance Co.
and Charter Insurance Corp. To assure that the cargoes are
all of good condition as specified in the contract, both parties
employed a supply inspector which examined the cargoes
before its shipment. After inspection, all steel pipes were
declared of good condition and was delivered to the
consignee. After arriving in Hong Kong, the cargoes were
discovered to be partially damaged. The consignee filed an
indemnity claim against the insurer under the insurance
contract. The insurer paid the agreed value of the shipment
as stipulated in their insurance contract. Petitioners likewise
demanded from the respondents the payment of the cost of
the
repair
of
the
damaged
steel
pipes.
The
respondent/insurer denied the request. They contended that
the damage was caused due to factory defects as specified
by their insurance inspector. The petitioner filed a case
before the trial court and the latter ordered the
respondent/insurer to pay the amount representing the
repair fees. The decision was appealed in the Court of
Appeals and was affirmed with revisions. The appellate court
affirmed that the damage sustained by the cargoes was not
due to factory defects and added that the cause of action of
the petitioners has already prescribed. Accordingly, the
action under Section 3(6) of the Carriage of Goods by Sea
Act has already prescribed since it was filed only on April 17,
1986, more than two years from the time the goods were
unloaded from the vessel. The provision expressly provides
that "the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought
within one year after delivery of the goods or the date when
the goods should have been delivered." The appellate court
ruled that this provision applies not only to the carrier but
also to the insurer. Hence, this petition for review on
certiorari.
ISSUE/S:
Whether or not the petitioners are barred by prescription
under the Carriage of Goods by Sea Act.

RULING/S:
The petition is granted and the decision of the appellate
court is set aside and the decision of the trial court is
reinstated.
NO, the appellate court erred in applying the provisions
under Commonwealth Act No. 65 otherwise known as the
Carriage of Goods by Sea Act. Sec. 3(6) shall not apply to
actions brought by the shipper against the insurer. Since
both parties are not under the contract of carriage but are
governed by the stipulations of their insurance contract,
hence the Insurance Code must be applied. An insurance
contract is a contract whereby one party, for a consideration
known as the premium, agrees to indemnify another for loss
or damage which he may suffer from a specified peril. An "all
risks" insurance policy covers all kinds of loss other than
those due to willful and fraudulent act of the insured. Thus,
when private respondents issued the "all risks" policies to
petitioner Mayer, they bound themselves to indemnify the
latter in case of loss or damage to the goods insured. Such
obligation prescribes in ten years, in accordance with Article
1144 of the New Civil Code

25.
[G.R. No. 119571. March 11, 1998]
MITSUI O.S.K. LINES LTD., represented by MAGSAYSAY
AGENCIES, INC., petitioner,
-versusCOURT OF APPEALS and LAVINE LOUNGEWEAR MFG.
CORP., respondents.
FACTS:
Petitioner, Mitsui O.S.K. Lines Ltd., entered into a
contract of carriage through Meister Transport, Inc., an
international freight forwarder, with private respondent
Lavine Loungewear Manufacturing Corporation to transport
goods of the latter from Manila to Le Havre, France.
Petitioner undertook to deliver the goods to France within 28
days from the initial loading of the cargoes to the vessel.
However, due to delays in Kaoshiung, Taiwan the cargoes
only arrived in France after almost 4 months. Consignee only
paid half of the actual price of the cargoes since it arrived

after the end of season that would entail business losses


upon them.
Respondent/consignee filed a case against
petitioners for the damages incurred that resulted from the
delayed arrival of the cargoes in France. The trial court as
well as the appellate court ruled against the petitioner.
ISSUE:
Whether or not the petitioners are barred by prescription
under the Carriage of Goods by Sea Act.
RULING/S:
The decision of the appellate court is affirmed.
NO, the applicable law in the case at bar is the New
Civil Code, specifically Art. 1144, which provides for ten (10)
years prescriptive period. Commonwealth Act No. 65
otherwise known as the Carriage of Goods by Sea Act
(COGSA) provision on liability due to damages refers to the
physical loss or damage of a shippers goods but petitioners
potential liability for the damages it has caused in the
general sense and, as such, the matter is governed by the
Civil Code on the other hand, the Code of Commerce and
COGSA, for the breach of its contract of carriage with
respondents. The damages contemplated of the respondents
does not fall part of either deterioration or disappearance or
destruction of goods caused by the carriers breach of the
contract of carriage. Whatever reduction there may have
been in the value of the goods is not due to their
deterioration or disappearance because they had been
damaged in transit.
Hence, the general application of
general laws, in this case the New Civil Code should be
applied as not to discourage the ends of justice.

26.
[G.R. No. L-7280. January 20, 1956.]
TAN LIAO, Plaintif-Appellant,
-versusAMERICAN PRESIDENT LINES, LTD., DefendantAppellee.

Facts:
Plaintiff entered into a contract with Ken Sales Co., Inc.,
of New York City, though the latter's agents in Manila, the
People Trading, for the importation of cases of fresh hen
eggs to be shipped on the S.S. Marine Leopard, sailing from
New York. Upon notification and receipt of the payment,
made by letter of credit of the Philippine Trust Co. Of Manila,
the Kent Sales So., Inc. issued an invoice in favor of plaintiff,
and on the same day contracted with the Defendant
shipping company to have the eggs shipped to Manila on the
vessel S.S. "Marine Leopard" in accordance with Bill of
Lading. Also on the same day, the Defendant received at the
port of New York the cases of eggs in question and looked
them on the S.S. "Marine Leopard."
Upon arrival in San Francisco, California, the Defendant
unloaded the cases of eggs from the S.S. "Marine Leopard
and shipped on another of Defendant's ships, the S.S."
General Meigs, which arrived in manila.
It is claimed by Plaintiff that the discharge of his cargo
at the port of Francisco was wrongful and unjustified, and a
violation of the bill of lading, which provided that the eggs
would be shipped to Manila on the S.S. "Marine Leopard."
When they were discharged in San Francisco, the eggs were
exposed to the hot summer whether without having been
placed in refrigeration. The eggs could have been
transhipped on the S.S. "Clovis Victory", also one of
Defendant's ships, that arrived in Manila. Because of the
delay in the shipment and the careless and repeated
handling of the cases of eggs by mechanical devices, a
substantial number of eggs arrived broken and damaged.
Defendant, on the other hand, alleged that under the
terms of the Bill of Lading, it was at liberty to tranship the
cargo in question on any other vessel.
After the trial, the lower court found that Plaintiff had
suffered a loss of more than 25,000 pesos by reason of the
delayed arrival of his cargo of eggs, which Defendant could
have transshiped on the S.S. "Clovis Victory". However, the
Court found Defendant's defense of prescription meritorious
since the filing of the complaint by the plaintiff was after
beyond 1 year after the delivery of the goods or the date
when the goods should have been delivered, and so
dismissed the case. As a consequence thereof, the plaintiff
appealed to the Supreme Court.

Issue:
1. Whether or not the instant case falls within the
prescriptive provision of the Carriage of Goods by Sea Act.
2. Whether or not there is a distinction between damage to
the goods and damages to the shipper or consignee.
Ruling:
Both issues are answered in nugatory.
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 (Sec. 3, paragraph 6 of Carriage of Goods by Sea
Act)..
Plaintiff makes a distinction between damage to the
goods and damages to the shipper or consignee, and claims
that while the former fails within the prescriptive period in
question, the latter is governed by the provision of the Code
of Civil Procedure (now the New Civil Code) on limitation of
actions.
SC: We see no difference between the two. Whatever
damage or injury is suffered by the goods while in transit
would result in loss or damage to either the shipper or the
consignee. As long as it is claimed, therefore, as it is done
here, that the losses or damages suffered by the shipper or
consignee were due to the arrival of the goods in damaged
or deteriorated condition, the action is still basically one for
damage to the goods, and must be filed within the period of
one year from delivery or receipt, under the above-quoted
provision of the Carriage of Goods by Sea Act.

27.

[G.R. No. 145044 June 12, 2008]


PHILIPPINE CHARTER INSURANCE
CORPORATION, petitioner,
-versusNEPTUNE ORIENT LINES/OVERSEAS AGENCY SERVICES,
INC., respondent.
Facts:
L.T. Garments Manufacturing Corp. Ltd. shipped from
HongKong three sets of warp yarn on returnable beams
aboard respondent Neptune Orient Lines vessel, M/V
Baltimar Orion, for transport and delivery to Fukuyama of
Metro Manila.
The said cargoes were loaded in a container in good
condition under a Bill of Lading. Fukuyama insured the
shipment against all risks with petitioner under a policy.
During the course of the voyage, the container with the
cargoes fell overboard and was lost.
Thus, Fukuyama wrote a letter to Overseas Agency,
agent of respondent and claimed for the value of the lost
cargoes. However, Overseas Agency ignored the claim.
Hence, Fukuyama sought payment from petitioner for the
insured value of the cargoes, which claim was fully satisfied
by the latter.
Fukuyama issued a Subrogation Receipt to petition for
the latter to be subrogated in its right to recover its losses
from respondents.
Petitioner demanded from respondents reimbursement
of the entire amount it paid to Fukuyama, but respondents
refused payment.
The CA ruled that the liability of the respondents was
only US$1,500 or US$500 per package under the limited
liability provision of the Carriage of Goods by Sea Act
(COGSA).
Issue:
Whether or not the CA erred in awarding respondents
damages subject to the US$500 per package limitation.

Ruling:
No.
The Supreme Court upholds the decision of the CA as
regards the issue on the limited liability of respondents.
Since the subject cargoes were lost while being
transported by respondent common carrier from Hong Kong
to the Philippines, Philippine law applies pursuant to the Civil
Code which provides:
Art. 1753. The law of the country to which the goods
are to be transported shall govern the liability of the
common carrier for the loss, destruction or deterioration.
Art. 1766. In all matters not regulated by this Code, the
rights and obligations of common carriers shall be governed
by the Code of Commerce and by special laws.
The rights and obligations or respondents common
carrier are thus governed by the provisions of the Civil Code,
and the COGSA, which is a special law, applies suppletorily.
The pertinent provisions of the Civil Code applicable to
this case are as follows:
Art. 1749. A stipulation that the common carrier 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.
In addition, Sec. 4, paragraph (5) of the COGSA, which
is applicable to all contracts for the carriage of goods by sea
to and from Philippine ports in foreign trade, provides:
Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection
with the transportation of goods in an amount exceeding

$500 per package lawful money of the United States, or in


case of goods not shipped in packages, per customary
freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been
declared by the shipper before shipment and inserted in the
bill of lading. This declaration, if embodied in the bill of
lading shall be prima facie evidence, but shall be conclusive
on the carrier.
In this case, the bill of lading failed to 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 carriers liability shall not exceed US$500 per
package applies.
Therefore, CA did not err in holding respondents liable
for damages to petitioner subject to the US$500 per package
limited-liability provision in the bill of lading.

28.
[G.R. No. 165647 March 26, 2009]
PHILIPPINES FIRST INSURANCE CO., INC., Petitioner,
-versusWALLEM PHILS. SHIPPING, INC., UNKNOWN OWNE
AND/OR Promulgated: UNKNOWN CHARTERER OF THE
VESSEL M/S OFFSHORE MASTER AND SHANGHAI
FAREAST SHIP
BUSINESS COMPANY, Respondents.
Facts:
Anhui Chemicals Import & Export Corporation loaded on
board M/S Offshore Master a shipment consisting of bags of
sodium sulphate anhydrous (shipment), complete and in
good order for transportation to and delivery at the port of
Manila for consignee covered by a bill of lading. The bill of
lading reflects the gross weight of the total cargo. The Owner
and/or Charterer of M/V Offshore Master is unknown while
the shipper of the shipment is Shanghai Fareast Ship
Business Company. Both are foreign firms doing business in
the Philippines, thru its local ship agent, respondent Wallem.

The shipment arrived at the port of Manila on board the


vessel M/S/ Offshore Master from which it was subsequently
discharged. It was disclosed during the discharge of the
shipment from the carrier that the bags were in bad order
and condition, having sustained various degrees of spillages
and losses. This is evidenced by the turn-over survey of the
arrastre operator. The bad state of the bags is also evinced
by the arrastre operators.
Asia Star Freight Services, Inc. undertook the delivery of
the subject shipment from the pier to the consignees
warehouse in Quezon City, while the final inspection was
conducted jointly by the consignees representative and the
cargo surveyor. During the unloading, it was found and noted
that bags had been discharged in demand and bad order
condition. Upon inspection, it was discovered that some of
the shipment had sustained unrecovered spillages, while the
others had been exposed and contaminated, resulting in
losses due to depreciation and downgrading.
The consignee filed a formal claim with Wallem for the
value of the damaged shipment, to no avail. Since the
shipment was insured with petitioner against all risks, the
consignee filed a formal claim with petitioner for the damage
and losses sustained by the shipment. After evaluating the
invoices, the turn-over survey, the bad order certificate and
other documents, petitioner found the claim to be in order
and compensable under the policy. Consequently, petitioner
paid the consignee and the latter signed a subrogation
receipt.
Petitioner sent a demand letter to Wallem for the
recovery of the amount paid by petitioner to the consignee.
However, despite receipt of the letter, Wallem did not settle
nor even send a response to petitioners claim.
CA made a decision the arrastre operator was held
solely liable to the consignee.
Issue:
1. Whether or not CA erred in not holding that as a common
carrier, the carriers duties extend to the obligation to safely
discharge the cargo from vessel.
2. Which entity had custody of the shipment during its
unloading from the vessel?

Ruling:
1. No. It is beyond question that respondents vessel is a
common carrier. Thus, the standards for determining the
existence or absence of the respondents liability will be
gauged on the degree of diligence required of a common
carrier. Moreover, as the shipment was an exercise of
international trade, the provisions of the Carriage of Goods
by Sea Act (COGSA), together with the Civil Code of the Code
of Commerce, shall apply.
Common carriers, from the nature of their business and
for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods
transported by them. Subject to certain exceptions
enumerated under Art. 1734 of the Civil Code, common
carriers are responsible for the loss, destruction, or
deterioration of the goods. The extraordinary responsibility
of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by
the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or
to the person who has a right to receive them.
For marine vessels, Art. 619 of the Code of Commerce
provides that the ship captain is liable for the cargo from the
time it turned over to him at the dock or afloat alongside the
vessel at the port of loading, until he delivers it on the shore
or on the discharging wharf at the port of unloading, unless
agreed otherwise.
Lastly, Sec. 2 of the COGSA, provides that under every
contract of carriage of goods by sea, the carrier in relation to
the loading, handling, stowage, carriage, custody, care, and
discharge of such goods, shall be subject to the
responsibilities and liabilities and entitled to the rights and
immunities set forth in the Act. Sec. 3(2) thereof then states
that among the carriers responsibilities are to properly and
carefully load, handle, stow, carry, keep, care for, and
discharge the goods carried.
On the other hand, handling cargo is mainly the
arrastre operator's principal work so its drivers/operators or
employees should observe the standards and measures
necessary to prevent losses and damage to shipments under
its custody.

The liability of the arrastre operator and the carrier are


not always and necessarily solidarily liable as the facts of a
case may vary the rule.
Thus, in this case the appellate court is correct insofar
as it ruled that an arrastre operator and a carrier may not be
held solidarily liable at all times.
2. It is settled in maritime law jurisprudence that cargoes
while being unloaded generally remain under the custody of
the carrier.

29.
[G.R. No. 168433 February 10, 2009]
UCPB GENERAL INSURANCE CO., INC., Petitioner
-versusABOITIZ SHIPPING CORP. EAGLE EXPRESS LINES,
DAMCO INTERMODAL SERVICES, INC., and PIMENTEL
CUSTOMS BROKERAGE CO., Respondents.
Facts:
Three units of waste water treatment plant with
accessories were purchased by SMS from Super Max of
Tapei, Taiwan. The goods came from USA 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. It was then discovered that
one electrical motor of DBS Drive Unit was damaged.
Pursuant to an insurance agreement, plaintiff paid SMC.
In turn, SMC executed a Subrogation in favor of plaintiff.
Consequently, the plaintiff filed a complaint as
subrogatee of SMC seeking to recover from defendants the
amount it had paid SMC.
The CA ruled that the plaintiff's right of action against
respondents did not accrue because UCPB failed to file a

formal notice of claim within 24 hours from SMCs receipt of


the damaged merchandise as required under Ar. 366 of the
code of Commerce. According to the CA, the filing of a claim
within the time limitation in Ar. 366 is a condition precent to
the accrual of a right of action against the carrier for the
damages caused to the merchandise.
UCPB asserts that Art. 366 of the Code of Commerce
does not apply to this case because the damage to the
merchandise had already been known to the carrier.
Issue:
Whether or not any of the parties may be held liable by
UCPB.
Ruling:
No.
The provision 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 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.
SC have construed the 24-hour claim requirement as a
condition precedent to the accrual of a right of action against
acarrier 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.
The Court of Appeals found out that the claims were
more than three months from receipt of the shipment and, at
that, even after the extent of the loss had already been
determined by SMC's surveyor. The claim was, therefore,
clearly filed beyond the 24-hour time frame prescribed by
Art. 366 of the Code of Commerce.
Sec. 3(6) of the COGSA provides a similar mechanism
as the Code of Commerce but prescribes a period of three
days within which notice of claim must be given if the loss or
damage is not apparent. However, the applicability of the
provision of the COGSA was not raised as an issue by UCPB
before the trial court and was only cited by UCPB in its
Memorandum in this case.
30.
[G.R. No. 161849 July 9, 2010]
WALLEM PHILIPPINES SHIPPING, INC., Petitioner,
-versusS.R. FARMS, INC., Respondent.
Facts:
Continental Enterprises Ltd loaded a shipment of Indian
Soya Bean Meal from India on the M/V Hui Yang, a vessel
owned and operated by Conti-Feed with S.R. Farms was
consignee and Wallem as its ship agent. The shipment
arrived in Manila on April 11, 1992 and the cargo was fully
offloaded on April 15, 1992. Upon inspection, a shortage of
80.467 metric tonnes was found. A complaint for damages
was subsequently filed against Conti-Feed among others on
March 11, 1993.
On June 7, 1993 an amended complaint was filed
impleading Wallem Shipping as the agent of Conti-Feed. The
lower court dismissed the complaint while the CA found both
Conti-Feed and Wallem liable for damages.
Wallem claims that it cannot be held liable because the
action had prescribed under the COGSA by the time it was
impleaded in the case while S.R. Farms claims that the filing
of the amended complaint should retroact to the time of the
original filing.

Issue:
Whether or not the complaint filed against Wallem was
barred by prescription.
Ruling:
Section 3 (6) of the COGSA provides that a suit for
recovery may be made one year from delivery of goods or
from the date the goods should have been delivered if a
notice of loss or damages is not filed within three days of
delivery.
Respondent failed to meet the requirement of filing a
notice of loss or damages and therefore the prescriptive
period of one year started to run of April 15, 1992.
While the initial complaint filed on March 11, 1993 was
within the prescriptive period, Wallem was only impleaded
on June 7, 1993.
An amended complaint does not retroact to the date of
filing the original except if the amendment merely
supplements and amplifies the facts alleged in the original
pleading. This exception, however doesnt apply to parties
impleaded for the first time in an amended complaint.
Therefore, the complaint against Wallem was dismissed.

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