CHAPTER 6 GENERAL CONCEPTS
Article 587 of the Code of Commerce: "The agent shall also be civilly
6.2 Real and Hypothecary Nature
Yangco vs. Laserna, et.al. (G.R. Nos. 47447-47449. October 29, 1941)
FACTS:
In May 26, 1927, the steamer S. S. Negros, belonging toYangco,
left the port of Romblon going to Manila. Typhoon signal No. 2 was then
up, of which fact the captain was duly advised and his attention thereto
called by the passengers themselves before the vessel set sail. The boat
was overloaded as indicated by the loadline which was 6 to 7 inches
below the surface of the water. Baggage, trunks and other equipments
were heaped on the upper deck, the hold being packed to capacity. In
addition, the vessel carried thirty sacks of crushed marble and about one
hundred sacks of copra and some lumber. The passengerswere
overcrowded, 180 over 123. After two hours of sailing, the boat
encountered strong winds and rough seas between the islands of Banton
and Simara. As the sea became increasingly violent, the captain ordered
the vessel to turn left, evidentlyto return to port, but in the maneuver, the
vessel was caught sidewise by a big wave which caused it to capsize and
sink. Many of the passengers died in the mishap, among them were the
family of the respondents. Hence, cases were instituted for separate civil
actions against Yangcoto recover damages for the death of the passengers
aforementioned.
RTC: awarded the heirs damages. After the rendition of the
judgment, petitioner, by a verified pleading, sought to abandon the
vessel, together with all its equipments, without prejudice to his right to
appeal. The abandonment having been denied. An appeal was made.
CA: affirmed except that which awarded to the Aldanas the sum of
P2,000, which sum was increased to P4,000.
Hence, this petition.
ISSUE:
May the shipowner or agent, notwithstanding the total loss of the
vessel as a result of the negligence of its captain, be properly held
liable in damages for the consequent death of its passengers?
RULING:
liable for the indemnities in favor of third persons which arise from the
conduct of the captain in the care of the goods which the vessel carried; but
he may exempt himself therefrom by abandoning the vessel with all her
equipments and the freight he may have earned during the voyage."
The provision accords a shipowner or agent the right of
abandonment; and by necessary implication, his liability is con to that which
he is entitled as of right to abandon - "the vessel with all her equipments and
the freight it may have earned during the voyage." It is true that the article
appears to deal only with the limited liability of shipowners or agents for
damages arising from the misconduct of the captain in the care of the goods
which the vessel carries, but this is a mere deficiency of language and in no
way indicates the true extent of such liability. The consensus of authorities is
to the effect that notwithstanding the language of the aforequoted provision,
the benefit of limited liability therein provided for, applies in all cases wherein
the shipowner or agent may properly be held liable for the negligent or illicit
acts of the captain.
While previously under the civil or common law, the owner of a vessel
was liable to the full amount for damages caused by the misconduct of the
master, by the general maritime law of modern Europe, the liability of the
shipowner was subsequently limited to his interest in the vessel.The policy
which the rule is designed to promote is the encouragement of shipbuilding
and investment in maritime commerce.
In the light of all the foregoing, we therefore hold that if the shipowner or
agent may in any way be held civilly liable at all for injury to or death of
passengers arising from the negligence of the captain in cases of collisions or
shipwrecks, his liability is merely co-extensive with his interest in the vessel
such that a total loss thereof results in its extinction. In arriving at this
conclusion, we have not been unmindful of the fact that the ill-fated steamship
is a common carrier and that the relationship between the petitioner and the
passengers who died in the mishap rests on a contract of carriage. But
assuming that petitioner is liable for a breach of contract of carriage, the
exclusively "real and hypothecary nature" of maritime law operates to limit
such liability to the value of the vessel, or to the insurance thereon, if any.
Whether the abandonment of the vessel sought by the petitioner in
the instant case was in accordance with law or not, is immaterial. The vessel
having totally perished, any act of abandonment would be an idle ceremony.
 Dela Torre vs. Court of Appeals and Concepcion (G.R. No. 160088. July 13,
2011)
FACTS:
Concepcion owned LCT-Josephine , a vessel registered with the
Philippine Coast Guard.
February 1, 1984 - Concepcion entered into a "Preliminary
Agreement" with Dela Torre for the dry- docking and repairs of the LCT
Josephine as well as for its charter afterwards. Under this agreement,
Concepcion agreed that after the dry-docking and repair of LCT-Josephine, it
"should" be chartered for P10,000.00 per month with the following
conditions:
1. The CHARTERER will be the one to pay the insurance premium of the vessel.
2. The vessel will be used once every three (3) months for a maximum period
of two (2) weeks.
3. Concepcion agreed that LCT-Josephine should be used by Dela Torre for
maximum period of two (2) years.
4. Dela Torre will take charge of maintenance cost of the said vessel.
June 20, 1984 - Concepcion and the Philippine Trigon Shipyard
Corporation (PTSC), represented by Dela Torre, entered into a "Contract of
Agreement," wherein the latter would charter LCT-Josephine retroactive to
May 1, 1984.
August 1, 1984 - PTSC/Roland sub-chartered LCT-Josephine to Trigon
Shipping Lines (TSL), a single proprietorship owned by Roland's father, Agustin
de la Torre (Agustin).
November 22, 1984 - TSL, this time represented by Roland per
Agustin's Special Power of Attorney, sub-chartered LCT-Josephine to
Larrazabal for the transport of cargo consisting of sand and gravel to Leyte.
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 vessel's ramp already lowered, the unloading of the vessel's
cargo began with the use of Larrazabal's payloader. While the payloader was
on the deck of the LCT-Josephine scooping a load of the cargo, the vessel's
ramp started to move downward, the vessel tilted and sea water rushed in.
Shortly thereafter, LCT-Josephine sank.
Concepcion demanded that PTSC/Roland refloat LCT-Josephine. The latter
assured Concepcion that negotiations were underway for the refloating of his
vessel. Unfortunately, this did not materialize. Hence, case was initiated by
Concepcion.
RTC: declared that the "efficient cause of the sinking of the LCT-JOSEPHINE
was the improper lowering or positioning of the ramp," which was well within
the charge or responsibility of the captain and crew of the vessel.Defedants
(Dela Torres and PTSC) were liable, jointly and severally.
CA: Affirmed in toto.
Additional findings:
There was improper lowering or positioning of the ramp, which was
not at "peak," according to de la Torre and "moving down" according
to Sungayan when the payloader entered and scooped up a load of
sand and gravel. Because of this, the payloader was in danger of being
submerged and caused Larrazabal to order the operator to go back
into the vessel, according to de la Torre's version, or back off to the
shore, per Sungayan. Whichever it was, the fact remains that the ramp
was unsteady (moving) and compelled action to save the payloader
from submerging, especially because of the conformation of the sea
and the shore. . .
The contract executed on June 20, 1984, between Concepcion and
Rolando showed that the services of the crew of the owner of the
vessel were terminated. This allowed the charterer, Rolando, to
employ their own. The sub-charter contract between PTSC TSL showed
similar provision where the crew of PTSC had to be terminated or
rehired by TSL. As to the agreement with fourth-party Larrazabal, it is
silent on who would hire the crew of the vessel. Clearly, the crew
manning the vessel when it sunk belonged to TSL. Hubart Sungayan,
the acting Chief Mate, testified that he was hired by Agustin de la
Torre, who in turn admitted to hiring the crew. The actions of
Larrazabal and his payloader operator did not include the operation of
docking where the problem arose.
ISSUE:
(1) W/N the Limited Liability Rule in Code of Commerce should be applied
to the defendants.
The said rule has been explained to be that of the real and
hypothecary doctrine in maritime law where the shipowner or ship
agent's liability is held as merely co-extensive with his interest in the
vessel such that a total loss thereof results in its extinction. In this
jurisdiction, this rule is provided in three articles of the Code of
Commerce. These are:
Art. 587. The ship agent shall also be civilly liable for the indemnities
in favor of third persons which may arise from the conduct of the
captain in the care of the goods which he loaded on the vessel; but he
may exempt himself therefrom by abandoning the vessel with all her
equipment and the freight it may have earned during the voyage.
Art. 590. The co-owners of the vessel shall be civilly liable in the
proportion of their interests in the common fund for the results of the
acts of the captain referred to in Art. 587.
Each co-owner may exempt himself from this liability by the
abandonment, before a notary, of the part of the vessel belonging to
him.
Art. 837. The civil liability incurred by shipowners in the case
prescribed in this section, shall be understood as limited to the value
of the vessel with all its appurtenances and freightage served during
the voyage.
Article 837 specifically applies to cases involving collision which is a
necessary consequence of the right to abandon the vessel given to the
shipowner or ship agent under the Article 587. Similarly, Article 590 is
a reiteration of Article
587, only this time the situation is that the vessel is co-owned by
several persons. Obviously, the forerunner of the Limited Liability Rule
under the Code of Commerce is Article 587.
Now, the latter is quite clear on which indemnities may be confined or
restricted to the value of the vessel pursuant to the said Rule, and
these are 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." Thus, what is contemplated is the liability to
third persons who may have dealt with the shipowner, the agent or
even the charterer in case of demise or bareboat charter. 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.
In Monarch Insurance Co., Inc. v. CA,Supreme Court held that:
'No vessel, no liability,' expresses in a nutshell the limited liability rule.
The shipowner's or agent's 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. 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.
In view of the foregoing, Concepcion as the real shipowner is the one
who is supposed to be supported and encouraged to pursue maritime
commerce. Thus, it would be absurd to apply the Limited Liability Rule
against him who, in the first place, should be the one benfitting from
the said rule.
Distinguish the rights of the Shipowner and the Charterer
(Yueng Sheng Exchange and Trading Co. v.
Urrutia & Co.)
As charterers of the vessel, did not put the latter in
the place of the former, nor make them agents of the
owner or owners of the vessel. With relation to those
agents, they retained opposing rights derived from
the charter party of the vessel, and at no time could
they be regarded by the third parties, or by the
authorities, or by the courts, as being in the place of
the owners or the agents in matters relating to the
 responsibilities pertaining to the ownership and
possession of the vessel.
Charterer does not completely and absolutely step
into the shoes of the shipowner or even the ship
agent because there remains conflicting rights
between the former and the real shipowner as
derived from their charter agreement.
Their (the charterer's) possession was, therefore, the
uncertain title of lease, not a possession of the owner,
such as is that of the agent, who is fully subrogated to
the place of the owner in regard to the dominion,
possession, free administration, and navigation of the
vessel.
Therefore, even if the contract is for a bareboat or demise charter
where possession, free administration and even navigation are
temporarily surrendered to the charterer, dominion over the vessel
remains with the shipowner. Ergo, the charterer or the sub-charterer,
whose rights cannot rise above that of the former, can never set up
the Limited Liability Rule against the very owner of the vessel.
Borrowing the words of Chief Justice Artemio V. Panganiban, "Indeed,
where the reason for the rule ceases, the rule itself does not apply."
(2) What is the liability of the Charterer and Sub-Charter?
In the present case, the charterer and the sub-charterer through their
respective contracts of agreement/charter parties, obtained the use
and service of the entire LCT- Josephine. The vessel was likewise
manned by the charterer and later by the sub- charterer's people.
With the complete and exclusive relinquishment of possession,
command and navigation of the vessel, the charterer and later the
sub-charterer became the vessel's owner pro hac vice. Now, and in
the absence of any showing that the vessel or any part thereof was
commercially offered for use to the public, the above
agreements/charter parties are that of a private carriage where the
rights of the
contracting parties are primarily defined and governed by the
stipulations in their contract. Although certain statutory rights and
obligations of charter parties are found in the Code of Commerce,
these provisions as correctly pointed out by the RTC, are not
applicable in the present case. Necessarily, the Court looks to the New
Civil Code to supply the deNciency. Thus, the RTC and the CA were
both correct in applying the statutory provisions of the New Civil Code
in order to define the respective rights and obligations of the
opposing parties.
Thus, Roland, who, in his personal capacity, entered into the
Preliminary Agreement with Concepcion for the dry-docking and
repair of LCT-Josephine, is liable under Article 1189 of the New Civil
Code. There is no denying that the vessel was not returned to
Concepcion after the repairs because of the provision in the
Preliminary Agreement that the same "should" be used by Roland for
the first two years. Before the vessel could be returned, it was lost
due to the negligence of Agustin to whom Roland chose to sub-
charter or sublet the vessel.
PTSC is liable to Concepcion under Articles 1665 and 1667 of the New
Civil Code. As the charterer or lessee under the Contract of
Agreement dated June 20, 1984, PTSC was contract-bound to return
the thing leased and it was liable for the deterioration or loss of the
same.
Agustin, on the other hand, who was the sub-charterer or sub-lessee
of LCT- Josephine, is liable under Article 1651 of the New Civil Code.
39 Although he was never privy to the contract between PTSC and
Concepcion, he remained bound to preserve the chartered vessel for
the latter.
In any case, all three petitioners are liable under Article 1170 of the New
Civil Code - DAMAGES.
Limited Liability Rule
Chua Yek Hong v. IAC, Guno and Olit (G.R. No. 74811, September 30,
1988)
FACTS:
Chua Yek Hong is a duly licensed copra dealer based at Puerta Galera,
Oriental Mindoro, while the respondents are the owners of the vessel,
"M/V Luzviminda I," a common carrier engaged in coastwise trade from
the different ports of Oriental Mindoro to the Port of Manila.
October 1977 Chua Yek Hong loaded 1,000 sacks of copra, valued at
P101,227.40, on board the vessel "M/V Luzviminda I" for shipment from
Oriental Mindoro to Manila. Said cargo, however, did not reach Manila
because somewhere between Cape Santiago and Calatagan, Batangas, the
vessel capsized and sank with all its cargo.
Hence, Chua Yek Hong instituted a case against private respondents.
Guno and Olits Contention: Even assuming that the alleged cargo was
truly loaded aboard their vessel, their liability had been extinguished by
reason of the total loss of said vessel.
RTC: decided in favor of Chua Yek Hong.
CA: Reversed the decision of RTC. Applied the case of Yangco vs. Laserna
(Limited Liability Rule).
Hence, this petition.
ISSUE: W/N Doctrine of Limited Liability can be applied in this case.
RULING:
Article 587 of the Code of Commerce provides:
The shipagent shall also be civilly liable for the indemnities in favor of third
persons which may arise from the conduct of the captain in the care of the
goods which he loaded on the vessel; but he may exempt himself
therefrom by abandoning the vessel with all the equipments and the
freight it may have earned during the voyage."
The term "shipagent" as used in the foregoing provision is broad enough
to include the shipowner (Standard Oil Co. vs. Lopez Castelo). Pursuant to
said provision, therefore, both the shipowner and shipagent are civilly and
directly liable for the indemnities in favor of third persons, which may
arise from the conduct of the captain in the care of goods transported, as
well as for the safety of passengers transported (Yangco vs. Laserna)
However, under the same Article, this direct liability is moderated and
limited by the shipagent's or shipowner's right of abandonment of the
vessel and earned freight. This expresses the universal principle of limited
liability under maritime law. The most fundamental effect of
abandonment is the cessation of the responsibility of the shipagent/owner
It has thus been held that by necessary implication, the shipagent's or
shipowner's liability is confined to that which he is entitled as of right to
abandon "the vessel with all her equipment and the freight it may have
earned during the voyage," and "to the insurance thereof if any.
Rationale:
The real and hypothecary nature of the liability of the
shipowner or agent had 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 so that if the shipowner or agent abandoned the
ship, equipment, and freight, his liability was
extinguished."
Without the principle of limited liability, a shipowner and
investor in maritime commerce would run the risk of being
ruined by the bad faith or negligence of his captain, and
the apprehension of this would be fatal to the interest of
navigation.
 As evidence of this 'real' nature of the maritime law we
have (1) the limitation of the liability of the agents to the
actual value of the vessel and the freight money, and (2)
the right to retain the cargo and the embargo and
detention of the vessel even in cases where the ordinary
civil law would not allow more than a personal action
against the debtor or person liable. It will be observed that
these rights are correlative, and naturally so, because if
the agent can exempt himself from liability by abandoning
the vessel and freight money, thus avoiding the possibility
of risking his whole fortune in the business, it is also just
that his maritime creditor may for any reason attach the
vessel itself to secure his claim without waiting for a
settlement of his rights by a final judgment, even to the
prejudice of a third person.

The limited liability rule, however, is not without exceptions, namely:

(1) where the injury or death to a passenger is due either to the fault
of the shipowner, or to the concurring
negligence of the shipowner and the captain (Manila Steamship
Co., Inc. vs. Abdulhaman, supra);
(2) where the vessel is insured; and
(3) in workmen's compensation claims (Abueg vs. San Diego, supra).

In this case, there is nothing in the records to show that the loss of the
cargo was due to the fault of the private respondents as shipowners,
or to their concurrent negligence with the captain of the vessel

In sum, it will have to be held that since the shipagent's or

shipowner's liability is merely co- extensive with his interest in the
vessel such that a total loss thereof results in its extinction (Yangco vs.
Laserna, supra), and none of the exceptions to the rule on limited
liability being present, the liability of private respondents for the loss
of the cargo of copra must be deemed to have been extinguished.
There is no showing that the vessel was insured in this case.

NOTE: Since the Civil Code contains no provisions regulating liability of

shipowners or agents in the event of total loss or destruction of the
vessel, it is the provisions of the Code of Commerce, more particularly
Article 587, that govern in this case.
Heirs of Amparo de los Santos v. CA (G.R. No. 51165. June 21, 1990)
Doctrine: The limited liability doctrine applies not only to goods but also in
all cases like death or injury to passengers wherein the shipowner or agent
may properly be held liable for the negligent or illicit acts of the captain
and it only applies in situations where the fault or negligence is committed
solely by the captain.
FACTS:
M/V Mindoro sailed from Manila to New Washington, Aklan with
many passengers aboard.
The vessel met typhoon Welming and it sank.
Many of its passengers died. One of them was Amparo
delos Santos.
In a decision by the Board of Marine Inquiry, it was found that the
captain and some officers of the crew were negligent in operating the
vessel.
The Heirs of Amparo contends that there was negligence on the part
of the vessel. On the other hand, Compania Maritima contends that
no negligence was ever established and that the drowning of the
passengers was due to force majeure.
ISSUE:
[1] WoN Compania Maritima was negligent YES
[2] WoN Art. 587 is applicable in this case NO
RULING:
[1] Compania Maritima was negligent.
Modern technology belies the claim of Compania Maritima that it did
not have any information about typhoon Welming until after the boat
was already at sea.
The Weather Bureau is equipped with modern apparatus
which enables it to detect any incoming atmospheric
disturbances.
It is highly improbable due to the late departure of the ship
that the Weather Bureau had not yet issued any typhoon
bulletin at any time during the day to the shipping companies.
Maritima displayed lack of foresight and minimum concern for the
safety of its passengers.
The ship was delayed for 4 hours and it did not check from the
captain the reasons behind the delay nor send its
representative to inquire into the cause of the delay.
A closer supervision could have prevented the overloading of
the vessel.
Maritima also did not install a radar which could have allowed
the ship to navigate safely for shelter during the storm. The
vessel was left at the mercy of Welming.
[2] Art. 587 is inapplicable because the shipowner was also negligent.
Under Art. 587 of the Code of Commerce, a shipowner or agent has
the right of abandonment; and by necessary implication, his liability is
confined to that which he is entitled of right to abandon the vessel
with all her equipments and the freight it may have earned during the
voyage.
This rule is necessary to offset against the innumerable hazards and perils of
sea voyage and to encourage shipbuilding and maritime commerce.
CHAPTER 7 VESSELS
Philippine Refining Co., Inc. vs. Jarque (G.R. No. 41506. March 25, 1935.)
FACTS:
Plaintiff Philippine Refining Co. and defendant Jarque executed three
mortgages on the motor vessels Pandan and Zargazo. The documents
were recorded as transfer and encumbrances of the vessels for the port of
Cebu and each was denominated a chattel mortgage.
The first two mortgages did not have an affidavit of good faith. A
fourth mortgage was executed by Jarque and Ramon Aboitiz over
motorship Zaragoza and was entered in the Chattel Mortgage Registry on
May 12, 1932, within the period of 30 days prior to the
foreclosure/institution of the insolvency proceedings.
Jose Curaminas filed with the CFI of Cebu a petition praying that
Francisco Jarque be declared an insolvent debtor. This was granted and
Jarques properties were then assigned to Curaminas.
A problem arose when Judge Jose Hontiveros declined to order the
foreclosure of the mortgages, and instead, ruled that they were defective
because they did not have affidavits of good faith.
ISSUES:
1.Whether or not the mortgages of the vessels are governed by the Chattel
Mortgage Law
2.Whether or not an affidavit of good faith is needed to enforce achattel
mortgage on a vessel
RULING:
YES. Personal property includes vessels. They are subject to the
provisions of the Chattel Mortgage Law. The Chattel Mortgage Law says
that a good chattel mortgage includes an affidavit of good faith. The
absence of such affidavit vitiates a mortgage against creditors and
subsequent encumbrances. As a consequence a chattel mortgage of a
vessel wherein the af davit of good faith required by the Chattel Mortgage
Law is lacking, is unenforceable against third persons.The judge was
correct.
Note: A mortgage on a vessel is generally like other chattel
mortgages. The only difference between a chattel mortgage of a vessel and
a chattel mortgage of other personalty is that the first must be noted in
the registry of the register of deeds, but it is essential that a record of
documents affecting the title to a vessel be entered in the record of the
Collector of Customs at the port of entry. Otherwise a mortgage on a
vessel is generally like other chattel mortgages as to its requisites and
validity.

CHAPTER 9 PERSONS WHO TAKE PART IN MARITIME COMMERCE
9.1 Ship Owners and Ship Agents; Captain and Masters of Vessels; Officers
and Crew, Supercargoes
Philippine American General Insurance v. CA (G.R. No. 116940. June 11,
1997.)
FACTS:
MV Asilda left the port of Zamboanga in fine weather at eight oclock
in the evening of the same day. At around eight forty-five the following
morning, 7 July 1983, the vessel sank in the waters of Zamboanga del
Norte bringing down her entire cargo with her including the subject 7,500
cases of 1-liter Coca-Cola softdrink bottles.
On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc.,
Cebu plant, filed a claim with respondent FELMAN for recovery of
damages it sustained as a result of the loss of its softdrink bottles that
sank with MV Asilda. Respondent denied the claim thus prompting the
consignee to file an insurance claim with PHILAMGEN which paid its claim
of P755,250.00.
Claiming its right of subrogation PHILAMGEN sought recourse against
respondent FELMAN which disclaimed any liability for the loss.
Consequently, on 29 November 1983 PHILAMGEN sued the shipowner for
sum of money and damages.
In its complaint PHILAMGEN alleged that the sinking and total loss of
MV Asilda and its cargo were due to the vessels unseaworthiness as she
was put to sea in an unstable condition. It further alleged that the vessel
was improperly manned and that its officers were grossly negligent in
failing to take appropriate measures to proceed to a nearby port or beach
after the vessel started to list.
On 15 February 1985 FELMAN filed a motion to dismiss based on the
affirmative defense that no right of subrogation in favor of PHILAMGEN
was transmitted by the shipper, and that, in any event, FELMAN had
abandoned all its rights, interests and ownership over MV Asilda together
with her freight and appurtenances for the purpose of limiting and
extinguishing its liability under Art. 587 of the Code of Commerce.
On 17 February 1986 the trial court dismissed the complaint of
PHILAMGEN. On appeal the Court of Appeals set aside the dismissal and
remanded the case to the lower court for trial on the merits.
On 28 February 1992 the trial court rendered judgment in favor of
FELMAN.[3] It ruled that MV Asilda was seaworthy when it left the port of
Zamboanga as confirmed by certificates issued by the Philippine Coast
Guard and the shipowners surveyor attesting to its seaworthiness. Thus
the loss of the vessel and its entire shipment could only be attributed to
either a fortuitous event, in which case, no liability should attach unless
there was a stipulation to the contrary, or to the negligence of the captain
and his crew, in which case, Art. 587 of the Code of Commerce should
apply.
On 18 March 1992 PHILAMGEN appealed the decision to the Court of
Appeals. On 29 August 1994 respondent appellate court rendered
judgment finding MV Asilda unseaworthy for being top- heavy as 2,500
cases of Coca-Cola softdrink bottles were improperly stowed on deck. In
other words, while the vessel possessed the necessary Coast Guard
certification indicating its seaworthiness with respect to the structure of
the ship itself, it was not seaworthy with respect to the cargo.
Nonetheless, the appellate court denied the claim of PHILAMGEN on the
ground that the assureds implied warranty of seaworthiness was not
complied with.
ISSUE:
W/N the limited liability under Art. 587 of the Code of Commerce
should apply.
 ship agent could still be held answerable despite the abandonment, as where
the loss or injury was due to the fault of the shipowner and the captain. The
RULING: international rule is to the effect that the right of abandonment of vessels, as
a legal limitation of a shipowners liability, does not apply to cases where the
MV Asilda was unseaworthy when it left the port of Zamboanga. In a
injury or average was occasioned by the shipowners own fault. It must be
joint statement, the captain as well as the chief mate of the vessel confirmed
stressed at this point that Art. 587 speaks only of situations where the fault or
that the weather was fine when they left the port of Zamboanga. The captain
negligence is committed solely by the captain. Where the shipowner is
observed that the vessel was listing slightly to starboard and would not
likewise to be blamed, Art. 587 will not apply, and such situation will be
correct itself despite the heavy rolling and pitching. He then ordered his crew
covered by the provisions of the Civil Code on common carrier.
to shift the cargo from starboard to portside until the vessel was balanced. He
ascribed the sinking to the entry of seawater through a hole in the hull caused It was already established at the outset that the sinking of MV Asilda
by the vessels collision with a partially submerged log. was due to its unseaworthiness even at the time of its departure from the
port of Zamboanga. As such, FELMAN was equally negligent. It cannot
The Elite Adjusters, Inc., submitted a report regarding the sinking of
therefore escape liability through the expedient of filing a notice of
MV Asilda. The report, which was adopted by the Court of Appeals, reads -
abandonment of the vessel by virtue of Art. 587 of the Code of Commerce.
the vessel was top-heavy which is to say that while the vessel may
In the event of loss of goods, common carriers are presumed to have
not have been overloaded, yet the distribution or stowage of the cargo on
acted negligently. FELMAN, the shipowner, was not able to rebut this
board was done in such a manner that the vessel was in top-heavy condition
presumption.
at the time of her departure and which condition rendered her unstable and
unseaworthy for that particular voyage.In this connection, we wish to call
attention to the fact that this vessel was designed as a fishing vessel x x x x
and it was not designed to carry a substantial amount or quantity of cargo on
deck. Therefore, we believe strongly that had her cargo been confined to
those that could have been accommodated under deck, her stability would
not have been affected and the vessel would not have been in any danger of
capsizing, even given the prevailing weather conditions at that time of
sinking.

Therefore, and so hold that the proximate cause of the sinking of the
M/V Asilda was her condition of unseaworthiness arising from her having
been top-heavy when she departed from the Port of Zamboanga.

Art. 587 of the Code of Commerce is not applicable to the case at

bar.Simply put, the ship agent is liable for the negligent acts of the captain in
the care of goods loaded on the vessel. This liability however can be limited
through abandonment of the vessel, its equipment and freightage as provided
in Art. 587. Nonetheless, there are exceptional circumstances wherein the
Sweet Lines v. Court of Appeals (G.R. No. L-46340. April 28, 1983.)
FACTS:
Private respondents purchased first- class tickets from petitioner at
the latter's office in Cebu City. They were to board petitioner's vessel, M/V
Sweet Grace, bound for Catbalogan, Western Samar. Instead of departing
at the scheduled hour of about midnight on July 8, 1972, the vessel set sail
at 3:00 A.M. of July 9, 1972 only to be towed back to Cebu due to engine
trouble, arriving there at about 4:00 P.M. on the same day. Repairs having
been accomplished, the vessel lifted anchor again on July 10, 1972 at
around 8:00 A.M.
Instead of docking at Catbalogan, which was the first port of call, the
vessel proceeded direct to Tacloban at around 9:00 P.M. of July 10, 1972.
Private respondents had no recourse but to disembark and board a
ferryboat to Catbalogan.
Hence, this suit for damages for breach of contract of carriage. Both
the trial court and the CA ruled in favor of the private respondents.
ISSUE:
WON there exists force majeure to absolve petitioner from liability to
damages under Articles 614 and 698 of the Code of Commerce?
RULING:
NO. As found by both Courts below, there was no fortuitous event
or force majeure which prevented the vessel from fulfilling its undertaking
of taking private respondents to Catbalogan. In the first place, mechanical
defects in the carrier are not considered a caso fortuito that exempts the
carrier from responsibility. In the second place, even granting arguendo
that the engine failure was a fortuitous event, it accounted only for the
delay in departure. When the vessel finally left the port of Cebu on July 10,
1972, there was no longer any force majeure that justified by-passing a
port of call. The vessel was completely repaired the following day after it
was towed back to Cebu. In fact, after docking at Tacloban City, it left the
next day for Manila to complete its voyage.
The governing provisions are found in the Code of Commerce and read as
follows:
ART. 614. A captain who, having agreed to make a voyage, fails to
fulfill his undertaking, without being prevented by fortuitous event or
force majeure, shall indemnify all the losses which his failure may cause,
without prejudice to criminal penalties which may be proper.
ART. 698. In case of interruption of a voyage already begun, the
passengers shall only be obliged to pay the fare in proportion to the
distance covered, without right to recover damages if the interruption is
due to fortuitous event or force majeure, but with a right to indemnity, if
the interruption should have been caused by the captain exclusively. If the
interruption should be caused by the disability of the vessel, and the
passenger should agree to wait for her repairs, he may not be required to
pay any increased fare of passage, but his living expenses during the delay
shall be for his own account.
The voyage to Catbalogan was "interrupted" by the captain upon
instruction of management. The "interruption" was not due to fortuitous
event or for majeure nor to disability of the vessel. Having been caused by
the captain upon instruction of management, the passengers' right to
indemnity is evident. The owner of a vessel and the ship agent shall be
civilly liable for the acts of the captain.
Moreover, petitioners defense of the conditions stipulated at the
back of the ticket cannot prevail over the above mentioned articles. The
conditions were:
The passenger's acceptance of this ticket shall be considered as
an acceptance of the following conditions:
3. In case the vessel cannot continue or complete the trip for any cause
whatsoever, the carrier reserves the right to bring the passenger to
his/her destination at the expense of the carrier or to cancel the ticket and
refund the passenger the value of his/her ticket

xxx xxx xxx

11. The sailing schedule of the vessel for which this ticket was issued is
subject to change without previous notice.

Even assuming that those conditions are squarely applicable to the case at
bar, petitioner did not comply with the same. It did not cancel the ticket
nor did it refund the value of the tickets to private respondents. Besides, it
was not the vessel's sailing schedule that was involved. Private
respondents' complaint is directed not at the delayed departure the next
day but at the by- passing of Catbalogan, their destination. Had petitioner
notified them previously, and offered to bring them to their destination at
its expense, or refunded the value of the tickets purchased, perhaps, this
controversy would not have arisen.
9.2 Arrastre Operator
Firemans Fund Insurance Co. v. Metro Port Services (G.R. No. 83613.
February 21, 1990.)
FACTS:
Vulcan Industrial and Mining Corporation imported from the United
States several machineries and equipment which were loaded on board the
SIS Albert Maersk at the port of Philadelphia, U.S.A., and transhipped for
Manila through the vessel S/S Maersk Tempo.
The shipment arrived at the port of Manila on June 3, 1979 and was
turned over complete and in good order condition to the arrastre operator E.
Razon Inc. (now Metro Port Service Inc. and referred to as the ARRASTRE).
A tractor operator, named DaniloLibrando and employed by the
ARRASTRE, was ordered to transfer the shipment to the Equipment Yard at
Pier 3. While Librando was maneuvering the tractor (owned and provided by
Maersk Line) to the left, the cargo fell from the chassis and hit one of the
container vans of American President Lines. It was discovered that there were
no twist lock at the rear end of the chassis where the cargo was loaded.
An Insurance was claimed by Vulcan Industrial, in turn, the petitioner
insurance company demanded recovery from Maerks Line. The trial court
ruled that Maerks and Metro Port be held solidarily liable. On appeal by
Metro Port, the Court of Appeals reversed, ruling that it is only Maerks that is
liable.
ISSUES:
Whether or not Maerks and Metro Port exercised the proper degree
of diligence.
Whether or not Maerks and Metro Port be held liable solidarity.
RULING:
Maerks and Metro port did not exercise the proper diligence.
In general, the nature of the work of an arrastre operator covers the
handling of cargoes at piers and wharves. The ARRASTRE is required to
provide cargo handling equipment which includes among others trailers,
chassis for containers. In some cases, however, the shipping line has its own
cargo handling equipment.
In this case, Maerks provide for the chassis and tractors and merely
requested the arrastre (Metro) to dispatch a tractor operator. ARRASTRE
which had the sole discretion and prerogative to hire and assign Librando to
operate the tractor. It was also the ARRASTRE's sole decision to detail and
deploy Librando for the particular task from among its pool of tractor
operators or drivers. Since the ARRASTRE offered its drivers for the operation
of tractors in the handling of cargo and equipment, then the ARRASTRE should
see to it that the drivers under its employ must exercise due diligence in the
performance of their work.
The testimonies are appreciated and the court held that Maerks is at
fault in not providing twist locks on the chassis and Metro is also at fault for
Librandos negligence in not checking that the cargo is securely loaded on the
chassis.
Both the arrastre and the carrier are charged with and obligated to
deliver the goods in good condition to the consignee.
The legal relationship between the consignee and the arrastre
operator is akin to that of a depositor and warehouseman (Lua Kian v. Manila
Railroad Co., 19 SCRA 5 [1967]). The relationship between the consignee and
the common carrier is similar to that of the consignee and the arrastre
operator (Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]).
Since it is the duty of the ARRASTRE to take good care of the goods that are in
its custody and to deliver them in good condition to the consignee, such
responsibility also devolves upon the CARRIER. Both the ARRASTRE and the
CARRIER are therefore charged with and obligated to deliver the goods in
good condition to the consignee
9.3 Pilots
Far Eastern Shipping v. Court of Appeals (G.R. No. 130068. October 1, 1998.)
FACTS:
M/V Pavlodar - owned and operated by FESC
Origin: Vancouver BC
Destination: Port of Manila
Capt. Abella was tasked by PPA to supervise the berthing. Capt.
Gavino was assigned by MPA to conduct docking maneuvers for the safe
berthing of the vessel. Capt. Gavino boarded the vssel with master of the
vessel Viktor Kavankov- they proceeded to Manila International Port.
When the vessel reached the land mark, Gavino ordered the engine
stopped.
When the vessel was already about 2000 ft from the pier- Gavino
ordered the anchors dropped, however the anchor did not take hold as
expected. After this Gavino ordered the engine half astern. Abella who
was the on the pier apron noticed that the vessel was approaching the
pier fast. Gavino thereafter gave the full astern code. Before the right
anchor and additional shackles could be dropped, the bow of the vessel
rammed the pier causing damage to the pier worth 1,126,132.25.
PPA filed a complaint for sum of money against Far eastern, capt
Gavino, Manila ports Association.
RTC: ordered defendants jointly and severally liable to pay PPA
CA: affirmed RTC, EXCEPT that it found no employer employee
relationship bet private respondent MPA and Gavino. The liability of MPA
is anchored on the provisions of CUSTOMS ADMINISTRATIVE ORDER NO.
15-65. Holding MPA, along with co defendants therein still solidarily liable
to PPA but entitled MPA to reimbursement from Capt Gavino for such
amount.
FESC CONTENTION: the veseel was under compulsory pilotage at the time
of the incident, it was the compulsory pilot who was in command and had
complete control in the navigation and docking
PPA CONTENTION: stresses the concurrent negligence of Capt Gavino and
Capt Kabankov bec he merely relied on capt Gavino
MPA CONTENTION: there being no employer employee relationship
neither can MPA be held liable for the liability of its members.
I. GR 130068
Issue: Who was negligent the master of the vessel or the harbor pilot or
both?
RULING: Both!
In the absence of sufficient proof in the rebuttal, the presumption of
fault attaches to the moving vessel which collides with a fixed object.
Capt Gavino failed to measure up to such strict standard of care and
diligence.He miscalculated and failed to make adequate measures to
arrest fully the momentum of the vessel.
Capt Kabankov is no less responsible for the collision. His lethargy as
master of the ship constitutes negligence.
In sum, where a compulsory pilot is in charge of a ship, the
master being required to permit him to navigate it, if the master
observes that the pilot is incompetent or physically incapable, then it
is the duty of the master to refuse to permit the pilot to act. The
master of a vessel must exercise a degree of vigilance commensurate
with the circumstances.
At common law, a shipowner is not liable for injuries inflicted
exclusively by the negligence of a pilot accepted by a vessel
compulsorily. The exemption from liability for such negligence shall
apply if the pilot is actually in charge and solely in fault. Since, a
pilot is responsible only for his own personal negligence, he cannot
be held accountable for damages proximately caused by the default
of others, or, if there be anything which concurred with the fault of
the pilot in producing the accident, the vessel master and owners are
liable.It must be shown affirmatively that the pilot was at fault, and
that there was no fault on the part of the officers or crew, which
might have been conducive to the damage. The fact that the law
compelled the master to take the pilot does not exonerate the vessel
from liability
 Even though the pilot is compulsory, if his negligence was not
the sole cause of the injury, but the negligence of the master or
crew contributed thereto, the owners are liable.

The rationale for this rule is that the master is not entirely
absolved of responsibility with respect to navigation when a
compulsory pilot is in charge.

As a general rule, the owners or those in possession and control

of a vessel and the vessel are liable for all natural and proximate
damages caused to persons or property by reason of her negligent
management or navigation.

II. G.R. No. 130150

ISSUE:
Whether the Court of Appeals erred in holding MPA jointly and
solidarily liable with its member pilot, Capt. Gavino, in the absence
of employer-employee relationship and in applying Customs
Administrative Order No. 15-65, as basis for the adjudged solidary
liability of MPA and Capt. Gavino.

RULING:
There being no employer-employee relationship, clearly Article
2180 108 108 of the Civil Code is inapplicable since there is no
vicarious liability of an employer to speak of.

No reliance can be placed by MPA on the cited American rulings

as to immunity from liability of a pilots' association in light of
existing positive regulation under Philippine law. The Court of Appeals
properly applied the clear and unequivocal provisions of Customs
Administrative Order No. 15-65. In doing so, it was just being
consistent with its finding of the non-existence of employer-employee
relationship between MPA and Capt. Gavino which precludes the
application of Article 2180 of the Civil Code. True, Customs
Administrative Order No. 15 -65 does not categorically characterize
or label MPA's liability as solidary in nature. Nevertheless, a careful
reading and proper analysis of the correlated provisions lead to the
conclusion that MPA is solidarily liable for the negligence of its
member pilots, without prejudice to subsequent reimbursement from
the pilot at fault. Petition denied, CA AFFIRMED IN TOTO.
CHAPTER 10 CHARTER PARTIES
10.2 Different Kinds of Charter Parties
Litonjua Shipping Co. v. NSB (G.R. No. L-51910 August 10, 1989)
FACTS:
Petitioner is the duly appointed local crewing managing office of the
Fairwind Shipping Corporation.
On September 11, 1976 M/V Dufton Bay an ocean-going vessel of
foreign registry owned by the R.D. Mullion ship broking agency under
charter by Fairwind, while in the port of Cebu contracted the services
(among others) of Gregorio Candongo as Third Engineer for 12 months
with a monthly wage of US$500.00. The agreement was executed before
the Cebu Area Manning Unit of the NSB, after which respondent boarded
the vessel.
On December 28, 1976 before the expiration of contract, respondent
was required to disembark at Port Kilang, Malaysia. Describe in his seamans
handbook is the reason by owners arrange.
Condongo filed a complaint against Mullion (Shipping company) for
violation of contract and against Litonjua as agent of shipowner.
On February 1977, NSB rendered a judgment by default for failure of
petitioners to appear during the initial hearing, rendering the same to pay
Candongo because there was no sufficient or valid cause for the respondents
to terminate the service of the complainant.
Litonjuas defense:
Contends that the shipowner, nor the charterer, was the employer of
private respondent; and that liability for damages cannot be imposed
upon petitioner which was a mere agent of the charterer.
ISSUE:
Whether or not Litonjua may be held liable to the private respondent
on the contract of employment?
RULING:
YES. The first basis is the charter party which existed between
Mullion, the shipowner, and Fairwind, the charterer.
It is well settled that in a demise or bare boat charter, the
charterer is treated as owner pro hac vice of the vessel, the charterer
assuming in large measure the customary rights and liabilities of the
shipowner in relation to third persons who have dealt with him or with the
vessel. In such case, the Master of the vessel is the agent of the charterer
and not of the shipowner. The charterer or owner pro hac vice, and not
the general owner of the vessel, is held liable for the expenses of the
voyage including the wages of the seamen
Treating Fairwind as owner pro hac vice, petitioner Litonjua having
failed to show that it was not such, we believe and so hold that petitioner
Litonjua, as Philippine agent of the charterer, may be held liable on the
contract of employment between the ship captain and the private
respondent.
There is a second and ethically more compelling basis for holding
petitioner Litonjua liable on the contract of employment of private
respondent. The charterer of the vessel, Fairwind, clearly benefitted from
the employment of private respondent as Third Engineer of the Dufton
Bay, along with the ten (10) other Filipino crewmembers recruited by
Captain Ho in Cebu at the same occasion.
In so doing, petitioner Litonjua certainly in effect represented that
it was taking care of the crewing and other requirements of a vessel
chartered by its principal, Fairwind. Last, but certainly not least, there is
the circumstance that extreme hardship would result for the private
respondent if petitioner Litonjua, as Philippine agent of the charterer, is
not held liable to private respondent upon the contract of employment.
10.3 Effect of Charter on Character of Carrier
Planters Products, Inc. vs Court of Appeals
FACTS
Planters Products, Inc. (PPI), purchased from Mitsubishi International
Corporation (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T)
of Urea fertilizer which the latter shipped in bulk on 16 June 1974 aboard the
cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen
Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San
Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed
by the master of the vessel and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the
vessel M/V "Sun Plum" pursuant to the Uniform General Charter was entered
into between Mitsubishi as shipper/charterer and KKKK as shipowner, in
Tokyo, Japan.
Before loading the fertilizer aboard the vessel, four (4) of her holds
were all presumably inspected by the charterer's representative and found fit
to take a load of urea in bulk pursuant to par. 16 of the charter-party. After
the Urea fertilizer was loaded in bulk by stevedores hired by and under the
supervision of the shipper, the steel hatches were closed with heavy iron lids,
covered with three (3) layers of tarpaulin, then tied with steel bonds. The
hatches remained closed and tightly sealed throughout the entire voyage.
Upon arrival of the vessel at her port of call on 3 July 1974, petitioner
unloaded the cargo from the holds into its steel-bodied dump trucks which
were parked alongside the berth, using metal scoops attached to the ship and
was transported to the consignee's warehouse located some fifty (50) meters
from the wharf. The port area was windy, certain portions of the route to the
warehouse were sandy and the weather was variable, raining occasionally
while the discharge was in progress. It took eleven (11) days for PPI to unload
the cargo. A survey report was made and revealed a shortage in the cargo and
some others were rendered unfit for commerce.
PPI sent a claim letter to the agent of the carrier for the cost of
the shortage and value of the diminution. The defendant carrier
argued that the strict public policy governing common carriers does
not apply to them because they have become private carriers by
reason of the provisions of the charter-party.
ISSUE:
Whether or not a charter-party between a shipowner and a charterer
transforms a common carrier into a private one as to negate the civil law
presumption of negligence in case of loss or damage to its cargo?
RULING:
NO. A "charter-party" is defined as 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 by which the owner of a
ship or other vessel lets the whole or a 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.
Charter parties are of two types: (a) contract of affreightment which
involves the use of shipping space on vessels leased by the owner in part or as
a whole, to carry goods for others; and, (b) charter by demise or bareboat
charter, by the terms of which the whole vessel is let to the charterer with a
transfer to him of its entire command and possession and consequent control
over its navigation, including the master and the crew, who are his servants.
Contract of affreightment may either be time charter, wherein the 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 shipowner to supply the ship's
stores, pay for the wages of the master and the crew, and defray the expenses
for the maintenance of the ship.
 It is not disputed that respondent carrier, in the ordinary course of
business, operates as a common carrier, transporting goods
indiscriminately for all persons. When petitioner chartered the vessel M/V
"Sun Plum", the ship captain, its officers and compliment were under the
employ of the shipowner and therefore continued to be under its direct
supervision and control. Hardly then can we charge the charterer, a
stranger to the crew and to the ship, with the duty of caring for his cargo
when the charterer did not have any control of the means in doing so. This
is evident in the present case considering that the steering of the ship, the
manning of the decks, the determination of the course of the voyage and
other technical incidents of maritime navigation were all consigned to the
officers and crew who were screened, chosen and hired by the shipowner.

It is therefore imperative that a public carrier shall remain as such,

notwithstanding the charter of the whole or portion of a vessel by one or
more persons, provided the charter is limited to the ship only, as in the
case of a time-charter or voyage-charter. It is only when the charter
includes both the vessel and its crew, as in a bareboat or demise that a
common carrier becomes private, at least insofar as the particular voyage
covering the charter-party is concerned. Indubitably, a shipowner 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.
Caltex v. Sulpicio Lines ISSUE:

FACTS: Whether or not the charterer is a common carrier.

On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at

about 8:00 p.m., enroute to Masbate, loaded with 8,800 barrels of petroleum
products shipped by petitioner Caltex. MT Vector is a tramping motor tanker
owned and operated by Vector Shipping Corporation, engaged in the business
of transporting fuel products such as gasoline, kerosene, diesel and crude oil.
During that particular voyage, the MT Vector carried on board gasoline and
other oil products owned by Caltex by virtue of a charter contract between
them.
On December 20, 1987, at about 6:30 a.m., the passenger ship MV
Doa Paz left the port of Tacloban headed for Manila with a complement of 59
crew members including the master and his officers, and passengers totaling
1,493 as indicated in the Coast Guard Clearance.The MV Doa Paz is a
passenger and cargo vessel owned and operated by Sulpicio Lines, Inc. plying
the route of Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/ Tacloban/
Manila, making trips twice a week.
RULING:
Yes. 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.
Charter parties fall into three main categories: (1) Demise or
bareboat, (2) time charter, (3) voyage charter.
In this case, the charter party agreement did not convert the common
carrier into a private carrier. The parties entered into a voyage charter, which
retains the character of the vessel as a common carrier.

At about 10:30 p.m. of December 20, 1987, the two vessels collided in
the open sea within the vicinity of Dumali Point between Marinduque and
Oriental Mindoro. All the crewmembers of MV Doa Paz died, while the two
survivors from MT Vector claimed that they were sleeping at the time of the
incident.

On March 22, 1988, the board of marine inquiry in BMI Case No. 653-
87 after investigation found that the MT Vector, its registered operator
Francisco Soriano, and its owner and actual operator Vector Shipping
Corporation, were at fault and responsible for its collision with MV Doa Paz.
CHAPTER 13 COLLISIONS
Williams vs Yangco
FACTS:
The steamer Subic, owned by the defendant, collided with the launch
Euclid owned by the plaintiff, in the Bay of Manila at an early hour on the
morning of January 9, 1911, and the Euclid sank five minutes thereafter. This
action was brought to recover the value of the Euclid.
The court below held from the evidence submitted that both vessels
were responsible for the collision; and that the loss should be divided equally
between the respective owners, P5,000 to be paid to the plaintiff by the
defendant, and P5,000 to be borne by the plaintiff himself. From this
judgment both defendant and plaintiff appealed.
Counsel for the plaintiff insists that under the doctrine of "the last
clear chance," the defendant should be held liable because, as he insists, even
if the officers on board the plaintiff's launch were negligent in failing to exhibit
proper lights and in failing to take the proper steps to keep out of the path of
the defendant's vessel, nevertheless the officers on defendant's vessel, by the
exercise of due precautions might have avoided the collision by a very simple
maneuver.
ISSUE:
Whether or not only the defendant may be held liable for collision
due to negligence.
RULING: No.
"ART. 827. If both vessels may be blamed for the collision, each one shall
be liable for its own damages, and both shall be jointly responsible for the
loss and damage suffered by their cargoes."
Under the rule, the evidence disclosing that both vessels were
blameworthy, the owners of neither can successfully maintain an action
against the other for the loss or injury of his vessel.
In disposing of this case the trial judge apparently had in mind that
portion of the section which treats of the joint liability of both vessels for
loss or damage suffered by their cargoes. In the case at bar, however, the
only loss incurred was that of the launch Euclid itself, which went to the
bottom soon after the collision. Manifestly, under the plain terms of the
statute, since the evidence of record clearly discloses, as found by the trial
judge, that "both vessels may be blamed for the collision," each one must
be held liable for its own damages, and the owner of neither one can
recover from the other in an action for damages to his vessel.
In cases of a disaster arising from mutual negligence of two parties,
the party who has a last clear opportunity of avoiding the accident,
notwithstanding the negligence of his opponent, is considered wholly
responsible for it under the common law rule of liability as applied in the
courts of common law in the United States. But this rule is limited in its
application by the further rule, that where the
previous act of negligence of one vessel has created a position of danger,
the other vessel is not necessarily liable for the mere failure to recognize
the perilous situation; and it is only when in fact it does discover it in time
to avoid the casualty by the use of ordinary care, that it becomes liable for
the failure to make use of this last clear opportunity to avoid the accident.
In the case at bar, the most that can be said in support of plaintiff's
contention is that there was negligence on the part of the officers on
defendant's vessel in failing to recognize the perilous situation created by
the negligence of those in charge of plaintiff's launch, and that had they
recognized it in time, they might have avoided the accident. But since it
does not appear from the evidence that they did, in fact, discover the
perilous situation of the launch in time to avoid the accident by the
exercise of ordinary care, it is very clear that under the above set out
limitation to the rule, the plaintiff cannot escape the legal consequences
of the contributory negligence of his launch.
IN SUMMARY: The findings of record disclosed that the officers on
both boats were negligent in the performance of their duties at the time
of the accident, and that both vessels were to blame for the disaster.
Hence, the owner of the launch Euclid has no cause of action against the
owner of the steamer Subic.
Smith and Bell Co. v. CA
FACTS:
M/V Don Carlos, an inter-island vessel owned and operated by
private respondent Go Thong was sailing south bound for Cebu, when it
collided with M/S YotaiMaru, a merchant vessel of Japanese registry which
was approaching the port of Manila coming in from Kobe, Japan. The bow of
the Don Carlos rammed the left side of the YotaiMaru inflicting a gaping
hole through which seawater rushed in and flooded the hatch, damaging all
the cargo stowed therein. The consignees of the damaged cargo having been
paid by their insurance companies, the latter in turn commenced actions
against private respondent Go Thong for damages sustained by the various
shipments. 2 cases were filed before the RTC. The first case (Smith Bell and
Sumitomo Insurance v. Go Thong) reached the SC which ruled in finality that
negligence was with the officers and crew of Don Carlos. On the contrary,
the second case (Smith Bell and Tokyo Insurance v. Go Thong) was decided by
the CA holding the officers and crew of YotaiMaru at fault in the collision.
Hence the present petition.
ISSUE:
Whether or not inscrutable fault is present in said collision.
RULING:
No.The Court believes that there are three (3) principal factors which are
constitutive of negligence on the part of the Don Carlos, which negligence
was the proximate cause of the collision.
(1) The first of these factors was the failure of the Don Carlos to
comply with the requirements of Rule 18 (a) of the International Rules of
the Road which provides as follows: (a) When two power-driven vessels
are meeting end on, or nearly end on, so as to involve risk of collision,
each shall alter her course to starboard, so that each may pass on the port
side of the other. The evidence on this factor state that Don Carlos
altered its course by five degrees to the left instead of to the right which
maneuver was the error that caused the collision in question. Why it did
so is because Don Carlos was overtaking another vessel, the Don
Francisco, and was then at the right side of the aforesaid vessel. It was in
the process of overtaking Don Francisco that Don Carlos was finally
brought into a situation where he was meeting end-on or nearly end-on
YotaiMaru, thus involving risk of collision.
(2) The second circumstance constitutive of negligence on the part of
the Don Carlos was its failure to have on board that night a proper
look-out as required by Rule I (B) Under Rule 29 of the same set of Rules,
all consequences arising from the failure of the Don Carlos to keep a
proper look-out must be borne by the Don Carlos. In the case at bar,
the failure of the Don Carlos to recognize in a timely manner the risk of
collision with the YotaiMaru coming in from the opposite direction, was
at least in part due to the failure of the Don Carlos to maintain a proper
look-out.
(3) The third factor constitutive of negligence on the part of the Don
Carlos relates to the fact that Second Mate Benito German was,
immediately before and during the collision, in command of the Don
Carlos. Second Mate German simply did not have the level of experience,
judgment and skill essential for recognizing and coping with the risk of
collision as it presented itself that early morning when the Don Carlos,
running at maximum speed and having just overtaken the Don Francisco
then approximately one mile behind to the right side of the Don Carlos,
found itself head-on or nearly head on vis-a-vis the YotaiMaru. It is
essential to point out that this situation was created by the Don Carlos
itself.
The decision of the Court of Appeals was REVERSED and SET ASIDE.
National Developmental Corporation v. CA
FACTS:
In accordance with a memorandum agreement entered into between
defendants NDC and MCP on September 13, 1962, defendant NDC as the first
preferred mortgagee of three ocean going vessels including one with the
name 'Dona Nati' appointed defendant MCP as its agent to manage and
operate said vessel for and in its behalf. On February 28, 1964 the E. Philipp
Corporation of New York loaded on board the vessel "Dona Nati" at San
Francisco, California, a total of 1,200 bales of American raw cotton consigned
to the order of Manila Banking Corporation, Manila and the People's Bank and
Trust Company acting for and in behalf of the Pan Asiatic Commercial
Company, Inc., who represents Riverside Mills Corporation. Loaded on the
same vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd.,
consigned to the order of Manila Banking Corporation consisting of 200
cartons of sodium lauryl sulfate and 10 cases of aluminum foil. En route to
Manila the vessel figured in a collision at 6:04 a.m. on April 15, 1964 at Ise
Bay, Japan with a Japanese vessel 'SS Yasushima Maru' as a result of which
550 bales of aforesaid cargo of American raw cotton were lost and/or
destroyed, of which 535 bales as damaged were landed and sold on the
authority of the General Average Surveyor for Yen 6,045,-500 and 15 bales
were not landed and deemed lost. The damaged and lost cargoes were worth
P344,977.86 which amount, the plaintiff as insurer, paid to the Riverside Mills
Corporation. Considered totally lost were the aforesaid shipment of Kyokuto,
Boekui Kaisa Ltd. The total loss was P19,938.00 which the plaintiff as insurer
paid to Guilcon as holder of the duly endorsed bill of lading. Thus, the plaintiff
had paid as insurer the total amount of P364,915.86 to the consignees or their
successors-in-interest, for the said lost or damaged cargoes. Hence, plaintiff
filed this complaint to recover said amount from the defendants-NDC and
MCP as owner and ship agent respectively, of the vessel. The trial court
rendered a decision ordering the defendants MCP and NDC to pay jointly and
solidarity to DISC which was affirmed in toto by the CA. NDC now argues that
the Carriage of Goods by Sea Act should apply to the case at bar and not the
Civil Code or the Code of Commerce. Under Section 4 (2) of said Act, the
carrier is not responsible for the loss or damage resulting from the "act,
neglect or default of the master, mariner, pilot or the servants of the carrier in
the navigation or in the management of the ship." Thus, NDC insists that both
pilots of the colliding vessels were at fault and negligent, NDC would have
been relieved of liability under the Carriage of Goods by Sea Act.
ISSUE:
WON COGSA should be primarily applied in the case at bar?
RULING:
NO. The law of the country to which the goods are to be transported
governs the liability of the common carrier in case of their loss, destruction or
deterioration" (Article 1753, Civil Code). Thus, the rule was specifically laid
down that for cargoes transported from Japan to the Philippines, the liability
of the carrier is governed primarily by the Civil Code and in all matters not
regulated by said Code, the rights and obligations of common carrier shall be
governed by the Code of commerce and by laws (Article 1766, Civil Code).
Hence, the Carriage of Goods by Sea Act, a special law, is merely suppletory to
the provision of the Civil Code.
In the case at bar, it has been established that the goods in question
are transported from San Francisco, California and Tokyo, Japan to the
Philippines and that they were lost or due to a collision which was found to
have been caused by the negligence or fault of both captains of the colliding
vessels. Under the above ruling, it is evident that the laws of the Philippines
will apply, and it is immaterial that the collision actually occurred in foreign
waters, such as Ise Bay, Japan.
It appears, however, that collision falls among matters not specifically
regulated by the Civil Code, so that no reversible error can be found in
respondent courses 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.
 Article 826 of the Code of Commerce provides that where collision is
imputable to the personnel of a vessel, the owner of the vessel at fault, shall
indemnify the losses and damages incurred after an expert appraisal. But
more in point to the instant case is Article 827 of the same Code, which
provides that if the collision is imputable to both vessels, each one shall
suffer its own damages and both shall be solidarily responsible for the losses
and damages suffered by their cargoes. Under the provisions of the Code of
Commerce, particularly Articles 826 to 839, the shipowner or carrier, is not
exempt from liability for damages arising from collision due to the fault or
negligence of the captain. Primary liability is imposed on the shipowner or
carrier in recognition of the universally accepted doctrine that the
shipmaster or captain is merely the representative of the owner who has the
actual or constructive control over the conduct of the voyage.
Aboitiz Shipping Corporation V. General Accident Fire and Life Assurance
Corporation, Ltd.
RULING:
Doctrine: The real and hypothecary nature of maritime law simply means
that 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 guaranty for their settlement.
FACTS:
Aboitiz Corporation operated M/V P. Aboitiz, a common carrier
which sank on a voyage from Hong Kong to the Philippines on 31
October 1980.
General Accident Fire and Life Assurance Corporation, Ltd. Is a
foreign insurance company pursuing its remedies as subrogee of
several cargo consignees whose cargo sank with the said vessel.
The sinking gave rise to several suits against Aboitiz.
The sinking was initially investigated by the Board of Marine
Inquiry which found that the sinking was due to force majeure and
that the vessel was seaworthy.
Notwithstanding such finding, the trial court found against the
carrier on the basis that the loss was not due to force majeure.
The attempted execution of the judgment award in
said case gave rise to this case.
Aboitiz contends that the Limited Liability Rule warrants
immediate stay of execution of judgment to prevent impairment
of other creditors shares.
ISSUE:
WON the Limited Liability Rule arising out of the real and hypothecary
nature of maritime law should apply in this case?
The real and hypothecary nature of maritime law simply means
that 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 guaranty for
their settlement.
The liability of the vessel owner and agent arising from the
operation of such
vessel were confined to the vessel itself, its equipment,
freight, and insurance, if any.
The Limited Liability Rule in the Philippines cover only liability for
injuries to third parties, acts of the captain and collisions.
The only time the Limited Liability Rule does not apply is when
there is an actual finding of negligence on the part of the vessel
owner or agent.
In this case, there has been no actual finding of
negligence on the part of Aboitiz.
The rights of parties to claim against an agent or owner of a vessel
may be compared to those of creditors against an insolvent
corporation whose assets are not enough to satisfy the totality of
claims against it.
Each individual creditor may prove the actual amount of
their respective claims but this does not mean that they
shall be allowed to recover fully.
The claimants or creditors are limited in their recovery to
the remaining value of accessible assets.
No claimant can be given precedence over the others by
the simple expedience of having filed or completed its
action than the rest.
Thus, execution of judgment must be stayed
pending completion of all cases occasioned by
the subject sinking.