TRANSPORTATION LAW April 13 Reading Assignment Page 1 of 31

TRANSPORTATION LAW (April 13)

that the investigations, made to ascertain their whereabouts, produced
no result.

CHAPTER 11 - VESSELS
The facts are also admitted by the aforementioned master and
supercargo, two of the defendants, that they received from the plaintiff
1. DEFINITIONS
said P450, which sum was in the latter's own trunk which was placed
*Cases:
outside the stateroom of the banca, for the reason, as they said, that
(a) YU CON, plaintiff-appellee, vs. GLICERIO IPIL, NARCISO there was no room for it inside the stateroom; that these defendants
LAURON, and JUSTO SOLAMO, defendants-appellants. [G.R. No. therefore transferred said money to their trunk, which was inside the
10195. December 29, 1916.]
stateroom, and that this trunk and the P450 therein contained
disappeared from the boat during the night of that same day; that said
FACTS: Petitioner Yu Con, a merchant and a resident of the town of sum had not been found or returned to the plaintiff; that the plaintiff,
San Nicolas, of the city of Cebu, engaged in the sale of cloth and being on the banca in the afternoon of that day, when his trunk
domestic articles and having a share in a shop, or small store, situated containing the P450 was carried aboard, and seeing that said two
in the town of Catmon, of said province, had several times chartered defendants, who had the key of the trunk, had removed said sum to
from the respondent Narciso Lauron, a banca named Maria belonging their trunk inside the stateroom, charged them to take special care of
to the latter, of which Glicerio Ipil was master and Justo Solamo, the money; that the master Ipil assured the plaintiff that there was no
supercargo, for the transportation of certain merchandise and some danger of the money being lost; and that, nally, during the night in
money to and from the said town and the port of Cebu, that, on or question, both the master and the supercargo and four cabin-boys
about the 17th of October, 1911, the plaintiff chartered the said banca were aboard the banca.

from the defendant Lauron for the transportation of various

merchandise from the port of Cebu to Catmon, at the price of P45 for
the round trip, which merchandise was loaded on board the said craft
which was then at anchor in front of one of the graded fills of the wharf
of said port; that in the afternoon of the following day, he delivered to
the other two defendants, Ipil, and Solamo, master and supercargo,
respectively, of the aforenamed banca, the sum of P450, which was in
a trunk belonging to the plaintiff and was taken charge of by said two
defendants, who received this money from the plaintiff, for the purpose
of its delivery to the latter's shop in Catmon for the purchase of corn in
this town; that while the money was still in said trunk aboard the
vessel, on the night of the said 18th of October, the time scheduled for
However, the money disappeared from the craft in the port of Cebu.
(18 October 1911), prompting Yu to file an action to recover from the
defendants jointly and severally the sum of P450 for corn purchase,
and that the disappearance was due to abandonment, negligence or
voluntary breach of Glicerio with the duty for safe-keeping of the sum.
In their defense, Ipil, Lauron and Solamo pleaded that YU chartered
the banca for P10 per diem for 3 days and the loss was due to the
neglect of YU himself. They further alleged that said defendant Lauron,
the owner of the banca merely placed this craft at the disposal of Yu
for the price and period agreed upon, and did not go with the banca on
its voyage from Catmon to Cebu. 

the departure of the Maria from the port of Cebu, said master and said
supercargo transferred the P450 from the plaintiff's trunk, where it was, RTC RULING: In favor of Yu Con. Held that there was no room to
to theirs, which was in a stateroom of the banca, from which stateroom doubt that the sole cause of the disappearance of the money from the
both the trunk and the money disappeared during that same night, and said banca was the negligence of the master and the supercargo, and
TRANSPORTATION LAW April 13 Reading Assignment Page 2 of 31
that the defendant Narciso Lauron was responsible for that negligence, of the Code of Civil Procedure, the said court did not incur the
as owner of the banca. Yu Con was absolved from the defendant's second error assigned by the appellants in their brief. Lastly, as
counterclaim.
the banca Maria did not make the trip she should have made from
RESPONDENTS’ CONTENTIONS: Allege that the trial court erred:
the port of Cebu to the town of Catmon, on the occasion in
question, through causes chargeable, as has been seen, to the
1. In applying articles 586, 587, and 618 of the Code of Commerce in captain and the supercargo of said banca, to wit, because of the
favor of the plaintiff;
loss, theft or robbery of the P450 belonging to the plaintiff, and as
a contract was made for the transportation of the said sum and
2. In overruling the motion for default presented by the defendants and the merchandise from one of said points to the other, for the round
in sentencing the defendants jointly and severally to pay the plaintiff trip, and not through payment by the plaintiff of the wages due the
the amount mentioned in the judgment; and
crew for each day, as alleged by the defendants, for the proofs
presented by the latter in regard to this point were insu cient, as
3. In absolving the plaintiff from the defendants' counterclaim.

the trial court so held, neither did the latter incur error in
overruling the cross-complaint formulated by the defendants in
ISSUE: Whether the defendants are liable for the loss of the amount?

their answer against the plaintiff.

It is therefore beyond all doubt that the loss or disappearance, on the

RULING: YES, the defendants are liable for the loss of the amount.
night aforementioned, of the P450, the property of the plaintiff, which,
In accordance with the provisions of the Code of Commerce in
were in the possession of the defendants, the master and the
force, which are applicable to the instant case, the defendant
supercargo of the banca Maria, occurred through the manifest fault
Narciso Lauron, as the proprietor and owner of the craft of which
and negligence of said defendants, for, not only did they fail to take the
Glicerio Ipil was the master and in which, through the fault and
necessary precautions in order that the stateroom containing the trunk
negligence of the latter and of the supercargo Justo Solamo, there
in which they kept the money should be properly guarded by members
occurred the loss, theft, or robbery of the P450 that belonged to
of the crew and put in such condition that it would be impossible to
the plaintiff and were delivered to said master and supercargo, a
steal the trunk from it or that persons not belonging to the vessel might
theft which, on the other hand, as shown by the evidence, does
force an entrance into the stateroom from the outside, but also they
not appear to have been committed by a person not belonging to
did not expressly station some person inside the stateroom for the
the craft, should, for said loss or theft, be held civilly liable to the
guarding and safe-keeping of the trunk, for it was not proven that the
plaintiff, who executed with said defendant Lauron the contract for
cabin-boy Gabriel slept there, as the master of the vessel, Ipil, stated,
the transportation of the merchandise and money aforementioned
nor that the other cabin-boy, Simeon Solamo, was on guard that night,
between the port of Cebu and the town of Catmon, by means of
for the latter contradicted the statements made by the two defendants
the said craft. Therefore, the trial court did not err in so holding in
on this point. On the contrary, it was proven by the master's own
the judgment appealed from. The plaintiff having led his answer to
statement that all the people on the vessel, including himself and the
the cross-complaint as soon as the defendant presented their
supercargo Solamo, slept soundly that night; which fact cannot, in any
motion for a declaration of the plaintiff's default in connection with
manner, serve them as an excuse, nor can it be accepted as an
said cross-complaint, and it being optional with the court to make
explanation of the statement that they were not aware of what was
in such cases the declaration of default, as provided in section 129
TRANSPORTATION LAW April 13 Reading Assignment
then occurring on board. if the trunk was actually stolen by outsiders
and removed through the small window of the stateroom, a detail
which also was not proven, but, on the contrary, increases their liability,
because it is very strange that none of them who were six and were
around or near the stateroom, should have heard the noise which the
robbers must have made in breaking its window. All of these
circumstances, together with that of its having been impossible to
know who took the trunk and the money and the failure to recover the
one or the other, make the conduct of the two defendants and of the
other members of the crew of the banca, eminently suspicious and
prevent our holding that the disappearance or loss of the money was
due to a fortuitous event, to force majeure, or that it was an occurrence
which could not have been foreseen, or which, if foreseen, was
inevitable.
Lauron, with whom, as aforesaid, the plaintiff contracted for the
It is unquestionable that the defendants Glicerio Ipil and Justo Solamo
were the carriers of the said P450 belonging to the plaintiff, and that
they received this sum from the latter for the purpose of delivering it to
the store of the town of Catmon, to which it had been consigned.
Under such circumstances, said defendants were the depositories of
the money.
Blanco, the commentator on mercantile law, in referring to the
The said two defendants being the depositaries of the sum in question,
and they having failed to exercise for its safe-keeping the diligence
required by the nature of the obligation assumed by them and by the
circumstances of the time and the place, it is evident that, in
pursuance of the provisions of articles 1601 and 1602, in their
relation to articles 1783 and 1784, and as prescribed in article 1770, of
the Civil Code, they are liable for its loss or misplacement and must
restore it to the plaintiff, together with the corresponding interest
thereon as an indemnity for the losses and damages caused him
through the loss of the said sum.
the service of an industry or in that of maritime commerce. . . ." (Vol. 1,
With respect to the other defendant, Narciso Lauron, as he was the
owner of the vessel in which the loss or misplacement of the P450
occurred, of which vessel, as aforestated, Glicerio Ipil was master and
Page 3 of 31
Justo Solamo, supercargo, both of whom were appointed to, or
chosen for, the positions they held, by the defendant himself, and, as
the aforementioned sum was delivered to the said master, Ipil, and the
merchandise to be transported by means of said vessel from the port
of Cebu to the town of Catmon was laden by virtue of a contract
executed by and between the plaintiff and the owner of the vessel,
Narciso Lauron, it behooves us to examine whether the latter, also,
should be held to be liable, as requested by the plaintiff in his
complaint.
Said vessel was engaged in the transportation of merchandise by sea
and made voyages to and from the port of Cebu to Catmon, and had
been equipped and victualed for this purpose by its owner, Narciso
transportation of the merchandise which was to be carried, on the date
hereinabove mentioned, from the port of Cebu to the town of Catmon.
 According to the Dictionary of Legislation and Jurisprudence by
Escriche, a vessel is any kind of craft, considering solely the hull.
grammatical meaning of the words "ship" and "vessels," says, in his
work aforecited, that these terms designate every kind of craft, large or
small, whether belonging to the merchant marine or to the navy. And
referring to their juridical meaning, he adds: "This does not differ
essentially from the grammatical meaning; the words 'ship' and
'vessel' also designate every craft, large or small, so long as it be not
an accessory of another, such as the small boat of a vessel, of greater
or less tonnage. This de nition comprises both the craft intended for
ocean or for coastwise navigation, as well as the oating docks, mud
lighters, dredges, dumpscows or any other oating apparatus used in
p. 389.)
According to the foregoing de nitions, then, we hold that the banca
called Maria, chartered by the plaintiff Yu Con from the defendant
TRANSPORTATION LAW April 13 Reading Assignment Page 4 of 31
Narciso Lauron, was a "vessel", pursuant to the meaning this word has to another of these Islands is under the law a shipowner, and the
in mercantile law, that is, in accordance with the provisions of the master of the craft is to be considered as its captain in the legal
Code of Commerce in force.
acceptation of this word, and the former must be held civilly liable for
indemnities in favor of third parties to which the conduct of the latter of
Glicerio Ipil, the master of the said banca, Maria, must also be them may give rise in the custody of the effects laden on the craft, and
considered as its captain, in the legal acceptation of this word.
for all losses which, through his fault or negligence, may occur to the
merchandise or effects delivered to him for that transportation as well
as for the damages suffered by their transportation, as those who
SYLLABUS
contracted with him, in consequence of misdemeanors and crimes
SHIPPING; LIABILITY OF MASTER AND SUPERCARGO OF VESSEL committed by him or by the members of the crew of the craft

FOR

LOSS OF MONEY ENTRUSTED TO THEIR CARE. —Held: That, as G

and J, the carriers of said sum received from Y for its delivery to a
shop in the town of Catmon where it had been consigned, were vested
with the character of depositories of the same, and as they failed to
exercise, in its safe-keeping, the diligence required by the nature of the
obligation assumed by them and required by the circumstances of the
time and the place, they are liable, pursuant to the provisions of
articles 1601 and 1602, in relation to articles 1783, 1784, and 1770 of
the Civil Code, for its loss or misplacement, and are obliged to deliver
it to Y, with the corresponding interest thereon as an indemnity for the
damage caused him through

WHAT CONSTITUTES A VESSEL. — A minor craft used for the

transportation of merchandise by sea and to make voyages from one
port to another of these Islands, equipped and victualed for this
purpose by its owner, is a vessel, within the purview of the law and for
the determination of the character and effect of the relations created
between the owners of the merchandise laden on it and its owner,
according to the meaning and construction given to the word vessel by
the Mercantile Code in treating of maritime commerce under Title 1,
Book 3.

LIABILITY OF SHIPOWNER FOR LOSSES CAUSED BY CAPTAIN. —

The owner of a minor craft who has equipped and victualed it for the
purpose of using it in the transportation of merchandise from one port
TRANSPORTATION LAW April 13 Reading Assignment
(b) AUGUSTO LOPEZ, plaintiff-appellant, vs. JUAN DURUELO, ET
AL., defendants. ALBINO JISON, appellee. [G.R. No. 29166.
October 22, 1928.]
RTC RULING: The demurrer was sustained and complaint of Lopez
FACTS: This action for damages (amounting in all to something more
than P120,000) was instituted in the Court of First Instance of
Occidental Negros by petitioner Augusto Lopez, for the purpose of
recovering damages for personal injuries inflicted upon him by reason
of the negligence of respondents Juan Duruelo and Albino Jison.
this case?
On February 10, 1927, Augusto was desirous of embarking upon the
interisland steamer San Jacinto in order to go to Iloilo. The boat was
anchored in port of Silay. The plaintiff therefore embarked at the
landing in the motor boat Jison, which was then engaged in conveying
passengers and luggage back and forth from the landing to boats at
anchor, and which was owned and operated by the defendant Albino
Jison, with Juan Duruelo as patron. The engineer (maquinista) aboard
on this trip was one Rodolin Duruelo, a boy of only 16 years of age on
the 3rd day of his apprenticeship. It is alleged that the Jison, upon this
trip, was grossly overladen, having aboard fourteen passengers, while
its capacity was only for eight or nine. As the boat was approaching
the San Jacinto the propeller of the ship struck the motor boat and
sank it. It was alleged that it was due to the fault negligence and lack if
skill of Juan as patron of the Jison. As the boat sank, Augusto was
thrown into the revolving blades and suffered various injuries (a bruise
in the breast, two serious fractures of the bones of the left leg, and a
compound fracture of the left femur), hence, Augusto was hospitalised
for 8 months. 
injuries suffered by the plaintiff in this case were of such a nature
RESPONDENT’S CONTENTION: Augusto’s complaint does not show
a right of action, and in the course of the argument submitted with the
demurrer attention is directed to the fact that the complaint does not
allege that a protest had been presented by the plaintiff, within twenty-
four hours after the occurrence, to the competent authority at the port
Page 5 of 31
where the accident occurred. It is accordingly insisted that, under
article 835 of the Code of Commerce, the plaintiff has shown no cause
of action.
was dismissed.
ISSUE: Whether Article 835 of the Code of Commerce which states
that a protest is a condition precedent on a boat should be applied in
RULING: NO,  Whether Article 835 of the Code of Commerce
cannot be applied since Jison is a small boat. In the case before
us the Jison, was propelled by a second-hand motor, originally
used for a tractor plow; and it had a capacity for only eight
persons. This was not such a boat as is contemplated in article
835 of the Code of Commerce, requiring protest in case of
collision. The Mamie (5 Fed., 813), wherein it was held that only
vessels engaged in what is ordinarily known as maritime
commerce are within the provisions of law conferring limited
liability on the owner in case of maritime disaster.  It is therefore
clear that a passenger on a boat like the Jison, in the case before
us, 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. In other words, article 835 of the Code
of Commerce does not apply. But even if said provision had been
considered applicable to the case in hand, a fair interpretation of
the allegations of the complaint indicates, we think, that the
as to excuse protest; for, under article 836, it is provided that want
of protest cannot prejudice a person not in a condition to make
known his wishes. An individual who has suffered a compound
fracture of the femur and received other physical injuries su cient
to keep him in a hospital for many months, cannot be supposed to
have been in a condition to make protest within twenty-four hours
TRANSPORTATION LAW April 13 Reading Assignment
of such occurrence. It follows that the demurrer in this case was
not well taken and should have been overruled. In their brief in this
court the attorneys for the defendant have criticized the complaint
for a general lack of certainty and precision in more than one
respect. However, we have read the document attentively and, in
our opinion, it states a good cause of action upon a civil liability
arising from tort under articles 1902 and 1903 of the Civil Code,
and our attention has not been drawn to any provision of law
which would constitute an obstacle to the maintenance of the
action.
merchant ships, as they do not include war ships, and furthermore,
Assuming that the article of the Code of Commerce relied upon states
a condition precedent to the maintenance of an action in a case where
protest is required and that the making of protest must be alleged in
the complaint in order to show a good cause of action — an
assumption that is possibly without basis, for the reason that lack of
protest in a case where protest is necessary would seem to supply
matter of defense proper to be set up in the answer, — we
nevertheless are of the opinion that protest was not necessary in the
case now before us. The article in question (835, Code of Com.) in
found in the section dealing with collisions, and the context shows
the collisions intended are collisions of sea-going vessels. Said article
cannot be applied to small boats engaged in river and bay traffic. The
Third Book of the Code of Commerce, dealing with Maritime
Commerce, of which the section on Collisions forms a part, was
evidently intended to define the law relative to merchant vessels and
marine shipping; and, as appears from said Code, the vessels intended
in that Book are such as are run by masters having special training,
with the elaborate apparatus of crew and equipment indicated in the
Code. The word "vessel" (Spanish, "buque," "nave"), used in the
section referred to was not intended to include all ships, craft or
floating structures of every kind without limitation, and the provisions
of that section should not be held to include minor craft engaged only
in river and bay traffic. Vessels which are licensed to engage in
maritime commerce, or commerce by sea, whether in foreign or
coastwise trade, are no doubt regulated by Book III of the Code of
Page 6 of 31
Commerce. Other vessels of a minor nature not engaged in maritime
commerce, such as river boats and those carrying passengers from
ship to shore, must be governed, as to their liability to passengers, by
the provisions of the Civil Code or other appropriate special provisions
of law.
This conclusion is substantiated by the writer Estasen who makes
comment upon the word "vessel" to the following effect: "When the
mercantile codes speak of vessels, they refer solely and exclusively to
they almost always refer to craft which are not accessory to another as
is the case of launches, lifeboats, etc. Moreover, the mercantile laws, in
making use of the words ship, vessel, boat, embarkation, etc., refer
exclusively to those which are engaged in the transportation of
passengers and freight from one port to another or from one place to
another; in a word, they refer to merchant vessels and in no way can
they or should they be understood as referring to pleasure craft,
yachts, pontoons, health service and harbor police vessels, oating
storehouses, warships or patrol vessels, coast guard vessels, shing
vessels, towboats, and other craft destined to other uses, such as for
instance coast and geodetic survey, those engaged in scienti c
research and exploration, craft engaged in the loading and discharge
of vessels from same to shore or docks, or in transhipment and those
small craft which in harbors, along shore, bays, inlets, coves and
anchorages are engaged in transporting passengers and
baggage." (Estasen, Der. Mer., vol. IV, p. 195.)
The court does not agree with the assignment of the defendants in
regards to the protest being a condition precedent. As article 835 of
the code of commerce that the context of the article is that of collision
of sea going vessels, not to small boats engaged in river and bay
traffic, and the vessel must be run by a master with special training
and competent crew.
The word "vessel" (Spanish, "buque," "nave"), used in the section
referred to was not intended to include all ships, craft or floating
TRANSPORTATION LAW April 13 Reading Assignment Page 7 of 31
structures of every kind without limitation, and the provisions of that
section should not be held to include minor craft engaged only in river MEANING OF WORD VESSEL. — The word "vessel "(Spanish,
and bay traffic. Vessels which are licensed to engage in maritime "buque,""nave") used in the Third Section of Title IV, Book Third, of the
commerce, or commerce by sea, whether in foreign or coastwise Code of Commerce, dealing with collisions, does not include all ships,
trade, are regulated by the code of commerce.
craft or floating structures of any kind without limitation. The provisions
of said section do not apply to minor craft engaged in river and bay
In Yu Con vs. Ipil (41 Phil., 770), this court held that a small vessel traffic

used  for the transportation of merchandise by sea and for the making
of  voyages from one port to another of these Islands, equipped and
victualed  for this purpose by its owner, is a vessel, within the purview 1.01 OTHER VESSELS

of the Code of  Commerce, for the determination of the character and 1.02 KINDS OF VESSELS

effect of the  relations created between the owners of the merchandise

laden on it and  its owner.
2. CONSTRUCTIONS, EQUIPMENT AND MANNING

3. VESSEL AS PERSONAL PROPERTY

SYLLABUS
4. ACQUISITION

4.01 PRESCRIPTION

SHIPPING; COLLISION; PROTEST. — The protest required by article 4.02 SALE

835 of the Code of Commerce in case of collision between vessels is 4.03 CO-OWNER’S RIGHTS

not necessary to preserve the rights of a person aboard a motor boat

engaged in conveying passengers between ship and shore who is 5. NATIONALITY OF VESSELS

injured in a collision between the motor boat and the larger vessel.
5.01 RIGHTS UNDER THE TARIFF AND CUSTOMS CODE

5.02 FLAGS OF CONVENIENCE

CASE AT BAR. — A person desirous of embarking on a ship which

was some distance away from the shore in a Philippine port took
passage upon a small motor boat, which was used in conveying
passengers and luggage to and fro between the shore and the
shipside. Owing to the negligence of thep at ron or incompetence of
the person in charge — so the complaint averred — the boat
approached too near to the stern of the ship, with the result that the
propeller of the ship, which was still turning, struck the motor boat and
sunk it, injuring the plaintiff. Held: Upon demurrer, that the failure of the
complaint to allege that the plaintiff had made protest according to
article 835 of the Code of Commerce was no impediment to the
maintenance of a civil action, under articles 1902 and 1903 of the Civil 6. REGISTRATION OF VESSELS

Code, to recover damages for the tort.

TRANSPORTATION LAW April 13 Reading Assignment Page 8 of 31

*Case: FAUSTO FUBISO and BONIFACIO GELITO, plaintiffs- registered in the office of the Collector of Customs and made a part of
appellee, vs. FLORENTINO E. RIVERA, defendant-appellant. [G.R. his answer; that later said Chinaman, the absolutely owner of the
No. L-11407. October 30, 1917.]
vessel, sold it in turn to the defendant Rivera, according to the public
instrument, also attached to his answer as Exhibit B; and that, for this
FACTS: The pilot boat Valentina was twice sold: first privately by its reason, Rivera took possession of the said pilot boat Valentina, as its
owner Sy Qui to the defendant to the defendant Florentino E. Rivera, sole owner. He therefore petitioned that the defendant be absolve from
on January 4, 1915, and afterwards by the sheriff at public auction in the complaint, with the costs against the plaintiffs.

conformity with the order contained in the judgment rendered by the

justice of the peace court, on January 23 of the same year, against the CFI RULING: Ruled in favor of Fubiso and Gelito. Rivera was ordered
Chinaman Sy Qui and in behalf of the plaintiff, Fausto Rubiso.
to place at the disposal of the plaintiff Fausto Rubiso the pilot boat in
On April 10, 1915, Fubiso and Gelito brought suit in the Court of First litigation.

Instance of this city and alleged in the complaint that they were the
owners of the pilot boat named Valentina, which had been in bad ISSUE: Whether Rubiso and Gelito’s rights on the boat prevails over
condition since the year 1914 and, on the date of the complaint, was Rivera’s rights?

stranded in the place called Tingloy, of the municipality of Bauan,

Batangas; that the defendant Florentino E. Rivera took charge or RULING: YES,  Rubiso and Gelito’s rights on the boat prevails over
possession of said vessel without the knowledge or consent of either Rivera’s rights.

Fubiso or Gelito and refused to deliver it to them, under claim that
Rivera was the owner thereof; and that such procedure on Rivera's
part cause the plaintiffs to suffer damages, not only because they
could not proceed to repair the vessel, but also because they were
unable to derive profit from the voyages for which said pilot boat was
customarily used; and that the net amount of such uncollected pro t
was P1,750. The complaint terminated with a petition that judgment be
rendered by ordering the defendant to deliver said pilot boat to Fubiso
and Gelito and indemnify them in the amount aforementioned or in
such amount as should be proven at trial, and to pay the costs.
to Rubiso, but the registration of this latter sale was prior by may days
It is undeniable that the defendant Rivera acquired by purchase the
pilot boat Valentina on behalf of the plaintiff Rubiso; but it is no less
true that the sale of the vessel by Sy Qui to Florentino E. Rivera, on
January 4, 1915, was entered in the customs registry only on March
17, 1915, while its sale is public auction to Fausto Rubiso on the 23d
of January of the same year, 1915, was recorded in the o ce 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 the sale made to the defendant.

Rivera entered a general and specific denial of all the facts set forth in Article 573 of the Code of Commerce provides, in its first paragraph:

the complaint, with the exception of those admitted in the special

defense and consisting in that said pilot boat belonged to the concern
named "Gelito & Co.," Bonifacio Gilito being a copartner thereof to the
extent of two-thirds, and the Chinaman Sy Qui, to that of one-third, of
the value of said vessel; that subsequently Bonifacio Gelito sold his
share to his copartner Sy Qui, as attested by the instrument Exhibit A,
"Merchant vessels constitute property which may be acquired an
transferred by any of the means recognized by law. The acquisition of
a vessel must be included in a written instrument, which shall not
produce any effect with regard to third persons if not recorded in the
commercial registry."

TRANSPORTATION LAW April 13 Reading Assignment Page 9 of 31

So that, pursuant to the above-quoted article, inscription in the
commercial registry was indispensable , in order that said acquisition
might affect, and produce consequences with respect to third persons.
Fausto Rubiso in the ownership of the pilot boat Valentina, inasmuch
However, since the enactment of Act No. 1900, on May 18, 1909, said
article of the Code of Commerce was amended, as appears by section
2 of that Act, herebelow transcribed.
record in the o ce of the Collector of Customs, on January 27, and
"The documenting, registering, enrolling, and licensing of vessels in
accordance with the Customs Administrative Act and customs rules
and regulations shall be deemed to be a 900, on May 18, 1909, said
In view of said legal provisions, it is undeniable that the defendant
Florentino E. Rivera's rights cannot prevail over those acquired by
as, though the latter's acquisition of the vessel at public auction, on
January 23, 1915, was subsequent to its purchase by the defendant
Rivera, nevertheless said sale at public auction was antecedently
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 o ce of the Collector of
Customs until many days afterwards, that is, not until March 17, 1915.

article of the Code of Commerce was amended, as appears by section

2 of that Act, herebelow transcribed.
The legal rule set down in the Mercantile Code subsists, inasmuch as
"The documenting, registering, enrolling, and licensing of vessels in
accordance with the Customs Administrative Act and customs rules
and regulations shall be deemed to be a registry of vessels within the
meaning of title two of the Code of Commerce, unless otherwise
provided in said Customs Administrative Act or in said customs rules
and regulations, and the Insular Collector of Customs shall perform the
duties of commercial register concerning the registering of vessels, as
defined in title two of the Code of Commerce."
of the creditors shall be considered canceled.
the amendment solely refers to the o cial who shall make the entry;
but, with respect to the rights of the two purchases, whichever of them
first registered his acquisition of the vessel in the one entitled to enjoy
the protection of the law, which considers him the absolute owner of
the purchased boat, an 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

The requisite of registration on 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 led by a third person. Such
registration is required both by the Code of Commerce and by Act No.
1900. The amendment solely consisted in charging the Insular
The purchaser at public auction, Fausto Rubiso, who was careful to
record his acquisition, opportunely and on prior date, has, according to
the law, a better right than the defendant Rivera who subsequently
recorded his purchase. The latter is a third person, who was directly
affected by the registration which the plaintiff made of the acquisition.

Collector of Customs, as at present, with the ful llment of the duties of

the commercial register concerning the registering of vessels; so that Ships or vessels, whether moved by steam or by sail, partake, to a
the registration of a bill of sale of a vessel shall be made in the o ce of certain extent, of the nature and conditions of real property, on
the Insular Collector of Customs, who, since May 18, 1909, has been account of their value and importance in the world commerce; and for
performing the duties of the commercial register in place of this latter this reason the provisions of article 573 of the Code of Commerce are
official.
nearly identical with article 1473 of the Civil Code.

TRANSPORTATION LAW April 13 Reading Assignment Page 10 of 31

With respect to the indemnity for losses and damages, requested by entered in the registry of the Insular Collector of Customs, who, since
the plaintiff, aside from the fact, as shown by the evidence, that, May 18 1909, has been performing the duties of commercial register.

subsequent to the date when the judgment appealed from was

rendered, the vessel in question emerged unharmed from the place 2. ID.; ID. — The legal rule set down in the Code of Commerce,
where it was stranded, and was, at the time of the trial, anchored in the subsist, inasmuch as the amendment solely refers to the official who
port of Maricaban, the record certainly does not furnish any positive shall make the entry.

evidence of the losses and damages alleged to have been occasioned.

On the other hand, it cannot be a rmed that the defendant acted in bad 3. ID.; ID. — Ships or vessels, whether moved by steam or by sail,
faith speci cally because he acquired the vessel on a date prior to that partake to a certain extent, of the nature and conditions of real
of its acquisition at public auction by the plaintiff Rubiso, who, for the property, on account of their value and importance in the world
reasons aforestated, is true and sole owner of said pilot boat.
commerce; and for this reason the provisions of article 573 of the
Code of Commerce are nearly identical with those of article 1473 of
With respect to the rights of the two purchases, whichever of them first the Civil Code.

registered his acquisition of the vessel in the one entitled to enjoy the
protection of the law, which considers him the absolute owner of the  

purchased boat. The purchaser at public auction, Fausto Rubiso, who

was careful to record his acquisition, opportunely and on prior date,
6.01 REGISTER OF PHILIPPINE VESSELS

has, according to the law, a better right than the defendant Rivera who
subsequently recorded his purchase. Ships or vessels, whether moved
7. SHIP’S MANIFEST

by steam or by sail, partake, to a certain extent, of the nature and

8. LOGBOOK

conditions of real property, on account of their value and importance in

9. SAFETY REGULATIONS 

the world commerce; and for this reason the provisions of article 573
10. CABOTAGE

of the Code of Commerce are nearly identical with article 1473 of the
11. REPAIR OF VESSELS

Civil Code. 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 may days to the sale made to the defendant.

CHAPTER 12 - SHIP MORTGAGE AND LIENS

SYLLABUS

1. SHIPPING; REGISTRATION OF THE PURCHASE OF A VESSES. — 1. APPLICABLE LAWS AND RULES

The requisite of registration in the registry of the purchase of a vessel 1.01 THE SHIP MORTGAGE DECREE OF 1978

is necessary and indispensable in orderer that the purchaser's rights 1.02 THE CODE OF COMMERCE PROVISIONS

may be maintained against a claim led by a third person; pursuant to 1.03 HISTORY OF SHIP MORTGAGE DECREE

article 573 of the Code of Commerce in connection with section 2 of

Act No. 1900, which Act, amending said article, provides that such 2. MEANING OF PREFERRED MORTGAGE

registration, instead of being made in the commercial registry, shall be

TRANSPORTATION LAW April 13 Reading Assignment Page 11 of 31
3. REQUIREMENTS FOR PREFERRED MORTGAGE
assumed Galleons management. NDC paid Asian Hardwood using its
3.01 ADDITIONAL REQUIREMENTS
own fund the partial payment for galleons obligation.

4. MARITIME LIEN
Another Loi was issued directing the foreclosure of the mortgage of the
*Case: POLIAND INDUSTRIAL LIMITED, petitioner, vs. NATIONAL 5 vessel for failure to pay Galleons debt despite demands.  DBP upon
DEVELOPMENT COMPANY, DEVELOPMENT BANK OF THE foreclosure of the 5 vessel sold it to NDC. 

PHILIPPINES, and THE HONORABLE COURT OF APPEALS

(Fourteenth Division), respondents. [G.R. No. 143866. August 22, 1982 Board of Directors of GALLEON amended the Articles of
2005.]
Incorporation changing the corporate name from Galleon Shipping
Corporation to National Galleon Shipping Corporation and increasing
FACTS: Consolidated petitions for review seeking the review of the the number of directors from seven to nine.

Decision of the Court of Appeals which modified the Decision of the

Regional Trial Court Makati 
Asian Hardwood assigned its rights over the outstanding obligation of
GALLEON to World Universal Trading and Investment Company, and in
In G.R. No. 143866, petitioner Poliand Industrial Limited (POLIAND) turn assigned the credit to petitioner POLIAND,.

seeks judgment declaring the National Development Company (NDC) President Aquino issued Administrative Order No. 64 directing NDC
and the DBP solidarily liable representing the maritime lien in favor of and Philippine Export and Foreign Loan Guarantee Corporation (now
POLIAND and the net amount of loans incurred by Galleon Shipping Trade and Investment Development Corporation of the Philippines) to
Corporation (GALLEON). Petitioner NDC seeks the reversal of the transfer some of their

Court of Appeals' Decision ordering it to pay POLIAND

assets to the National Government among those transferred was the 5
foreclosed vessel of the Galleon. 

Asian Hardwood Limited (Asian Hardwood), a Hong Kong corporation,

extended credit accommodations in favor of GALLEON. GALLEON, a POLIAND made written demands on GALLEON, NDC, and DBP for the
domestic corporation engaged in maritime transport of goods. The satisfaction of the outstanding balance. POLIAND then instituted a
credit was used to purchase 5 vessel and 2 second hand vessel. 
collection suit against them through RTC MAKATI. POLIAND claims the
LOI and Memorandum of agreement between Galleon and NDC made
Galleon also obtained loans from Japanese lenders to acquire vessels them solidarily liable to POLIAND as assignee of rights of credit to
with a deed of guarantee with DBP. And the 5 vessels were mortgage Galleon. POLIAND also claimed that it had a preferred maritime lien
in favor of DBP. 
over the proceeds of the extrajudicial foreclosure sale of GALLEON's
1981 Pres marcos ordered NDC through Letter of instruction to acquire vessels mortgaged by NDC to DBP.

the entire shareholding of Galleon, were DBP were to advance to

Galleon within 3 years the principal amount and interest of Galleons In its Answer DBP denied being a party to the loan transaction. No
maturing obligation. Through this Galleon forged a memorandum of cause of action and or was barred by statute of frauds as DBP did not
agreement where NDC and galleon agreed to execute a share sign any memorandum to act as guarantor for the alleged credit
purchase agreement for the transfer of Galleons shareholding, NDC advance in favor of POLIAND. And that DBP was unaware of
TRANSPORTATION LAW April 13 Reading Assignment Page 12 of 31
GALLEONS foreign borrowings. DBP agreed to act as guarantor Article 578 of the Code of Commerce is not relevant to the facts of the
thereof only under the conditions laid down under the Deed of instant case because it governs the sale of vessels in a foreign port.
Undertaking.
The resolution of the instant case depends on the determination as to
which creditor is entitled to the proceeds of the foreclosure sale of the
NDC denied any participation in the execution of the loan as alleging vessels.

that it acted only as manager. Nor it agreed in the assumption of Article 580, while providing for the order of payment of creditors in the
Galleons liabilities for no purchase and sale agreement was executed event of sale of a vessel, had been repealed by (P.D.) No. 1521 Ship
and the delivery of the required shares of stock of Galleon did not take Mortgage Decree of 1978 Section 17 thereof confers on the preferred
place. 
mortgage lien on the vessel superiority over all other claims, thereby
engendering an irreconcilable conflict with the order of preference
RTC RULING: Upon motion by POLIAND, the trial court dropped provided under Article 580 of the Code of Commerce, it follows that
GALLEON as a defendant the trial court concluded that under LOI No. the Code of Commerce provision is deemed repealed by the provision
1155, DBP and NDC are liable for those obligations. In sum, NDC and of P.D. No. 1521, as the poster

DBP were ordered to pay POLIAND

P.D. No. 1521 is applicable not the Civil Code

CA RULING: rendered a modified judgment, absolving DBP of any

liability in view of POLIAND's failure to clearly prove its action against Whether or not the order of preference under Section 17, P.D. No. 1521
DBP. Discharged NDC of any liability arising from the credit on the may be

ground that NDC did not acquire ownership of GALLEON only control properly applied in the instant case depends on the classification of
and management. NDC was held liable to POLIAND for the payment of the mortgage on the GALLEON vessels

the preferred maritime lien based on LOI No. 1195

The mortgage executed in favor of DBP is covered by P.D.No. 1521

ISSUES:
and is preferred because GALLEON constituted the same for the
WON NDC and DBP are liable for the loans of GALLEON - NO purpose of financing the construction, acquisition, purchase of vessels
WON POLIAND has a maritime lien enforceable against NDC or DBP or initial operation of vessels.

or both. - NDC only

DBP's undertaking to pay the Japanese banks was a condition sine
qua non to the acquisition of funds for the purchase of the GALLEON
RULINGS: vessels. The mortgage in favor of DBP was therefore constituted to
facilitate the acquisition of funds necessary for the purchase of the
(1) National Development Company is liable to Poliand Industrial vessels.

Limited

The provision of P.D. No. 1521 on the order of preference in the

Liability on maritime lien
satisfaction of the claims against the vessel is the more applicable
Articles 578 and 580 of the Code of Commerce, not applicable
statute to the instant case compared to the Civil Code provisions on
the concurrence and preference of credit. General legislation must give
TRANSPORTATION LAW April 13 Reading Assignment Page 13 of 31
way to special legislation on the same subject, and generally be so damages arising out of tort; and (7) preferred mortgage registered prior
interpreted as to embrace only cases in which the special provisions in time.

are not applicable.

POLIAND's maritime lien is superior to DBP's mortgage lien

NDC and DBP both argue that POLIAND's claim cannot prevail over
DBP's mortgage credit over the foreclosed vessels was an ordinary As stated in Section 21, P.D. No. 1521, a maritime lien may consist in
ship mortgage and not a preferred one, for the purpose of "other necessaries spent for the vessel." The ship modification cost
guaranteeing GALLEON's foreign borrowings.
may properly be classified under this broad category because it was a
Section 2 of P.D. No. 1521 recognizes the constitution of a mortgage necessary expenses for the vessel's navigation. As long as an expense
on a vessel, to wit:
on the vessel is indispensable to the maintenance and navigation of
SECTION 2. Who may Constitute a Ship Mortgage. — Any citizen of the vessel, it may properly be treated as a maritime lien for necessaries
the
under Section 21, P.D. No. 1521.

Philippines, or any association or corporation organized under the laws

of the Philippines, at least sixty per cent of the capital of which is The trial court also found that the advances from Asian Hardwood
owned by citizens of the Philippines may, for the purpose of financing were spent for ship modification cost and the crew's salary and wages.

the construction, acquisition, purchase of vessels or initial operation of

vessels, freely constitute a mortgage or any other lien or encumbrance With respect to the claim for salary and wages of the crew, it is second
on his or its vessels and its equipment with any bank or other financial only to judicial costs and taxes due the government in preference thus,
institutions, domestic or foreign. DTIc
having a status superior to DBP's mortgage lien.

SECTION 17. Preferred Maritime Lien, Priorities, Other Liens. — (a) Only NDC is liable on the maritime lien 

Upon the sale of any mortgaged vessel in any extra-judicial sale or by POLIAND maintains that DBP is also solidarily liable for the payment of
order of a district court of the Philippines in any suit in rem in admiralty the preferred maritime lien over the proceeds of the foreclosure sale 

for the enforcement of a preferred mortgage lien thereon, all pre-

existing claims in the vessel, including any possessory common-law
lien of which a lienor is deprived under the provisions of Section 16 of
this Decree, shall be held terminated and shall thereafter attach in like
amount and in accordance with the priorities established herein to the
proceeds of the sale. The preferred mortgage lien shall have priority
over all claims against the vessel, except the following claims in the
DBP reiterates the following arguments: (1) The salary and crew's
wages cannot be claimed by POLIAND or its predecessors-in-interest
because none of them is a sailor or mariner; 61 (2) Even if conceded,
POLIAND's preferred maritime lien is unenforceable pursuant to Article
1403 of the Civil Code; and (3) POLIAND's claim is barred by
prescription and laches.

order stated: (1) expenses and fees allowed and costs taxed by the
court and taxes due to the Government; (2) crew's wages; (3) general The first argument is absurd. Although POLIAND are not sailors
average; (4) salvage including contract salvage; (5) maritime liens entitled to wages they can still make a claim for the advances spent for
arising prior in time to the recording of the preferred mortgage; (6) the salary and wages of the crew under the principle of legal
TRANSPORTATION LAW April 13 Reading Assignment Page 14 of 31
subrogation. By definition, subrogation is the transfer of all the rights of POLIAND's cause of action against NDC is premised on the theory that
the creditor to a third person who substitutes him in all his rights.
when NDC acquired all the shareholdings of GALLEON, the former
also assumed the latter's liabilities.

DBP's reliance on the Statute of Frauds is misplaced. There is no

privity of contract between POLIAND and DBP, on the other. POLIAND NDC asserts that it could not have acquired GALLEON's equity and,
hinges its claim on the maritime lien based the LOI and not on any consequently, its liabilities because LOI No. 1155 had been rescinded
contract or agreement. HTSaE
by LOI No.

1195, therefore became inoperative and non-existent. Is of the opinion

Neither can DBP invoke prescription or laches against POLIAND. An that LOI No. 1155 does not have the force and effect of law and
action upon an obligation created by law must be brought within ten cannot be a valid source of obligation

years from the time the right of action accrues. The right of action
arose after January 15, 1982 the prescriptive period was tolled when -NDC, not liable under LOI No. 1155

POLIAND made a written demand for the satisfaction on September 24 As a general rule, letters of instructions are simply directives of the
1991. Laches also do not lie because there was no unreasonable delay President of the Philippines Being administrative in nature, they do not
on the part of POLIAND in asserting its rights.
have the force and effect of a law and, thus, cannot be a valid source
of obligation. However President Marcos exercised extraordinary
the Court finds that only NDC is liable for the payment of the maritime legislative powers, which the Court has declared as having the force
lien. maritime lien is akin to a mortgage lien in that in spite of the and effect of a statute including LOI.

transfer of ownership, the lien is not extinguished. The maritime lien is

inseparable from the vessel and until discharged, it follows the vessel. To form part of the law of the land, the decree, order or LOI must be
It is in the nature and character of a proceeding quasi in rem. used only issued by  the President in the exercise of his extraordinary power of
with reference to certain proceedings in courts of admiralty wherein the legislation as  contemplated in Section 6 of the 1976 amendments to
property alone is treated as responsible for the claim or obligation the Constitution,  whenever in his judgment, there exists a grave
upon which the proceedings are based. Considering that DBP emergency or threat or  imminence thereof, or whenever the interim
subsequently transferred ownership of the vessels to NDC, NDC is Batasan Pambansa or the regular  National Assembly fails or is unable
liable for the maritime lien. 
to act adequately on any matter for any  reason that in his judgment
There is bad faith in the forclosure of the vessels It took place when requires immediate action.

NDC had already assumed the management and operations of LOI was issued at the time when the President exercised legislative
GALLEON. NDC could not have pleaded ignorance over the existence powers the LOI is not connected to a grave emergency or threat to
of a prior or preferential lien on the vessels subject of foreclosure.
peace and order. It is only for rehabilitation purpose.

NDC cannot claim that it was a subsequent purchaser in good faith

because it had knowledge that the vessels were subject to various
liens. 
NDC, not liable under the Corporation Code

The Court cannot accept POLIAND's theory that with the effectivity of
LOI No. 1155, N D C ipso facto acquired the interests in GALLEON
TRANSPORTATION LAW April 13 Reading Assignment Page 15 of 31
without disregarding applicable statutory requirements governing the Legaspi v. Minister of Finance, paramount considerations compelled
acquisition of a corporation. Ordinarily, in the merger of two or more the grant of extraordinary legislative power to the President at that time
existing corporations, one of the combining corporations survives and when the nation was beset with threats to public order and the
continues the combined business, while the rest are dissolved and all purpose for which the authority was granted was speci c to meet the
their rights, properties and liabilities are acquired by the surviving exigencies of that period[.]

corporation. The merger, however, does not become effective upon the
mere agreement of the constituent corporations. Since no certificate of 3. ID.; ID.; ID.; ID.; CONDITIONS THAT MUST BE ESTABLISHED
merger was issued as the certificate is the consequence that a merger BEFORE A LETTER OF INSTRUCTION MAY BE CONSIDERED A LAW.
took place.
— The following conditions must be established before a letter of
The records do not show SEC approval of the merger.
instruction may be considered a law: To form part of the law of the
land, the decree, order or LOI must be issued by the President in the
DBP, not liable under LOI No. 1155
exercise of his extraordinary power of legislation as contemplated in
Being a mere administrative issuance LOI No. 1155 cannot be a valid Section 6 of the 1976 amendments to the Constitution, whenever in his
source of obligation because it did not create any privity of contract judgment, there exists a grave emergency or threat or imminence
between DBP and POLIAND or its predecessors-in-interest.
thereof, or whenever the interim Batasan Pambansa or the regular
National Assembly fails or is unable to act adequately on any matter
SYLLABUS
for any reason that in his judgment requires immediate action. Only
when issued under any of the two circumstances will a decree, order,
1. POLITICAL LAW; LETTERS OF INSTRUCTION; GENERALLY, or letter be quali ed as having the force and effect of law. The decree
LETTERS OF INSTRUCTION DO NOT HAVE THE FORCE AND or instruction should have been issued either when there existed a
EFFECT OF A LAW AND CANNOT BE A VALID SOURCE OF grave emergency or threat or imminence or when the Legislature failed
OBLIGATION. — As a general rule, letters of instructions are simply or was unable to act adequately on the matter. The qualification that
directives of the President of the Philippines, issued in the exercise of there exists a grave emergency or threat or imminence thereof must be
his administrative power of control, to heads of departments and/or o interpreted to refer to the prevailing peace and order conditions
cers under the executive branch of the government for observance by because the particular purpose the President was authorized to
the o cials and/or employees thereof. Being administrative in nature, assume legislative powers was to address the deteriorating peace and
they do not have the force and effect of a law and, thus, cannot be a order situation during the martial law period.

valid source of obligation.

2. ID.; ID.; ID.; EXCEPTION; PRESIDENT MARCOS ISSUED CERTAIN
DECREES, ORDERS AND LETTERS OF INSTRUCTION WHICH THE
COURT HAS DECLARED AS HAVING THE FORCE AND EFFECT OF A
STATUTE. — However, during the period when then President Marcos
exercised extraordinary legislative powers, he issued certain decrees,
orders and letters of instruction which the Court has declared as
having the force and effect of a statute. As pointed out by the Court in
4. ID.; ID.; ID.; ID.; LETTER OF INSTRUCTION NO. 1155 WAS IN THE
NATURE OF A MERE ADMINISTRATIVE ISSUANCE TO UNDERTAKE A
POLICY MEASURE. — Although LOI No. 1155 was undoubtedly
issued at the time when the President exercised legislative powers
granted under Amendment No. 6 of the 1973 Constitution, the
language and purpose of LOI No. 1155 precludes this Court from
declaring that said LOI had the force and effect of law in the absence
of any of the conditions set out in Parong. The subject matter of LOI
TRANSPORTATION LAW April 13 Reading Assignment
No. 1155 is not connected, directly or remotely, to a grave emergency
or threat to the peace and order situation of the nation in particular or
to the public interest in general. Nothing in the language of LOI No.
1155 suggests that it was issued to address the security of the nation.
Obviously, LOI No. 1155 was in the nature of a mere administrative
issuance directed to NDC, DBP and MARINA to undertake a policy
measure, that is, to rehabilitate a private corporation.
law; (c) Matters not assigned as errors on appeal but consideration of
5. MERCANTILE LAW; CORPORATION LAW; MERGER AND
CONSOLIDATION OF CORPORATION; MERGER SHALL ONLY BE
EFFECTIVE UPON THE ISSUANCE OF A CERTIFICATE OF MERGER
BY THE SECURITIES AND EXCHANGE COMMISSION (SEC). —
Ordinarily, in the merger of two or more existing corporations, one of
the combining corporations survives and continues the combined
business, while the rest are dissolved and all their rights, properties
and liabilities are acquired by the surviving corporation. The merger,
however, does not become effective upon the mere agreement of the
constituent corporations. As speci cally provided under Section 79 of
said Code, the merger shall only be effective upon the issuance of a
certi cate of merger by the Securities and Exchange Commission
(SEC), subject to its prior determination that the merger is not
inconsistent with the Code or existing laws. Where a party to the
merger is a special corporation governed by its own charter, the Code
particularly mandates that a favorable recommendation of the
appropriate government agency should rst be obtained. The issuance
of the certi cate of merger is crucial because not only does it bear out
SEC's approval but also marks the moment whereupon the
consequences of a merger take place. By operation of law, upon the
effectivity of the merger, the absorbed corporation ceases to exist but
its rights, and properties as well as liabilities shall be taken and
deemed transferred to and vested in the surviving corporation.
Commerce is inapplicable.
6. REMEDIAL LAW; CIVIL PROCEDURE; APPEAL BY CERTIORARI;
GENERALLY, AN APPELLATE COURT MAY ONLY PASS UPON
ERRORS ASSIGNED; EXCEPTIONS. — Generally, an appellate court
may only pass upon errors assigned. However, this rule is not without
Page 16 of 31
exceptions. In the following instances, the Court ruled that an
appellate court is accorded a broad discretionary power to waive the
lack of assignment of errors and consider errors not assigned: (a)
Grounds not assigned as errors but affecting the jurisdiction of the
court over the subject matter; (b) Matters not assigned as errors on
appeal but are evidently plain or clerical errors within contemplation of
which is necessary in arriving at a just decision and complete
resolution of the case or to serve the interests of a justice or to avoid
dispensing piecemeal justice; (d) Matters not speci cally assigned as
errors on appeal but raised in the trial court and are matters of record
having some bearing on the issue submitted which the parties failed to
raise or which the lower court ignored; (e) Matters not assigned as
errors on appeal but closely related to an error assigned; (f) Matters not
assigned as errors on appeal but upon which the determination of a
question properly assigned, is dependent.
7. MERCANTILE LAW; CODE OF COMMERCE; ARTICLE 378
THEREOF GOVERNS THE SALE OF VESSELS IN A FOREIGN PORT;
NOT APPLICABLE IN CASE AT BAR. — NDC cites Articles 578 and
580 of the Code of Commerce to bolster its argument that the
foreclosure of the vessels extinguished all claims against the vessels
including POLIAND's claim. Article 578 of the Code of Commerce is
not relevant to the facts of the instant case because it governs the sale
of vessels in a foreign port. Said provision outlines the formal and
registration requirements in order that a sale of a vessel on voyage or
in a foreign port becomes effective as against third persons. On the
other hand, the resolution of the instant case depends on the
determination as to which creditor is entitled to the proceeds of the
foreclosure sale of the vessels. Clearly, Article 578 of the Code of
8. ID.; PRESIDENTIAL DECREE NO. 1521 (SHIP MORTGAGE DECREE
OF 1978); PREFERRED MORTGAGE LIEN; SECTION 17 THEREOF
REPEALED ARTICLE 580 OF THE CODE OF COMMERCE. — Article
580, while providing for the order of payment of creditors in the event
TRANSPORTATION LAW April 13 Reading Assignment
of sale of a vessel, had been repealed by the pertinent provisions of
Presidential Decree (P.D.) No. 1521, otherwise known as the Ship
Mortgage Decree of 1978. In particular, Article 580 provides that in
case of the judicial sale of a vessel for the payment of creditors, the
debts shall be satis ed in the order speci ed therein. On the other hand,
Section 17 of P.D. No. 1521 also provides that in the judicial or
extrajudicial sale of a vessel for the enforcement of a preferred
mortgage lien constituted in accordance with Section 2 of P.D. No.
1521, such preferred mortgage lien shall have priority over all pre-
existing claims against the vessel, save for those claims enumerated
under Section 17, which have preference over the preferred mortgage
lien in the order stated therein. Since P.D. No. 1521 is a subsequent
legislation and since said law in Section 17 thereof confers on the
preferred mortgage lien on the vessel superiority over all other claims,
thereby engendering an irreconcilable con ict with the order of
preference provided under Article 580 of the Code of Commerce, it
follows that the Code of Commerce provision is deemed repealed by
the provision of P.D. No. 1521, as the posterior law.
authorized person and prior to the recording of the ship mortgage.
9. ID.; ID.; ID.; IF IT IS CONSTITUTED FOR THE PURPOSE STATED
UNDER SECTION 2 THEREOF, THE MORTGAGE OBTAINS A
PREFERRED STATUS. — If the mortgage on the vessel is constituted
for the purpose stated under Section 2, the mortgage obtains a
preferred status provided the formal requisites enumerated under
Section 4 are complied with. Upon enforcement of the preferred
mortgage and eventual foreclosure of the vessel, the proceeds of the
sale shall be rst applied to the claim of the mortgage creditor unless
there are superior or preferential liens, as enumerated under Section
17[.]
on the vessel is indispensable to the maintenance and navigation of
10. ID.; ID.; ID.; ITS PROVISION ON THE ORDER OF PREFERENCE IN
THE SATISFACTION OF THE CLAIMS AGAINST THE VESSEL IS
MORE APPLICABLE COMPARED TO THE CIVIL CODE PROVISIONS
ON THE CONCURRENCE AND PREFERENCE OF CREDITS. — The
provision of P.D. No. 1521 on the order of preference in the satisfaction
of the claims against the vessel is the more applicable statute to the
Page 17 of 31
instant case compared to the Civil Code provisions on the concurrence
and preference of credit. General legislation must give way to special
legislation on the same subject, and generally be so interpreted as to
embrace only cases in which the special provisions are not applicable.
11. ID.; ID.; ID.; MARITIME LIEN ARISING PRIOR IN TIME TO THE
RECORDING OF THE PREFERRED MORTGAGE IS CONSIDERED TO
BE SUPERIOR TO THE LATTER. — Before POLIAND's claim may be
classi ed as superior to the mortgage constituted on the vessel, it must
be shown to be one of the enumerated claims which Section 17, P.D.
No. 1521 declares as having preferential status in the event of the sale
of the vessel. One of such claims enumerated under Section 17, P.D.
No. 1521 which is considered to be superior to the preferred mortgage
lien is a maritime lien arising prior in time to the recording of the
preferred mortgage. Such maritime lien is described under Section 21,
P.D. No. 1521[.] . . . Under the aforequoted provision, the expense
must be incurred upon the order of the owner of the vessel or its
Under the law, it must be established that the credit was extended to
the vessel itself.
12. ID.; ID.; ID.; EXPENSE ON THE VESSEL INDISPENSABLE TO THE
MAINTENANCE AND NAVIGATION OF THE VESSEL MAY PROPERLY
BE TREATED AS A MARITIME LIEN FOR NECESSARIES. — As stated
in Section 21, P.D. No. 1521, a maritime lien may consist in "other
necessaries spent for the vessel." The ship modi cation cost may
properly be classi ed under this broad category because it was a
necessary expenses for the vessel's navigation. As long as an expense
the vessel, it may properly be treated as a maritime lien for necessaries
under Section 21, P.D. No. 1521. With respect to the claim for salary
and wages of the crew, there is no doubt that it is also one of the
enumerated claims under Section 17, P.D. No. 1521, second only to
judicial costs and taxes due the government in preference and, thus,
having a status superior to DBP's mortgage lien.
TRANSPORTATION LAW April 13 Reading Assignment
13. REMEDIAL LAW; EVIDENCE; CREDIBILITY; GENERALLY,
FINDINGS OF FACT OF LOWER COURTS ARE DEEMED
CONCLUSIVE AND BINDING UPON THE SUPREME COURT. — All
told, the determination of the existence and the amount of POLIAND's
claim for maritime lien is a nding of fact which is within the province of
the courts below. Findings of fact of lower courts are deemed
conclusive and binding upon the Supreme Court except when the
ndings are grounded on speculation, surmises or conjectures; when
the inference made is manifestly mistaken, absurd or impossible; when
there is grave abuse of discretion in the appreciation of facts; when the
factual ndings of the trial and appellate courts are con icting; when the
Court of Appeals, in making its ndings, has gone beyond the issues of
the case and such ndings are contrary to the admissions of both
appellant and appellee; when the judgment of the appellate court is
premised on a misapprehension of facts or when it has failed to notice
certain relevant facts which, if properly considered, will justify a
different conclusion; when the ndings of fact are conclusions without
citation of speci c evidence upon which they are based; and when
ndings of fact of the Court of Appeals are premised on the absence of
evidence but are contradicted by the evidence on record. The Court
nds no su cient justi cation to reverse the ndings of the trial court and
the appellate court in respect to the existence and amount of maritime
lien.
tolled when POLIAND made a written demand for the satisfaction of
14. MERCANTILE LAW; PRESIDENTIAL DECREE NO. 1521;
PREFERRED MORTGAGE LIEN; THIRD PERSON WHO SATISFIES
THE OBLIGATION TO AN ORIGINAL MARITIME LIEN MAY CLAIM
FROM THE DEBTOR. — The rst argument is absurd. Although
POLIAND or its predecessors-in-interest are not sailors entitled to
wages, they can still make a claim for the advances spent for the
salary and wages of the crew under the principle of legal subrogation.
As explained in Philippine National Bank v. Court of Appeals, a third
person who satis es 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.
lien is not extinguished. The maritime lien is inseparable from the
Page 18 of 31
15. CIVIL LAW; OBLIGATIONS AND CONTRACTS; STATUTE OF
FRAUDS; INAPPLICABLE WHEN THERE IS NO CONTRACT
BETWEEN THE PARTIES. — DBP's reliance on the Statute of Frauds is
misplaced. Article 1403 (2) of the Civil Code, which enumerates the
contracts covered by the Statute of Frauds, is inapplicable. To begin
with, there is no privity of contract between POLIAND or its
predecessors-in-interest, on one hand, and DBP, on the other.
POLIAND hinges its claim on the maritime lien based on LOI No. 1195
and P.D. No. 1521, and not on any contract or agreement.
16. ID.; PROPERTY; MODES OF ACQUIRING OWNERSHIP;
PRESCRIPTION OF ACTIONS; PRESCRIPTIVE PERIOD WAS TOLLED
WHEN A WRITTEN DEMAND FOR THE SATISFACTION OF
OBLIGATION WAS MADE. — Neither can DBP invoke prescription or
laches against POLIAND. Under Article 1144 of the Civil Code, an
action upon an obligation created by law must be brought within ten
years from the time the right of action accrues. The right of action
arose after January 15, 1982, when NDC partially paid off GALLEON's
obligations to POLIAND's predecessor-in-interest, Asian Hardwood. At
that time, the prescriptive period for the enforcement by action of the
balance of GALLEON's outstanding obligations had commenced.
Prescription could not have set in because the prescriptive period was
the obligation on September 24, 1991, or before the lapse of the ten-
year prescriptive period. Laches also do not lie because there was no
unreasonable delay on the part of POLIAND in asserting its rights.
Indeed, it instituted the instant suit seasonably.
17. MERCANTILE LAW; PRESIDENTIAL DECREE NO. 1521;
PREFERRED MORTGAGE LIEN; MARITIME LIEN IS INSEPARABLE
FROM THE VESSEL AND UNTIL DISCHARGED, IT FOLLOWS THE
VESSEL. — All things considered, however, the Court nds that only
NDC is liable for the payment of the maritime lien. A maritime lien is
akin to a mortgage lien in that in spite of the transfer of ownership, the
vessel and until discharged, it follows the vessel. Hence, the
TRANSPORTATION LAW April 13 Reading Assignment
enforcement of a maritime lien is in the nature and character of a
proceeding quasi in rem. The expression "action in rem" is, in its
narrow application, used only with reference to certain proceedings in
courts of admiralty wherein the property alone is treated as responsible
for the claim or obligation upon which the proceedings are based.
Considering that DBP subsequently transferred ownership of the
vessels to NDC, the Court holds the latter liable on the maritime lien.
Notwithstanding the subsequent transfer of the vessels to NDC, the
maritime lien subsists.
PORTSERV LIMITED and/or TRANSMAR SHIPPING,
18. CIVIL LAW; DAMAGES; ATTORNEY'S FEES; WHEN IT CAN BE
AWARDED. — This Court nds no reversible error with the award as
upheld by the appellate court. Under Article 2208 of the Civil Code,
attorney's fees may be awarded inter alia when the defendant's act or
omission has compelled the plaintiff to incur expenses to protect his
interest or in any other case where the court deems it just and
equitable that attorney's fees and expenses of litigation be recovered.
complaint.
19. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; WHERE THE
INEVITABLE CONCLUSION FROM THE BODY OF THE DECISION IS
SO CLEAR AS TO SHOUT THAT THERE WAS A MISTAKE IN THE
DISPOSITIVE PORTION, THE BODY OF THE DECISION WILL
PREVAIL. — The general rule is that where there is con ict between the
dispositive portion or the fallo and the body of the decision, the fallo
controls. This rule rests on the theory that the fallo is the nal order
while the opinion in the body is merely a statement ordering nothing.
However, where the inevitable conclusion from the body of the
decision is so clear as to show that there was a mistake in the
dispositive portion, the body of the decision will prevail. In the instant
case, it is clear from the trial court records and the Court of Appeals'
Rollo that the bigger amount awarded in the dispositive portion of the
Court of Appeals' Decision was a typographical mistake. Considering
that the appellate court's Decision merely a rmed the trial court's nding
with respect to the amount of maritime lien, the bigger amount stated
in the dispositive portion of the Court of Appeals' Decision must have
been awarded through inadvertence.
Page 19 of 31
  5. PREFERRED CLAIMS
5.01 EXECUTORY CONTRACT DOCTRINE
5.02 WAIVER OF LIEN
5.03 PRESCIPTION AND LACHES
5.04 MARITIMES LIENS FOR NECESSARIES 
*Case: CRESCENT PETROLEUM, LTD., petitioner, vs. M/V "LOK
MAHESHWARI," THE SHIPPING CORPORATION OF INDIA, and
INC., respondents. [G.R. No. 155014. November 11, 2005.]
FACTS: This petition for review on certiorari under Rule 45 seeks the
reversal of the Decision of the Court of Appeals which dismissed for
"want of jurisdiction" the instant case and reinstatement of the
Decision of the Regional Trial Court (RTC) which held that respondents
were solidarily liable to pay petitioner the sum prayed for in the
In a nutshell, this case is for the satisfaction of unpaid supplies
furnished by a foreign supplier in a foreign port to a vessel of foreign
registry that is owned, chartered and sub-chartered by foreign entities.
Respondent M/V "Lok Maheshwari" (Vessel) an oceangoing vessel of
Indian registry owned by an indian corporation. was time-chartered by
respondent SCI to Halla Merchant Marine Co. Ltd. (Halla), a South
Korean company. Halla, in turn, sub-chartered the Vessel through a
time charter to Transmar Shipping, Inc. (Transmar). Transmar further
sub-chartered the Vessel to Portserv Limited (Portserv). Both Transmar
and Portserv are Canadian corporations
1995, Portserv requested petitioner Crescent Petroleum a canadian
corporation engaged in the business of selling petroleum and oil
products for the use and operation of oceangoing vessels, to deliver
marine fuel oils to the Vessel. Petitioner Crescent granted the request
through facsimile.

TRANSPORTATION LAW April 13 Reading Assignment Page 20 of 31

RULINGS:

As security for the payment of the bunker fuels and related services, it The case has to be dismissed.

received 2 checks which later was dishonored. Thus, petitioner

Crescent contracted with its supplier, Marine Petrobulk for the physical Even in applying the doctrine of processual presumption, the result will
delivery of the bunker fuels to the Vessel.
still be the same.

Marine Petrobulk delivered the bunker fuels, Having paid Marine the following are the requisites for maritime liens on necessaries to
Petrobulk, Crescent issued a revised invoice to "Portserv Limited, of exist: (1) the "necessaries" must have been furnished to and for the
M/V 'Lok Maheshwari.
benefit of the vessel; (2) the "necessaries" must have been necessary
The period lapsed and several demands were made but no payment for the continuation of the voyage of the vessel; (3) the credit must
was received. 
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
while the Vessel was docked at the port of Cebu City, Crescent persons authorized to contract on behalf of the vessel.

instituted before the RTC of Cebu City an action "for a sum of money
against respondent vessel.
First. It was not established that benefit was extended to the vessel.

Second. Petitioner Crescent did not show any proof that the marine
For failing to file their answers trial court declared respondents Vessel products were necessary for the continuation of the vessel.

in default.

Third. It was not established that credit was extended to the vessel.

RTC RULING: Ruled in favor of Crescent

Fourth. There was no proof of necessity of credit. 

respondents Vessel and SCI appealed to the Court of Appeals. They

pointed out that Portserv and that there is a clause in the time charters Finally. The necessaries were not ordered by persons authorized to
on who will pay for the fuel. 
contract in

behalf of the vessel as provided

CA RULING: REVERSED RTC on the ground of forum non conveniens A time charter is a contract for the use of a vessel for a specified
considering that the parties are foreign corporations which are not period of time or for the duration of one or more specified voyages
doing business in the
wherein the owner of the time-chartered vessel retains possession and
Philippines."
control through the master and crew who remain his employees. Not
enjoying the presumption of authority, petitioner Crescent should have
ISSUES:
proved that Portserv was authorized by the shipowner to contract for
WON RTC has jurisdiction over the case - YES
supplies.

WON petitioner Crescent entitled to a maritime lien under our laws -

NO

TRANSPORTATION LAW April 13 Reading Assignment Page 21 of 31

A contract for furnishing supplies like the one involved in this case is vessel, which may be enforced by suit in rem, and it shall be necessary
maritime and within the jurisdiction of admiralty. It may be invoked to allege or prove that credit was given to the vessel. jurc d06

before our courts through an action in rem or quasi in rem or an action

in personam . 
Sec. 22. Persons Authorized to Procure Repairs, Supplies and
Necessaries. — The following persons shall be presumed to have
"Articles 579 and 584 [of the Code of Commerce] provide a method of
authority from the owner to procure repairs, supplies, towage, use of
collecting or enforcing not only the liens created under Section 580 but dry dock or marine railway, and other necessaries for the vessel: The
also  for the collection of any kind of lien whatsoever." 8 In the managing owner, ship's husband, master or any person to whom the
Philippines, we have ` a complete legislation, both substantive and management of the vessel at the port of supply is entrusted. No
adjective, under which to bring  an action in rem against a vessel for person tortuously or unlawfully in possession or charge of a vessel
the purpose of enforcing liens. The  substantive law is found in Article shall have authority to bind the vessel.

580 of the Code of Commerce. The  procedural law is to be found in

Article 584 of the same Code. The result is,  therefore, that in the Sec. 23. Notice to Person Furnishing Repairs, Supplies and
Philippines any vessel — even though it be a foreign  vessel —found in Necessaries. — The officers and agents of a vessel specified in
any port of this Archipelago may be attached and sold  under the Section 22 of this Decree shall be taken to include such officers and
substantive law which defines the right, and the procedural law  agents when appointed by a charterer, by an owner pro hac vice, or by
contained in the Code of Commerce by which this right is to be an agreed purchaser in possession of the vessel; but nothing in this
enforced. 9 . . .  But where neither the law nor the contract between Decree shall be construed to confer a lien when the furnisher knew, or
the parties creates any  lien or charge upon the vessel, the only way in by exercise of reasonable diligence could have ascertained, that
which it can be seized before  judgment is by pursuing the remedy because of the terms of a charter party, agreement for sale of the
relating to attachment under Rule 59  [now Rule 57] of the Rules of vessel, or for any other reason, the person ordering the repairs,
Court.
supplies, or other necessaries was without authority to bind the vessel
therefor.

Is petitioner Crescent entitled to a maritime lien under our laws?

Petitioner Crescent submits that these provisions apply to both

Crescent bases its claim of a maritime lien on Sections 21, 22 and 23 domestic and foreign vessels, as well as domestic and foreign
of Presidential Decree No. 1521 (P.D. No. 1521), also known as the suppliers of necessaries.

Ship Mortgage Decree of 1978

Respondents Vessel and SCI, maintain that Section 21 of the P.D. No.
Sec. 21. Maritime Lien for Necessaries; persons entitled to such lien.
1521 does not apply to a foreign supplier 

— Any person furnishing repairs, supplies, towage, use of dry dock or

maritime railway, or other necessaries, to any vessel, whether foreign We find against petitioner Crescent

or domestic, upon the order of the owner of such vessel, or of a

person authorized by the owner, shall have a maritime lien on the
TRANSPORTATION LAW April 13 Reading Assignment Page 22 of 31
The various tests used in the U.S. to determine whether a maritime lien
exists are the following:
Finding guidance from the foregoing decisions, the Court cannot
sustain petitioner Crescent's insistence on the application of P.D. No.
One. "In a suit to establish and enforce a maritime lien for supplies 1521 or the Ship Mortgage Decree of 1978 and hold that a maritime
furnished to a vessel in a foreign port, whether such lien exists, or lien exists.

whether the court has or will exercise jurisdiction, depends on the law
of the country where the supplies were furnished, which must be First. Out of the seven basic factors listed in the case of Lauritzen,
pleaded and proved."
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
Two. The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced allegiance or domicile of the injured and the place of contract; India is
such single-factor methodologies as the law of the place of supply.
the law of the flag and the allegiance of the defendant shipowner.
The following factors were considered: (1) place of the wrongful act; Balancing these basic interests, it is inconceivable that the Philippine
(2)  law of the flag; (3) allegiance or domicile of the injured; (4) court has any interest in the case that outweighs the interests of
allegiance  of the defendant shipowner; (5) place of contract; (6) Canada or India for that matter.

inaccessibility  of foreign forum; and (7) law of the forum. (8) in hellenic
lines vs  RHoditis ship owners base of operation is another factor in Second. P.D. No. 1521 or the Ship Mortgage Decree of 1978 is
determining  whether the Jones Act is applicable; and there well may inapplicable following the factors under Restatement (Second) of
be others."
Conflict of Laws. Like the Federal Maritime Lien Act of the U.S., P.D.
No. 1521 or the Ship Mortgage Decree of 1978 was enacted primarily
THIS IS applicable not only to personal injury claims arising under the to protect Filipino suppliers and was not intended to create a lien from
Jones Act but to all matters arising under maritime law in general.
a contract for  supplies between foreign entities delivered in a foreign
Lauritzen test is not a mechanical one. the list of seven factors in
port.

Lauritzen was not intended to be exhaustive. . . . [T]he shipowner's

base of operations is another factor of importance in determining Third. Applying P.D. No. 1521 or the Ship Mortgage Decree of 1978
whether the Jones Act is applicable; and there well may be others."
and rule that a maritime lien exists would not promote the public policy
behind the enactment of the law to develop the domestic shipping
Three. The factors provided in Restatement (Second) of Conflicts of industry. Opening up our courts to foreign suppliers by granting them a
Law have also been applied, in the absence of an effective choice of maritime lien under our laws even if they are not entitled to a maritime
law by the parties, the forum contacts to be considered include: (a) the lien under their laws will encourage forum shopping.

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 Finally. The submission of petitioner is not in keeping with the
contract; and (e) the domicile, residence, nationality, place of reasonable expectation of the parties to the contract. The contract of
incorporation and place of business of the parties.
supplies could not have intended to be the laws of a remote country to
The initial choice of law determination is significantly affected by the determine the creation of a lien by the mere accident of the vessel
statutory policies surrounding a maritime lien.
being in the Philippine territory.

TRANSPORTATION LAW April 13 Reading Assignment Page 23 of 31

*Case: STANDARD OIL COMPANY OF NEW YORK, plaintiff-
But under which law should petitioner Crescent prove the existence of appellee, vs. MANUEL LOPEZ CASTELO, defendant-appellant.
its maritime lien?
[G.R. No. 13695. October 18, 1921.]

In light of the interests of the various foreign elements involved, it is

clear that
FACTS: By contract of charter Manuel Lopez Castelo, as owner let the
Canada has the most significant interest in this dispute.
small interisland steamer Batangueño for the term of one year to Jose
The case has to be dismissed.
Lim for use in the conveying of cargo between certain ports of the
Philippines. The officers and crew of the Batangueño should be
supplied by the owner and the charterer should have no other control
5.05 MARITIME TORT
over the captain, pilot, and engineers than to specify the voyages that
5.06 SALVAGE LIEN
they should make and to require the owner to discipline or relieve them
5.07 SUBROGATION
as soon as possible

5.08 WHEN PROCEEDS NOT SUFFICIENT

5.09 TESTS TO DETERMINE THE PRESENCE OF LIEN

Standard Oil Company delivered to the agent of the boat in Manila a
*Case: CRESCENT PETROLEUM, LTD., petitioner, vs. M/V "LOK petroleum to be conveyed to the port of Casiguran, Sorsogon. a bill of
MAHESHWARI," THE SHIPPING CORPORATION OF INDIA, and lading of the usual form was delivered and that the freight is to be paid
PORTSERV LIMITED and/or TRANSMAR SHIPPING, at destination. The bill contains no provision with respect to the
INC., respondents. [G.R. No. 155014. November 11, 2005.]
storage of the petroleum, which was placed on the deck and not in the
hold.

6. WHO MAY CONSTITUTE PREFERRED SHIP MORTGAGE

6.01 PURPOSE
A typhoon passed over the region while the boat was sailing the
6.02 FORMAL REQUIREMENTS
captain was compelled for the safety of all to jettison the entire
6.03 MARINA RULES
consignment of petroleum consisting of two hundred cases. After, only
13 cases were recovered, the rest was lost. 

7. MORTGAGE OF VESSEL WITH OTHER PROPERTIES

7.01 MORTGAGE WITH NON-MARITIMES PROPERTY

Standard Oil Company filed a case against the owner of the ship in the
7.02 FLEET MORTGAGE
CFI of manila. 

8. ARREST AND FORECLOSURE

CFI RULING: judgment was rendered in favor of Standard Oil
Company

CHAPTER 13 - PERSONS WHO TAKE PART IN MARITIME No question is made upon the point that the captain exercised proper
COMMERCE
discretion in casting this petroleum overboard as a step necessary to
the salvation of the ship;

1. LIABILITY OF SHIP OWNERS AND SHIP AGENTS

TRANSPORTATION LAW April 13 Reading Assignment Page 24 of 31

ISSUE: Whether Castelo is liable to Standard Oil?

The word "naviero" must be understood to refer to the person

RULING: YES, Castelo is liable to Standard Oil. It results that the undertaking the voyage, who in one case may be the owner and in
plaintiff is entitled to recover in this action; the judgment appealed another the charterer. But this is not vital to the present discussion.

from to this extent, we affirm

The real point to which we direct attention is that, by the express

The first question for discussion is whether the loss of this petroleum provision of the Code, the owner of the vessel is civilly liable for the
was a general average loss or a particular loss to be borne solely by acts of the captain; and he can only escape from this civil liability by
the owner of the cargo.
abandoning his property in the ship and any freight that he may have
earned on the voyage (arts. 587, 588, Code of Comm.).

Ordinarily the loss of cargo carried on deck shall not be considered a

general average loss.
Now, by article 852 of the Code of Commerce-the captain is therefore
his duty to take the proper steps to protect any shipper whose goods
The Marine Regulations now in force recognize the right of vessels may have been jettisoned for the general safety. the captain is required
engaged in the interisland trade to carry deck cargo. Indeed, there is to take the necessary steps to effect the adjustment, liquidation, and
one commodity, namely, gasoline, which from its inflammable nature is distribution of the general average. 

not permitted to be carried in the hold of any passenger vessel, though In the case the captain of the vessel did not take those steps; that the
it may be carried on the deck if certain precautions are taken due to its failure of the captain to take those steps gave rise to a liability for
flammable nature.
which the owner of the ship must answer.

The reason is that in the coastwise trade the boats are small and the owner of the ship, in the person of the captain, has complete and
voyages are short, and she can port easily. And also to encourage exclusive control of the crew and of the navigation of the ship, as well
traffic even if not altogether ideal. 
as of the disposition of the cargo at the end of the voyage. 

From what has been said it is evident that the loss of this petroleum is The evident intention of the Code, taken in all of its provisions, is to
a general and not a special average. 
place the primary liability upon the person who has actual control over
the conduct of the voyage and who has most capital embarked in the
It is universally recognized that the captain is primarily the venture, namely, the owner of the ship, leaving him to obtain recourse
representative of the owner and article 586 of the Code of Commerce from other individuals who have been drawn into the venture as
expressly declares that both the owner of the vessel and the naviero, shippers. 

or charterer, shall be civilly liable for the acts of the master. 

In this connection, it may be noted that there is a discrepancy between SYLLABUS

the meaning of naviero, in article 586 of the Code of Commerce, where

the word is used in contradistinction to the term "owner of the GENERAL AVERAGE; COASTWISE TRADE; JETTISON OF DECK
vessel" (propietario), and in article 587 where it is used alone, and CARGO —

apparently in a sense broad enough to include the owner.

TRANSPORTATION LAW April 13 Reading Assignment Page 25 of 31

When, in conformity with marine regulations, cargo is carried on the on the left, or to her own port side. Perla disagreed with the signal and
deck of a steamer engaged in coastwise trade, the jettison of such maintained her position on the right or starboard. The Ban Yek made
cargo upon occasion of peril makes a case for general average.
no reply to this signal. The Perla was navigating with the current, then
running in from the sea, thus have right of way over Ban yek and the
JETTISON; LIQUIDATION OF GENERAL AVERAGE; OMISSION OF officers of the Perla interpreted the action of the Ban Yek in not
CAPTAIN
replying as an indication of acquiescence of the officers of the Ban
TO DISTRIBUTE LOSS. — When jettison of cargo occurs it is the duty Yek 

of the captain to effect the adjustment, liquidation, and distribution of

the general average; and his omission to take these steps constitutes Ban Yek backed away but due to the current her bow was thrown out
an actionable dereliction of duty.
into the stream crashed into the starboard bumpers of the Perla
inflicting material damage on the hull.

LIABILITY OF SHIPOWNERS. — For this omission not only is the

captain personally liable to the shipper of the jettisoned goods, but the ISSUE: Whether the owner is liable

latter may go at once upon the owner, since the captain of the ship is
the representative of the owner, and the latter is civilly liable for the RULING: YES the owner is liable, But it does not necessarily follow
acts of the former.
that Siy Cong Bieng & Co as charterer or agent is exempt from
liability; and both the owner and agent can be held responsible
where both are impleaded together. 

1.01 SHIP AGENT DEFINED

1.02 EXTENT OF LIABILITY

in article 826 of the Code of Commerce it is declared that the owner of
*Cases:
any vessel shall be liable for the indemnity due to any other vessel
(a) VICENTE VERZOSA and RUIZ, REMENTERIA CIA., S. in injured by the fault, negligence, or lack of skill of the captain of the
C., plaintiffs-appellants, vs. SILVINO LIM and SIY CONG BIENG & first.

COMPANY, INC., defendants-appellants. [G.R. No. 20145.

November 15, 1923.]
We say "owner," which is the word used in the current translation of
FACTS: This action was instituted in the Court of First Instance of the this  article in the Spanish Code of Commerce. It is to be observed,
City of Manila by Vicente Verzosa as owners of the coastwise vessel however,  that the Spanish text itself uses the word naviero; and there
Perla, against Silvino Lim as owner and agent, of the vessel Ban Yek is some  ambiguity in the use of said word in this article, owing to the
for the purpose of recovering a sum of money resulting to the plaintiffs fact that  naviero in Spanish has several meanings. 

from a collision.

the coastwise steamer Ban Yek left the port of Naga on the Bicol River That naviero, as used in the Spanish text of article 826, means owner
Camarines Sur, with destination to the City of Manila. As the ship is further to be inferred from article 837, which limits the civil liability
approached the Malbong bend of the Bicol River, Gainza, another expressed in article 826 to the value of the vessel with all her
vessel, the Perla was up the river on the way to Naga. the Ban Yek appurtenances and all the freight earned during the voyage. 

gave two blasts with her whistle, thus indicating an intention to pass
TRANSPORTATION LAW April 13 Reading Assignment Page 26 of 31
There would have been no propriety in limiting liability to the value of (b) WING KEE COMPRADORING COMPANY, plaintiff-appellant, vs.
the vessel unless the owner were understood to be the person liable. It THE BARK "MONONGAHELA," VICTOR S. FOX & CO., INC., owner
is therefore clear that by special provision of the Code of Commerce of the bark Monongahela, THE ADMIRAL LINE, and C.G.
the owner is made responsible for the damage caused by an accident LOTHIGIUS, defendants-appellees. [G.R. No. 19540. January 29,
of the kind under consideration in this case; and in more than one case 1923.]

this court has held the owner liable, when sued alone

FACTS: The plaintiff in this case, Wing Kee Corporation Company

But it does not necessarily follow that Siy Cong Bieng & Co as seeks to recover from the defendants principally the Admiral Line, as
charterer or agent is exempt from liability; and both the owner and agent for the Bark Monongahela account of goods wares,, and
agent can be held responsible where both are impleaded together. 
merchandise sold and delivered by the plaintiff to the defendants for
The liability of the naviero, in the sense of charterer or agent, if not the use of the crew of the Bark Monongahela.

expressed in article 826 of the Code of Commerce, is clearly deducible

from the general doctrine of jurisprudence stated in article 1902 of the
Civil Code and it is also recognized, but more especially as regards
contractual obligations, in article 586 of the Code of Commerce. 
presumption is that they had a just and preferred claim upon by
both the owner and agent (naviero) should be declared to be jointly
and severally liable, since the obligation which is the subject of this
WING KEE COMPRADORING COMPANY praying for judgment against
the defendants jointly and severally for the sum of P17,675.64, as
furnishing supplies to Bark Monoghaela from march to august 1921
and that the debt was due from Admiral Line.

action had its origin in a tortious act and did not arise from contract. 

No action against the bark was taken.

A regular justice of the peace would without doubt be competent to In 1921 Admiral Line no longer was an agent of Bark Monongahela.
take a marine protest, and the same authority must be conceded to But supplies were furnished to Monongahela after the agency was
the auxiliary justice in the absence of any showing in the record to the terminated.

effect that the justice of the peace himself was acting at the time in the
municipality.
WING KEE COMPRADORING COMPANY wants for the Admiral Line,
as the agent for the Bark Monongahela, to pay the claim, leaving the
Upon the point of responsibility for the collision the fault is to be latter to reimburse itself.

attributed exclusively to the negligence and inattention of the captain

and pilot in charge of the Ban Yek .
Admiral Line answers that as the agency has ceased, action cannot be
brought against it.

RTC RULING: Dismissed the complaint.

CA RULING: ruled in favor of Admiral line

ISSUE: Whether the admiral line being an agent is liable?

TRANSPORTATION LAW April 13 Reading Assignment Page 27 of 31

for the acts of the captain and for the obligations contracted by the
RULING: YES, the admiral line being an agentfor the Bark latter to repair, equip, and provision the vessel, provided the creditor
Monongahela, is liable  to the plaintiff between March 16, 1921 and proves that the amount claimed was invested therein."

August 2, 1921, but is not responsible for supplies furnished after

that date.
When the agents buy in their own names, but really for the account of
To our minds this is a rather far-fetched argument, for pursued to its their principal, the seller has an option to look to either for payment,
logical conclusion, every agent for a vessel could thus avoid unless (1) he trusted the agent exclusively; or (2) by the usage and
responsibility pursuant to article 586 of the Code of Commerce, by understanding of the business the agent only is held; or (3) unless the
giving up its agency when threatened with suit to enforce the special circumstances of the case show that only the agent was
obligations of third parties. 
intended to be bound and the seller knew it or was chargeable with
Moreover, the bills were presented when the Admiral Line was yet the knowledge of it.

agent.

Art 586

 "The owner of a vessel and the agent shall 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.

"By agent is understood the person entrusted with the provisioning of

a  vessel, or who represents her in the port in which she happens to
be."

when the agents buy in their own names, but really for the account of
their principal the seller has an option to look to either for payment,
unless (1) he trusted the agent exclusively; or (2) by the usage and
understanding of the business the agent only is held; or (3) unless the
special circumstances of the case show that only the agent was
intended to be bound and the seller knew it or was chargeable with
knowledge of it. 

SYLLABUS

SHIP AND SHIPPING; ARTICLE 586, CODE OF COMMERCE;

SUPPLIES FOR BARK "MONONGAHELA." — By article 586 of the
Code of Commerce, "the owner of a vessel and agent be civilly liable
TRANSPORTATION LAW April 13 Reading Assignment Page 28 of 31
Where the vessel is one of freight, a public concern on public utility, its
(c) YU BIAO SONTUA & CO., plaintiff-appellee, vs. MIGUEL J. owner or agent is liable for the tortuous acts of his agents.

OSSORIO, defendant-appellant. [G.R. No. 17690. June 14, 1922.]

"Vessel owner's liability in general. — The general liability of a vessel

FACTS: In 1920, a fire broke out on board the motor boat Alfonso owner extends to losses by fire arising from another vessel, or from the
while anchored in Pasig River. A short distance from the Alfonso the shore; and the fact that fire produces the motive power of a boat does
steamer Y. Sontua was lying alongside and moored to the wharf. The not affect the case. Such losses are not within the exceptions either of
fire spread to the steamer causing deck damage.
act of God, or peril of the sea, except by local custom, unless
proximately caused by one of these events. In jurisdictions where the
The Yu brought this action to recover from the defendant damages civil law obtains, however, it has been held that if property on a
sustained by him through the negligence of the agents and employees steamboat is destroyed by fire, the owners of the boat are not
of Ossorio.
responsible, if it was being navigated with proper diligence, although
two causes of action were set forth in the complaint, for the damage the accident occurred at night. The common law liability extends even
and for the repair of the steamer. 
to loss by fires caused entirely by spontaneous combustion of the
cargo, without any negligence on the part of master or crew." (R.C.L.
Ossorio answered as special defense that he has taken no part either vol. 24, pp. 1324-1325.)

directly or indirectly in the acts alleged in the complaint. That the

damage was fortuitous and not imputable to negligence. 
Article 612 of our Code of Commerce are inherent in the master such
inherent duties do not limit to the latter the civil liability arising from
- loaded in the motor boat of Ossorio are thousands of cases of their nonfulfillment, but while the master is responsible to the ship
gasoline and petroleum without permission of customs. And the cause agent, the ship agent, in turn, is responsible to third persons.

of the fire was the explosion of the motorboat when readying to sail,
due to the near proximity of the gasoline and petroleum’s leak and not SYLLABUS 

enough ventilation.
MASTER AND SERVANT; SHIPOWNER'S OR SHIP AGENT'S
LIABILITY FOR ACTS OF HIS EMPLOYEES. — It having been proven
RTC RULING: Ruled in favor of Yu there is negligence
that the explosion and fire which took place in a ship are, with good
ground, imputable to the negligence of the persons who were then in
ISSUE: Whether Ossorio is ought to be liable for the negligence of his charge thereof and under whose direction the loading of cases of
agents and employees 
petroleum and gasoline had been affected, and that the said persons
are agents of the shipowner or ship agent, the latter is liable for the
RULING: YES, Ossorio is ought to be liable for the negligence of negligent acts committed by them, under articles 587, 613, and 618 of
his agents and employees. Defendant sentenced to pay the the Code of Commerce, and 1902, 1903, and 1908 of the Civil Code.

plaintiff the sum of P54,486.70. It is proven that the agents and

employees were negligent in the fire that occurred.
INHERENT DUTIES OF THE MASTER OF A SHIP; LIABILITY OF THE
SHIP AGENT TOWARDS THIRD PERSONS. — Although the duties
TRANSPORTATION LAW April 13 Reading Assignment Page 29 of 31
enumerated in article 612 of the Code of Commerce are inherent in the
master, the civil liability arising from the nonfulfillment thereof is not Claims were filed with Trade & Transport and Macondray Plaintiff but
limited to the latter, since while the master is responsible to the ship refused to settle hence the complaint. 

agent, he is, in turn, liable to third persons, as is clearly provided in

article 618 of the said Code, which in its subsections 5 and 7 expressly TRADE AND TRANSPORT is no longer connected with Macondray the
mentions such duties enumerated in the aforesaid article 612.
case against wasconsidered dismissed without prejudice.

MACONDRAY Plaintiff - is the local representative of the SHIPPER and

1.03 WHEN CAPTAIN ACTS IN EXCESS OF AUTHORITY
not party to this case and that it has no control over the acts of the
1.04 LIABILITY FOR EXTRA-CONTRACTUAL OBLIGATIONS
captain and crew of the Carrier and cannot be held responsible for any
*Case: YU BIAO SONTUA & CO., plaintiff-appellee, vs. MIGUEL J. damage arising from the fault or negligence. 

OSSORIO, defendant-appellant. [G.R. No. 17690. June 14, 1922.]

RTC RULING: Dismissed the case

2. PART OWNERS

CA RULING: affirmed RTC finding that petitioner was not the agent of
3. POWERS AND FUNCTIONS OF SHIP AGENT
Trade and Transport.

*Cases:
However, that petitioner could still be held liable for the shortages of
(a) MACONDRAY & CO., INC., petitioner, vs. PROVIDENT the shipment because the latter was the ship agent of Canpotex the
INSURANCE CORPORATION, respondent. [G.R. No. 154305. shipper and charterer of the vessel M/V Trade Carrier. Petitioner
December 9, 2004.]
represented the vessel.

Hornbook is the doctrine that the negligence of counsel binds the ISSUE: Whether Macondray and Co. Inc., as an agent is responsible
client. Also settled is the rule that clients should take the initiative of for any loss sustained by any party from the vessel owned by
periodically checking the progress of their cases, so that they could defendant Trade and Transport.

take timely steps to protect their interest.

RULING: 
FACTS: On 1991 CANPOTEX SHIPPING SERVICES LIMITED INC., of Petition is DENIED and the assailed Decision AFFIRMED

Saskatoon, Saskatchewan Canada (SHIPPER) shipped and loaded on

board the vessel M/V 'Trade Carrier', 5k metric ton of Standard Grade In the present case, we find no compelling reason to overturn the
Muriate of Potash for transport to Sangi Toledo Cebu in favor of ATLAS Court of Appeals finding that petitioner was the ship agent. Indeed,
FERTILIZER (CONSIGNEE). The shipment were insured by respondent although it is not an agent of Trade and Transport,petitioner can still be
Provident Insurance against all risk. 
the ship agent of the vessel M/V Trade Carrier.

Upon arrival CONSIGNEE discovered that the shipment sustained loss Article 586 of the Code of Commerce 

of 476 metric tons valued at P1,657,700.95 Provident paid losses.

TRANSPORTATION LAW April 13 Reading Assignment Page 30 of 31

Ship agent - the person entrusted with provisioning or representing the The subject shipment was insured with respondents, FGU and
vessel in the port in which it may be found."
(PIONEER), against all risks.

Hence, whether acting as agent of the owner of the vessel or as agent The subject vessel is owned by P.T. Pakarti Tata (PAKARTI) which it
of the charterer, petitioner will be considered as the ship agent and chartered to (SHINWA). Representing itself as owner of the vessel,
may be held liable as such, as long as the latter is the one that SHINWA entered into a charter party contract with Sky an agent of Kee
provisions or represents the vessel.
Yeh which further chartered it to Regency. Thus, it was REGENCY that
Acts of petitioners employees points that they are the shippers agent
directly dealt with consignee HEINDRICH and issued clean bill of
As ship agent, it may be held civilly liable in certain instances. The lading.

Code of

Commerce provides:
The vessel arrived at the Port of Manila it was found upon inspection
"Article 586. The ship-owner and the ship agent shall be civilly liable that 43,905 bags were in bad order and condition.

for the acts of the captain and for the obligations contracted by the Unable to collect the sustained damages from the shipper, CARDIA,
latter to repair, equip, and provision the vessel, provided the creditor and the charterer, REGENCY, each paid the consignee, HEINDRICH
proves that the amount claimed was invested for the benefit of the and consequently became subrogated to all the rights and causes of
same."
action accruing to HEINDRICH.

"Article 587. The ship agent shall also be civilly liable for the respondents filed a complaint for damages against Regency , Sky,
indemnities in favor of third persons which may arise from the conduct Ace.

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 PAKARTI and SHINWA alleged ACENAV claimed that, not being privy
all her equipment’s and the freight it may have earned during the to the bill of lading it was not a real party-in-interest from whom the
voyage."
respondents can demand compensation. They claimed that they were
agent of Shipper Cardia not of the vessel or regency

(b) ACE NAVIGATION CO., INC., petitioner, vs. FGU INSURANCE Another claim were filed by heindrich which was later consolidated.

CORPORATION and PIONEER INSURANCE AND SURETY

CORPORATION, respondents. [G.R. No. 171591. June 25, 2012.]
RTC RULING: dismissed the complaint

FACTS: 1990, Cardia Limited (CARDIA) shipped on board the vessel CA RULING: found PAKARTI, SHINWA, KEE YEH and its agent, SKY,
M/V Pakarti Tiga at Shanghai Port China, tons worth of Grey Portland solidarily liable remaining 30% to be shouldered solidarity by CARDIA
Cement to be discharged at the Port of Manila and delivered to its and its agent, ACENAV,

consignee, (HEINDRICH).

PAKARTI, SHINWA, SKY and ACENAV filed separate petitions for

review which were ordered consolidated 

TRANSPORTATION LAW April 13 Reading Assignment Page 31 of 31

SKY manifested that it will no longer pursue its petition. And has
preferred to await the resolution filed by PAKARTI and SHINWA.
Article 586 of the Code of Commerce provides:

PAKARTI and SHINWA moved or the withdrawal of their petitions for The shipowner and the ship agent shall be civilly liable for the acts of
lack of interest
the captain and for the obligations contracted by the latter to repair,
equip, and provision the vessel, provided the creditor proves that the
Only the petition of ACENAV remained for the Court's resolution
amount claimed was invested therein.

By ship agent is understood the person entrusted with the provisioning

Acenav - ACENAV is a ship agent and not a mere agent of CARDIA
of a vessel, or who represents her in the port in which she may be
found.

ISSUE: Whether ACENAV may be held liable to the respondents for

30% of their claim.
Clearly, ACENAV's participation was simply to assume responsibility
over the cargo when they were unloaded from the vessel. Thus 
RULING: NO, as mere agent, ACENAV cannot be made responsible ACENAV was not a ship agent within the meaning and context of
or held accountable for the damage supposedly caused by its Article 586 but a mere agent of CARDIA, the shipper.

principal.

Decision and Resolution of the Court of Appeals hereby REVERSED
personally liable to the party with whom he contracts unless he
bill of lading is defined as "an instrument in writing, signed by a carrier
On this score, Article 1868 of the Civil Code states that an agent is not
expressly binds himself or exceeds the limits of his authority without
giving such party sufficient notice of his powers.

or his agent, describing the freight so as to identify it, stating the name Records are bereft of any showing that ACENAV exceeded its authority
of the consignor, the terms of the contract for carriage, and agreeing or in the discharge of its duties as a mere agent of CARDIA. Furthermore,
directing that the freight to be delivered to the order or assigns of a since CARDIA was not impleaded as a party in the instant suit, the
specified person at a specified place."
liability attributed upon it that the damage sustained by the cargo was
It operates both as a receipt and as a contract.
due to improper packing cannot be borne by ACENAV.

As a receipt, it recites the date and place of shipment, describes the

goods as to quantity, weight, dimensions, identification.
3.01 POWERS OF SHIP AGENT

As a contract, it names the contracting parties

3.02 DISCHARGE OF CAPTAIN AND CREW 

The original parties to the bill of lading are: (a) the shipper CARDIA; (b) 4. CAPTAINS AND MASTERS OF VESSELS

the carrier PAKARTI c) the consignee HEINDRICH.

*Case: YU CON, plaintiff-appellee, vs. GLICERIO IPIL, NARCISO
However, by virtue of their relationship with PAKARTI under separate LAURON, and JUSTO SOLAMO, defendants-appellants. [G.R. No.
charter arrangements, SHINWA, KEE YEH and its agent SKY likewise 10195. December 29, 1916.]

became parties to the bill of lading. 

4.01 QUALIFICATIONS
In the same vein, ACENAV, as admitted agent of CARDIA, also became
a party to the said contract of carriage.